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Introduction

INTRODUCTION. Television industry is experiencing significant growth in the UK. During the past decade it went through some major changes, that have reshaped the whole picture in the industry. These changes will most certainly continue in future. There are a number of questions that are important to answer, such as where all these changes will lead to? Will they make the industry more profitable or will they cause losses? Which companies will more likely fall into each of these categories? Is the industry worth investing? Can it bring any good return on the investments made today? If it can, then where in particular and in what particular way these investments should be made? The authors of this report aim to analyze the current situation in the UK TV industry and suggest the forecast for its future, taking into account the various trends of development, present today in the industry. A significant part of this report is devoted to the overview of the industry and SWOT analyses of the main companies and industry sectors. This kind of analysis gives an extensive information about the current situation in the industry as it provides a detailed list of the strengths and weaknesses of the main companies. It also outlines their opportunities and threats, which gives the base for the future forecast. The information found in the SWOT analyses is summed up in the sections: "The current situation in the UK TV industry" and "The main trends in the UK TV industry". The report moves on to forecasting the future and on the basis of its findings gives recommendations to an investment bank. THE PAST GROWTH AND THE FORECAST FOR THE FUTURE. The UK television is experiencing a period of significant change with continuing developments in broadcasting via cable satellite and digital terrestrial platform. According to the information, presented in the Key Note 2002 report on cable and satellite broadcasting in the UK, in nominal revenue terms, the total UK television market grew from �4.21bn. ...read more.

Middle

- - - - Though DTT service is cheaper, than that of satellite and cable broadcasters, the difference is not big. Monthly license fee is approximately �9.7. For just �12.50 a month you can subscribe for BSkyB - package, which includes 102 channels, including some 90 free-to-air channels. This package will also offer some interactive services and a very high quality picture. Opportunities: - The only opportunity for DTT is the extension of market. But it is very doubtful that the digital terrestrial television will be able to withstand the competition from cable and satellite operators, due to the weaknesses, described earlier and the threats (see next paragraph). Threats: - The increasing popularity of interactive services presents a big threat for DTT, as most subscribers will go for BSkyB or NTL and Telewest packages. - The fragmentation of advertising market means less advertising revenues for Channel Four, Film Four, Five, etc. - The increasing competition from satellite and cable operators. - The increasing quality and versatility of the content offered by the cable and satellite operators. The UK television content providers. Channel Owner Share Sky One UK Gold Sky Sports 1 ITV 2 CBeeBies UK Style Sky Sports 2 Nickelodeon Hallmark Sky Premier 1 BSkyB UKTV+ BSkyB Carlton (44%), Granada (56%) BBC UKTV+ BSkyB BSkyB (50%), Viacom (50%) Crown Entertainment Ltd. Sky 2.8% 2.5% 2.1% 1.8% 1.2% 1.2% 1.0% 1.0% 0.9% 0.9% Table 1. UK Multichannel TV: Most popular channels. Adopted from ITC the UK television market overview September 2003. The largest content provider in the UK television industry is currently BBC. The second position is occupied by Granada and the third - by Carlton. The upcoming merger between Granada and Carlton will reshape the current situation in the UK TV content production market. BBC and ITV plc. (the new merged company) will occupy about 65% of the total turnover of the UK program supply market, with BBC and ITV plc. ...read more.

Conclusion

This will continue until the cable operators won't become less reliant on BSkyB for the content. This may result from the cooperation between cable operators and ITV plc. - There will be even more consolidation of the industry, especially in the independent production sector, which will start experiencing hard times. RECOMMENDATIONS FOR AN INVESTMENT BANK. The current situation in the industry leaves no place for the new entrants in nether of the industry sectors. The content distribution sector is dominated by just three strongly established companies BSkyB, NTL and Telewest. It could be possible to invest in some new business in the independent production sector, but the future situation in this sector doesn't look optimistic. Moreover this kind of business will doubtly be successful as it is almost impossible to find a new niche in it. There are almost 400 different channels available in the UK, which present an extremely versatile content. It is only possible to profitably invest in existing companies. The investment in the independent production sector is unlikely to bring any profit. The companies, that will most certainly be profitable in future are BSkyB, NTL, Telewest and ITV plc. Investing in BSkyB is more likely to bring profits in the short term (i.e. within the next 3 to 5 years). Other companies are unlikely to bring high return in this period. However they will bring high returns in the long-term (i.e. 10 years), as they will most certainly outrun BSkyB by 2013. ITV plc. is more likely to bring higher profits, comparing with that of NTL and Telewest, as the UK cable operators have very large debts, which means that they will have to cover them when they start receiving profits Thus the companies, that are worth investment are BSkyB and ITV plc.. The average brokerage recommendation on the shares of BSkyB, Carlton, Granada and Telewest (NTL is not included as it is a limited company) is moderated buy, hold, hold and moderate sell respectively. In order to reduce risk it would be sensible to make a portfolio investment in both the companies. ...read more.

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