the video markets prospects idate
DESCRIPTION
Disruptions in the TV businessTRANSCRIPT
22
Short term and medium term challenges for the video content industry
Audience fragmentationIncreased competitionPiracyPersonal TV
New drivers on the video market
Since early 2003, the S&P European media index has underperformed the Eurostoxx 50 by 40% (143% vs. 103%)
Leading European TV franchises such as TF1 have performed much worse (+33% over the same period
The European cable industry has seen massive consolidation in most major markets (France, UK, Germany, Netherlands)
Continuous growth of online video usage; switch from a trafic model to an audience model
Google buys You Tube; seeks agreements with studios and introduces advertising
All studios/TV channels launch online services; strong momentum on catch-up TV
Competition for advertisingNew competitorsNew content
Internet migration
1
2
33
New drivers on the video content market
44
The video content market so far
77%
14%9%
TV DVD/VHS* Theatres
31%
69%
Ad-funded Pay
TV by far the major market segment. Direct paiement = 70% of commercial income
The growth challenge: Growth rate under 4%;TV growing faster than DVD and theatres
Subscription growing faster than advertising
0%
1%
2%
3%
4%
5%
6%
Subscription Ads Total TV DVD Theatres Total video
55
Further segmenting the video content market: premium vs non premium content; program vs packaging
DVD, Theatres
Premium
pay-TV
Free to air
Basic pay packages
Premium
Pay-TV
Premium content= exclusive, first window(s), high value proposition programs Either stand-alone programming or premium pay-channel Basic pay-packages= choice, service, non exclusive rerun programsFree-to-air major channels = “event makers”, sport, TV reality
Value proposition
Packaging
Content
Theatres, DVD
Basic pay
Major FTA channels
Premium pay TV
66
Time spent and advertising
77
Reviewing the TV video market key drivers: audience
150
160
170
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210
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250
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
DE ES FR GB IT
Daily TV audience in Europe
Eurodata TV/EAO
TV time on the TV set is stagnating, no evidence that Europe will catch-up US daily viewingBut…multichannel television increases television timeBut…PVR increases TV programming time, other terminals yet to be included in metricsBut…Mobile TV conforts personal viewing and opens up nomadism
88
Reviewing the TV video market key drivers: from audience to advertising
Negative driver: below the line ad spending gaining market share vs above the line
64.9
%
67.7
%
65.2
%
67.2
%
65.5
%
68.1
%
64.0
%
68.9
%
35.1
%
32.3
%
34.8
%
32.8
%
34.5
%
31.9
%
36.0
%
31.1
%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
France USA France USA France USA France USA
2003 2004 2005 2006
Below-the-line Above-the-line
Positive driver: TV increases market share vs other traditionnal media, better resist vs
internet
99
Reviewing the TV video market key drivers: from audience to advertising
But audience fragmentation is not a winning game !
Viewing share of top channels constantly decreasing as multichannel television
develops
Advertising not proportionate to audienceStrong premium for leading channels due to
higher CPM in prime timeWill not transfer to other TV channels ?
0,0
0,5
1,0
1,5
2,0
2,5
ITV US netw orks RTL TF1
TV ad share/Audience share ratio
1010
Reviewing the TV video market key drivers: from audience to advertising
Major FTA channels refocusing to consolidate mass media position, increasingly relying on events (Reality TV, sport…)
France: Top 20 programs
1111
Packaged premium the strongest pay market segment
1212
Reviewing the TV video market key drivers: consumers willingness to pay
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2005 2006 2007
DVD VOD
DVD directly hit by piracy, will note fully migrate to VOD
The piracy effect ?
New forms of VOD aiming at advertising, help convert subs to digital services, increase market
share, reduce reduce churn
COMCAST (US Cable): 10 000 hours of TV channels branded content 95% is free (for digital subs) Key to competition with satellite Consider advertising“Premium VOD” disappointing results
1313
Reviewing the TV video market key drivers: consumers willingness to pay
DTT:
15-20 channels
0 €
IPTV, FTA sat
30-70 channels
0 -10 €
Pay Satellite, cable
100 channels
30-40 €
Tarif
#channels
Low end pay-tv threatened by free/near to free multichannel DTT and IPTV
services
5,12
5,14
5,16
5,18
5,2
5,22
5,24
5,26
5,28
5,3
5,32
Canal+ CanaSat
2006 2007
Premium pay-TV may prove a stronger model, based on exclusivity and
premium programming
1414
The new deal
1515
Year 1 for Internet video ?
Enablers
Premium content + new original content now available on the InternetVideo usage massively increase audienceNew technologies to include ads in video availableStrong aggregators to market servicesEfficient Content Delivery Networks
Internet video:
Migration of the existing video services or potential additional new services ? Value creation or value destruction ? A switch in the video market business models A transfer for “the old media” world to Internet pure players ?
