Connected Life Market Watch:          Transitions in U.S. Consumer Video          Entertainment          Cisco Internet Bu...
Connected Life Market Watch Program           Transitions in Consumer Video             Scope                             ...
Transitions in U.S. Consumer Video           Entertainment           Video Entertainment Today           •  Traditional ca...
Video Entertainment TodaySituation                            4
Mature, Mostly Saturated Pay-TV Market   U.S. Pay-TV Households                                               Monthly Pay-...
Traditional Content Still Drives Industry                             Most Important Attribute to Video Experience        ...
Consumers Are Investing Heavily in           Home Video ExperienceAverage Broadband Household:                            ...
Consumers Spend More Time on           Internet than Watching TV  Consumers spend                                        ...
#1 Reason Consumers Use the Internet          Is Entertainment                            Consumer Internet:              ...
Key TransitionsConsumers Are TakingControl of Video Experience                              10
Consumers Are Taking Control of         Video Entertainment Experience           2006 Time Magazine                       ...
Traditional TV Experience Is Changing          Consumers Are No Longer Making Appointments          with Their TVs        ...
The TV-Content “Walled Garden”                 Is Cracking                 Consumers Are Supplementing TV with Other Video...
Consumers Are Aware of Their Many           Choices in Video Entertainment          In an average month:            33% o...
Consumers Are Exploring Alternative           Video Entertainment          Percentage of Broadband Users that Use Alternat...
Today, TV Is Consumers’ Preferred           Device for Video Entertainment                        Device Used To Watch    ...
Young Consumers Watch Less TV           Young Viewers Watch Nearly Twice as Much Non-TV Video as           Average Broadba...
Consumers Often Choose Alternative           Devices, Even When TV Is Available          Consumers Watch Video on Their Co...
Consumers of All Ages Watch All             Types of Internet Video Content           Internet Video Is No Longer Defined ...
Time Spent Watching Internet Video                           Is Growing                            More Than Half of Broad...
Internet Video Has Different Value           Proposition from Traditional TV    Reasons for Watching/Downloading Online Vi...
Internet Video Use Is Driven by Friends           and In-Home Entertainment    Reasons for Watching/Downloading Online Vid...
Nearly 30% of Consumer Video Spending       Is for Supplemental Video Options          U.S. Broadband Consumers’ Monthly  ...
Secondary Video Market Is Fragmented,                    with Opportunity for New Entrants     Penetration and Spending in...
Spending in Secondary Video Is Shifting          from Traditional Media to Internet                                       ...
Younger Consumers Allocate More            Spending to Secondary Video Options                                      Monthl...
Impact of Transitions inConsumer Video                           27
Consumers Are Ready for New TV           Services, Such as Web Video to TV                                                ...
Web Video to TV Service Would           Address Many Consumer Pain Points            Important Drivers of Interest in Web ...
Concept Attracts Average Consumers           Who Want To Control TV Experience                                            ...
Consumers Under 30 Are Less Tied to           Traditional TV                                                              ...
Some Groups Are Abandoning           Traditional Pay TV             Internet Video Dominant               10% of this gro...
However, Traditional TV Has Strong           Appeal for Key Market Segments         Older consumers          spend more t...
For Some Consumers, Internet Video Is           Cannibalizing Traditional Linear TV   Change in Time Spent Watching TV    ...
As Alternatives Enter the Market, Internet           Video Could Threaten SP Core Businesses         Question:            ...
Evaluating the Long-Term Threat            Will today’s 20-somethings stay less attached to traditional pay TV as they age...
Going Forward:Key Trends to Watch                      37
Trends To Watch:                                                                                                          ...
Trends To Watch: Quality Can                                                                                              ...
Impact: Quality Improvements and TV           Accessibility Could Boost Internet Video                  Reasons Consumers ...
Trends To Watch: TV Screen                                                                                                ...
Trends To Watch:                                                                                                          ...
Going Forward:Service Provider Opportunities                                 43
SPs Are Strongly Positioned To Deliver           Internet Video to Consumers                                              ...
