January/February 2011
Volume 31 No. 1

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The Change In Spain Is Mainly On The Air

Raffaele Annechino, senior vice president and general manager, MTV Iberia, expressed his belief that, “Spain is currently one of the most interesting, if not the most interesting, broadcast markets in the world. This,” he explained, “Is because all of the changes that are happening in the rest of the world have [already] happened in Spain [and] in a very short time.”

One significant change is the switching off, last April, of the analog signal. Although, as David Esquinas, Research and Strategic Resources director at Spanish ad agency Optimedia pointed out, even though “The final move to digital was made in April, this is a process

esquinasthat has been ongoing since 2008.” He added that, “the effect this year has been really dramatic: The market share taken by niche digital channels had risen by the end of October to 21.4 percent, compared with 11.5 percent in October ’09.” Of course, this has meant a corresponding drop in market share for the previously dominant state broadcaster TVE, which Annechino estimated, “has fallen from a market share of around 26 percent to a new level of between 10 percent and 12 percent, as the market moved from having five national broadcasters to its current level of 32.”

All the terrestrial broadcasters, not just TVE, have lost share, something which has led commercial broadcaster Antena 3 to introduce a policy under which an advertiser wishing to buy a particular spot on their main channel had to buy the same slot across all their niche channels, prompting Tele5 to introduce a similar policy.

TVE is also at the heart of another major change to the Spanish broadcast market, as all advertising was removed from it, and all its digital channels such as kids offering Clan TV, sports channel Teledeporte and international channel 24 H, last January.

The impact of this move is underscored by the fact that, prior to the ban coming into effect, TVE and its channels accounted for 23 percent of the total television advertising market in Spain. Now, some of this ad revenue appears to have vanished. Optimedia’s Esquinas estimated that only about 19 percent had been moved to other channels.

Another issue raised by the TVE ad ban is a tax the government imposed on telco operators to fund TVE. Set at 0.9 percent of total telco revenue, the tax represents around 250 million euro, ($335 million) or just under half the planned state subsidy for 2011 of 547 million euro ($735 million). This action has sparked both legal proceedings by the E.U. against the Spanish government, and an offer from the Spanish Advertisers Association, to pay the 250 million euro conditional on a moratorium which would see advertising return to TVE for an unspecified period but, possibly, until 2016 in line with the decision of the French government to postpone the removal of advertising from its public channels from 2011 to 2016.

Market consolidation is also well under way, bringing more significant changes to Tele5, which is owned by Italian media group Mediaset. Marco Giordani, CEO of Mediaset’s broadcasting arm, RTI, and CFO of Mediaset, confirmed to VideoAge in November 2010 that Tele5 had acquired rival commercial broadcaster Cuatro. The deal, which sees Tele5 grab 100 percent of Cuatro and 22 percent of its Digital+, cost the company 488 million euro ($655 million) and 18 percent of Tele5 equity. This move has revitalized Antena’s on and off talks with broadcaster La Sexta. A spokesperson for Antena owners D’Agostini confirmed to VideoAge in early December that talks were back on again now that Tele5 is out of the picture as a competing buyer.

“If that [remaining] merger goes ahead,” said Esquinas, “it will mean that around 90 percent of the Spanish television advertising market will be in the hands of just two groups. This will create a situation in which audiences are fragmenting, but the cost of airtime is rising.”

Despite all, Esquinas was sanguine as to the future of television advertising in Spain. “Television still has a massive appeal for the Spanish people,” he asserted, revealing, “Last year it accounted for 42 percent of total Spanish advertising spend, and this is because it is still possible to reach almost 90 percent of the population in one day advertising on television.” Nor did he see television’s dominance of the Spanish advertising market slipping, predicting that in 2012, “Television will still have around 41 percent of the market and the Internet between 15 percent and 17 percent.”

But some broadcasters are in trouble. Regional channels, such as TV3 Catalunya and ETB in the Basque region, collectively reported 2009 advertising income of 237 million euro ($318 million), representing a drop of 25.6 percent from the 2008 figure of 319 million euro ($425 million). Worse, a recent study for Deloitte, commissioned by The Commercial Television Union put the combined running costs of the regionals at 1.9 billion euro ($2.6 billion). Given the severe nature of the Spanish economic downturn — which is on a par with Greece and Ireland — it must be questionable how long the national government will be able to continue to support subsidy on this scale.

But, regional broadcasters aside, there are plenty of reasons to support Esquinas’ confidence in the future of the Spanish television industry. Leading telco Telefonica announced that it finished Q3 with a total of 773,000 subscribers to its Pay service Movistar Imagenio, representing an 18.2 percent climb from Q3 2009. This represents a substantial earnings growth as Spain is one of the most expensive countries in Europe for Pay-TV with the average cost of a basic package standing at 94.39 euro ($125) per month compared, for example, with 47.90 euro ($67) in France. Profits to the end of Q3 at Telefonica increased six percent to 44.28 million euro ($59 million). However, the company generates approximately 65 percent of its revenue from Latin America. Also confidently eyeing expansion overseas is Prisa. The publishing giant, which also owns the Localia Network, a stake in Digital+ and TV1 in Portugal, recently announced it had received a cash injection from major shareholder U.S.’s Liberty Global of $868 million to fund expansion into the U.S. and Latin America; although it will also help lighten the load of Prisa’s 4.8 billion euro ($6.5 billion) of debt.

Despite the national economic woes, Spain’s content business is undergoing massive change and offering real potential. The extent to which it is coming of age was underlined in November when Disney ABC announced its new series Body Of Proof will air in Spain (and Italy and Hungary) before it bows in the U.S. Now, that really is change!