The first modern Olympics held in Athens in 1896 featured some 241 athletes and were probably witnessed by several thousand spectators. Well over 10,000 athletes are expected for the 2008 Summer Olympics in Beijing, and the best estimates are that the TV viewership records broken during the 2004 Olympics will be smashed once again this year with the possibility of over 4 billion people watching the events in the coming days. This represents three out of every five people on the face of the planet and, quite simply, is a feat that would be essentially impossible to achieve without the use of satellites.
Another feat planned for the 2008 Beijing Olympics is the recording and broadcasting of every event in High Definition format. Prior Summer and Winter Olympics have had specific elements broadcast in HD, but this represents the first time the entire Olympics will be available in HD from the Opening to Closing ceremonies. Only a small fraction of the 4 billion TV viewers will see even part of the 2008 Olympics in HD, but this does not diminish the significance of the accomplishment. The Summer Olympics are such a bellwether event that, in a few years time, the industry may look back and see these three weeks as the point when HD was finally fully embraced by the world at large. The move to HD has many parallels to the move to color television. Most have forgotten, but the transition to color television was in fact a long, drawn out affair of conflicting standards, limited content, expensive production, and high cost consumer television sets. Yet, most people look back and only remember one or two key moments that mark for them the arrival of color television in their lives.
For China itself, the Beijing Summer Olympics have presented a myriad of opportunities and challenges. According to a recent Screen Digest Report entitled "'China Cable Television Market: Assessment and Forecast to 2012", China has the world's largest cable television market with some 152 million cable television households. Here, the Beijing Olympics are expected to be a catalyst both for the adoption of HD in the country but also accelerating the trend towards digital television services. According to the Screen Digest report, less than 20% of the 2007 market in China utilized digital cable services, and this figure is predicted to reach nearly half by 2012. The benefit here is that the transition to digital should help drive up average revenues per subscriber, which stood at a relatively meager sum of about US$2 per household per month in 2007.
The transition to digital also typically implies more content to be carried by satellite to cable headends in China. It is NSR's current view that China's domestic satellite operator, China DBSAT, will benefit the most by this growth in content distribution given its dominance of the domestic Chinese market and clear government policy to place the majority of television channels for the Chinese cable market on domestic satellites because of cultural sensibilities and concerns. China DBSAT also successfully launched ChinaSat-9 in June of 2008 with this satellite being designated for the country's first domestic DTH service. With an initial compliment of 47 national and provincial channels, the DTH platform will initially target households in remote and rural regions of China that only have poor access to a few terrestrial broadcast television channels or none at all. Over time, NSR projects that the DTH service will expand to address more mainstream audiences and eventually compete head on with cable in some markets in China.
With transponder demand for cable distribution and DTH mostly going to China DBSAT, what does this leave for other satellite operators in the Chinese market? The recent issue surrounding the dropping of New Tang Dynasty TV from Eutelsat's W5 satellite, in fact, illustrates the great importance that broadcasters place on the unofficial satellite television market in China. Broadcasters in Asia have long taken advantage of "overspill" video signals for television channels that are nominally meant for other countries but are receivable in all or large parts of China. Numbers vary, but NSR generally holds by estimates that there are some 25 million illegal satellite dishes in China receiving television programming from many different satellites. To the great consternation of some in the Chinese government, there is hardly a single individual in China who, if they don't have an illegal satellite dish themselves, does not know someone who does. Yet, the government largely turns a blind eye to this area simply because it is so widespread, and the large majority of the programming is relatively innocuous in nature and does not run counter to Chinese cultural sensibilities. NSR predicts that distribution of television channels on non-domestic satellites will continue to grow in the coming years, not withstanding issues like NTD TV.
Other non-television markets do exist in China, and NSR forecasts some transponder gains there in the coming years. However, it is television content on domestic and non-domestic satellites that will account for the majority of future capacity demand growth and, in NSR's estimate, will take four out of every five additional transponder leases between 2007 and 2013. Overall, NSR projects that C- and Ku-band transponder demand for greater China, including Hong Kong and Macau, will increase at the average annual rate of 5.3% in the coming six years according to NSR's recently published "China Satellite Markets" study.
And what about satellite transponder supply for the Chinese market? NSR's analysis indicates that, overall, there is more than enough capacity to meet projected growth. There is always the possibility that some specific beams on certain satellites serving China many have high fill rates, but NSR's estimates are that average C-band fill rates for capacity serving China will tend to trend just above or just below 50% depending on the actual launch and retirement schedule of a number of satellites, while Ku-band fill rates will be even lower. Part of the low estimate for Ku-band capacity is due to on-orbit backup capacity planned for DTH services in China, but even with this excluded, NSR estimates that average Ku-band fill will be no better that C-band in the coming six years. Simply put, the low fill rates are in part due to the fact that China DBSAT is going through a major capacity refresh period and has no fewer than four satellite launches planned for the coming two to three years (Chinastar-2, Sinosat-4, Sinosat-5 and Sinosat-6).
For non-domestic satellite operators, the situation is a bit more complicated. Technically, it is impossible to provide a definitive assessment of supply on non-domestic fleets because, for example, an unleased transponder on a satellite beam that covers China, Malaysia and the Philippines could in fact be leased in any of these three markets. Therefore it is somewhat arbitrary how much of the said unleased transponder is allocated to each regional market for the supply assessment. More importantly, NSR is not expecting that non-Chinese operators will launch substantial new capacity for the Chinese market in the coming years. These operators can see as well as NSR that most new demand will be picked up by China DBSAT due to its privileged position in the Chinese market, and they will not invest substantial capital in growing capacity for the Chinese market when there is already oversupply once one gets beyond the few key video distribution hotspots that are currently in high demand.
Overall, NSR is fairly positive about prospects for the Chinese satellite transponder market even if the full potential demand that the Middle Kingdom could offer is never truly realized. As with so many other things in China, the Olympics signal the coming out of the satellite sector in the country and offer an opportunity to move quickly ahead in the digital transition of the TV market in the country and to begin to open the door to HD services. The development of the satellite market in China may seem monumentally slow at times, but advances are being made and as all know, patience is key when it comes to the outlook for Chinese satellite services in the coming years. The Great Wall was not built in a day after all.
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Note: Information from this article was extracted from the report: China Satellite Markets. For additional information on this report, visit www.nsr.com or call NSR at +1 617-576-5771 ..
