The Philippines in View

(1)

The Philippines in View

Executive Summary

(2)

1 Executive

Summary

1.1 |

A

DTH

Shake

‐

up?

Despite the global economic crisis and the many

structural problems faced by the Philippines

economy, the pay‐TV market should see an overall

market expansion of around 5% this year ahead of a

2.5‐3.5% growth for the economy as whole.

Indeed, the Philippine pay‐TV industry should expect

some modest increase in revenue over the next few

years but piracy, lack of legislative reforms and

economics will restrict the pace of growth. Major

urban centers where there is critical mass are the

main focus for investors.

With a population of 92 million (18.26 million

households), GDP per person stands at US$1,866,

just below Mongolia and Sri Lanka, and just above

Pakistan and Vietnam.

The number of TV households stands at 13.5 million.

By far the highest penetration of pay‐TV households

is in Metro Manila (population 14 million) where

27% of homes passed by a cable service view

subscription TV services.

Nationally, 51% of the population is under the age of

25 and more than half live in urban areas. Mobile

teledensity stands at 73 million subscribers, with

fixed line subscribers at 4 million households. Almost

all TV households have colour television. Broadband

penetration stands at 4%.

Thus the legitimate pay‐TV market has been slow to

grow with an estimated 1.5 million and 100,000

cable TV and DTH subscribers respectively.

A key factor holding back national growth remains

poverty – the World Bank estimates 40% of the

population lives on less than US$2 a day or US$60

per month.

Source: Synovate Media Atlas Q108‐Q408

0 5 10 15 20 25 30 35 Below P7,500 P8,000 ‐ 9,999 P10,000 ‐ 14,999 P15,000 ‐ 24,999 P25,000 ‐ 59, 999 P60,000+

The

Philippines:

Subscribers

by

Monthly

Household

Income

(3)

Source: Synovate Media Atlas Q108 – Q408

But other factors restraining the growth of

subscription TV have been the overbuilding of cable

systems (multiple operators competing solely on

price within franchise areas) and a lack of

enforcement of an already weak intellectual

property rights regime (signal theft).

The weak regulatory environment has led to either

outright piracy by commercial entities or endemic

under‐reporting of subscriber numbers by licensed

operators. Both issues are major problems for

legitimate domestic operators and the suppliers of

international programming (the bulk of cable

content) alike.

However, the gradual deployment of digital systems

should create greater transparency of subscriber

numbers, permit an increase in ARPU as more

premium tiers are rolled out and make individual

line‐tapping more difficult.

Meanwhile, the deployment of new DTH platforms

may energise the nationwide market, buoyed by the

fact that MediaQuest, the media partner of telco

behemoth Philippines Long Distance Telephone

Company (PLDT), has recently joined the DTH fray

through Cignal TV.

1.2 |

Cable

TV

Services

Currently, there are some 700 CATV systems under

management (out of 1,500 entities holding cable

licenses from the National Telecommunications

Commission) that provide a broad range of services,

from basic tier analogue delivery to broadband

internet and even Pay Per View services.

The majority of cable TV subscription rates remain

low thanks to the high level of poverty even where

there is critical mass in areas such as Metro Manila,

Cebu, Davao City and Baguio. This leaves much room

for further growth. Monthly cable subscriber rates

vary from P250‐300 (US$5.65‐$6.40) in the provinces

to P1000 (US$22.60) in the upscale areas of Manila.

The dominant cable player is SkyCable, accounting

for an estimated one third of national cable

penetration if we include partial investments in

subsidiaries such as Home Cable and Sun Cable in

Cebu, Davao City and Baguio.

SkyCable, which launched in the late 1980s, is owned

and operated by the Lopez Group, which also owns

and operates ABS‐CBN, one of three dominant free

to air broadcasting networks.

