AUTOBUS PARA FUMADORES

& Private Television sector in Spain

IMBA 2010 – 2011

IEDE Business School - UEM

First Research Project

Madrid, December 10th, 2010

Rodolfo Rangel

Jacquelin Flores

Lara Alonso

Richard Morla

INDEX

1• Executive summary 3

2• Private Television Sector 4

3• Macro environment & Nonmarket factors. PEST analysis 5

4• Identification of company’s mission & vision 7

5• Company milestones 8

6• Company’s products and/or services 9

7• Value network 11

8• Value chain 12

9• Customers / consumers 14

10• Substitutes 15

11• Pricing aspects 17

12• Market size & market share 19

13• Competitors 23

14• Strategic tools 25

15• Company´s differentiators 31

16• Potential for growth strategies 31

17• Exhibits 33

18• Sources 37

1• Executive summary

TV is an exciting sector that moves around a restless race to provide the best content in order to reach a huge audience, with all the glamour and the stars from the shows; and a less sparkle window to satisfy the advertisers who are constantly seeking for greater efficiency in their advertising campaigns budget.

During 2010, private TV industry has faced the most important milestones in its short history; we cannot forget that private channels began to broadcast only 20 years ago. These are the three main ones:

1. The merger of large media groups. Telecinco is still running the acquisition of Cuatro and it appears that Antena 3 is going to merger with La Sexta.

2. The elimination of advertising on RTVE. It held 18,4% of the advertising TV market by 2009, and now this figure have gone to the rest market. Taking advantage of this, Telecinco figures grew from 26,4% in 2009 to 32,5% of the advertising TV market during the first 9 months of 2010. However in return, not only Telecinco but also the rest of private TV channels had to pay 3% of their gross revenue to RTVE.

3. The analog switch-off (DTT), which gave to the viewers hundreds of channels and leads to the fragmentation of the audience.

Under this scenario, Telecinco is the most important private channel in Spain in terms of audience market share (14,7% Jan-Sept 2010), just behind tve1, which belongs to the State with 16,2%. Also speaking of advertising, Telecinco is the unbeatable leader with 32,5% of the market. It belongs to the Spanish group Gestevision Telecinco S.A. that at the same time belongs to the Italian group Mediaset, having as a major shareholder Mr. Silvio Berlusconi.

The key to differentiate from its competitors is the content. Always demonized as junk TV or “telebasura” -the Spanish way to refer to its programs- Telecinco has a unique proposition that takes to lead the audience. It is based on the leverage of broadcast “star” reality shows and creating programs such as “Sálvame” to simply speak about them. It’s a system that feeds from the word of mouth around the contents.

Now, when all the competitors arrived to the DTT, with important substitutes as Internet gaining terrain, an economic crisis that is not gone, and the merger with Cuatro, Telecinco faces great opportunities and threats to be solved in order to maintain its leadership. Is it going to get it? Enter to the fabulous world of television, come and see!

2• Private Television Sector

The history of the television in Spain started on October 28, 1956, when Television Española began broadcasting in analog terrestrial television on VHF. It’s could only be seen in Madrid and nearby towns under approximately 300 televisions. The broadcast time was only 3 hours a day.

TVE is the national state-owned public-service television. His activities were previously financed by a combination of advertising revenue and subsidies from the national government, but since January 2010 it's been supported only by subsidies. A second channel was added on 15 November 1966, first known as the UHF channel, while the original VHF channel was simply known as TVE or the first channel.

Regional Channels

During 1982 the government adopted the “Law of the Third TV Channel”, and some new regional channels were created. The first ones were ETB1 in the Basque Country and TV3 in Catalonia early. The regional channels are regional stations which broadcast in a region. They are usually public owned and managed by the government.

Private televisions

In 1888, the government of Felipe Gonzalez granted licenses for new private television channels. Until then only some regions enjoyed some varied programming offered by the regional channels born in the early 80's, the others had limited the spectrum to TVE.

Grupo Godó with Antena 3 radio and some print media companies created Antena 3 Television, the first private television channel. Mediaset and ONCE joined together to achieve the second license for Telecinco, and Sogecable got Canal Plus.

On January 25, 1990, Antena 3 began broadcasting. Only 1 month after, the night of March 3th, 1990, Telecinco was born. Canal + starts June 8, 1990 being the first pay television in Spain. It broadcasted for everyone for six hours a day. Subscribers to the chain had to pay about 3,000 pesetas a month if they wanted to see the latest films.

DTT and multiplication of channels

The real revolution began some years later. Cuatro was founded by the PRISA Group from the conversion of Canal + with regular broadcasting from November 7, 2005. In the same month came with La Sexta on DTT, the privates who destabilize the monopoly of Antena 3 and Telecinco.

With DTT the private channels have multiplied by hundreds (not so much the media groups).

3• Macro environment & Nonmarket factors. PEST analysis.

• Political – Legal Aspects

1. New law on financing of RTVE: advertising on public television was gradually reduced in the last quarter of 2009 until its complete disappearance on January 1, 2010. This is a standardization of the market towards resemble the European model of television. To finance RTVE, charges are made in open private channels (3% of gross revenues), pay (1.5% of gross revenues) and telecommunication companies (0.9 percent of its income).

Telecinco and the elimination of advertising on public TV.

The elimination of advertising on TVE has established a new framework. This new milestone has caused that private broadcasters will not compete with the state public TV advertising investment anymore. In this

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