Why digital pay-TV failed?

One plus one equals one. At least this is how things stand in the Greek digital pay-TV market, in its current state of development. Since digital pay-TV entered our lives, we have often remarked that the domestic market, due to its size and peculiarities, was not in a position to sustain two competitive digital platforms. In practice, the eagerness of the interested businesses to introduce digital TV services led them to ignore both the size of the Greek market and Greek consumers’ behavior. Perhaps now, after the recent fiasco, those involved (the soccer teams, businessmen and the State) have learned about the peculiarities of the Greek market. The Greek market is too small for competing digital pay-TV ventures. As a result, no economies of scale are created and the final cost is passed on to the consumer. In other words, Greek customers have to pay more than their counterparts in a bigger country to buy the service and the needed reception equipment. At this point, someone could object that the existence of competing services could offer better prices to Greek consumers. This, however, did not happen in practice. On the contrary, the 35,000 to 40,000 consumers that put their trust in Alpha Digital feel they have lost faith in innovative ventures, although it has been said they will be allowed to transfer to another platform, at no extra cost. Even worse, the competition between the two incompatible platforms hindered, rather than helped, develop digital and pay-TV in Greece. The market did not expand with the arrival of the second platform but changed only marginally, as consumers either deserted one platform for another or paid for a second subscription and decoder. In Europe and the United States, which are far ahead of us in new media, the venture into competitive platforms was proven financially unsound, causing great losses to competitors. The messages were quite plain but, strangely, overlooked. Besides the arguments about the economic feasibility of the future, what would be interesting to know would be whether this service would actually be attractive to the average TV viewer, who has gone through a protracted period of economic austerity, has long exhausted any excess savings and replaced them with debt, and, after all that, is called upon to choose among non-compatible stations – especially when, because of the small size of the market, he will be called upon to pay more than, say, his British or German counterparts. Despite all that, digital and ground pay-TV has a quite big market penetration in Greece, even by international standards. But at around 11 percent, this translates into a mere 355,000 subscribers. Even if this rose, say, to 400,000, this number is too small for competing stations to coexist. In Spain, for example, the disappearance of digital pay-TV Quiero led the two competitors, Sogecable and Telefonica, to conclude, according to a local analyst, that «in such a small market as Spain, with 11.7 million TV households and a potential market of between 5 and 6 million subscribers, there is no room for two competitive digital platforms.» If there is «no room» in such a market, what can one conclude about Greece? The size of the market also has another dimension, namely, the capacity of Greece’s audiovisual production. Everyone in the market knows that, in order for satellite TV ventures to succeed, they must feature programming attractive to Greek TV viewers. TV viewers have proven they are attracted mainly by domestic productions. Is local production ready to satisfy such a high demand, and is this economically feasible, given that no other country, save Cyprus, listens to Greek programs? It is known that the culture of pay-TV has not taken root in Greece as much as in other European countries. Even in those countries, the majority of TV viewers either have not heard of digital TV (UK, Germany, Italy) or do not care to find out (Spain). One can wonder if we could envisage a fast growth of digital TV in Greece. Its proponents probably confused the digital TV and the mobile telephony markets. The relationship between new media and technological systems is not simple. At the very least, new media demand systems, and content, that the consumer would not find anywhere else at reasonable prices. Thus, in a country like Greece, why would the average consumer shell out a large sum of money in order to buy new TV equipment when the product on offer is not significantly different from what the usual TV channels offer for free? Digital TV’s insistence on soccer as the product that would create clients was mistaken, since regular TV services show soccer games at least twice a week, albeit not live. Also, the fact that one could not see the whole Greek league on a single platform also worked against it. Thus, analyzing beforehand the relationship between new media and new systems will help amend the very optimistic, and simplistic, views about the capacity of both for future growth. TV rights for Greek soccer games, which were, erroneously, considered as the main engine of digital TV’s development, became too expensive. Compared to the size of the population of subscribers, TV rights for Greek soccer had become the second most expensive in Europe, after the UK. NetMed Hellas, which had the monopoly for broadcasting Greek soccer matches for five years, and which had paid a total of about 15 billion drachmas (44 million euros) had sustained big losses throughout. With Alpha Digital’s entry, in 2001, TV rights increased six times. What the Europeans learned six months ago and we have just learned is that soccer’s attraction to the public has its limits. As a result, it and other sports are now considered an overvalued product. Combine this with the economic slowdown and the low rate of growth of digital TV and you can see why pay TV channels can no longer afford to pay the vast sums they did for TV rights. It is very unlikely that soccer teams, especially Greek soccer teams, will ever be offered these sums again.