CHAPTER TWO
By the end of March 1999, pay TV had gained over 959 000 subscribers, representing nearly 15 per cent of all households. This chapter provides a brief overview of pay TV in Australia.
MORE CHOICE AND DIVERSITY
Pay TV offers viewers more choice and variety. It is also progressively transforming television from a mass medium to one catering to the diversity of viewers' interests and tastes.
Prior to the introduction of pay TV, most Australians received five FTA channels -- the three commercial networks (Channels 7, 9 and 10) and two government-owned channels (ABC and SBS). By early 1999, the number of channels and choice of programming had increased substantially, with nearly 50 additional channels -- a ninefold increase in the number of channels.
Pay TV leads to more diversity because it has greater capacity to carry channels, thus removing the distribution bottleneck. Pay TV operators are able to offer a large number of channels and to package programmes into channels which cater for specific tastes and interests. Thus, instead of one general FTA channel offering a mix of sport, news, current affairs, movies and entertainment, specialist channels are offered dedicated to one type of programming such as movies, sport, children's, music, comedy, nature documentaries, news, lifestyle and many other genres (Table 2.1).
As the sector develops, other ways of packaging and pricing video entertainment will be introduced. Digital television, which has been introduced in Europe, will result in hundreds of channels offering services such as video on demand, individual programmes sold on a pay-per-view (PPV) basis, interactive television, and the bundling of video, telephone, Internet and information services. PPV, for example, exists in Australia but has so far been restricted to major events such as sports finals, major boxing championships, wrestling and other popular events such as concerts.
This increase in diversity and different formatting of channels is related to the funding of pay TV. As will be discussed in greater detail in Chapter 4, pay TV alters the nature of television by creating a market in programmes. The direct contractual link between viewers (subscribers) and broadcasters provides an incentive for the operators to cater for the diversity of viewers' tastes and preferences. This contrasts to the commercial FTA, whose primary commercial goal is to provide audiences to advertisers.
PACKAGING AND PRICING
Pay TV is usually packaged and priced in tiers or bundles of channels. In Australia, the basic tier or package consists of between 15 and 30 channels, depending on the operator, at monthly subscriptions ranging between $14.95 and $56.95 (Table 2.2). In addition, other tiers, add-ons and premium channels (mainly movie, sports and foreign language channels) are available for an additional charge.
Table 2.1: Pay TV Channels by Operator as at May 1999
| Channel | Tiering of Channels | ||
| Austar (Satellite) | FOXTEL (Cable) | Optus Vision (Cable) | |
| Adults only | Add on | Add on | Add on |
| Arena | Basic | Basic | |
| BBC World | Basic | Basic | |
| Bloomberg Television | Basic | ||
| C7 Sports 1 | Tier | Tier | |
| C7 Sports 2 | Tier | Tier | |
| Cartoon Network | Basic | Basic | Basic |
| Christian TV | Basic | ||
| Channel [V] | Basic | Basic | |
| CMT | Basic | Basic | Basic |
| CNBC Asia | Basic | Basic | Basic |
| CNNI | Basic | Basic | Basic |
| Discovery Channel | Basic | Basic | |
| Disney Channel | Basic | ||
| Encore | Tier | Basic | |
| ESPN | Tier | Tier | |
| FOX 8 | Tier | Basic | |
| Fox | News | Basic | |
| Fox Sports | Basic | Basic | |
| Fox Sports 2 | Basic | Basic | |
| FOXTEL Weather | Basic | ||
| FX /FX Movies | Tier | Tier | |
| Hallmark | Tier | Tier | |
| Horizon | Basic | ||
| MainEvent (PPV) | Add on | Add on | Add on |
| Movie Extra | Tier | Tier | |
| Movie Greats | Tier | Tier | |
| Movie One | Tier | Tier | |
| MTV | Basic | ||
| National Geographic | Basic | Basic | |
| Nickelodeon | Basic | Basic | |
| Odyssey | Basic | ||
| Ovation | Basic | ||
| Showtime | Tier | Basic | |
| Sky News Australia | Basic | Basic | |
| Sky Racing | Basic | Basic | Basic |
| The Comedy Channel | Basic | Tier | |
| The History Channel/FOX Kids Network | Tier | ||
| The Lifestyle Channel | Basic | Basic | |
| TNT | Basic | Basic | Basic |
| TV1 | Basic | Basic | |
| TVSN | Basic | Basic | Basic |
| UKTV | Tier | Basic | |
| Weather 21 | Basic | ||
| Weather Vision | Basic | ||
| World Movies | Add on | Add on | Add on |
| NHK (Japanese) | Add on | ||
| Antenna (Greek) | Add on | Add on | |
| GATV (Greek) | Add on | ||
| Mega Australia (Greek) | Add on | ||
| RAI International (Italian) | Add on | Add on | |
| ART (Arabic) | Add on | ||
| LBC (Lebanese) | Add on | ||
