New forms of TV distribution, including cable and Internet-based delivery, are gaining in popularity and siphoning away market share from satellite TV.
That’s the word from industry analysts in a new report that looks at satellite TV provision in Canada.
Nevertheless, IBISWorld says, revenue is forecast to grow over the next five years, and new satellite services are planned for the Canadian market. Looking to 2018, the industry is expected to continue adding subscribers, albeit at a slower rate than in past years.
Over the past five years, satellite TV providers here have benefitted from increasing subscriber numbers and a higher number of subs with more expensive programming packages. Consequently, revenue is expected to grow at an annualized rate of 4.8% to $2.8 billion over the five years to 2013.
“The industry is highly concentrated, with two national satellite TV providers – Bell Canada and Shaw Communications – dominating the market,” says IBISWorld industry analyst Kevin Boyland.
These firms have taken steps to improve their service quality and range of programming by upgrading their satellite networks; Bell launched a new satellite in 2012 and Shaw is expected to launch a new satellite in 2013.
The industry also gains from increasing consumer adoption of premium programming packages, which provide the broadest range of specialty channels and HD programming.
“These packages are more expensive than standard programming packages and, thus, have boosted industry revenue,” according to Boyland. "Average industry profitability has increased as well because, once the fixed costs of building, insuring and launching a satellite have been spread across a sizeable subscriber base, profit increases with each additional subscriber added. Revenue is expected to grow 2.2% in 2013 as more subscribers are added and more existing subscribers upgrade to premium services; average industry profit, defined as earnings before interest and taxes, is estimated to be about 7.3% of revenue through 2013.
The satellite TV providers industry exhibits a high level of concentration, with the two largest companies controlling about 90.0% of the market. Concentration is high in line with the extremely capital intensive nature of developing, launching and maintaining satellites. The industry's major players are diversified telecommunications operators that offer a range of services and have extensive financial resources at their disposal. Smaller players with fewer resources are naturally precluded from entering the industry due to the high capital costs of satellite development, launches and licences.
IBISWorld estimates that the remaining 10.0% of the market is highly fragmented and divided among satellite TV resellers (e.g. TELUS) and an array of rural multipoint distributions system operators.
Net subscriber additions are expected to decrease over the period amid intense competition from established cable providers as well as emerging Internet-protocol television (IPTV) providers. IPTV providers are aggressively expanding their network's coverage in major metropolitan areas, increasing competition in these markets. IPTV benefits from the fact that it uses existing packet-switched networks and can be easily bundled with other services that use the same networks such as home phone and internet access services. Notably, both Bell and Shaw offer an IPTV service in addition to their satellite TV service.
Internal competition is also set to increase with the entrance of a new satellite TV provider, BluSky HDTV. The firm is expected to launch service sometime in 2013.
IBISWorld offers a comprehensive database of unique information and analysis on every US and Canadian industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide.
For more Mediacaster Magazine coverage related to this topic, please see:
Canadians Subscribe to IPTV Pitches from Cable, Telcos
Operator Opportunities Increase as Pay TV Penetration Peaks
Shaw Direct Acquires Capacity on Third Satellite
New Satellite Launch in 2012 Booked for Bell
Canadian Satellite Firm Leads in HDTV Delivery
New FreeHD Canada Channel Looks to BluSky its HDTV Plans