Consequences of TV 2 becoming a pay-TV channel

Camilla Mejdahl Jeppesen

Student thesis: Master thesis

Abstract

This thesis investigates the effects of the change of the main channel TV 2 from free-to-air to pay-TV chan-nel. Specifically, the effects regarding TV 2|DANMARK and its two main commercial broadcasting compet-itors are investigated. In recent years, the channel TV 2 has based its earnings solely on advertising revenue making it sensitive to economic changes. This came into sight as the recent financial crisis affected the financial situation of TV 2 very negatively and triggered the decision to change the revenue base. The pay-TV market can be characterised as a two-sided market. The market is comprised by an overall two-sided market with one two-sided market embedded. A good understanding of the two-sided markets on the pay-TV market, makes it possible to select which factors are determining, when the effects from the change of TV 2 are evaluated. The two different two-sided markets are both characterised by a few dominating play-ers. Distributors on the pay-TV market records an increase in subscribers related to the change of TV 2. Most of the new subscribers choose TV packages, which include TV channels from the commercial broadcasters, thus the change of TV 2 could have a positive spillover effect on the commercial broadcasters. The geo-graphical location of the subscribers’ household can affect the choice of distributor, as some areas in Den-mark are only supported by a single subscription platform. In order to see if the change of TV 2 affects the commercial broadcaster, the relationship between advertising revenue and number of viewers is evaluated. Regression models are developed for each of the three broad-casters in question. It is expected that advertising revenue is primarily explained by number of viewers, and that the two are positively related, which is verified by the regression models developed. The regression models are used to predict the advertising revenue of the three broadcasters for the first quar-ter of 2012. This is done such that the actual advertising revenue can be compared with the estimated one in order to see, if the change of TV 2 has had an effect in the short run. The regression models are based on a very small sample, which makes it difficult to draw conclusions with respect to the estimated advertising revenue. Though, it seems as if the commercial broadcasters are positively affected by the change in the short run. Whether or not the change of TV 2 has a permanent effect on the pay-TV market and the commer-cial broadcasters only time will show.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2012
Number of pages90