Northern Sky Research

UltraHD: An Ultra Growth Story

Jul 23rd, 2015 by Alan Crisp   More from this Analyst | Profile

Despite continuing concerns about OTT threatening the future growth of Linear TV (which are for the most part unwarranted), UltraHD, with its premium nature, is being seen as a fresh way to grow DTH, Cable and IPTV businesses further worldwide.

While 3DTV never really took off, UltraHD investment has risen to new highs, with seemingly every few weeks another DTH platform announcing its UltraHD intentions, trials, or commercial broadcast. Just last week Sky Deutschland secured more capacity in order to commence UltraHD broadcasts, and the Polish public broadcaster, TVP is trialling UltraHD on terrestrial television in Warsaw. Don’t be surprised to see more UltraHD announcements coming to a DTH platform near you.

According to NSR’s recently released Linear TV via Satellite: DTH, OTT & IPTV, 8th Edition, the number UltraHD channels broadcasting will accelerate longer term with growth of the new format in every region worldwide, developing and developed.

On DTH platforms, by 2024 NSR expects UltraHD linear content to consume approx. 70 transponders globally from 315+ UltraHD channels. This equates to an estimated additional $185M in leasing revenues from UltraHD content on DTH alone. This means in 2024, UltraHD represents 1.2% of capacity globally on Ku-band DTH – a niche market, but one which is highly sought after by the premium market.

For video distribution to Cable and IPTV headends, a similar trend emerges. 180 UltraHD channels on Ku-band and 75 channels on C-band, leading to a combined total of 57 transponders, roughly 4% of global distribution capacity on all bands attributed to UltraHD, leading to an even larger $219M in leasing revenues.

NSR previously noted that SD programming is the largest driver for subscribers, revenues, and channels in developing (high growth) regions. Whilst NSR sees SD to be the largest growth opportunity in these regions, UltraHD plays a key supplemental role at targeting those with increasingly higher levels of disposable income available. This is the view that DTH platforms in India took when they publicly announced their UltraHD plans, with sports content now available in the format, likewise with Tricolor TV in Russia when they are expected to launch their UltraHD channel in the next year.

On the other hand in developed regions, where subscriber growth remains low, and in the United States in some instances declining, UltraHD is poised to be a way to move customers from basic TV packages, primarily SD content, towards premium and ultra-premium services, thus increasing ARPU and revenue growth. KT SkyLife in Korea and Sky PerfecTV in Japan are already broadcasting 24 hours per day a variety of content on their linear streams. Both markets are already quite saturated with pay TV, but they intend for UltraHD to increase revenues from their existing subscriber bases.

UltraHD isn’t limited to the realm of Linear TV – in fact far from it.  The popularity of the format has already been demonstrated in North America and elsewhere with the success of the UltraHD subscriber base on Netflix, where not only is Netflix able to charger higher monthly fees for UltraHD access, but actually been successful in convincing customers to join this highest tier. Higher ARPUs from UltraHD content have already been demonstrated.

This combined with the fact that UltraHD TV sets are now lower in price than ever before, with Sharp now selling UltraHD TV sets for under $600, means that Linear TV will follow in the footsteps of OTT services and start broadcasting content soon in the new format.

Although these OTT services are cutting into viewing hours of traditional Linear TV content, it is NSR’s view that there remain very compelling reasons for consumers to continue subscribing and paying for Linear content – most notably movies, sports, and other live events. What’s notable is this is the exact type of content that is first being filmed in UltraHD – movies and sports. Without an UltraHD service in the medium-term, Linear TV may appear to be a lower quality service compared to OTT in regions that are offering UltraHD content. Thus implementing UltraHD for sports content adds yet another compelling reason for customers to sign-up and remain subscribers for pay TV services. With Netflix, YouTube and other OTT platforms already serving UltraHD content and consumer awareness and familiarity of UltraHD rising, consumers in developed regions will come to expect UltraHD content on their pay TV services, sooner rather than later. No wonder satellite operators are upping their investment for these high quality products.

Bottom Line

UltraHD programming is expected to see strong takeup rates globally, with fastest growth expected in North America and the weakest in Sub-Saharan Africa. Although SD content is driving growth in developing regions, providing UltraHD content is important to capture the higher levels of spending that some in these markets can afford. While the satellite capacity requirements over the long-term are a niche market, it is an important niche that will drive Linear TV platforms towards higher ARPUs and revenues. The upward trend for UltraHD is clearer than ever, and a failure to invest now will mean a failure to tap into its growing premium revenues.

NSR is experienced in strategic advisory and consulting efforts regarding linear TV and OTT growth across all regions, platforms and channel types, including UltraHD.  Please contact Christopher Baugh for more information.