In the last five years the economies of Eastern Europe and Russia have enjoyed phenomenal growth: almost twice the rate seen in the economies in Western Europe.
This is also true of the pay-TV market. By and large the pay-TV markets in Western Europe are approaching saturation while there is still potential for serious growth in markets further east.
The pay-TV markets in the region are generally dominated by cable although satellite is making significant inroads and is expected to double its average market penetration within the next few years. According to London-based analysts Screen Digest, cable now has an estimated 32% market penetration and some forecasts suggest this will increase to about 40% within the next three years. Screen Digest also estimates that satellite currently has 8% penetration but this is expected to double in the same timeframe. It should be noted that while many of the region’s cable operators are embarking on the process of digitisation, all of the region’s satellite operators are already in the digital age.
“There are different issues facing each territory,” says Jeremy Maddocks, NDS Regional Director, Russia, CIS and Eastern Europe. “There are markets with hundreds of small operators offering relatively low-quality content and these are going through a process of consolidation. Meanwhile countries like Russia, where cable TV was introduced more than 40 years ago, will undergo a massive programme of upgrades and deployment of replacement infrastructure,” he says.
“In addition to consolidation of small operators, the other trends we are seeing include digitisation and the growth of satellite broadcasting. IPTV isn’t far behind and in certain markets like Russia, IPTV is predicted to grow much faster than we have seen in the rest of Europe,” he says. All of these factors are taking place against a background where each country is making the transition from managed economy to a freer market at its own pace.
Maddocks gives his assessment of the current state of pay-TV in the region.
Russia: Success is city-centred
“When discussing Russia there are a number of important factors that have to be taken into account,” Maddocks says. “Not only is it a vast country, but unlike other countries in the region most of its population lives in large cities. “Economically there is a big difference between Moscow [estimated population about 10 million] and the rest of the country,” he says.
“There is a lot of cable but it’s mostly old and low quality. Nevertheless the majority of the homes are connected,” he says. “The reality is that it is mostly analogue and subscribers pay very little.”
What they receive is about 10 channels. “Because there is a lot of cable with few alternatives in many cities, there is a huge demand for TV services. As a result, a number of satellite TV providers are launching extended viewing packages.” The package usually includes a set-top box which subscribers pay for, and it includes up to 12 months of extended basic channels. “These operators are clearly meeting a need,” he continues, “because they’ve
attracted millions of subscribers in a relatively short time.”
In Moscow most subscribers have either digital cable or IPTV whereas the more rural areas are served by satellite broadcasters. “Installing cable in rural areas will never be truly cost effective – but the fundamental question is what proportion of the rural population can in fact afford premium pay TV,” Maddocks says.
Economies are more recession-resistant
In the past few years as the market has become more competitive, a number of cable operators have consolidated. “In general there are five or six very large groups that are offering full media packages,” he says. “This includes satellite, cable and IPTV. In Eastern Europe generally, digital terrestrial broadcasting hasn’t been very successful. In order for it to become more successful it will probably have to be predominantly free-to-air.”
“I expect that IPTV will take off more quickly in Russia than in other Eastern and Western European countries,” Maddocks says. “They’re already rolling out small- to medium-size Ethernet systems that deliver high speed Internet to the home. In order to make these systems more cost-effective they’re adding new TV services.”
Maddocks suggests that one of the factors helping the free-to-air market is the phenomenal growth rate for the local advertising market which has consistently hovered around 30% annually for at least five years up to the present recession. “No one should underestimate the ability of fast growing economies like Russia to get out of this recession much faster than those in the West. They have more flexible employment laws and aggressive management that is truly focused on growth. In 12-18 months, I expect that Russia will be steaming ahead. Even now the much hyped decline in growth is only relative to previous Russian growth rates. In comparison with other countries, it is strong,” he says.
NDS in Russia
NDS customers in Russia include Akado, the largest cable operator, and Comstar Direct, the third largest which also offers IPTV. “The current economic crisis has affected everyone’s investment plans,” he says. “Nevertheless we expect investment to continue.”
Digitisation is taking hold quickly in Russia. “This is significant because there is so much old analogue cable infrastructure,” he says. “We are also seeing an increase in IPTV offerings.” Satellite is still very expensive, Maddocks says. “Basic level operators who are growing quickly, and will continue to meet a basic need in the market. The question is what they will offer in a few years’ time.”
NDS supplies technology to several premium Russian pay-TV operators: “We have been supporting operators in Russia for more than seven years and during that time there has been a massive growth in demand for quality TV,” he says. “It is gratifying that NDS has played a role in delivering better entertainment to ordinary Russian people, helping them to view TV that matches or exceeds what is available in the West.”
NDS products deliver quality consumers demand
The world market leading digital video recorder solution, NDS XTV™, is soon expected to be deployed in Russia. There is also a lot of interest in NDS EPGs because operators realise this is one of the best ways to differentiate their service from the competition. “People in Russia appreciate quality products and services because they were starved of quality for so many years,” Maddocks says. “The presentation and image on the TV is important to Russians who no longer accept anything less than the best. NDS will be meeting that need as we offer some of the world’s most advanced programme guides available,” he says.
