Germany, the European Union’s economic powerhouse, is the continent’s most important television market thanks to the number of TV households. However, Germany has proved a very difficult case for premium television. In the other top five European markets (the UK, France, Italy and Spain) the penetration of premium television currently ranges between 15 and 41%. By contrast, Germany’s only significant premium TV operator, Premiere, has reached a penetration of only 8.5% as of year end 2004.
Cable operators, still hampered by regulatory issues, have just started to offer digital and premium television but so far the take-up has been disappointing. It will depend on the performance of Germany’s huge, largely undeveloped cable market whether the television market can catch up with its European neighbours in terms of subscription revenues.
Satellite TV
About 30% of Germany’s television households receive TV signals through satellite, a figure higher than in most other European markets. In France the total penetration of satellite television is 21%, while it is 19% in Italy and 17% in Spain. The problem for providers like Premiere is: the vast majority of Germans is unwilling to pay for premium television.
Free satellite television penetration currently stands at 26%, whilst Premiere’s premium satellite service has achieved a penetration of less than four% since it was launched in 1996. It is easy to understand why most Germans have so far refused to subscribe to a premium television service. A large number of free channels are available via satellite, enough to satisfy the average German’s demand for television. However, since Premiere is under new management, which took over after the collapse of the company’s former owner, the Kirch group, subscriber take-up has gone up and the future does not as bleak as a couple of years before.
Cable TV
Germany is home to the most complex and troubled cable market in Europe. At 58% of TV households, cable uptake is relatively high. But digital cable penetration currently stands at 0.15%, a figure that leaves Germany lagging behind all other major European markets. What’s more, cable subscribers pay only a relatively small fee for the television service, limiting the revenues of cable operators. The latter is typical for utility television models, which for long have been prevalent in Germany, the Benelux and Nordic countries. In a utility model cable operators mainly act as signal distributors, and broadcasters generally have to pay fees in order to get carriage. Different cable tiers and premium content packages were largely unknown in Germany outside of the small premium television world of Premiere.
The largely undeveloped German cable market and its supposed growth potential has constantly attracted the attention of the world’s most powerful investors and cable companies. When Deutsche Telekom was selling off its nine regional cable systems, Liberty Media made an impressive bid of 5.5 bln euros in 2002, but withdrew after objections brought forward by the German Cartel Office. The sale of all cable systems has been completed since, but for a much smaller price than once asked for by the former owner.
Kabel Deutschland is the country’s biggest cable operator, owning six of the former nine Deutsche Telekom cable systems serving about 10 mln customers. The remaining three regional cable systems are each operated by a different company. The fragmentation of the German cable market has certainly hampered the development of a healthy cable market with a modern infrastructure and appropriate premium services. Yet the biggest problem is the split of the German cable system into different levels. Whilst Level Three describes the trunk network owned and operated by the likes of Kabel Deutschland, Level Four is the last mile that links cable customers’ homes with the trunk network.
The different ownership of the Levels Three and Four?and insufficient cooperation between these parties and unresolved questions as to who should pay for any cable upgrades? have led to a standstill in the upgrade of cable systems. The low penetration of digital cable is the consequence of this situation. Meanwhile, both Level Three and Level Four operators have started offering digital packages, premium packages and cable Internet. But similar to the situation that satellite premium television operators have to deal with, many Germans will stick to the basic package of public and commercial channels they are used to watch, and premium television is likely to remain a tough sell.
Digital terrestrial television (DTT)
Free DTT launched in 2003 and has proved relatively successful, considering that less than five% of the population makes use of terrestrial transmission for television reception. After encouraging results in Berlin, where the analogue signal has since been switched off, DTT is now available in a large number of regions. With more than one mln DTT users by end 2004, the penetration currently stands at 2.7% of all television households. DTT has been subsidised by the local media authorities, which helped to set up the technical infrastructure. With up to 28 channels available and settop boxes retailing at ever-falling prices, DTT has now become an alternative to cable and satellite television. And although under five% of television households are using terrestrial signals, a higher proportion of households could use their redundant rooftop antennae to get DTT.
Internet Protocol television (IPTV)
IPTV certainly has been one of the buzzwords of 2004. Although at the moment there is only one example of a commercially viable IPTV service (Italy’s Fastweb) in almost every European market, pay TV operators or/and Telcos have got involved in IPTV projects. In contrast to Fastweb and other significant IPTV services, like France Telecom’s MaLigneTV, there is no broadcasting service via IP networks in Germany. Deutsche Telekom offers T-Online Vision, which is a video-on-demand (VoD) service. Chiefly because of the non-availability of affordable set-top boxes, and perhaps the lack of television channels to complete the offer, the service has not proved very successful. As of year end 2004, IPTV penetration stood at a mere 0.03%.
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Germany television market overview | |||||
| 2000 | 2001 | 2002 | 2003 | 2004 | |
| population, 000s | 82,193 | 82,263 | 82,526 | 82,789 | 83,053 |
| households, 000s | 37,853 | 38,061 | 38,428 | 38,793 | 39,163 |
| TV households, 000s | 37,096 | 37,338 | 37,660 | 38,017 | 38,379 |
| digital cable penetration % |
0.00 | 0.02 | 0.02 | 0.06 | 0.15 |
| analogue cable penetration % |
59.57 | 59.17 | 58.80 | 58.34 | 57.69 |
| total cable penetration % | 59.58 | 59.19 | 58.82 | 58.39 | 57.84 |
| analogue DTH penetration (pay) % |
0.54 | 0.35 | 0.11 | 0.00 | 0.00 |
| digital DTH penetration (pay) % |
1.83 | 2.23 | 3.06 | 3.52 | 3.89 |
| DTH penetration (pay) % |
2.37 | 2.58 | 3.17 | 3.52 | 3.89 |
| analogue DTH penetration (free) % |
26.65 | 26.48 | 26.25 | 26.01 | 25.76 |
| digital DTH penetration (free) % |
0.16 | 0.16 | 0.16 | 0.16 | 0.16 |
| DTH penetration (free) % | 26.81 | 26.64 | 26.41 | 26.16 | 25.92 |
| DTH (total) % | 29.19 | 29.22 | 29.58 | 29.68 | 29.81 |
| DTT penetration (pay) % | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| DTT penetration (free) % | 0.08 | 0.53 | 2.72 | ||
| DTT penetration (total) % | 0.00 | 0.00 | 0.08 | 0.53 | 2.72 |
| total analogue terrestrial penetration (pay) % |
0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| IPTV penetration % | 0.00 | 0.00 | 0.00 | 0.00 | 0.03 |
| total analogue pay TV penetration % |
60.11 | 59.52 | 58.90 | 58.34 | 57.69 |
| total digital pay TV penetration % |
1.83 | 2.25 | 3.08 | 3.58 | 4.07 |
| pay TV penetration % | 61.95 | 61.77 | 61.99 | 61.92 | 61.76 |
| total digital TV penetration (pay and free) % |
1.99 | 2.41 | 3.32 | 4.26 | 6.95 |
| Source: Screen Digest | |||||