| CCTV & TVBJ (Cantonese & Mandarin) | Add on | ||
Table 2.2: Pay TV Packages and Prices, May 1999
| Delivery | Operator | Basic Package | Additional Tiers | No. of channels (whole package) | Add-ons | |
| Channels | Price $ p.m. | |||||
| MDS and/or DTH | Austar | 14 | 31.95 | Movie Network (3 Channels) Showtime and Encore | 19 | World Movies $6.95 Adults Only $6.95 per night |
| FOXTEL | 21 | 56.95 | Entertainment Plus (4 Channels) | 25 | World Movies $6.95 | |
| Austar | 18 | 35.95 | Movie Network Showtime and Encore C7 Sports 1 & 2, ESPN Hallmark, UKTV Fox 8, FX | 30 | Adults only $14.95 | |
| Cable | FOXTEL | 30 | 42.95 | Entertainment Plus | 34 | Antenna/RAI $19.95 Adults Only $14.95 World Movies $6.95 PPV $19.95–$49.95 |
| Optus Vision | 15 | 14.95 | Deluxe (6 Movie and Sports Channels) | 21 | Adults Only $13.95–$19.95 Japanese $25.00 Languages $20.00 each PPV $19.95–$49.95 World Movies $6.95 | |
Source: Operators
DELIVERY
Pay TV is delivered by different technologies or "platforms", as they are often called. At present three platforms are used: terrestrial microwave transmitters (Multipoint Distribution System, MDS), Direct-to-Home (DTH) satellite, and broadband cable networks. The majority of subscribers (61 per cent) receive pay TV via the two broadband cable networks built by Telstra and C&W Optus respectively. This is double the share receiving satellite pay TV (about 28 per cent), with MDS much lower and losing share at 9 per cent (Table 2.3). Of the 594 000 cable subscribers at March 1999, 385 000 received the FOXTEL programme packages, representing a take-up of 15 per cent of homes passed by Telstra's broadband network. Optus Vision programming is carried by C&W Optus's broadband network which at March 1999 had a take-up of 10 per cent of homes passed. The aggregate cable pay TV penetration is about 20 per cent of all homes passed.
Table 2.3: Pay TV Subscribers and Penetration by Operators,
31 March 1999
| Delivery | Operator | Subscribers | Share | Homes passed | Penetration | |
| MDS | Austar* | Total | 93,000 93,000 | 9.6% | 2,000,000 | 4.6% |
| DTH | Austar* FOXTEL | Total | 217,000 55,000 272,000 | 28.0% | 6,500,000 | 4.2% |
| Cable | FOXTEL Optus Vision | Total | 385,000 209,000 594,000 | 61.3% | 3,000,000** | 19.8% |
| All | 959,000 | 14.8% |
* Industry estimate based on 30%/70% split between MDS and DTH.
** Industry estimate based on 80% Telstra/Optus cable overlap.
In order to receive pay TV, subscribers require new reception equipment. This consists of a dish antenna in the case of satellite reception and, for all platforms, an integrated receiving decoder (IRD), often called a "decoder" or "settop box". The decoder sits on or near the television set and receives the encrypted video channels. This requires a conditional access system (CAS), and a separate billing and subscriber management system (SMS). CAS is a system which operates in much the same way as an electronic turnstile, allowing those who have paid to view pay TV channels, and those who have not to see only a distorted picture. The key that unlocks the decoders currently takes the form of a smartcard. Authorised subscribers access programmes through a smartcard which contains algorithms enabling different bundles of programmes to be decoded and viewed, depending on the number of tiers which the subscriber has purchased. In the future, television sets may contain the necessary electronics to remove the need for decoders and smartcards, and will be directly addressable by the pay TV operator.
THE OPERATORS
Pay TV is supplied by three main operators -- FOXTEL and Optus Vision in metropolitan areas and Austar in regional centres -- and several smaller regional operators. FOXTEL is a partnership between Telstra, News and PBL to supply pay TV on Telstra Multimedia's broadband network. Optus Vision is a wholly-owned subsidiary of C&W Optus providing pay TV on C&W Optus's broadband network.
FOXTEL is the largest operator with 45 per cent of all subscribers, followed by Austar (32 per cent) and Optus Vision (22 per cent) (Figure 2.1 and Figure 2.2). FOXTEL and Optus Vision are cable operators; recently the former has entered satellite pay TV delivery as well. Austar, on the other hand, uses a combination of satellite and MDS delivery, and cable in Darwin.
Figure 2.1: Operators' Share of Pay TV Subscribers, 31 December 1998
Figure 2.2: Pay TV Subscribers by Operator, 1995–98
* Includes ECTV from September 1998
Source: FOXTEL
As can be seen from Figures 2.1 and 2.2, the industry has rationalised as some operators have floundered. Since 1995, Australis has gone into receivership and Austar has purchased ECTV. It is the declining fortunes of Australis that form the principal focus of this book.
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