Media Trends Q4 2010


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This Media Trends report explores the current environment in which the subscription television sectors of Australia, the United Kingdom and the United States are operating.

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Media Trends Q4 2010

  1. 1. Media Trends Issue 1 , Q4 2010Introduction Technology and changes in consumer The proliferation of media devices such preference continue to shape the as internet enabled TVs, internet media and communications connected set top boxes, streaming landscape. While regulation and devices and TV services on iPad and economic trends play a role in mobiles is emphasising the importance of influencing some of the outcomes of access to content. domestic and international media developments, it is the dynamic nature Social TV, where an internet connected of the industry that continues to be TV becomes a social media device, is reflected by on-going marketplace also being reflected through transformation. developments where EPG providers are pioneering systems which let subscribers In the first of a series of quarterly discover what their friends are viewing reports on Media Trends we explore via Facebook and Twitter. the current environment in which the subscription television sectors of The growth of multiplatform TV formats Australia, the United Kingdom and the continues to be recognised both in the United States are operating. United Kingdom and Australia. The Australian subscription television industry Our analysis this quarter indicates that also continues to invest in multiplatform subscription television distribution is local productions, such as Slide, which being affected by a number of will launch in 2011. variables including economic conditions and changes in consumer In 2010, television remains the main ad preference. At the same time medium in terms of share of total global innovation is offering consumers ad spend. greater choice of reception devices Statistics indicate that positive trends will and content. Multiplatform continue for the Australian and opportunities are also being utilised by international advertising markets in 2011. industry and adding value to the relationship with viewers. This quarterly report also highlights domestic and international trends in TV While difficult economic conditions in viewership, media stacking habits, online the United Kingdom, and to a lesser video and the take-up of web enabled extent Australia, resulted in continued devices. growth in subscriber numbers and profit cable television providers in the United States have been impacted by unprecedented declines in subscriber numbers. With 3DTV and TV anywhere services being rolled out across a number of countries there is still a level of uncertainty in relation to consumer interest, particularly in relation to 3DTV. 1
  2. 2. Media Trends Issue 1 , Q4 2010STV DistributionCurrent subscriber and profit margins are being USA: STV under pressure?influenced by economic trends and changes inviewer preference brought about by Leichtman Research Group reported the top 10technological development. Growth in traditional cable providers lost 1.4m cable TV subscriberssubscription television take-up is being in year ending Q1 2010. Satellite operatorssupported and challenged by growth in gained 1.33m subscribers and IPTV 1.78m.alternative distribution platforms such asbroadband, satellite and IPTV. US STV SubscribersUK: BSkyB, Virgin Media results 2For the quarter ending 30 September 2010, CableBSkyB net profits rose 78.1% to £228m, mainly 0 Satellitefrom broadband and telephony take-up. Thismonth BSkyB also passed its long term target of -2 IPTV10m subscribers.Annual ARPU hit a record £514, boosted byHDTV and broadband. A 39% leap in triple-playcustomers sent the total to 2.3m. STV subscribers Q1 2009 – Q1 2010 (millions)News Corp’s bid to take full control of BSkyBhas been referred to the European Commission SNL Kagan found total US STV subscriptions(EC) on competition grounds. The EC and declined for the first time ever in Q2 2010. AllOfcom will both respond in December. News operators combined lost 216,000 customers.Corp currently has a 39.1% stake in BSkyB. However, satellite added 81,000 subscribers, IPTV 414,000. Cable operator Time Warner mayFor the same quarter, cable operator Virgin introduce lower-cost tiers to regain subscribers.Media’s revenue grew 6.4% to £978m. It added14,100 customers, for 4.78m total. 3.77m are TV Cord-cutting anxietysubscribers; with 1.4m taking HD. Monthly TVARPU is £46.39, mobile £15.01. Triple-play There is ongoing debate in the USA aboutsubscribers are 62.7%, quad-play 11.5%. Virgin whether consumers are dropping STV serviceswill launch 100Mb broadband and TiVo in Q4. or ‘cord cutting’ in favour of on-line or over the top (OTT) services.Australia: AUSTAR, FOXTEL results SNL Kagan argues that low housing formationFor the quarter ending 30 September 2010, and high unemployment caused cableAUSTAR’s TV subscribers grew by 14,771 to subscribers to fall, not OTT competition. Yet,761,919. MyStar subscribers rose to 180,998 Convergence Consulting forecasts cord-cutting(29% of residential subscribers). Revenue grew homes will grow to 1.6m by end 2011.Analyststo $180.1m, a 6% increase on Q3 2009. at investment bank Credit Suisse predicted Apple TV and Netflix OTT services will replaceFOXTEL’s earnings (EBITDA)for the year to 30 cable for young consumers.June 2010 grew by 17.5% to $477m.ProfitBefore Tax grew to $160m. Subscriber numbers Netflix and cable operators are competing viagrew to 1.632M and ARPU rose sharply from the windows and prices. Netflix is payingtake up of FOXTEL iQand HD TV services. Paramount, Lionsgate and MGM almost $1bn over five years for online streaming rights to first-run movies ahead of cable. While Cable operators are in talks with studios Sony, Warners and Disney for a trial to show films soon after cinema release, at $30 per viewing. 2
