Television of the future –
 barriers and success factors of IPTV




Presentation of the 2nd IPTV study


January 2009
Structure of the study




               goetzpartners Company Profile

               IPTV – a flop about to make its br...
goetzpartners combines top-tier Corporate Finance and Management
Consulting under one roof
goetzpartners One firm - Two Se...
goetzpartners aspiration is to become the leading European based corporate
    advisory firm
    goetzpartners One firm - ...
Based on in-depth sector knowledge, established business relationships and strong
transaction know-how goetzpartners provi...
goetzpartners offers Top Management Consulting services to companies in various
stages of development
goetzpartners Manage...
The Leadership-Team of goetzpartners Management Consultants combines industry
expertise and functional competencies to cre...
goetzpartners offers a full range of Investment Banking advisory services to
companies in various stages of development
go...
goetzpartners offers the full range of investment banking services to a broad range
of industries throughout Europe and …
...
goetzpartners ranks among the top M&A advisors in the TMT sector in Europe and
    has a particularly strong footprint in ...
Why goetzpartners?
goetzpartners One firm - goetzpartners’ USPs


                   goetzpartners’ USPs                  ...
Structure of the study




               goetzpartners Company Profile

               IPTV – a flop about to make its br...
goetzpartners defines IPTV as the broadcast of moving images via Internet protocol
goetzpartners definition of IPTV




  ...
IPTV market penetration is influenced by numerous factors
IPTV elements
                                               Adv...
Structure of the study




               goetzpartners Company Profile

               IPTV – a flop about to make its br...
The development of the IPTV market in 2008 was influenced by six key driving
forces
IPTV market 2008 – current driving for...
In 2008 the IPTV market was driven by falling prices, the expansion of existing offers
and the development of new ones
IPT...
New market participants and formats define the overall look of the IPTV market
in 2008
IPTV market 2008 – products and off...
The necessary bandwidths and digitization of networks for the distribution of IPTV
are still not sufficiently available in...
Existing revenue models are not yet fully developed, representing an obstacle to the
further advance of IPTV
IPTV market 2...
Structure of the study




               goetzpartners Company Profile

               IPTV – a flop about to make its br...
Low level of cable penetration shows strong correlation with high level of IPTV
penetration
IPTV distribution in selected ...
France is the world’s largest market for IPTV via closed networks
           Case study: France 2008 (1/3)


             ...
Free is the most successful provider in France, the world’s largest IPTV market
      Case study: France 2008 (2/3)


    ...
Free has become the world’s largest provider of closed IPTV by way of penetration
pricing of interesting content
     Case...
The structural preconditions of almost unlimited infrastructure account for the very
  high IPTV penetration level in Hong...
With exclusive package content and individually adaptable package options, PCCW
successfully dominates the highly develope...
With exclusive package content and individually adaptable package options, PCCW
successfully dominates the highly develope...
By international comparison, use of closed IPTV offers in Germany lags far behind
   International benchmark summary



  ...
Structure of the study




               goetzpartners Company Profile

               IPTV – a flop about to make its br...
Due to the high appeal of the existing TV offerings, market penetration is difficult for
IPTV in Germany
High appeal of TV...
IPTV accounts for only a small part of moving image use in Germany, especially
since many offers are only used sporadicall...
Additional functionalities are the central success factor for IPTV offers
  IPTV additional factors – consumers interest

...
Structure of the study




               goetzpartners Company Profile

               IPTV – a flop about to make its br...
Distribution in the consumer survey and low level of willingness to change
infrastructure reflect poor infrastructure
Infr...
Simple operation and reusability are the main end device properties that consumers
value
Properties of IPTV end devices

 ...
Experts forecast increased use of combined devices consisting of a TV set and a
 set-top box for consumption of IPTV conte...
Structure of the study




               goetzpartners Company Profile

               IPTV – a flop about to make its br...
Telecommunication providers and TV broadcasting companies are the preferred
providers of IPTV offers from the consumer’s p...
Complexity of IPTV products results in the need for expert consultation in the
purchase of offerings subject to a charge
S...
090122 IPTV Presentation eng final
090122 IPTV Presentation eng final
090122 IPTV Presentation eng final
090122 IPTV Presentation eng final
090122 IPTV Presentation eng final
090122 IPTV Presentation eng final
090122 IPTV Presentation eng final
090122 IPTV Presentation eng final
090122 IPTV Presentation eng final
090122 IPTV Presentation eng final
090122 IPTV Presentation eng final
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090122 IPTV Presentation eng final