The Lopez Group and its related Benpres Holdings

until recently held a firm grip on the Manila Electric

Company (Meralco), the biggest power company in

the country with management of a significant

percentage of the electricity poles in Metro Manila

(used for electricity and cable TV distribution) and

nearby suburbs and provinces. Through its First

Philippine Holdings and Benpres units, the Lopez

Group controls a 13.4% stake, while the First Pacific

group, through national telco PLDT and Metro Pacific

Investments, owns 34.7%. 0 5 10 15 20 25 30 35

Any Subscription _{TV SkyCable} _Destiny

Home Cable _Others

The

Philippines:

Subscribers

by

Operator

(4)

The SkyCable system has now digitized around 90%

of its network in Metro Manila enabling it to better

control individual households illegally tapping into

its network, among other advantages.

Other MSO style operators include Global Destiny

Cable, Cable Link, Central CATV and Pacific CATV.

1.3 |

DTH

Services

A major shake‐up of the Philippines pay‐TV market

could be in the offing, as new investment comes on‐

line from MediaQuest, which in July 2009 launched

its Cignal TV DTH platform. The Cignal TV platform is

distributed via Ku‐band transponders on the NSS‐11

satellite.

Cignal TV offers 22 Standard Definition channels, of

which 11 are free‐to‐air, plus a bouquet HDTV and

VOD channels.

The MediaQuest DTH offering may be strengthened

by the recent purchase of a stake in ABC

Development which operates the country's third‐

largest free to air network TV5 (formerly ABC‐5) and

holds a 100% stake in Primedia, which in turn is a

programme producer and air‐time wholesaler. TV5

currently ranks third in the Philippines after the

Lopez Group’s ABS‐CBN and GMA Network.

MediaQuest’s other investments include a 30% stake

in business newspaper BusinessWorld and a 51%

interest in Nation Broadcasting. In July 2007 it also

acquired licensed DTH firm GV Broadcasting

Systems, which later changed its name to

Mediascape. The related MediaQuest also has a

minority stake in The Philippine Star newspaper.

Another relatively new entrant to the DTH market is

G‐SAT, which is owned by Global Broadcasting and

Multimedia (GBMI), a joint venture between cable

operator Global Destiny Cable and the Tieng family’s

Solar Group. The Solar Group holds rights to sports,

film and TV distribution, production and broadcast

divisions. It controls several free‐to‐air and CATV

channels, including ETC, 2nd Avenue, Basketball TV,

Solar Sports and CS9.

The third DTH provider is Dream Satellite TV, which

claims around 45,000 subscribers. Owned by the

Cojuangco family and operating from the Agila‐2

satellite, the Dream platform comprises some 30

channels, many of which have been available

regionally via unauthorised IRDs.

1.4 |

Pay

‐

TV

Content

Wholesalers

Two competing organisations dominate the

wholesale distribution of pay‐TV content in the

Philippines, Cable Boss and ACCION. Cable Boss, its

affiliate Omnicontent Management, and ACCION

represent almost all of the major international

channel brands such as HBO Asia, CNN, Discovery,

ESPN and Fox International Channels for sales of

international cable TV programming. (Contracts with

SkyCable are negotiated directly by programmers.)

Source: Nielsen Audience Measurement Q109 – Q209

0 20 40 60 80 100 120

All Youth Upmarket Kids Men Women

37 36 38 42 40 ₃₄

63 64 62 58 60 ₆₇

The

Philippines:

Share

of

Viewing

in

Subscription

TV

Homes

(5)

1.5 |

Fixed

broadband,

Mobile

and

Internet

Fixed broadband penetration in the Philippines

stands at 4% of households with PLDT controlling

63% of the DSL market. PLDT also leads the mobile

broadband market through Smart Communications

which has 700,000 subscribers.

PLDT had 1.2 million broadband subscribers at the

end of June 2009 while nearest rival Globe Telecom

had 379,308 with smaller players BayanTel (Benpres)

and Sun Cellular a distant third and fourth.

The NTC announced in June last year it would issue

new rules to liberalize the broadband industry to

spur universal access by 2010.

Under the government’s Medium Term Philippine

Development Plan, all municipalities should have

100% access to broadband by 2010. However, the

plan is seriously delayed and a long‐time off

becoming a reality.

