China and New Zealand will switch off Analog TV in 2015. Accelerating Digital TV?

Posted by Gianluigi Cuccureddu SMP in Writers on September 06, 2010  |  0 Comments More from this author  |    |  Follow Gianluigi Cuccureddu SMP on: Facebook | LinkedIn | Twitter |

Two reports are announcing that both China and New Zealand will halt analog TV in 2015.
The reports are "China Digital TV Operation Report, 2009-2010" and "New Zealand - Broadcasting - FTA, Pay TV, Digital TV and Radio - Statistics & Overview - 2010".

With regard to New Zealand's situation:

The government plans to switch off analogue TV by 2015 or when 75% of homes have digital TV service. While there is discussion that the switch off date may be brought forward possibly to 2013, in the meantime, SKY became the first New Zealand 100% digital TV broadcaster after decommissioning the 20 year old analogue network in early 2010.

With regard to China's situation:

According to the provisions of SARFT, China will carry out digital broadcast and television roundly in 2010, and will halt analog TV programs in 2015. With the approaching deadline, the pace of conversion to DTV speeds up in China.
In 2009, China boasted of 174 million cable TV subscribers, including 65 million cable DTV subscribers.

The SARFT, State Administration of Radio, Film, and Television, is an executive branch under the State Council of the People's Republic of China.
Its main task is the administration and supervision of state-owned enterprises engaged in the television, radio, and film industries.

What does this mean for companies and business development opportunities?

(Reverse) Innovation
Adoption and advancement of Digital TV is being increased, faster than somewhere else. This creates opportunities in R&D and further product- and market development globally.
In our previous article, the (growth) advantages of reverse innovation are referred to.
This brings us to the second opportunity:

China's Mass Market
The reach in China is massive, figures from the aforementioned report:

* In 2009, China boasted of 174 million cable TV subscribers, including 65 million cable DTV subscribers.

* The number of Cable DTV Subscribers in China rose from 190,000 in 2003 to 65 million in 2009.
New systems of cable DTV technology have been established in 53 cities and regions across China, and the holistic digital transformation has been completed in 31 ones of these cities.
Guangxi, Shaanxi, Jiangxi and Jilin provinces have finished the provincial network integration.

* The external policy environment which China's IPTV market is confronted with has not turned favorable, there is still the amounting pressure from the broadcasting system.
However, after several years of promotion, the number of subscribers has increased to a certain extent.
The IPTV subscribers numbered 2.65 million in 2008, and 4.33 million in 2009 with an increase of 63.4%. In Shanghai, Zhejiang, Guangdong, Jiangsu and other economically-developed areas, the number has been rising rapidly. The number of IPTV subscribers will reach 8.5 million in 2010.

The (test) market is huge. If companies enter this market early, entrants are able to achieve the largest part of product innovation, from there on it is Process R&D.
In terms of Life Cycle it's in a Mature phase, heavier competition, decreasing margins etc.

Another reason -as explained in our previous article- is the effect of the Power Curve dynamics:

If companies can become first runner in their niche, the bigger the inequality can become with the rest of the competitors/market landscape. Inequality in this case refers to market share, revenue and so on.

In the case of China, this could be a potential flourishing market.

What to do?
From an overall Marketing Management point of view, companies in emerging markets should perform periodical DESTEP analyses, governments and regulatory entities are closely monitoring new shifts and trends in these markets.
Examples are Comcast's bid to purchase control of NBC Universal television, Google's acquisition of ITA and others that can be altered or constrained or approved. In all three cases it has implications in terms of business strategies.