Things are looking up at Spain’s dominant paybox

Finally, there’s light at the end of the tunnel for Prisa-owned Digital Plus, Spain’s dominant pay TV operator.

On Nov 25, Spanish telco giant Telefonica paid E470 million ($698.4 million) for a 21% stake in the satcaster.

Digital Plus still faces challenges, including new competition from Mediapro soccer channel Gol TV, which is available on other pay TV operators and via pay digital terrestrial TV; an 8% year-on-year subscriber slump; and rampant Internet piracy of its top U.S. series acquisitions.

Despite this, “Digital Plus is in a much better position than early this year when nobody knew who had soccer rights in Spain, nor the impact of pay digital terrestrial TV. That’s now cleared up,” says Maria Aguete at global media research firm Screen Digest.

And, with deep-pocketed Telefonica on board, Digital can now rebuild. The question is, how will it pull in the most coin?

Pay TV growth strategies vary across Europe.

In France, Canal Plus is building value via international expansion into the Maghreb and Vietnam; higher-tech services; production subsid StudioCanal; and original series production, including “Spiral,” “Braquo” and the Chris Albrecht-produced “Borgias.”

In the U.K., BSkyB’s third quarter growth — it gained 95,000 new customers for a 9.5 million total — was driven by demand for HDTV.

Digital Plus has 2 million subscribers, a figure that “doesn’t look easy to surpass, especially with content such as soccer, open to other platforms,” according to Luis Padron, an analyst at international bank BNPP Fortis.

HDTV could pump growth at Digital Plus, boosting revenues per subscriber.

“We’re being much more aggressive in HD to mark ourselves apart, compared to other operators, giving the best contents via the best technology,” says Digital Plus contents head Alex Martinez Roig.

Spain’s only major HD TV operator, Digital Plus has upped its HD channels from three in 2008 to 10.

Some 60% of the 4 million TV sets bought this year by Spaniards are HD-capable, according to local tech trade body Asimelec.

Digital Plus will air nearly all its World Cup games in HD, Roig says.Enthused by Spain’s status as a front-runner in soccer’s 2010 World Cup, Digital Plus HD viewership — currently 100,000 subs — will grow.

Telefonica’s investment in Digital Plus is another large leg-up.

“For Telefonica, it’s a defensive move to prevent other operators getting a hold on Digital Plus content and boosting their triple-play offers,” says an analyst.

Mediapro claimed 613,000 subscribers through Nov. 9 for its Gol TV soccer channel on IPTV in Spain, principally on Telefonica’s IPTV service Imagenio, rolled into Imagenio’s $94.5 a month Family triple play offer.

Regulator allowing, Telefonica could bundle Digital Plus with its Internet and telephony services, offering triple-play via a single multipurpose box and customer management service.

This would bolster its position against triple-play rivals Ono, a broadband communication and entertainment company, and telco Orange. Both carry soccer via Gol but will miss out on other Digital Plus content.

“Digital Plus has 2 million subscribers with often large disposable incomes. It’s a very attractive demography target for a Telefonica triple-play,” Aguete says.

And Prisa can resell Digital Plus content — channels like Canal Plus Action or Canal Plus Football, or top series such as “The Tudors” — to bolster Imagenio or other platforms.

Another way ahead is VOD: supplying Digital Plus clients with a hybrid satellite/IPTV box allowing shows to be downloaded on demand.

Growth for Digital Plus is limited; it could add just 100,000 more subscribers in four years, according to Screen Digest forecasts. But the improvement in its position may persuade other companies to kick Digital Plus’ tires — and Prisa, which has a $2.8 billion bridge loan maturing in March, would certainly welcome offers.

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