Meanwhile, PLDT’s Smart Communications had 35.3

million mobile subscribers at the end of 2008. Globe

Telecom (45% owned by SingTel and 34% by the

local Ayala group) had 25 million mobile customers.

1.6 |

Digital

Transition

The transition from analogue to digital terrestrial

television (DTT) has moved slowly with the migration

deadline now extended to 2015. The NTC is said to

be in favor of the European Digital Video Broadcast

Terrestrial (DVB‐T) as the preferred platform for

DTT.

The US‐based Advanced Television Systems (ATS)

and Japan’s Integrated Services Digital Broadcast

(ISDB) technical standards are also being considered

but most of the industry favors the European

platform.

ASEAN has already adopted the European standard.

A number of players have already started testing the

European platform including the country’s two

biggest television networks ‐ ABS‐CBN and GMA7 ‐

and Smart has tested DVB‐H for mobile TV.

Meanwhile, the technical standard for digital pay‐TV

services seems to have been settled as DVB.

1.7 |

Regulatory

Environment

Politics plays a significant part in the pay‐TV

regulatory environment within the Philippines and

there is not expected to be significant movement on

this front until well after early May’s presidential

election.

The late president Corazon Aquino signed an order

in June 1987 regulating the operation of cable

antenna television (CATV) systems in the Philippines.

In the meantime, a bill to regulate the pay‐TV

industry (the Convergence Bill) has been stalled in

the House of Representatives for 10 years. Under

the current constitution, cable TV is defined as

"Media" and is thus barred from any foreign

investment. Passage of the draft Convergence Bill

would open pay‐TV infrastructure up for a level of

Foreign Direct Investment (FDI), at least.

At present, industry infrastructure regulation is

covered by the NTC whose composition is influenced

largely by major operators and political leaders. The

NTC, much of whose agenda is driven by traditional

telecoms issues, has had four commissioners in two

years, apparently largely due to lobbying related to

the Digital TV standard as well as telco issues.

Intellectual property rights enforcement for the pay‐

TV sector remains weak despite a 2006

Memorandum of Agreement signed between the

NTC and the Intellectual Property Office (IPO) to

cooperate fully on issues pertaining to pay‐TV piracy.

In theory, the IPO is mandated to process piracy

complaints and pass them to the NTC for action

against infringing operators. In practice this has yet

to deliver a decisive decision in favour of the rights

holders.

The criminal justice system for copyright issues

within the Philippines remains frozen and, despite

complaints filed by industry groups on behalf of

content owners, has yet to deliver a decisive result.

The Movie and Television Review and Classification

Board (MTRCB) is mandated to have oversight of

content issues but is largely passive within the pay‐

TV sector.

(6)

ABOUT

CASBAA

The

Cable

&

Satellite

Broadcasting

Association

of

Asia

(CASBAA)

is

dedicated

to

the

promotion

of

multi

‐

channel

television

via

cable,

satellite,

broadband

and

wireless

video

networks

across

the

Asia

‐

Pacific.

CASBAA

represents

some

130 Asia

‐

based

corporations,

which

in

turn

serve

more

than

3 billion

people.

Among

the

highest

priorities

for

CASBAA

are

the

promotion

of

free

and

fair

markets

and

the

protection

of

intellectual

property

rights,

as

well

as

the

development

of

thriving

and

competitive

domestic

communications

industries.

The

Association

is

also

dedicated

to

the

development

of

regulatory

best

practices

which

assist

the

interests

of

both

domestic

and

international

participants

within

the

multi

‐

channel

and

communication

communities.

CASBAA

undertakes

a

number

of

initiatives

including

the

pursuit

of

copyright

enforcement,

promotion

of

cable

and

satellite

as

a

key

advertising

medium,

lobbying

activities,

the

promotion

of

regional

technical

standards,

regulatory

roundtables,

and

educational

seminars.

stated, and no part thereof may be reproduced or replicated without prior explicit and written permission.