The European pay-TV market is set to quadruple by the year 2000 but British Sky Broadcasting Group Plc faces a tough time ahead as it seeks to consolidate its position in the market, and will trail French rivals Canal Plus, says a new report from analysts JP Morgan. The report predicts the European Pay-TV market will see compound annual growth of around 20% over the next eight years, with the number of households paying for TV channels expected to rise from 17 million to around 41 million by 2005. The forecasts, higher than most in the industry, suggest total revenues will grow from $6bn to $26bn by 2005, fueled by the introduction of digital technology and an estimated tenfold increase in the number of channels available. While the UK will be among the fastest growing markets for Pay-TV, the report suggests Canal Plus is a better prospect than BSkyB in the medium to longer term, due largely to the fact that it has more diverse pan European interests. JP Morgan analyst Nick Berlotti says BSkyB will suffer as a result of forcing customers to buy rather than rent set top boxes, with consumers reluctant to make a high initial outlay. The report predicts the satellite TV company will face increased competition from digital terrestrial channels and in bidding with rivals for sports rights. Berlotti forecasts poor results for Canal Plus in 1998 due to high customer acquisition costs and ongoing restructuring as a result of its merger with NetHold in September 1996. Despite these factors and increased competition in France and Spain, Berlotti believes Canal Plus has the long term advantage due to its dominant position in several of the major markets, quality content, more effective subscriber management systems and a stronger brand. Meanwhile, there was more bad news for BSkyB as house broker BZW cut its predictions for 1998 earnings to 290 pounds, compared to last year’s figure of 313m pounds. BZW also reduced its 1999 profit forecast by 118m pounds to 320m pounds, the lowest prediction in the market. Monday saw BSkyB shares slide 8% to a two year low of 378.5p, adding to a bad week for the company which has witnessed shares lose 15% of their value in just six trading days.