Service Providers Have Multiple Ways           To Monetize Web-Video-to-TV Services                          Price Sensiti...
CE Manufacturers Do Not Currently           Have Edge in Device Choice                             Consumers Limiting Inte...
SPs Have Many Options in Developing          Their Advanced Video Strategy          Consumer Interest in Select Advanced V...
Service Provider Next Steps:           Preparing for Video Disruption  Consumer video entertainment is poised   for signi...
US Market Transitions In Consumer Video
Upcoming SlideShare
Loading in...5
×

US Market Transitions In Consumer Video

823
-1

Published on

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
823
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
0
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

US Market Transitions In Consumer Video

  1. 1. Connected Life Market Watch: Transitions in U.S. Consumer Video Entertainment Cisco Internet Business Solutions Group July 2010 Kate Griffin Kate GriffinCisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group
  2. 2. Connected Life Market Watch Program Transitions in Consumer Video Scope Approach •  United States Market Watch Program •  Cisco IBSG’s recurring primary research •  United Kingdom program •  Brazil •  Monitors changing consumer behavior to identify key market transitions •  China Methodology •  Germany •  Broadband consumers •  20-minute online survey •  5,500 total respondents •  December 2009 – January 2010 Segmentation   Used proprietary scoring methodologies to identify consumer “technology” segments Source: Cisco IBSG Connected Life Market Watch, 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 2
  3. 3. Transitions in U.S. Consumer Video Entertainment Video Entertainment Today •  Traditional cable/satellite TV market is saturated •  Consumers have invested significantly in home entertainment equipment •  Traditional premium content still drives the market •  The Internet has become a key source for entertainment Key Transitions: Consumers Are Taking Control •  Consumer TV viewing behavior is changing (e.g., time shifting, device shifting) •  Consumers are exploring Internet video as a new source of video entertainment Impact of Transition •  Consumers are interested in alternative services •  New usage patterns can impact traditional TV revenue streams •  Interest differs by customer segment Going Forward •  Key trends to watch •  Service provider opportunities Source: Cisco IBSG Connected Life Market Watch, 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 3
  4. 4. Video Entertainment TodaySituation 4
  5. 5. Mature, Mostly Saturated Pay-TV Market U.S. Pay-TV Households Monthly Pay-TV ARPU U.S. Pay-TV Market Share as Percentage of Total US $ 2000 Satellite Cable 17% 83% IPTV 6% 2009 Satellite 63% Cable 63%At 90% of households, With average monthly spending of Competition is increasing fromU.S. pay-TV market is saturated. $62, consumer market for advanced new players (IPTV, Apple TV, Hulu). pay-TV services may be tapped out. Source: Screen Digest, 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 5
  6. 6. Traditional Content Still Drives Industry Most Important Attribute to Video Experience Interest in Viewing Ranked #1 by Consumers, for All Viewing Devices Internet Video on TV% of Respondents Ranking Factor #1 by Type of Content Content Content is most important part of the Even with Internet-sourced experience, even as consumers explore video, consumers are most new devices and video sources. interested in traditional, professional content. Source: Cisco IBSG Connected Life Market Watch, 2010 Base: U.S. Broadband Consumers Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 6
  7. 7. Consumers Are Investing Heavily in Home Video ExperienceAverage Broadband Household: U.S. Broadband Consumers Subscribe to cable/satellite/telco TV 89%•  Has 2.6 TVs, including 1 HDTV Subscribe to premium movies 34%•  Spends more than $60 per month Subscribe to Netflix 30% for pay-TV service Have HDTV 58%•  Spends another $20 on other Have DVR 42% forms of video watched at home Have gaming console with DVD 37% functionality Source: Cisco IBSG Connected Life Market Watch, 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 7