  1. 1. Television of the future – barriers and success factors of IPTV Presentation of the 2nd IPTV study January 2009
  2. 2. Structure of the study goetzpartners Company Profile IPTV – a flop about to make its breakthrough? Barriers and success factors relating to IPTV in Germany – an empirical analysis Quo vadis IPTV? Action strategies for IPTV players IPTV – a future technology on the advance 2
  3. 3. goetzpartners combines top-tier Corporate Finance and Management Consulting under one roof goetzpartners One firm - Two Services goetzpartners is a top-tier corporate advisory firm, bringing together corporate finance and management consulting services Mergers & Acquisitions Strategic Advise Offering these two services under one roof reflects the Corporate Finance Organization upcoming shift from traditional specialization to a more Fairness Opinion Sales/ Marketing Strategy integrated approach of advisory activity Corporate Partnering Operational Excellence With two sharply defined but interlocked service lines Restructuring goetzpartners consolidates the market knowledge and Transaction Services the unrivalled networks of two formerly separated organisations for the benefits of its clients 3
  4. 4. goetzpartners aspiration is to become the leading European based corporate advisory firm goetzpartners One firm - Group history and international footprint History International footprint goetzpartners has its roots in the U.S. based Europe: With 7 offices in 5 countries goetzpartners has become one of the corporate finance advisory firm CEA leading European corporate advisory firms (Communications Equity Associates), which was established in 1973 by Rick Michaels In 1990 Dr. Stephan Goetz established CEA Europe in Munich and gradually expanded London the corporate finance operation to other Düsseldorf Frankfurt Prague European countries Paris Munich In 1996 Stefan Sanktjohanser joined the Madrid group and shortly thereafter TransConnect was established in order to develop business in the field of management consulting US, Russia, Asia*: Through associated offices in the U.S., Russia and Asia, In 2004 goetzpartners was formed by the goetzpartners offers a strong worldwide network combination of CEA and TransConnect taking a single approach to two disciplines Moscow San Francisco Ashgabat Today, goetzpartners has about 200 New York Los Angeles Mumbai professionals of which 150 employees work Bangalore in 7 European offices and more than 50 employees in US, Russia and Asia. *JV / Partner offices 4
  5. 5. Based on in-depth sector knowledge, established business relationships and strong transaction know-how goetzpartners provides significant value add to its customers goetzpartners One firm - Service offering Close industry relationship management via a dedicated senior Industry // Industry TMT Automotive Consumer Utilities Industrials goetzpartners managing director Service portfolio Service portfolio Goods & Retail One single point of contact for all business issues enables a fast and goetzpartners goetzpartners efficient communication as well as CORPORATE FINANCE CORPORATE FINANCE -- Mergers & Acquisitions Mergers & Acquisitions project execution -- Corporate Finance Corporate Finance -- Fairness Opinion Fairness Opinion -- Corporate Partnering Corporate Partnering Full service portfolio tailored to the needs of the relevant case and situation goetzpartners goetzpartners Links of strategic and operational MANAGEMENT CONSULTING MANAGEMENT CONSULTING -- Strategic Advise Strategic Advise issues with M&A activities and vice -- Organization Organization versa -- Sales/ Marketing Strategy Sales/ Marketing Strategy -- Operational Excellence Operational Excellence -- Restructuring Restructuring -- Transaction Services Transaction Services “One firm – two services” approach helps to deliver outstanding professional results based “One firm – two services” approach helps to deliver outstanding professional results based on extensive sector and deal expertise as well as integrated delivery capabilities on extensive sector and deal expertise as well as integrated delivery capabilities 5
  6. 6. goetzpartners offers Top Management Consulting services to companies in various stages of development goetzpartners Management Consultants - Overview Change Management Top Management Consulting Services Growth and differentiation strategies based on long-term USP achievements Marketing/sales strategy in growth and mature markets Operational excellence programs to improve clients’ Vision margin flow Se Customer care & loyalty programs to secure customer rv base and stable revenue streams Corporate ice Strategy C el Value chain optimization with focus on clients’ core ove Lev competences and market development rag ess eg Corporate recovery services to help companies overcome sin Segment Strategy oet Bu corporate crisis zpa Customer rate Public private interface management rtne rpo rs Co Services Value Chain Transaction Related Services Operations Market and target evaluation to assist clients’ market entry and expansion strategy Organization Business Processes Strategic and operational due diligence to support value based acquisition processes Post-merger integration to achieve business goals Human Resources IT Implementation Full potential programs to leverage clients’ competences and assets 6