Romanian pay-TV on the rise
“Romania boasts cable TV penetration of 80% which is one of the highest rates in Europe,” Maddocks says. The population is estimated to be just over 22 million. “There are currently two giant cable operators: RCS is Romanian-based, and UPC-Astral is headquartered in the US.” They offer IP telephony and Internet. The national cable TV network is being improved and digitisation is taking place. Digital direct-to-home satellite service is provided by several operators and accounts for about 10-15% of the pay-TV market while terrestrial analogue service accounts for only about 5%.
“Before the fall of communism in 1989 there was only one state-owned TV channel in Romania,” Maddocks says. “Pay-TV began in the early 1990s when private channels began broadcasting a few hours a day. When cable TV operators began to offer 15-20 foreign channels for a low price, their success was almost immediate.”
Consolidation of some of the new, smaller operators began in the mid-1990s, he says. Ten years later two large operators remain. Internet over cable and IP telephony are both available in Romania. “Cable TV is on offer throughout most of the country, including rural areas where about half of the population lives.” Digital satellite was launched in 2004.
NDS currently has several customers in Romania. Dolce is the pay-TV offering from RomTelecom, the country’s largest fixed line telephone supplier. Boom TV is a DTH satellite operator that has deployed an NDS end-to-end solution using VideoGuard® conditional access, MediaHighway® middleware and the NDS electronic programme guide.
NDS Solutions help deliver the TV people want
VideoGuard Express™ is NDS’ all-in-one solution for rapid deployment and is ideal for the Eastern European pay-TV markets for which it was originally conceived. It offers the robust security of VideoGuard® conditional access combined with MediaHighway® middleware and the NDS Guide, a seven-day electronic programme guide. It is pre-integrated with selected STBs which are typically priced to meet the needs of the region’s providers.
“There is a lot of interest in VideoGuard Express in Romania,” Maddocks says, “because it also enables operators to efficiently roll out digital TV, and to migrate to the XTV™ DVR solution as well as NDS Dynamic™ the end-to-end suite of advanced TV advertising solutions.”
Poland’s cable consolidation
TVP (Telewizja Polska) has been on air without interruption since 1956 and has been a commercial operation since 1994. Other private stations appeared in the early 1990s. “NDS has a long standing relationship with TVP. We have been providing TCP with a distribution system via satellite for over 10 years,” Maddocks says.
“Cable is very successful in Poland and the consolidation of smaller operators is well underway.” There are three major pay-TV satellite operators and they have all begun high definition broadcasting. Some have additionally introduced DVRs. IPTV is also seeing real growth.
Aster a true innovator in Poland
Aster is one of the most respected cable operators in the country. It was the first to digitise and is usually a trailblazer in offering innovative solutions to their customers. NDS became Aster’s technology partner a year ago when Aster chose NDS to provide VideoGuard conditional access, MediaHighway middleware, a customised EPG and a suite of interactive technologies. See interview with Aster’s Krzysztof Zaborowski in this edition of World Vision.
Vision TV leads the way in Ukraine
There are an estimated 17 million TV households in Ukraine, more than half of which have analogue terrestrial service. The population is estimated to be over 46 million.
“The pay-TV market in Ukraine is new and with a few exceptions, it is characterised by hundreds of small analogue cable operators,” Maddocks says. “Our major challenge is to be able to provide a quality pay-TV solution to millions of potential subscribers who have never been initiated to pay-TV."
Viasat Ukraine, formerly Vision TV, was the first licensed satellite pay-TV provider in Ukraine, and is an NDS customer. NDS provides VideoGuard and MediaHighway, as well as a Ukrainian language EPG.
“Everyone has been scrambling to get a piece of the action in one of the last open opportunities for digital satellite pay-TV in Europe. Viasat Ukraine selected NDS because of our determination to show that we understood the market,” Maddocks says.
“We are flexible and offer a superior solution as well as a future roadmap which operators clearly appreciate,” he says.
Pay-TV on cable and satellite from Serbia Broadband
Serbia has an estimated population of about 10 million people. More than 40 percent of homes have cable TV. “There has been extraordinary growth in virtually all segments of the economy – including communications. Upgrading the television infrastructure and introducing pay-TV is part of the modernisation process,” Maddocks says.
“I first met the CEO of Serbia Broadband (SBB) just over five years ago when he started a small cable network with 10,000 subscribers,” Maddocks says. Today SBB has more than 200,000 digital subscribers using NDS CA, middleware and programme guide on both satellite and cable platforms.
“It is significant that SBB, the country’s largest cable operator became the first customer for NDS VideoGuard Express. SBB now offers both satellite and cable services, delivering a virtually nationwide reach.”
Eastern Promise
“The pay-TV markets in Eastern Europe and Russia are fascinating. As free market economies develop, the populations demand all the same services as in the West – including high-quality pay-TV,” Maddocks says. The general pay-TV trends in the region include digitisation and consolidation.
“NDS is succeeding because we are flexible enough to offer solutions the operators can use.” At the top of the list are VideoGuard Express and customised electronic programme guides. “It’s clear that the platforms are succeeding because in several cases the growth rates are higher than in platforms in Western Europe,” he says. “Despite the worldwide recession I expect this market to be resilient as it continues its development.”
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