Key Industry Trends in the U.S.

Television networks: Broadcast and Cable

Buoyed by rising viewership, cable networks are continuing to gain advertising share from the broadcast networks. Broadcast networks are trying to counter that by leveraging their pricing.

Cable operators are resisting license fee hikes, but growing digital broadcast satellite (DBS) penetration and the emergence of competition from telephone companies is fuelling basic network license fee growth. Premium license fees is benefiting from a growing digital household universe and higher buy rates in those households. Digital video recorders are gaining popularity, but they are not cutting into television advertising. High-definition-television market expansion is having a positive impact on advertising. The overall market is projected to expand at a compounded annual growth rate of 6.4 percent, reaching $73.2 billion in 2009. Licence fee will be the faster-growing category, rising at a projected 7.2 percent compound annual rate to $28.4 billion. Advertising is projected to rise at a 5.9 percent rate compounded annually to $44.8 billion in 2009.

TV distribution: Station, Cable, and Satellite

Aggressive rollouts by telephone companies are attracting subscribers from cable operators and have increased price competition. Attractive price-points are leading to continued direct broadcast satellite (DBS) gains. Migration to digital will bolster basic and premium subscription spending, but declining growth in the subscriber base will limit overall gains. Cable is aggressively rolling out video-on-demand (VOD) services to compete with DBS, but reallocation of channel capacity from pay-per-view (PPV) to VOD will limit PPV growth. Political advertising is growing in importance and exaggerating the even-year/odd-year cycle for both TV stations and cable operators, while the advent of continuous local ratings and hard interconnects will enhance local cable advertising. End-user spending is projected to grow at 4.5 percent compound annual rate, rising to $69 billion in 2009. Saturated market for subscription TV will limit subscription spending growth on basic services to 3.8 percent compounded annually, making it the slowest-growing category. VOD will be the fastest-growing category, at 16.1 percent compounded annually, but will remain the smallest component, at $2 billion, in 2009. PPV will expand at a 7.6 percent rate compounded annually to $3.5 billion, and premium subscriptions will increase to $14.1 billion, a 5.3 percent advance compounded annually. Even-year infusions of political dollars will generate sharp up-and-down swings in television advertising, which will grow by 5 percent compounded annually to $40 billion in 2009. Local cable will expand at 11.1 percent annually to $9.2 billion, and television stations will increase to $30.8 billion, a 3.6 percent compound annual growth rate. The overall market is projected to rise to $109 billion in 2009, growing at a 4.7 percent compound annual rate.

Source: FICCI / PricewaterhouseCoopers