  8. 8. Consumers Spend More Time on Internet than Watching TV  Consumers spend Internet and TV Viewing by Age more time in front of the computer Age screen than the TV screen  Entertainment- focused Internet time does not exceed TV time, but it is significant, especially among those under 30 Hours per week Internet Video Time Spent Other Internet Time Spent Other Internet Time Spent Watching TV Entertainment Time Spent Source: Cisco IBSG Connected Life Market Watch, 2010 Base: U.S. Broadband ConsumersCisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group
  9. 9. #1 Reason Consumers Use the Internet Is Entertainment Consumer Internet:   More time is spent on Internet Time Spent by Category entertainment than on other Internet categories among all age groups Other 10%   Broadband consumers spend Work or Shopping School more than 25 hours per week 8% 18% on the Internet—more than 7 of them on entertainment News and Information Communicate   Internet as an entertainment 15% 21% vehicle is not limited to early Entertainment technology adopters 29% Late market adopters spend more of their Internet time on entertainment than earlier technology adopters do Source: Cisco IBSG Connected Life Market Watch, 2010 Base: U.S. Broadband ConsumersCisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 9
  10. 10. Key TransitionsConsumers Are TakingControl of Video Experience 10
  11. 11. Consumers Are Taking Control of Video Entertainment Experience 2006 Time Magazine   DVRs taught users they Person of the Year could take control of video experience   This increased user control is driving four interrelated trends: 1.  Time shifting Consumers 2.  Device shifting got the 3.  Increased video sourcing message options (e.g., Internet) 4.  Increased spending control   Together, these are part of larger, viewer-controlled viewing trend Source: Time Magazine, 2006; Cisco IBSG Connected Life Market Watch, 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 11
  12. 12. Traditional TV Experience Is Changing Consumers Are No Longer Making Appointments with Their TVs Real-Time vs.. Controlled Viewing (Percentage of Time Spent)   Consumers are changing their usage patterns Average DVR Owners   They are no longer making appointments Viewer- with their TV Controlled Viewing Viewer- Controlled Viewing   They want to watch 38% 58% Real-Time their video Real-Time Viewing Viewing 42% entertainment at the 62% time they choose Base: U.S. Broadband Base: U.S. Broadband Consumers Consumers with DVRs Source: Cisco IBSG Connected Life Market Watch, 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 12
  13. 13. The TV-Content “Walled Garden” Is Cracking Consumers Are Supplementing TV with Other Video Weekly Time Spent on Weekly Time Spent on Video Video Entertainment Entertainment by Age Portable devices Computer-based DVDs VoD Hours per WeekHours per Week DVR Real-time TV Age Source: Cisco IBSG Connected Life Market Watch, 2010 Base: U.S. Broadband Consumers Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 13
  14. 14. Consumers Are Aware of Their Many Choices in Video Entertainment In an average month:   33% of broadband consumers watch TV programs on the Internet   Broadband consumers watch more than 4 hours of video on the Internet   11% connect their computer to the TV   Another 11% watch video on their mobile phone   23% of broadband consumers use their gaming consoles to watch DVDs   9% rent a movie online from their gaming console Source: Cisco IBSG Connected Life Market Watch, 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 14
  15. 15. Consumers Are Exploring Alternative Video Entertainment Percentage of Broadband Users that Use Alternative Video Sources United Kingdom Germany 68% 70% United States 61% 45% 38% 26% 75% 52% 40% China Brazil 99% 90% 88% 95% 83% 67% Source: Cisco IBSG Connected In a given month, more U.S. broadband consumers watch TV programs on Life Market Watch, 2010 the Internet than watch on-demand videos on TV (33% vs.. 23%)Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 15
  16. 16. Today, TV Is Consumers’ Preferred Device for Video Entertainment Device Used To Watch Video Entertainment Consumers Like Their as a Portion of Total Spend Video Entertainment on TV Computer Portable 5.5% Devices 1.5%   58% of U.S. broadband consumers have a high- definition television at home   The #1 reason consumers don’t watch more Internet video today is because they’d Television 93% rather watch video entertainment on a TV screen than on a computer screen Base: U.S. Broadband Consumers But that is changing… Source: Cisco IBSG Connected Life Market Watch, 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 16
