BBC - HDTV Europe - Tom Morrod

HD in Western Europe Tom Morrod Head of TV Technology Screen Digest 9 November 2009

After three years, HD broadcasts available everywhere in Europe 2005 2006 2007 2008

However, service provision is only one part of the equation to HD watching…

The result is that HD is a very small subset of viewers Screen Digest: May 2009 Western Europe 2009 All TV homes 167m HD-display homes 75m Active HD-enabled homes:9.2m (2.5%)

The gap between who have HD screens but don’t watch HD is persistent, although closing

And this problem is also persistent in pay TV
Western European HD STB installed base vs. HD subscribers (m)
Just 30% of the HD STBs in W.E. homes were being used to watch HD content at the end of 2008
This will rise to 67% by the end of 2013

So there is a massive opportunity to close this HD gap
In Western Europe there are 66m households without HD content but with HD TV screens – only 12% watching
In the Netherlands there are 3.6m households – only 11% watching
What does this mean?
There is latent demand for HD content if consumers can be given value
But there are several other questions to ask…
Does uptake differ across Europe?
How technically ready is the consumer base for HD?
How much is HD an opportunity or a cost?

Europe seems split between those with ‘active’ HD interest and those without

But it’s not a technical disadvantage since they all have TV screens and services…

But pay TV penetration is a very strong driver since there is so little free HD content Consumer don’t change platforms ‘for HD’

Screen Digest June 2009 And this is corroborated by the data… free does not drive HD

So what is can drive HD migration?
Coming to Spain : HD on DTT
PSB TVE introducing HD feed in 2009-2010
After ASO (April 2010), existing free DTT channels will be given spectrum to go HD
French-style HD tuner obligation to be introduced for TV sets over 21”
Coming to Germany : a rebirth of HD in 2010
RTL and Vox to launch HD simulcast in Autumn 2009
ARD/ZDF to launch in Feb 2010 after showcases in 2009
Astra launching HD+ sat platform with RTL onboard
Sky takes over Premiere and relaunches HD (5 new channels announced)
HD drivers in place early 2009 Spain and Germany to witness a new boost in 2010

And in the consumer home? The installed base of TV sets continues to grow

HD is driving growth in the Western European set-top box market
Annual pay TV STB shipments to Western Europe (m)
HD STBs accounted for 30% of all STBs shipped to W.E. in 2008
This will rise to over 52% by 2013
There will still be demand for low-cost SD STBs to convert secondary TV sets as W.E. approaches analogue switch off

So the average household looks like this… Western Europe 2009 Western Europe 2012 1.5 SD TVs 0.6 HD TVs 1.0 SD STB 0.1 HD STB 0.8 SD TVs 1.3 HD TVs 1.8 SD STB 0.3 HD STB

What about content? HD channel count in Western Europe has overtaken US HD channel count 2006 2007 2008 2009 2010 UK 10 12 28 38 42 France 6 13 20 24 28 Netherlands 2 7 16 23 27 Sweden 4 8 14 21 23 Italy 4 5 7 10 13 Spain 0 2 4 6 7 Germany 3 3 2 2 7 Western Europe 31 58 112 182 217 US 39 93 137 147 162

And this has driven channel launches from more diverse content types

So what are the key challenges to broadcasters and operators to continue HD rollout?
Production facilities – very little HD ready and high cost for 1080p
Transmission costs – 4x bandwidth
Set-top box fleet – HD boxes 2x the price
Advertising revenue – no incremental advertising revenue
So what are the drivers for HD?
Subscriber revenue – HD subscription revenue
And competitive pressures and consumer demand...

Across all broadcasters and production facilities, there is still a lack of HD equipment

Set-top box fleet replacement is very expensive and time consuming
Upgrading all set-top boxes in Western Europe to HD would over $25bn 1
Cost is higher for operators since there is often a truck roll involved and conditional access systems
But operators drive HD, so cost must be borne by subscriber revenue
Free to air market is much harder to switch because consumers demand is harder to stimulate – it will take 8-12 years to naturally transition all DTT installed base to DVB-T2 HD MPEG-4 boxes
1. Assuming proportion of PVRs remains stable and all TV sets were equipped with basic FTA HD boxes
Subscribers/households Pay TV cost ($m) Retail consumer cost ($m) 10,000 1.02 0.62 100,000 10.2 6.2 500,000 51 31 1,000,000 102 62 2,000,000 204 124 4,000,000 408 248

HD doesn’t drive ad revenue, but subscription revenue is partially driven by HD

3D: the next big thing but sure to face many of the same challenges again

So some final thoughts...
HD platforms operate in virtually every country in Europe
But delivering HD is about developing an ecosystem of TVs, set-top boxes, service platforms and channels
And the volume of content is growing fast and diversifying
But there are challenges , including production facilities, transmission costs and business models for ROI
And the future will demand another upgrade for 3D !!

Thank you. Any question?
[email_address]
www.screendigest.com
TV Technology, Television; Advertising, Broadband; Mobile, Games, Cinema, Video On-line media Intelligence databases; Single client consulting; Reports & Analysis; Due-diligence

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BBC - HDTV Europe - Tom Morrod

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