  3. 3. Media Trends Issue 1 , Q4 20103D and TV EverywhereIn the United States American research by FOXTEL OnDemand includes 30 live streamedCTAM (Cable & Telecommunications TV channels, catch-up programming from theAssociation for Marketing) found consumers channels at no extra cost and On-demand TVexpect to pay an extra $20 monthly to get 3D shows and movies rentals.STV, but still need convincing of the benefits. FOXTEL also recently started rolling outSky launched Europe’s first dedicated 3D services via Microsoft Xbox 360 on 1 October, 2010 and FOXTEL willlaunch Australia’s first 3D channel in November The AUSTAR Anywhere service also enablesthis year. Australian subscribers the ability to view programming on up to two PCs per AUSTARIn the US Time Warner and Comcast are account at no extra cost. It provides a contentcurrently trialling a TV Everywhere video internet download and streaming service with hundredsservice. of hours of premium content from 38 channels, plus the online-only sports channels ESPN360In Australia, FOXTEL On Demand currently and Setanta-i.uses broadband Internet to deliver content toTVs via its 780,000 iQ set-top boxes.InnovationsConvergence is altering the once distinct Google is partnering with Sony for TV sets andtelevision and online environments. New and Logitech for set-top boxes. The boxes areplanned internet connected TVs; set top devices available at retail and subsidised to DISHsuch as Apple TV, Google TV, the Telstra T- satellite TV subscribers. Google TV emphasisesBox, IPTV services and online streaming are its comprehensive video search. It also has aoffering consumers greater choice. The PC-style browser, accessing the whole Web.proliferation of media devices is in turn Sites from partners including TBS, CNN andemphasising the importance of access to Cartoon Network have been redesigned for TVcontent. viewing. HBO is making its content available.Connected TV Internationally, seven of the 10 major TV manufacturers are selling sets that use theConsumer electronics manufacturers, Yahoo Connected TV platform. Samsung istechnology giants and STV operators are budgeting $70m to market its connected TVcompeting and partnering in a race to connect apps.the home television set to the Internet. At stakeis the opportunity to offer consumers next- In Australia, the Telstra T-Box offers moviegeneration television services: video-on- rental and Unmetered BigPond Internet TV.demand, information and social networking. AUSTAR owner Liberty Global is rolling out connected TV in its European cable systems.In the USA, Apple and Google are head-to-headwith rival devices and philosophies. The Apple However, there are major challenges in clinchingTV mini set-top box provides TV shows and deals for broadcasters’ content. Google TV ismovie rentals from iTunes and Netflix. It does blocked from the Web sites of US broadcastersnot access websites nor so far include the ABC, CBS and applications (apps) for interactiveservices that made the iPhone and iPad so Google TV’s lead product manager Rishisuccessful. Chandra said Google TV is “a platform” and broadcasters could use a service like YouTube to monetise content, with ad revenue share. 3
  4. 4. Media Trends Issue 1 , Q4 2010Social TVOne significant consequence of connecting TV STV operators are also recognising thesets to the Internet is the television becomes an importance of social relationships inonline social device (social TV). recommending content to boost VOD buy rates and encourage people to take higher tierConsumers can access social networks such as packages.Facebook and Twitter via the TV set. Manyviewers, particularly in younger demographics,already use them via laptops or mobiles to share EPG providers, such as News Corp’s NDS, areopinions about what they are watching on TV, pioneering systems which let subscribersespecially in relation to music video and sports discover what their friends are viewing, viaevents. Facebook or Twitter.Facebook is reportedly in talks with US TVnetworks “at least in research mode for socialTV.”New Developments in ProgrammingBroadcasters are supporting new television FOXTEL’s FOX8 will air multiplatform dramaformats that make the most of multiplatform Slide in 2011. The 10 x 60 minute series isopportunities to engage audiences. budgeted at more than $1m per episode and follows five Brisbane teens as they “smash theirNew transmedia TV formats and extensions are way into Adulthood.”emerging across a range of genres, often withviewer participation via social media. The 2010 I Love Food Awards run by LifeStyle FOOD channel received 100,000 online votesMultiplatform TV formats from the public across 26 dining categories. Votes were compiled into Australias largestIn the UK, Channel 4 docu soap-reality hybrid peoples choice Eat Out Guide.Seven Days invites viewers to give the show’sparticipants advice about their dilemmas via New TV services on iPad and mobilesharing “thoughts” (ie comments) with them onthe show’s site. STV operators and broadcasters are launching innovative new services on the iPad, other tabletMTV’s Being Victor blends social media and PCs and mobile devices.Web drama to let viewers discuss serious issuesrelevant to a teen audience. The show has been FOXTEL has launched its TV Guide on the iPad.growing its audience via an in-character blog The free app lets users search program listings,and tweets. set program reminders and remote record shows to the FOXTEL iQ set-top box. Since itsVenerable soap Coronation Street launched its December 2009 iPhone debut, the app has beensocial networking game Corrie Nation on downloaded 200,000 times.Facebook and as the show celebrated50 years on air. Seven of the top 10 US STV providers are building tablet apps offering subscribers TVFacebook is increasingly also the first choice for shows and movies.TV show promotion. ITV debuted this year’spromo video for The X Factor on the show’s Satellite operator DirecTV plans to offer NFLThe BBC has also commissioned season three games on iPad for $50 on top of the $300of its EastEnders derived teen Web drama E20. season TV subscription. 4
