The Communications Market 2009 (August)
In this section
1 - The market in context
Introduction and structure
This section of the Communications Market Report 2009 summarises a range of communications market developments over the last twelve months. It is organised into four sections:
- Key market trends
This section summarises developments in communications services availability and take-up. It then sets out industry revenue trends and household spend on communications services before concluding with consumer satisfaction metrics and consumers' propensity to bundle services together.
- Communications markets and the recession
The UK moved into recession in the final quarter of 2008, and its impact is being felt by consumers and industry. In this context, we commissioned research to understand the degree to which consumers' attitudes towards communications services are being influenced by the recession. We also explore how industry revenues have fared over the last twelve months, and the steps that companies have taken to control costs.
- Consumers' use of digital video recorders (DVR)
The advent of the DVR - also known as a personal video recorder (PVR) or digital television recorder (DTR) has offered consumers greater convenience and control over their television viewing than was available through analogue video cassette recorders (VCR). Now in more than a quarter of UK homes, consumers have embraced DVRs across a range of digital television platforms. Here we set out key metrics on the take-up and use of DVR products and identify trends in consumer attitudes towards DVR use.
- The nations' communications markets
Ofcom has published four nations' Communications Market Reports alongside this report. As national or regional issues become more prominent in communications policy development (for example, the future of public service broadcasting and the Government's proposed universal availability of 2Mbit/s broadband), so the characteristics of service availability, take-up and consumption by nation grow in importance. In this section we provide a short summary of the findings of CMR: Nations reports.
The Market in Context (840 kB)
This section explores developments and trends in the UK television market. Some of the key findings are:
- Television industry revenue grew by 1.3% to reach 11.2bn in 2008. Pay-TV subscriptions rose by 6% but total net advertising revenue fell by 3%, as broadcasters began to feel the impact of the recession. The proportion of the BBC's licence fee revenue spent on television decreased by 1.2% year on year to 2.6bn.
- Advertising growth slows for independent multichannel broadcasters. The commercial portfolio channels of the PSBs accounted for the majority of growth in multichannel advertising (77m out of 79m) in 2008. Advertising revenue from the rest of the multichannel sector rose by just 2m in 2008 to reach 810m .
- Digital television take-up reached 89.2% at the end of Q1 2009. It increased by 2.1 percentage points year on year. Nearly nine million digital video recording devices (also known as 'digital television recorders' or 'personal video recorders') had been sold by the end of Q1 2009.
- Digital switchover is now well under way and Exeter in the West Country became the UK's first 'digital city' in May 2009. Digital switchover in Scottish Borders was completed in November 2008 and 20% of homes across the UK will have had their analogue terrestrial television signals switched off by the end of 2009.
- High-definition (HD) television gains traction. By the end of Q1 2009, 2.3 million homes had HD reception equipment either a set-top box or an integrated digital television capable of accessing linear or on-demand HD content. Some broadcasters are now evaluating the potential of 3DTV.
- Entertainment channels (excluding the five main PSBs) accounted for one in five hours of viewing in multichannel homes in 2008. The Entertainment genre's aggregate viewing share (excluding the five main PSBs) grew by 1.8 percentage points in 2008 to account for a 21.3% share in multichannel homes.
- The number of television channel licences awarded by Ofcom decreased year on year. The appetite to launch new channels appears to be waning in the UK, with 495 channels already on-air at the end of 2008, up from 470 in 2007. Seventy-seven licences were issued by Ofcom in 2008, down by 46%, and the lowest number issued since 1998 when digital television launched in the UK
Television (738 kB)
3 - Radio
This section explores developments and trends in the UK radio market. Some of the key findings are:
- Total UK radio industry funding stood at £1.15bn in 2008, down by 2.3% on 2007. This followed a fall in commercial revenues of 3.3% to £505m and we estimate that the BBC reduced its radio spend by 1.5% to £643m (accounting for a 56% share of all radio income/spend).
- In June 2009, the Government's Digital Britain report was published, recommending the 'digital migration' of the majority of radio services in the UK, with a proposed target of 2015. It specified an interim 2013 milestone of 50% of all radio listening to be through a digital platform and targets for national DAB coverage to be comparable to FM and for car manufacturers to be installing DAB sets as standard.
- By Q1 2009 digital radio platforms attracted just over a fifth (20.1%) of all radio listening hours, up from 17.8% in Q1 2008. The majority (63%) of digital listening was through a DAB digital radio set, and this platform alone accounted for 12.7% of all radio listening. Digital television delivered a further 3.4% and the internet 2.2%.
- Cumulative sales of DAB digital radio sets passed 9 million by Q1 2009 (up from almost 7 million in Q1 2008). RAJAR estimates that almost a third (32%) of UK adults owned a DAB set by the end of Q1 2009, up by five percentage points on the previous year.
- A third of adults had listened to the radio online, according to the RAJAR internet and audio services survey carried out in May 2009. This was up from 29% a year earlier and 24% 18 months ago.
Radio (2081 kB)
4 - Telecoms
We start this section by looking at key metrics of the UK telecoms market in terms of revenues, connections and usage patterns. We then look at seven key themes that highlight how developments in the industry are extending consumer choice and changing consumer behaviour. These themes are:
- A decade of change: the shift towards mobile and data services. We assess the transformation of the telecoms market over the last ten years as mobile phone and internet services have become mass-market.
- How the growth of local loop unbundling is reshaping the internet service provider market. With the cost structures associated with providing LLU-based services determining that 'bigger is better', we examine how the broadband market has been transformed since the introduction of LLU, both in terms of market size and the subscriber shares of the larger players.
- Super-fast broadband becomes a reality. We look at the emergence of the UK's first super-fast broadband services, which are now being implemented after much anticipation, and consider how these services might impact the ISP market.
- Mobile broadband matures. Around three million people in the UK now access broadband services provided over a cellular network via USB modems (or 'dongles'). As the market matures we examine the relationship between mobile and fixed broadband services.
- Smartphones and applications drive more sophisticated use of 'mobile internet'. In this section we look at the rise of the 'mobile app' and how advances in mobile handset technology are affecting the way in which we use our mobile phones to access online services.
- SIM-only contracts central to new focus on low-cost tariffs. We consider the changes in operator strategy and consumer behaviour that have resulted in a growth in the share of pay-monthly contracts, driven primarily by the take-up of sub-£20-a-month tariffs.
- New MVNOs gain market share. We examine the market conditions that have seen a raft of virtual network operators and service providers launch in the last couple of years and win market share.
Telecoms (640 kB)
5 - Converging Markets
The term 'convergence' in communications markets is often used to describe the growing tendency for different content formats (audio, video, text, pictures) to reach consumers via a range of digital networks (the internet, mobile infrastructure, satellite, cable, digital terrestrial etc) and consumer devices (PC, TV, mobile etc.) This section looks at what these trends mean for the supply and consumption of communications content and services in the UK.
The commentary in this section focuses on:
- Content – including the creation and packaging of content types where converging technologies have had a significant bearing.
- Distribution and devices – looking at the networks and devices over, and through which, consumers access content.
Each of these two sections groups together data which tell 'stories' within the overall framework of the convergence value chain.
Converging Markets (587 kB)
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The Communications Market 2009 (3063 kB)
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