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  • Slide 1
  • e-Media Research Ltd. CENTRALITY OF CONTENT IN A CONTEXT OF INCREASING CONNECTIVITY THE ROLE OF DIGITAL TERRESTRIAL TELEVISION (DTT) IN THE ITALIAN COMMUNICATIONS SECTOR AND THE WHOLE NATIONAL ECONOMY MARCH 2014 DAILY MEDIA REACH IN ITALY (% of total population 14+, average day, Feb / Apr 2013) 85.5% 60.3% 29.5% 48.0% 33.5% 21.7% 27.5% DTT-native FTA channels Pay-TV Radio Newspaper Magazines Internet Generalist FTA TV channels DTT Source: Eurisko. Survey of a nationally representative sample of individuals 14+.
  • Slide 2
  • CONTENT CENTRALITY IN A CONTEXT OF INCREASING CONNECTIVITY - March 2014 e-Media Research Ltd. 2 EXECUTIVE SUMMARY / 1 THE ROLE OF DTT IN THE ITALIAN TV AND MEDIA LANDSCAPE DTT is by far the most widespread mode of TV reception in Italy. The network has 95% coverage of the population for most national multiplexes and reaches 96% of all TV households (TVHH), either on the primary or secondary TV set. DTT is the only TV platform playing a universal role in Italian territory, distributing public service and both national and local commercial free-to-air television channels, as well as pay-TV services. Thanks to its 19 multiplexes, it distributes 76 national free-to-air channels and 37 pay-TV channels. In addition, DTT delivers hundreds of local TV channels and 15 national radio stations. A benchmark of the results achieved by native DTT channels in some of Europes largest terrestrial TV markets shows that Italian DTT has been a success story in terms of opening up the TV market. Not only has Italian DTT attracted a larger number of new entrants than has been the case in France or the UK, but these new entrants currently generate the largest aggregate viewership of the three markets. Not only is DTT the sole platform in Italy with quasi-universal reach, the widest reach of all media and a significantly larger share of the audience than the other TV platforms, it also accounts for a larger proportion of the publics time than any other medium. Crucially, the amount of time devoted to linear TV viewing is large even among the younger public, which is more exposed to the Internet. Moreover, it is important to keep in mind that much of the time devoted to content consumption over the Internet is accounted for by professional content produced by publishers and broadcasters. This is a fact of paramount importance, although often overlooked. Assessing the effect of growing non-linear consumption should always come along with careful evaluation of the importance of quality content. Such content is primarily produced by publishers and, in the case of audiovisual content, by broadcasters. Free-to-air TV (public service and commercial, generalist and thematic, national and local) plays a vital role in nurturing the productive capacity of the editorial system and the quality of the content that is consumed on all platforms, in linear and non-linear mode. In fact, its role is also fundamental in terms of the content that is consumed via the Internet. ITALIAN DTT ATTRACTS: 84% of total television audience share (p. 10) 70% of total time spent with media (p.18) 48% of total advertising expenditure (p. 21) 58% of total audiovisual sector turnover (p. 25)
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  • CONTENT CENTRALITY IN A CONTEXT OF INCREASING CONNECTIVITY - March 2014 EXECUTIVE SUMMARY / 2 AN IRREPLACEABLE ROLE IN THE COMMUNICATIONS SECTOR AND THE WHOLE NATIONAL ECONOMY The Italian editorial content sector generated 26 billion in turnover in 2012. The audiovisual industry (cinema, home video and TV) is the most important component of the sector and is worth 11.2 billion or 43% of the sectors total. With 6.5 billion in turnover and 22,500 employees, free-to-air TV is, in turn, the most important component of the audiovisual industry and the wider editorial content sector. Beyond its economic size, the free-to-air TV industry has a unique feature that no other medium shares, which is the economic effect (direct economic multiplier) of the sales it activates through advertising. Based on preliminary estimates, the 4 billion spent by advertisers on DTT in 2012 generated 20-36 billion in additional sales, thanks to the mediums particularly high revenue return on investment (revenue ROI). This means that for every euro spent by advertisers on TV, at least 5-9 has been generated elsewhere in the economy. 3 e-Media Research Ltd. EDITORIAL CONTENT SECTOR 26 billion AUDIOVISUAL INDUSTRIES 11.2 billion DTT 6.5 billion ESTIMATED SALES DIRECTLY ACTIVATED BY DTT 25-41 billion (TV advertising R-ROI + sales of goods / services in the CE and ICT sectors) e-Media Research has found that, on the Italian market, new digital businesses (e.g. e-commerce, online services) enjoy a revenue ROI from TV advertising equal to a multiplier ranging from 18 to 26. TV has also a significant economic impact on the consumer electronics and ICT sectors. Overall, in these sectors e-Media Research estimates that TV contributed to generating 5 billion in 2012. On the whole, DTT directly contributed to generating an estimated 31-47 billion in sales volume in 2012, equal to 2-3% of Italys GDP. When further economic, social and cultural externalities generated by DTT are factored in such as its contribution to social cohesion, and centrality among the creative industries and within the education and knowledge system it is easy to understand the size of its extended impact on society. DTTS ECONOMIC IMPACT 31-47 bn (2-3% of GDP)