  17. 17. Young Consumers Watch Less TV Young Viewers Watch Nearly Twice as Much Non-TV Video as Average Broadband User Device Used To Watch Video Entertainment   Average U.S. broadband as Portion of Total Spending Portable Devices 4% consumer spends 1.3 hours per week watching video on a computer Computer 14%   Average 18- to 24-year-old broadband consumer spends nearly twice that time, watching 2.5 hours of video on a Television computer per week 82%   On average, U.S. broadband consumers watch 21 minutes of video per week on portable Base: U.S. Broadband Consumers devices, while 18- to 24-year- Between 18–24 Years olds watch 38 minutes Source: Cisco IBSG Connected Life Market Watch 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 17
  18. 18. Consumers Often Choose Alternative Devices, Even When TV Is Available Consumers Watch Video on Their Computers To Time-Shift and Multi-task   75% of respondents watch Reasons for Watching Computer Video video on computers, When At Home averaging about 1 hour, 45 minutes each week 63% of the time at home 93% of 18- to 24-year-olds watch video on a computer, averaging 2 hours, 45 minutes   40% of respondents watch video using portable devices, averaging about 54 minutes each week 39% of this time they are at home Base: Watch Video on the Computer at Home Source: Cisco IBSG Connected Life Market Watch, 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 18
  19. 19. Consumers of All Ages Watch All Types of Internet Video Content Internet Video Is No Longer Defined Only by Young People Watching YouTube Watching Internet Video (by Age) Watching Internet Video (by Content) 93% 61% 80% 81% 52% 51% 67% 38% 55% 25% Time 2.6 1.7 1.1 47 43per week hours hours hours min min Source: Cisco IBSG Connected Life Market Watch, 2010 Base: U.S. Broadband Consumers Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 19
  20. 20. Time Spent Watching Internet Video Is Growing More Than Half of Broadband Consumers Watch TV on the Internet   In the 18 months ending Increase in TV Viewership on the Internet (July 2008 to Dec. 2009) December 2009, there was about a 10% increase in thePercentage of Consumers number of people who watch TV on the Internet   comScore reports even more aggressive growth, with a 10% increase in total online video viewers in the last 6 months of 2009   Time spent viewing online video has grown 17% since July 2008 Source: Cisco IBSG Connected Life Market Watch, 2010; comScore, 2010 Base: U.S. Broadband Consumers Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 20
  21. 21. Internet Video Has Different Value Proposition from Traditional TV Reasons for Watching/Downloading Online Video Choice, control and convenience are driving Internet TV use   “Snacking” and new non-TV content are key drivers Source: Cisco IBSG U.S. Connected Life Market Watch, 2010 Base: U.S. Internet Video ViewersCisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 21
  22. 22. Internet Video Use Is Driven by Friends and In-Home Entertainment Reasons for Watching/Downloading Online Video   In the last year, two factors have gained importance as drivers of Internet video usage: Shared experience In-home entertainment July 2008 December 2009 Source: Cisco IBSG U.S. Connected Life Market Watch, 2010 Base: U.S. Internet Video ViewersCisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 22
  23. 23. Nearly 30% of Consumer Video Spending Is for Supplemental Video Options U.S. Broadband Consumers’ Monthly   Consumers supplement Video Spending their basic TV experience •  Premium movie with as many as 7 other channels sources of video •  Mail-based rentals •  VoD/PPV   Consumers can exert moreSecondary •  Rentals immediate control over these Video $14.40 $22.69 •  DVD purchases a la carte options •  Internet downloads & subscriptions They have flexibility and can •  Kiosks select the secondary video Primary Video $30.00 option that best suits a given situation $56.08 Average monthly subscription for In many cases, they can adjust cable, satellite, or their spending incrementally Pay TV without entirely canceling or abandoning the service Source: Cisco IBSG Connected Life Market Watch, 2010 Base: U.S. Broadband Consumers Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 23
  24. 24. Secondary Video Market Is Fragmented, with Opportunity for New Entrants Penetration and Spending in Secondary Video Market   Fragmentation and shift in secondary market make it easier to displace than primary   Consumers use multiple SpendingPenetration methods; few attached to any one   While representing the highest adoption, DVD purchase and retail rental are declining   High DVD purchase suggests desire to “own” media, which presents opportunity in digital, online world Source: Cisco IBSG Connected Life Market Watch, 2008, 2010 Base: U.S. Broadband Consumers Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 24
