Digital TV arrives in Austria…and major competition

Michael Hedges August 28, 2007

Within weeks Austrian television will be fully digital. The change-over arrives as ProSiebenSat takes over a local Vienna channel and the only privately held national commercial channel goes up for bids, with big broadcasters first in line. Competing for viewers, subscribers and advertisers at this level will shake Austria’s conservative media and the rattle might be felt in Brussels.

Austrian competition authorities last week approved the sale of Puls TV to SevenOne Media, a subsidiary of ProSiebenSat. The deal, announced in early July, immediately closed. Terms were not mentioned. Adding Puls TV is a financial consolidation as ProSiebenSat, through SevenOne Media, has been both sales-house and local program producer for several years.

“In the future, goal is it to position the channel as an Austrian channel broadcasting from Vienna,” said SevenOne Media managing director Marcus Breitenecker to Der Standard.

The Puls TV transaction is the first major television deal by ProSiebenSat after the merger with SBS Broadcasting. And the Austrian market is perfect for that ever-expected challenge to RTL. The quirk – and there’s always a quirk or two – is the powerful but aging public broadcaster and, yes, the possibility of another major TV competitor.

Austria was the last European country to license privately owned commercial broadcasting. Public broadcaster ORF remains the dominant force in TV and radio but it’s TV market shares have sagged from competition from locally controlled ATV (Austrian Television) and a host of cable and satellite channels, including ProSiebenSat and RTL. SevenOne Media has offered ad and program windows on Austrian cable channels since 1998.

ORF (Österreichischer Rundfunk / Austrian Broadcasting) offers two terrestrial channels plus cable/satellite channel ORF Sport Plus. In the July AGTT GfK Austria national TV market survey ORF carried 40.6% reach, compared with 2.6% for ATV. ORF’s reach in 1998 was 49.7% of the Austrian population.

Television’s share of Austrian advertising was 23.1% in 2006, down from 24% in 2005. About two-thirds goes to ORF. Print dominates ad spending with 57%, down from 60% in 2005. Total ad spending in the first half of 2007 was €1.754 billion, up 7.9% over the first half of 2006, according to Focus Research. Total television ad spending increased 8.1% comparing first half year 2007 (€322 million) with 2006 (€298 million).

By October 22nd, barring any unforeseen difficulties, analogue TV will end in Austria. Digital terrestrial television (DTT) was launched in October 2006. National coverage exceeds 75%.

One DTT multiplex, owned by ORF, is operational. The second DTT multiplex will carry six channels. A third multiplex is planned.

A week ago (August 21st) Puls TV announced digital distribution on the Astra satellite. Austria has one of the highest penetrations of satellite dish ownership in Europe.

The European Commission ‘communicated’ to Member States the need to accelerate analogue to digital conversion for television by 2012 at the latest. More channels, higher quality and interactivity are the supposed digital dividend. With the exception of public (State) broadcasters, enthusiasm has been quite low. Private sector broadcasters – with pressure from advertisers – would rather not take on the expense and it seems neither would consumers.

Companies looking to invest in European television like markets with increasing GDP rates (like Eastern Europe) to fuel ad growth or consumer demand for pay-TV. As a bonus, they like markets with artificially high print advertising spending (easy competition) or those with artificially high market shares for public broadcasting (relatively easy competition). And they like to buy market share rather than built it.

So in Austria, media watcher’s eyes are on Austria’s first privately owned television channel ATV, put up for bid in June by leading shareholder BAWAG PSK (Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG), which hired investment banker Rothschild to sell off the non-banking businesses.

It’s highly unlikely any of this escapes RTL CEO Gerhard Zeiler’s attention. The native Viennese was ORF CEO between 1994 and 1998. A year ago Zeiler brushed off questions about RTL buying ATV, apparently after negotiations soured.

CME is another possibility as Herbert Kloiber sits on its board. Kloiber is Chairman of Tele-München Gruppe (TMG), an ATV shareholder. He sat on the SBS Broadcasting board until the ProSiebenSat take-over. Last March Kloiber met with BAWAG PSK managing director Ewald Nowotny to discuss the ‘beauty contest’ for ATV. Nothing, then, happened.

Telekom Austria is another reported ATV suitor, said Der Standard in June. The former State-owned telephone operator has looked high and low for new revenue sources as telco competition has eaten into profits. France Telecom entered the Austrian market recently and Deutsche Telekom is reportedly nosing around. Telekom Austria released its second quarter 2007 financial report last week, boosting investor confidence as it posted a smaller decline in revenues and profits than expected. The company has been chasing revenue in Central and Eastern Europe, buying mobile phone businesses in Bulgaria, Macedonia, Croatia, Slovenia and Liechtenstein and a 3G license in Serbia.

Meanwhile, the suggested retail price for ATV is around $100 million.

Austria will be a hot TV market to watch over the next two years. If viewers learn to love – and use - DTT and mobile TV, competition to provide those services will increase at an astounding rate. Austrian economics already benefit from proximity to the new EU Member States and candidate countries. If cable and satellite services prevail and private sector broadcasters continue to wean themselves from a purely ad driven business model, Austria could be the best example of failed intervention in media markets.

ftm Follow Up & Comments