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Evolution of the Canadian Pay-TV Market

According to Kagan Research, Canada's entrenched cable TV industry was startled when satellite TV made big inroads after its 1997 debut. Canada's two direct broadcast satellite (DBS) platforms have 2.6 million total subs today accounting for about 25 percent of the 10.3 million total subscription TV households.

"Multichannel has matured and reached a saturation of 85 percent penetration, so it's no longer a pitched battle simply to add more subscribers," says Brian Schecter, analyst at Kagan Research. "With multichannel plateauing, DBS aims to dial back on new subscriber acquisition expenditures to instead grow what it already has by raising average revenue per subscriber unit," or ARPU.

Schecter says that means offering fancier hardware, new services, up-selling existing subscribers to more expensive packages and boosting pay-per-view programs. The country's two DBS platforms are Bell ExpressVu with 1.8 million subscribers and Shaw Star Choice with 869,208 subscribers (Shaw is also Canada's second-biggest cable MSO).

In the quarter ended September 30, Bell ExpressVu lifted ARPU to C$54, from C$51 a year earlier. Satellite TV is the high-end multichannel service in many regions, including Latin America.

Kagan forecasts that Canadian DBS collectively will manage to carve out another 2 percent of the multichannel market by 2015, reaching 27 percent. Some of that gain will come from picking up cable TV subscribers dissatisfied with their low-tech analog service (DBS is all digital).

The growth is also impressive given that Internet protocol video is a new force, with Canadian telcos such as Telus rolling out IP-video (IPTV) services, which will chip away at cable's shrinking market share.

DBS ARPU is forecast to grow at low single-digit rates over the next decade. "DBS revenues are projected to increase nearly 80 percent over the next 10 years from a combined C$1.5 billion (US$1.3 billion) in 2005," notes Kagan.

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