1616
Internet usage switching to video
A few metrics:Google= c. 2% of time spentContent= c. 50% of time spent on the InternetVideo = c. 10% of time spent on the Internet16% of US Internet users watch TV shows on-line
Internet usages for entertainment in France
6%
13%
14%
17%
17%
24%
26%
29%
42%
48%
12%
37%
32%
38%
42%
56%
31%
62%
75%
50%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Watch TV channels
Movie download
Short videos download
Online gaming
Watch movies
Music doownload
Listen to radio
Watch short videos
Listen to music
Press
All Internet users 15-24 years Internet users
Source: Use IT 2007 - IDATE
Internet video becomes mainstream for 15-24 yo
1717
Internet video is both TV content and original content
On demand
UGC
Simulcast
VODpremium
Catch-up
Hig
h
VODcatalogue
Lo
w
Web TV
Linear
Va
lue
pe
r pro
gra
m
TV content, either available as stand alone, simulcast or catch-up TV
Specific content, only available on the Web
Back catalogue content either demonetized or broadcast by niche channels
Internet video content:
1818
There is more to Internet content than UGC
Professional, repurposed content
User Generated:
Amateur “Motion maker” Rework Professionalised
Specific, low cost content
Back catalogues
Content ranked by popularity
Au
die
nc
e p
er
co
nte
nt
Mid
-ta
il
Dig
ital H
olly
wo
od
Long tail
The “mid tail”
The mid-tail strategy: Aggregating long tail content to build sustainable niche markets sellable to advertisers (1 x 1000 viewers generate more revenues than 1000 x 1 viewer)
Providing a new distribution channel for back catalogues
1919
The competition for service provision: who will be the aggregator ?The scenarios
Partnering with new distributors (B2B) or maintaining direct customer relationship (B2C) ?
The content industry
The contenders:
The telcos (pipe providers) Monetizing the network or integrating for service provision ?
The Internet aggregators (YouTube, Joost, itunes…)
Building on mid-tail new markets or becoming mainstream distributors ?
The scenarios:Brave new world
• Content providers partner with Internet aggregators for open Internet distribution• Telcos and TV aggregators by passed •Internet players active on premium programming
Competition
• Telcos become content aggregators and distributors of premium content on managed networks•TV aggregators by-passed•Internet players active on mid-tail services only
Cooperation
• The content industry keeps control of distribution. •Telcos provide high QoS network services. •Internet players active on mid-tail services only
2020
First evidences: media groups keep control of premium, open up distribution of back catalogue
B2B Generally non-exclusive online content supply for distribution platform. Revenue sharing Back catalogue
B2C Direct distribution , capitalising on the leading channels’ / programs brand name Getting a share of Internet advertising to substitute pay revenuesIn USA : ad financing for the top channels’ online services. In Europe ?
B2B B2B2C B2C
Consumer relationship
Advertising
Paying services
Content Syndication
Direct to consumer
Content Syndication
Platform agnostic
Pay VOD services (streaming/download)
Free catch up (streaming)
US networks launched free catch up TV services after prime time airing
Among others, TF1, Pro7Sat1 launched VOD services on the Web
Content distribution to pay platforms
2121
First evidences: Internet aggregators intend to create value leveraging UGC and back catalogues
Volume is critical (and not exclusivity) for building massive audience Ex: Dailymotion: 20 M unique visitors / month in France, 20 minutes average time.15 000 videos uploaded per day4 million video programs.
3 content categories :« true » UGC generating almost no advertising revenues« motion maker » contents (top ranking, semi professional)« official user » contents . Professional partners from MTV to sports’ association. No premium content (Google exits Video on Demand Business)
Business model Low programming costs: revenue sharing is only proposed to professional top audience contents Aggregate audience to sell advertisingAdvertising revenues come from motion makers and official users. Today the split is 50%-50%, Tomorrow “official user” will increase (audience and advertising revenues generating)
The Internet video service case
2222
First evidences: telcos follow different paths
Marketapproach
Strategic imperatives for ROIC optimization
Value added application
provider
Enhancedconnectivity
provider
Primarily allocating resources to the proliferation of applications targeting niches and short-lived opportunities to increase customer base and/or revenue per customer. Network no longer considered a strategic asset and outsourced to reduce invested capital base.
Maximizing utilization of best-of-breed network to enable economies of scale, at the lowest possible cost per Mb provisioned.
Revenues generated from leased capacity of enhanced connectivity. End user service creation and commercialization left to 3rd party providers.
Convergedservices
integratedoperator
Leveraging owned fixed and mobile networks to offer truly converged and seamless multimedia-rich premium services in addition to over the top content..
Incremental revenues by targeting the premium digital content opportunity and tight cost control through converged IP network architectures.
Converged services
integrated operator
1
2
3
Revenues
Invested capital
Likelycandidates
Operations Network
13
Customers & services
Value added
application
providerConverg
ed
services in
tegrated
operato
r
2
Enhanced connectivity
provider
Opex
2323
The competition for service provision: who will be the aggregator ?The scenarios
The scenarios:
Brave new world
• Content providers partner with Internet aggregators for open Internet distribution• Telcos and TV aggregators by passed •Internet players active on premium programming
Competition
• Telcos become content aggregators and distributors of premium content on managed networks•TV aggregators by-passed•Internet players active on mid-tail services only
Cooperation
• The content industry keeps control of distribution. •Telcos provide high QoS network services. •Internet players active on mid-tail services only
Optimum for telcos and content industry
2424
The 6 key takeaways for today
1. The video content industry is facing an unprecedented accumulation of major challenges profoundly reshuffling the industry’s structure and dynamics
2. The content industry will experiment both value destruction (lower end paid content threatened by piracy and free offers) and value creation (new advertising revenues deriving from increased video usage).
3. “Old” media groups have a stronghold on premium content and will likely keep in on the Internet market. Quality of service will be key to differentiate with non premium content.
4. Beware of VOD hype ! Catch-up TV is a key service.
5. There is a business case for Internet “new video” services building on UGC and back catalogues.
6. Cooperation between the content industry and pipe providers provides a superior optimum for content and pipe providers vis-à-vis direct competition.