  25. 25. Spending in Secondary Video Is Shifting from Traditional Media to Internet   Total secondary video Shifting Secondary Video Spending July 2008 to December 2009 market declined 10% in 18 months   Decline led by DVD purchase and rental declines; at same time, Internet movie down- loads increased by nearly 30%   In 2010, 22% of respondents expect to spend less on DVDs; these reductions may not be fully reallocated to Spending on DVDs other video options, but Spending on DVD Rental (retail) Spending on Internet Downloads instead to savings and Total Secondary Market Spending other nonvideo expenses Source: Cisco IBSG Connected Life Market Watch, 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 25
  26. 26. Younger Consumers Allocate More Spending to Secondary Video Options Monthly Video Spending by Age   Greater reliance on secondary video among Primary Secondary younger consumers could support rapid shifts in spending   On average, consumers between 25 and 29 spend more than $5 per month on Internet video% Spent onSecondary 38% 39% 32% 24% 12% Source: Cisco IBSG Connected Life Market Watch, 2010 Base: U.S. Broadband Consumers Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 26
  27. 27. Impact of Transitions inConsumer Video 27
  28. 28. Consumers Are Ready for New TV Services, Such as Web Video to TV Service Concept: Web Video to TV Consumer Interest in a Service that Simply and Easily Enables Internet   Web video to TV makes it simple and easy Video on TV to watch all the different types of video available on the Internet today on your TV instead of on your computer   This includes: Strong Interest 43% Full-length movies and TV shows from sites like 4% Hulu, Amazon Unbox, and ABC.com Professional short videos from sites like CNN.com, Moviefone.com Significant Interest User-created short videos from sites like 14% Facebook and YouTube   For web video to TV, use your TVs remote control to find and select a video from an Internet site and watch it directly on TV Question:   Web video to TV is enabled through a How interested would you be in this offering, if it device attached to your TV and is separate were priced at a level you consider reasonable? from your TV service, so it does not provide access to your regular TV channels Source: Cisco IBSG Connected Life Market Watch, 2010 Base: U.S. Broadband ConsumersCisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 28
  29. 29. Web Video to TV Service Would Address Many Consumer Pain Points Important Drivers of Interest in Web Video to TV   Moving Internet video to the TV is important, but not the only driver   Consumers want control of when they choose to watch their video entertainment   Web video to TV addresses many other consumer pain points, from access, to content, Respondents Rank 6+ on 10-point scale to total spending Source: Cisco IBSG Connected Life Market Watch, 2010 Base: Any Interest in Web Video to TVCisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 29
  30. 30. Concept Attracts Average Consumers Who Want To Control TV Experience Profile Comparison Web Video To TV Strong Interest versus Average U.S. BB Consumer Profile of Initial Target Segment: Profile of Initial Target Segment:   Average TV usage and spending   Average TV usage and spending   Younger and more likely to have   Younger and more likely to children living at have children living at home home   Have strong   Have strong existing alternative existing alternative TV behavior TV behavior   More likely to want   More likely to want to control their TV viewing Average respondent to control their TV Strong interest in web video to TV viewing Source: Cisco IBSG Connected Life Market Watch, 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 30
  31. 31. Consumers Under 30 Are Less Tied to Traditional TV 18-24 25-29 30+ Watch video on computer 2.8 hours 2.2 hours 1.3 hours Higher (hours per week) Usage of Watch TV via Internet 42% 28% 13% (weekly or more)Alternative Connect computer to TV (at any time) 31% 39% 16% Purchase movies via gaming console 19% 19% 11% (at any time) Spend on online video $3.00 $5.20 $1.20 (average per month) 18-24 25-29 30+ Watch TV on TV Lower (hours per week) 13 hours 16 hours 23 hours Usage of Real-time viewing Traditional 55% 50% 65% (as percent of total video entertainment) Spending on cable/satellite TV service $57.20 $63.20 $71.01 (average among users) Current cable/satellite subscribers likely to cancel cable/satellite 8% 7% 5% (if Internet video available on TV) Source: Cisco IBSG Connected Life Market Watch, 2010 Base: U.S. Broadband ConsumersCisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 31
