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Eastern Europe Multichannel Pay-TV Market

As the wheels of economic prosperity gain traction in Eastern Europe, so too does the region's multichannel television industry that Kagan Research forecasts to achieve double-digit compound annual revenue growth rates over the coming ten years.

According to Kagan, thanks to increases in capital investment, operator consolidation and new technologies, Eastern European multichannel video revenue is expected to grow from $2.2 billion in 2006 to $5.8 billion in 2016.

"Eastern European markets are poised for considerable near-term growth due in part to maximizing emerging DTT and IPTV technologies," says Kagan Research associate analyst Josh Hizon. "By adopting emerging DTV platforms, Eastern European linear video markets are likely to mature at an accelerate rate compared to their Western counterparts."

According to Kagan's research, with 86 percent of the 32.4 million pay-TV households, incumbent cable dominates the market today. In Western Europe, DTH has managed to attract a sizeable and growing percentage of pay-TV HHs in many markets, but the platforms in the East have developed more slowly due primarily to affordability barriers. Still, DTH bright spots highlighting future market potential can be found in Poland and Turkey, each of which already serves more than a million subscribers nationwide.

IPTV has been a growing force in Western Europe with many of the systems utilizing hybrid set-top boxes to combine telco TV with digital terrestrial TV (DTT), which has become a powerful DTV option. With the ability to offer free and encrypted TV, DTT holds the potential to mute cable and satellite adoption rates, particularly in markets with high affordability concerns and low pay-TV penetration.

While on an upward growth curve, Eastern European pay TV markets will have to develop significantly before measuring up to mature global TV markets in terms of revenues. The biggest hurdle is the challenge of expanding TV services to justify the rise of subscription fees.

According to Kagan's 75-country international CIS portal, Global Multichannel Markets , the region contains some of the lowest ARPUs (average revenue per subscriber) in the world with 7 countries in Eastern Europe making the bottom 10 worldwide, including Estonia and Latvia.

Paramount for the region is the competitive dynamics relating to the transition from analog to digital platforms. A large part of the DTV adoption across Europe will be led by DTH and telco-driven IPTV platforms offering new services such as interactivity and HDTV to challenge cable's dominant hold through 2016.

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