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Domino effect of Europe’s DTT switchover

MIP Preview 2012

With 2012 the year of Europe’s self-imposed deadline to switch from analog to digital terrestrial television, or DTT, the region has been making “multichannel” its mantra.

Multichannel growth is boosting overall European TV revenues, up 5.6% to $120 billion in 2010, while upping the amount of time spent in front of the tube by an average 2.7%, according to a recent study by Italy’s ITMedia Consulting.

The key change in this new landscape is that auds for free DTT and pay TV channels are growing at the expense of traditional stations.

“If you look at the American multichannel market, it’s very similar to what the European multichannel market will become in the next decade, when generalist channels will be phased out and you will just have thematic channels,” predicts Francesco Nespega, topper of Italy’s Switchover Media.

Switchover is a typical new player in Europe’s digital TV market, recently becoming an Italo market leader in the kiddie field with two channels, K2 and Frisbee.

That said, channel multiplication is mostly due to existing players expanding their services, rather than a proliferation of new ones, says analyst Augusto Preta, who heads Rome-based ITMedia Consulting. In the U.K., for example, the incumbents — BBC, ITV, Channel 4 and Channel 5 — now have a combined total of DTT 26 channels.

The numerous niche channels, beamed either on free or pay TV, altogether account for half of TV viewing. The fastest growing genres are sports (thanks to high-def), movies, light entertainment and kids’ channels.

For Hollywood, the key impact of Europe’s new TV scenario is that lucrative output deals, which the studios once relied on, are fading as generalist players tighten their belts, faced with the new distribution model and the economic crisis.

That is why Disney, Discovery, and other Stateside content companies have been accessing the European market directly by launching signature channels on DTT in several countries, integrating free programs with their premium offer on pay.

In February, Viacom chose Spain as the first country to launch Paramount Channel, a free-to-air, ad-supported movie channel. Disney Channel has been beaming on DTT in Spain since 2008.

“The key difference with the U.S. is that the U.S. cable system can rely on fees as well as advertising, while in Europe the DTT system is entirely advertising-supported,” says Nespega.

For paybox operators, Europe’s wide free multichannel DTT offer means they must boost their offer to more premium product like high-def, 3D, or exclusive events.

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