  • Slide 4
  • CONTENT CENTRALITY IN A CONTEXT OF INCREASING CONNECTIVITY - March 2014 e-Media Research Ltd. 4 EXECUTIVE SUMMARY / 3 CENTRALITY OF CONTENT IN A CONTEXT OF INCREASING CONNECTIVITY Although it is possible to assume that the market for fixed and mobile Internet connectivity, just as the market for access devices, is somewhat independent from the richness and quality of content produced by the national content industries, it seems more plausible to argue that growth in the above-mentioned markets is directly affected by the availability of quality content, and that production of such content provides an essential contribution to economic and social development. Both free-to-air TV and the entire editorial content sector are going through a critical period one of strong asymmetry between growing content distribution opportunities, on one side, and decreasing economic resources flowing into the value chain of original content production, on the other. Policy-making in the market for data transmission should, therefore, carefully take into account possible adverse effects on the market for content creation. It would be desirable that allocation of spectrum in the 700MHz band for other uses than terrestrial broadcasting was carefully evaluated against its potential impact on free-to-air TV, which is one of the main pillars of the editorial content sector, in Italy and elsewhere in Europe. Should the drastic reduction in the capacity available to terrestrial broadcasting somewhat erode the economic and social value of free- to-air TV, which in turn has a universal role, this could have devastating consequences on the entire content industry and on the economic and social-cultural structures of the nation. A richer linear /non linear distribution environment Larger economic and social development
  • Slide 5
  • CONTENT CENTRALITY IN A CONTEXT OF INCREASING CONNECTIVITY - March 2014 e-Media Research Ltd. 5 CONTENTS INTRODUCTION 1.THE ROLE OF DTT IN THE ITALIAN TV LANDSCAPE 2.DTT: A UNIQUE MASS MEDIUM IN THE COMMUNICATIONS SECTOR 3.THE ECONOMIC, SOCIAL AND CULTURAL IMPORTANCE OF DTT 4.A CRITICAL MOMENT IN THE EVOLUTION OF THE NATIONAL CONTENT INDUSTRY NOTES AND REFERENCES
  • Slide 6
  • CONTENT CENTRALITY IN A CONTEXT OF INCREASING CONNECTIVITY - March 2014 e-Media Research Ltd. 6 INTRODUCTION A REPORT PREPARED FOR MEDIASET The present report has been prepared for the Mediaset Group and focuses on the role and socio-economic value of free-to-air terrestrial television in the Italian market. It was drafted with a view to contributing to the current debate on the eventual allocation of the 700MHz band of the radio-electric spectrum to fourth generation mobile and wireless data services (LTE). A structured research approach employing existing e-Media Research databases was used to prepare the report for further discussion. e-Media Research has also conducted interviews with industry stakeholders such as market participants, research institutions and investors, along with open discussions with key market players. Extensive desk research was also carried out encompassing but not limited to corporate information, annual reports, external market studies and surveys. It should be noted that in many cases market figures are not released into the public domain by the relevant parties. Where figures from primary sources are lacking, we have used a range of third party estimates after an appropriate evaluation. Where third party estimates have been inconsistent, we have taken the value from the source that appears more to be the most thorough and reliable. Users of this report should be aware that some figures are based on estimates produced by e-Media Research in absence of official data. DISCLAIMER Any opinions expressed in this report are solely those of e-Media Research and do not necessarily reflect those of the Mediaset Group. While e-Media Research has made every effort to ensure that the information contained herein has been obtained from reliable sources, e-Media Research makes no representation or guarantee as to the accuracy and completeness of such information. The information reported in this document is not intended to be a comprehensive study or intended to provide strategic, legal or commercial advice to clients or potential clients of e-Media Research. No party

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