  5. 5. Media Trends Issue 1 , Q4 2010 Original content is keyRival DISH Network will let subscribers viewDVR recordings on iPad. Broadband and IPTV This importance of content has been highlightedprovider Verizon has prototyped a live TV throughout this report.service for iPad and other mobile devices. Local production of content is well supported byAustralian audiences are being offered Australian subscription platforms and channels,multiplatform original Australian made which invested over $541m in Australian contentprogramming via subscription television. in 2009. Spirited, the comedy-drama about life and loveProvider Verizon has prototyped a live TV after death, became the #1 and #3 time-shiftedservice for iPad and other mobile devices. show on W. A second season has been commissioned for next year.The HBO Go service will provide 800 hours ofprogramming to subscribers’ iPads, at no extra 2011 will also see the premiere on Showcase ofcost. more locally-produced drama, with Cloudstreet. The mini-series of Tim Winton’s iconic novel isOther broadcasters are launching apps that shot in Perth and stars Stephen Curry and Essiework in sync with live TV: the CBS sports app Davies.brings real-time American football stats to iPadsThe Samsung Galaxy tablet will compete withthe iPad/iTunes offering. It will have TV showsand movies from NBC, Universal, MTV,Paramount and Warners.AdvertisingResearch indicates a positive outlook for the Australian TV 2011 ad growthinternational advertising market and AustralianTV advertising in 2011. • Media buyer Mitchell Communication Group predicts the FTA ad market will growWorldwide ad spend growing 6% and TV ad rates rise by 5% • Mediabrands predicts the combined FTA• Nielsen research found worldwide ad spend and STV market will grow 4.3% continues to rise in first half 2010• It grew globally year-on-year 12.8%, in the Online measurement USA 3.8% and in Australia 8%• Globally, television grew 15.8% and remains • The Interactive Advertising Bureau (IAB) is the main ad medium with 62% share of total tendering for a new online media audience global ad spend, a 1% increase measurement system • The initiative is supported by a media research group formed by major Australian advertisers to improve media measurement 5
  6. 6. Media Trends Issue 1 , Q4 2010Definitions and StatsEssential terminology and need-to-know data.Key terms Over-the-top (OTT) video: TV shows and movies delivered to homes via broadbandARPU: Average revenue per user Internet instead of STVCord-cutting: US cable TV subscribers Quad play: Voice, video, broadband, wirelesscancelling subscriptions (sometimes preferringonline or connected TV video) Triple play: Voice, video and broadbandMedia stacking: simultaneous use of multiple TV Everywhere: initiatives to enable STVelectronic media (eg watching TV and using the subscribers to view programming via a rangeInternet) ofdevices, such as PCs, game consoles and Internet-connected TVsTV viewership and technology trends Inability to multitask is a barrier to 3DTV • CTAM study of viewers finds that 89%Australia – primetime viewing in mainland believe multitasking is best suited forcapitals regular, non-3D viewing.• OzTAM people meters: total viewing of prime time TV: up 3% on 2009. Web-to-TV video content revenue will reach• Viewing by 16-to-39s up 7%. $17bn in 2014• However, viewing of main FTAs (ABC, SBS, • In-Stat forecasts 57m US homes will be Seven, Nine, TEN) down 6% as viewers viewing full-length online content on their migrate to new FTA digital channels. TVs in 2014, with associated revenue• STV up 1% and for viewers 16-39 up 11%. reaching $17bn.Media stacking prevalent amongst younger Apple TV has only three of the top 25 US TVUK viewers shows• Survey of 2,000 UK consumers • At launch, Apple TV offers just three of the commissioned by social media agency top 25 broadcast TV shows (Desperate Diffusion. Housewives, Glee and Grey’s Anatomy).• "Media stacking" is prevalent among 18- 24s, with 76% responding that they Apple iPad now in 3.6% of US homes "regularly" browse the Internet while • The Q2 2010 Nielsen Home Technology watching TV. Report finds fast penetration for the iPad,• 58% use online or mobile services while which launched on April 3, 2010 and was watching TV programmes. added to the Report’s survey in May.• 40% of women and 29% of men ages 18-24 mostly use social networking sites such as TV set is no longer a “necessity” for US Twitter and Facebook while watching TV. consumers • 2010 Pew study finds only 42% ofUS 18-34s keep moving to online and time- Americans believe a television set is ashifted video "necessity," down from 64% in 2006.• Market researcher Morpace: Viewing by American 18-34s continues moving from Digital replaces analogue in UK homes broadcast television towards online and • Institution of Engineering and Technology time-shifted video. survey: A typical British home has six web-• Only 41% of their viewing time is spent enabled devices, compared to one in 2000. watching live TV versus time-shifted and Vinyl, film and video tape are all dying out. online content. 6