  32. 32. Some Groups Are Abandoning Traditional Pay TV Internet Video Dominant   10% of this group already use Internet video for most of their video viewing   20% of this group do not subscribe to pay TV   Another 10% would cancel pay TV if Internet video were A smaller group (3%) of accessible easily on TV consumers have no TV   This group is younger and more service at all likely to live with roommates or They use only their computer parents and, in general, spend and/or portable devices to more time on the Internet meet their video entertainment needs Source: Cisco IBSG Connected Life Market Watch, 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 32
  33. 33. However, Traditional TV Has Strong Appeal for Key Market Segments   Older consumers spend more time and money on TV   Families are heavy time shifters and strong Internet video watchers, but they are not likely to cut the cable cord Source: Cisco IBSG Connected Life Market Watch, 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 33
  34. 34. For Some Consumers, Internet Video Is Cannibalizing Traditional Linear TV Change in Time Spent Watching TV   For 70% of consumers, Internet After Beginning To Watch Internet TV TV viewing has not impacted time spent watching TV 18% watch less on TV since they Less began watching Internet TV 18% 12% watch more TV on television More now, supporting theory that 12% Internet can find new user bases The Same 70% and/or help keep users loyal   There is more cannibalization effect in younger consumers 31% of Internet TV viewers agedQuestion:Since you began watching TV programs on the 18-24 say they watch less TV onInternet, do you spend more, less, or the same television since they begantime watching TV programs on a television? watching Internet TV Source: Cisco IBSG Connected Life Market Watch, 2010 Base: U.S. Internet TV ViewersCisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 34
  35. 35. As Alternatives Enter the Market, Internet Video Could Threaten SP Core Businesses Question: Potential To Cancel Pay TV Service (Percentage of subscribers responding they would cancel) Imagine that you were able to access web video to TV for free, and that you could easily watch all Internet video content on your TV. Web video to TV includes on-demand Potential to Cancel Premium Movie Subscription access to prime-time TV (Percentage of subscribers responding they would cancel) shows, but does not include your regular TV service or your TV lineup as it airs. Would you make any changes to your current TV service package? While the greatest threat is in secondary video, even the core primary video market could be impacted Source: Cisco IBSG Connected Life Market Watch, 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 35
  36. 36. Evaluating the Long-Term Threat Will today’s 20-somethings stay less attached to traditional pay TV as they age? Forecasting Future TV Behavior What’s Likely To Change •  More disposable income •  Investment in home technology (e.g., HDTV) •  Time spent at home •  Degree of “busy-ness” •  Extreme behavior is averaged out. HouseholdYoung Adults Aging (30+) decisions are compromises based on interest and(18 – 30) •  Married, w/ needs of multiple people.•  Unmarried children•  No children •  Financially stable What’s Likely To Stay the Same•  Living alone •  General level of technology comfort•  Early in financial •  Family needs •  Less time to •  Awareness of options independence •  Desire for control, choice, and convenience follow trends Market Evolution •  As these consumers age, will they be presented with the same options available in today’s market? •  Or, will there be new options that make it easier to source video from alternative sources and watch it at home on TV? Source: Cisco IBSG Connected Life Market Watch, 2010 Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 36
  37. 37. Going Forward:Key Trends to Watch 37
