IPTV market analysis

IPTV market Summary

Global Trends

In the past year, IPTV has emerged as a hot topic within the global digital entertainment and telecommunications industries. The telcos’ core wireline voice business continues to erode as substitute technologies - wireless and broadband - increasingly displace wireline services and contribute to shrinking voice revenue.

Carriers around the world recognize that the emergence of digital video over IP networks, often referred to as IPTV, presents them with a tremendous opportunity to tap into the multibillion-dollar pay-TV market.

With more than $55 billion in subscriber revenue in 2004, United States pay-TV services represent a high revenue-generating business opportunity for service providers (SPs). Moreover, the international opportunity for IPTV subscriber growth is tremendous, with services being rolled out across the Asia/Pacific region including China. The Asia/Pacific opportunity alone could reach as much as 20 million IPTV/TV over broadband subscribers by 2009.

The U.S. pay-TV market generated more than $55 billion in revenue for cable and satellite providers in 2004. Thus, U.S. telcos are eagerly looking to capitalize on the significant revenue opportunities associated with digital video services

Main drivers

The triple play - the combination of data, voice, and video services is the first step on the path to truly converged networks, devices, and services. The value proposition of the triple play is that it enables SPs to drive revenue gains by increasing the ARPU through bundling data, voice, and video services together. The triple play also keeps the customer bound to multiple services delivered by the same provider, thus effectively increasing customer loyalty, and customer spend with one provider.

Broadband and video compression technologies have matured to the point where it is now feasible to offer competitive and compelling IPTV services. The advent of new DSL technologies, such as ADSL2+ and VDSL, as well as advances in fiber technologies have led to the increased bandwidth throughput necessary to deliver a quality video experience over DSL and/or fiber networks. At the same time, advanced compression technologies. H.264 and VC1 . have made delivering video over IP much more bandwidth efficient. Thus making DVD quality streaming and HDTV delivery available and financially efficient.

Main drivers (cont)

Consumers are interested in being able to watch affordable specialty video content on their televisions with the flexibility of video-on-demand (VoD). Most of this content is unavailable from conventional satellite and cable providers.

Internet broadband connections are growing in popularity, and the cost of transporting video over the Internet has decreased to less than $1 per gigabyte.

IP-Digital Set Top Boxes are now readily available with the processing performance required for video decode, EPG applications and storage.

Lots of independent and private content available over Net, with social journalism, amateur video, podcasting and blogging taking leading places in multimedia consumption.

Long Tail – future of economy?

The vision of the long tail is that an increasingly greater number of digital content authors, from book writers to independent musicians will soon realize that the race to be a star is finally over. There is no need to be one, to make a living while expressing and sharing your creative talent.

The long tail ushers an era in which content authors will not search anymore for a market of a million readers or listeners but for a million markets of ones.

IPTV can provide both – a market of thousands of users via its channels and thousand of market via Net over TV

And if the long tail concept has proven to reflect the reality of online book and music distribution clearinghouses why shouldn't the same concept apply to films and IPTV distribution too?

Where new opportunities lie

Except triple play and long tail approach, there are also new opportunities around professional communities of interest - teachers, doctors, healthcare workers, accountants, etc – who are not just buying into training and professional updating – but also a community of like-minded people where they can tap into each others knowledge and experiences. This then leads onto additional service offerings in the form of RSS feeds, user generated content, video-podcasting, blogging, one-to-one and one to a few, TV based, video-conferencing - in order to create a rich social experience around using the TV. However, all these services will need to be easy to use as well as complement, enhance and enrich the experience that some users already experience on their PCs. In addition, some of these services will need to be seamless and also be easily accessible, on a PC as well as a mobile device.

Most of the profits generated in this new market will be driven by services and applications, not by innovations in enabling devices.

Some facts and figures

Worldwide consumer VoIP revenues will rise from $2.48 billion in 2004 to $16.36 billion in 2009, and advanced video services will increase from $500 million to $2.36 billion over that timeframe

-- "Broadband Value-Added Services: Business & Residential Opportunities," Juniper Research, March 2004.

Worldwide revenue for IPTV services will top $17 billion by 2010, as the technology evolves well beyond a telco only play

- "IPTV: Analysis and Global Forecast," The Diffusion Group, January 2005.

By 2009, some 7 million subscribers are expected to get television programming from a phone company, according to forecasts from PricewaterhouseCoopers. Over the same period, cable subscribers are expected to fall to 64 million, from 70 million, while satellite companies can expect 32 million subscribers, an increase from 23 million now.

- "Increasingly, the Bells See Their Future on a Screen,” Ken Belson, New York Times, April 4,2005.

The number of digital homes will grow to almost 50 million US homes by 2010, comprising more than 45% of all US households

-- "The Digital Home: Is It Really Here? You're Kidding, Right?" Michael Greeson, The Diffusion Group, January 2005.

Microsoft is a leader

Microsoft's IPTV product, an end-to-end solution for service providers, will allow telephone companies and ISPs—or anybody operating a broadband IP network—to offer pay TV services competitive with current satellite and cable offerings, showing the same channels, but with additional IP-based services and features.

The other big benefit of the Microsoft IP-based technology is that it allows service providers to more easily and inexpensively integrate pay TV with VoIP and high-speed data services over the same infrastructure to create the kind of "triple-play" offering that many feel will be a key to future success.

The Microsoft technology is also more bandwidth efficient because, unlike satellite and cable delivery systems, it doesn't require that all 200 - or however many - channels be broadcast down to the set-top box to be available when requested.

Another feature is that since the set-top-box is on an IP network and has an IP address, subscribers who purchase an IPTV box with a hard drive and PVR functionality could log on to it from any Internet-connected computer and program it to record a program.

Future with Microsoft

As a result of successful politics provided by Microsoft in promotion and deployment of its IPTV platform, several agreements have been signed with leading telcos, who are considering a role of IPTV providers and STB manufactures.

IPTV providers:

Verizon Communications (USA)

Bell South (USA)

SBC Communications (USA)

TelecomItalia (Italy)

BT Group PLC (UK)

Deutsche telecom (Germany)

Bluewin AG / Swisscom (Switzerland)

Reliance Infocom, Ltd (India)

Bell Canada (Cananda)

STB vendors:

Motorola

Thompson

Tatung

Scientific-Atlanta

Linksys-KISS

Future prospects

The primary competitive determinants for consumer adoption will be

(1) breadth of content offerings,

(2) pricing of services, and

(3) creation of unique compelling bundled offerings.

Early IPTV differentiators will include an “a la carte” pricing model, a move that will put pressure on the traditional business practices of incumbent PayTV operators.

Despite the increased use of IP-based video transport technologies, independent web sites and Internet-based IP TV and video services will remain a niche proposition and may be aggregated or acquired by the larger IPTV operators.

Long-tail content and community-

oriented services can become that

Holy Grail all the telcos are currently

in the quest for

Summary

This new emerging yet already promising broadband medium called IPTV can leverage all of existing distribution systems to allow content and broadband service providers to deliver something unique -- truly interactive personalized content of all kinds. The integration of the Internet and PC technology with video news, entertainment, sports and gambling is launching a revolution in content delivery, with cable operators, telecommunication companies, Internet giants, Hollywood studios, sports leagues, cable networks, advertisers and technology providers struggling to move to the new world of broadband delivery

New market will inevitably lead to creation of new business models and thus will lead to redistribution of revenue in new market which will be determined in large part by which service segments win out.

The market is just being formed and populated, so the first comers are in good position to reap the harvests of the market redistribution and what has been already called Web 2 formation.

Contacts