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Shelter from the storm

February 8, 2008 12.39 Europe/London By Julian Clover

Economic downturn may be a possibility, but multichannel TV can still hold its own.

You would expect most business leaders to be confident, at least in public, that their business is the one that is most likely to be recession proof. Economists are clearly warning that we are in for a rocky ride and we need no clearer illustration than the recent performance of the stock market.

The man from the whiskey company was confident that anyone who bought three bottles per year of an expensive malt would continue to enjoy their favourite tipple in equal measure, but how well is our part of the market doing?

The fast moving sector we cover across digital and broadband TV markets is one that is characterised by a steady supply of takeover talk and companies that are expecting “breakeven within 18 months and profitability after five years”.

Sky CEO Jeremy Darroch has said he expects that Sky will hold on to the majority of its customers, should any recession come, and much the same was said this week by Virgin Media’s Neil Berkett. The threat for any operator must surely be from spin down as subscribers opt to take one less premium channel. I’ve always thought it more likely that people would turn away from movies rather than sports, particularly now that VOD provides a stop gap, enhanced by the arrival of ‘day & date’. You can may be able to put off seeing a movie blockbuster until it arrives in the basic package, but the prospect of missing the big match might not be such a good idea, though arguably ESPN Classic still makes it possible to see it all over again.

Multichannel TV is to all intents and purposes a cheap form of entertainment, but questions are still being asked of our industry leaders as to how they might weather any storm. “Clearly NDS and its customers are not insulated from economic reality and should there be a recession that affects the socio-economic groups that typically are the customers of are customers then it clearly would be felt,” NDS President Dr Abe Peled said on a recent investor call. “The only parallel I can relate to is that there was a period in Latin America when there were significant economic difficulties and we saw a decline of about two and a half per cent in the installed base and that’s the worst I’ve seen in my 12 years at NDS.”

There are as yet few signs of a retrenchment in the significant build out plans of many operators, if anything quite the opposite, and for the operators there is now so much more to keep the customer locked in.

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Filed Under: Clover's Week Edited: 8 February 2008 12:43

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About Julian Clover

Julian Clover is a Media and Technology journalist based in Cambridge, UK. He works in online and printed media. Julian is also a voice on local radio. You can talk to Julian on X @julianclover, or by email at jclover@broadbandtvnews.com.

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