  38. 38. Trends To Watch: Migration1 Moving Internet Video to the TV to TVThe latest TVs & consumer   In-Stat predicted that all digital TVs would have at least 1 HDMI input by end of 2009electronics products make it   21% of U.S. broadband consumers have alreadyeasier to watch Internet connected their computer to the TVvideo on TV   4% of broadband consumers have an Internet video device (Roku, Apple TV)   Netflix reports that half of its subscribers with broadband are getting movies on TVAs Internet video moves to   Today, 93% of video entertainment is viewed on a TV; it is the preferred viewing devicethe TV, usage patterns will   The #1 reason consumers don’t watch moreshift significantly Internet video today is because they’d rather not watch their entertainment on a computer   As CE offers make it easier to access Internet- sourced video on this preferred device, usage patterns could shift rapidly Source: Cisco IBSG Connected Life Market Watch, 2010; In-Stat, 2008; company reportsCisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 38
  39. 39. Trends To Watch: Quality Can Impact of2 Impact Internet Video Use Quality Consumer Perception of Quality of Quality Will Play Role in Internet-Based TV Viewing Experience Evolution of Alternative TV Very Poor 2% Poor   Only 7% see Internet-based TV Very 5% Good video as being poor today 15%   This positive perception may be Adequate related to low expectations, because 39% Good 1 out of 4 Internet TV viewers say 39% that quality limits them from watching more Internet video   With improved quality, 29% of Consumers Limiting Internet Video Viewing Internet TV viewers and 37% of Due to Video Quality those watching Internet TV weekly would spend more time watching TV on the Internet   After competitors begin to match each other in content breadth and control capability, quality will rise in importance as a competitive differentiator Source: Cisco IBSG Connected Life Market Watch, 2010 Base: U.S. Internet TV ViewersCisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 39
  40. 40. Impact: Quality Improvements and TV Accessibility Could Boost Internet Video Reasons Consumers Don’t Watch More   Major protections for Video on the Internet traditional pay TV include screen preference, business models that enforce time delays, and video quality   The challenge: protections are not fully in the control of service providers   Changes in content distribution policy and technology can drastically impact consumers’ behavior Source: Cisco IBSG Connected Life Market Watch, 2010 Base: U.S. Internet TV ViewersCisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 40
  41. 41. Trends To Watch: TV Screen TV Internet3 Becomes New Internet Screen Access In January 2009, Yahoo! first announced distribution partners for its TV widgets.As widgets proliferate, Today, more than two dozen widgets areconsumers may come available on TVs from Vizio, Samsung, LG, and Sonyto recognize TV screen Three weeks after Verizon FiOS launchedas another access point updated widgets, they reported that “millions”to the Internet of Tweets and Facebook gallery photos had been viewed by FiOS TV subscribers on their TVs   Today, only 1 out of 3 consumers express interest in accessing2010 will be a learning Internet content from the TVyear for consumers   In aided discussions with specific use cases, interest grows   Cisco IBSG expects competitive differentiation in GUI and generalMarket impact may not ease of use versus exclusive widgets or applicationsbe in competitive   The significance of TV widgets may not be in the competitive edgedifferentiation, but in they deliver, but in their role in fundamentally changing the wayconsumer perception consumers view their TV screen—opening the door for Consumer TelePresence and other services Source: Cisco IBSG Connected Life Market Watch, 2010; Company Reports Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 41
  42. 42. Trends To Watch: TV Social4 Introduce Social Behavior into TV Behavior“TV is fundamentally a social experience, and the only reason people haven’tengaged socially with their TV screens to date is that they haven’t had aconvenient way to do so.” —Forrester, August 2009 4 Potential Social TV Developments TV Watching Behavior Is Complex Applications that….   People watch TV alone about half 1 Enhance a live group experience the time Create a “virtual” group experience,   People multitask while watching TV 2 about 40% of the time watching TV with people in other locations The Value of Social TV Is 3 Foster interaction with the TV programming itself (decide plot lines, Unclear to Today’s Consumer vote on reality winners)   Only 14% say the desire to watch with others prevents them from watching 4 Create a peer recommendation more Internet TV engine and commentary on viewing   Only 23% of broadband consumers express interest in friend-to-friend social TV service Source: Cisco IBSG Connected Life Market Watch, 2007, 2010; Forrester, 2009Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 42
