Pay DTT set to grow from low base

Pay services over digital terrestrial (DTT) networks are benefiting from the OTT phenomenon which has generated a growing appetite for pay TV Lite. It has created an admittedly modest niche for existing FTA (Free to Air) commercial TV services to add a paid option for some premium channels, or for pay TV operators to come in with flexible bundles at lower prices comprising just what individuals want to watch.

This field barely existed a decade ago but has emerged on the back of digitization, particularly in some relatively developing markets, such as Eastern Europe and parts of Asia Pacific. The infrastructure is ready and well proven, without imposing the same barrier to entry as DTH, requiring just aerials rather than satellite dishes which can be an impediment, especially for some multi-dwelling units (MDUs) in urban areas.

Before OTT, TV viewers came in one of two camps, those willing to pay and those not. There is now a substantial third category comprising people prepared to pay smaller amounts for access to some of their favorite content, often not including premium live sports. They are unwilling to fork out for bloated packages comprising a lot of content they do not need.

Now it can be argued that Netflix, Amazon and HBO also offer far more content than any individual wants to watch, but being on demand and at a keen price, this is invisible to the consumer, providing search and recommendation work effectively. The same opportunity is open to traditional operators who can pose as aggregators. DTT can give those that are not broadband providers a route to the consumer here, or else can extend reach beyond their existing footprint.

For these reasons, pay DTT is still growing globally and set to continue doing so over the next five years, even though it will be dwarfed not just by the other pay TV distribution options but also commercial FTA DTT from traditional broadcasters. There will also though be some cases where DTT is combined with OTT in hybrid pay services, as in the UK with BT and TalkTalk, where admittedly the DTT component only delivers the FTA channels.

Comcast’s Sky has also taken to pay DTT in Europe, having originally launched a hybrid DTT/OTT box for its Now TV service in the UK. Sky has enjoyed greater success with DTT in Italy after collaborating with the broadcaster Mediaset to develop a combined DTT offering. Under this deal Sky purchased Mediaset’s pay TV platform and R2, the underlying technical infrastructure. This prompted an investigation in March 2019 by Italy’s antitrust watchdog AGCM, concerned over “the possible competitive effects of the acquisition by Sky, the dominant operator in the pay TV market, of R2, Mediaset Premium’s digital terrestrial technical platform which in the past was substantially Sky’s only competitor in that market.” The success of Sky’s pay DTT adventure in Italy rests partly on the outcome of that investigation.

Another example in Western Europe comes from M7 Group’s Belgian subsidiary TV Vlaanderen covering Flanders and Brussels with a pay DTT option launched in 2017.

Meanwhile, pay DTT is enjoying a spike in Eastern Europe as a result of analog shut-off having been completed with a corresponding rise in DTT penetration, reaching almost 30% of homes in the region, about 40 million. While the vast majority of these are on FTA, over 500,000 are pay DTT and rising, with recently introduced new services in several countries including Hungary, Slovenia, Georgia, Bosnia-Herzegovina and Czech Republic. For example, the Hungarian regulator NMHH recently confirmed that there are now 47 pay TV channels distributed over one of five DVB-T networks operating between 470-790 MHz in the UHF band.

The other region where pay DTT has been marking a mark is the Far East. The Asia Video Industry Association (AVIA) has counted 189.5 million FTA DTT households, with Japan leading on 52.5 million. It reports pay DTT in several countries of SE Asia, including Indonesia and Vietnam, accounting for about 0.25% of the region’s pay TV base or 450,000 subscribers. While AVIA does not anticipate any great take off, it sees pay DTT expanding slightly.