  43. 43. Going Forward:Service Provider Opportunities 43
  44. 44. SPs Are Strongly Positioned To Deliver Internet Video to Consumers   66% of consumers choose an SP Preferred Provider for to deliver web video to TV service Web Video to TV United States   SPs can address consumers’ concerns, including up-front cost and quality Movie studio—2%Broadcast company—4%   To optimize any offer that requires Online aggregator—3% consumers to buy a separate device, SPs should work with retailers 55% would buy the enabling device Video rental—7% Retail store—4% at a consumer electronics or Internet retailerTV manufacturer—2% Gaming service—1%   This preferred position reflects the lack of activity in the market by any player, and could change quickly if any consumer electronics vendor, retailer, or aggregator launches aggressively Source: Cisco IBSG Connected Life Market Watch, 2010 Base: Interested in Web Video to TV, U.S.Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 44
  45. 45. Service Providers Have Multiple Ways To Monetize Web-Video-to-TV Services Price Sensitivity: Web Video-to-TV   Consumers are willing to Monthly Basic Service pay directly for web (Van Westendorp Price Sensitivity Meter) video to TV Range of acceptable pricing for interested consumers is between $7 to $11 per month for this service   Consumers would upgrade their broadband to gain access to web video to TV 39% of broadband consumers would upgrade their broadband service for an additional $10 per month if web video to TV were available for free with premium broadband Source: Cisco IBSG Connected Life Market Watch, 2010 Base: Interested ConsumersCisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 45
  46. 46. CE Manufacturers Do Not Currently Have Edge in Device Choice Consumers Limiting Internet Video Viewing   Consumers prefer Due to Video Quality to enable their Other 2% web video to TV service Gaming Console 7% Home Media Server 7% through stand-alone, service-specific devices Stand-Alone Device Blue-Ray Disc Player 9% (such as Roku, Apple 30% TV) or their existing set- TV 16% top boxes Set-Top Box 29%   Most important factors in choosing device were Device Selection Criteria (select all that apply) price, ease of installation, and the 38% 36% desire to limit the 30% number of devices in 22% the home 10% 3% 8%   62% did not cite cost as a factor Base: Interested in Web Video to TVCisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 46
  47. 47. SPs Have Many Options in Developing Their Advanced Video Strategy Consumer Interest in Select Advanced Video Service ConceptsConnected Home A service that makes it easy to move digital content suchMove Digital Content as photos, music, and videos from any TV or computerAround the Home in the home to any other TV or computer in the home 44%Select Camera A feature that enables you to choose from differentAngles camera angles to view your show 25%Social TV A "Friend-to-Friend TV" feature that enables you to inviteFriend-to-Friend Chat friends to participate in interactive chat sessions while you 23% watch TV and to share the same viewing experienceInteractive TV A feature that enables you to use your TV to retrieveRetrieve More Info information and videos about the program you are 34% watching, while you are watching itInternet A service that provides quick access to a selection ofWidgets Internet sites directly from your TV 34% Source: Cisco IBSG Connected Life Market Watch, 2010 Consumers’ rating interest 6+ on a 10-point scaleCisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 47
  48. 48. Service Provider Next Steps: Preparing for Video Disruption  Consumer video entertainment is poised for significant disruption  As incumbents, SPs are strongly positioned, but many factors are outside their control  To prepare for the disruption, SPs can: 1.  Develop services, such as web video to TV, that provide consumers with more control 2.  Stay ahead of changes in the video experience, such as interactivity and TV- based Internet access 3.  Fully take advantage of monetization options to capture and retain value across the complete portfolio and full customer lifecycle Source: Cisco IBSG Connected Life Market Watch, 2010Cisco IBSG © 2010 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 48

×