  7. 7. The Leadership-Team of goetzpartners Management Consultants combines industry expertise and functional competencies to create customized client solutions goetzpartners Management Consultants - Leadership Team Industry Focus Industry Focus Industry Focus Industrials Public Sector Utilities Infrastructure Telecommunications & Media Competencies Competencies Competencies Strategy Public Private Interface Strategy Organization Management Organization Postmerger Integration Sales & Marketing Operational Excellence Stefan Sanktjohanser Dr. Hans Gerd Prodoehl Michael Sanktjohanser managing partner managing director managing director Industry Focus Industry Focus Industry Focus Consumer Goods General Industries Financial Industries Retail Telecommunications & IT High Tech Industries Telecommunications & Media Competencies Competencies Competencies Strategy Strategy Restructuring Strategic Due Diligence Marketing & Sales Organization Frank Ewerdwalbesloh Hans-Jürgen Titz Dr. Wolfram Roemhild managing director managing director managing director Industry Focus Telecommunications & Media Consumer Goods Retail Competencies Strategy Marketing & Sales Organization Dr. Alexander Henschel managing director 7
  8. 8. goetzpartners offers a full range of Investment Banking advisory services to companies in various stages of development goetzpartners Corporate Finance - Overview M&A Services M&A services include mergers, acquisitions, e nt divestitures, MBOs/MBIs, joint ventures, public opm e vel acquisitions and public-to-private yD Mature pan Stage As seller´s agent, goetzpartners typically prepares Com a detailed information package for distribution to selected qualified prospects. goetzpartners assists Growth in and coordinates the due diligence and Stage management presentations and assists in Expansion negotiations Stage As buyer´s agent, goetzpartners assists with the development of a business strategy, identifies appropriate opportunities, and handles due diligence and negotiations Mergers & Acquisitions Corporate Finance Services Corporate Finance Corporate Finance encompasses debt and equity fund raising including financial structuring goetzpartners assists the clients with the Fairness Opinions/Valuations preparation of a financially sound business plan, leads and coordinates the discussions with various debt and equity providers and negotiates the terms Corporate Partnering of the financing 8
  9. 9. goetzpartners offers the full range of investment banking services to a broad range of industries throughout Europe and … goetzpartners Corporate Finance - Expertise across Europe London Industry Focus Munich Telecommunications (Headquarter) Media & Entertainment Software & IT Services Production facilities Industry Focus Dr. Stephan Goetz Telecommunications managing partner Hak Yeung Media & Entertainment managing director Software & IT Services Automotive & General Industries Business Services Paris Industry Focus Retail Dr. Gernot Wunderle Telecommunications managing partner Real Estate Media & Entertainment Utilities Software & IT Services General Industries Franck Portais managing director Dr. Henrietta Schmidt-Wilke managing director Madrid Industry Focus Prague Telecommunications Media & Entertainment Industry Focus Software & IT Services Telecommunications Retail Media & Entertainment Software & IT Services Vaclav Matatko General Industries managing director Jose Cabrera-Kabana managing director 9
  10. 10. goetzpartners ranks among the top M&A advisors in the TMT sector in Europe and has a particularly strong footprint in Germany goetzpartners Corporate Finance - M&A League Tables Europe/Germany TMT – Transactions in Europe (2006-2007) TMT – Transactions in Germany (2006-2007) Rank Company Name value (in € m) # of transactions Rank Company Name value (in € m) # of transactions 1 Rothschild 6,551 35 1 goetzpartners 1,198 7 2 KPMG Corp Fin 1,482 25 2 Rothschild 466 4 3 Lazard 6,093 23 3 Sal. Oppenheim 354 4 4 Deloitte 2,358 22 4 Goldman Sachs 1,737 3 5 ABN AMRO 3,933 18 5 Ernst & Young 760 3 6 LongAcre Partners 1,903 16 6 UBS 668 3 7 UBS 4,196 15 7 Lazard 611 3 8 goetzpartners 2,278 15 8 Credit Suisse 1,210 2 9 Ernst & Young 1,383 15 9 ABN AMRO 1,152 2 10 PricewaterhouseCoopers 1,026 15 10 Merrill Lynch 732 2 11 Deutsche Bank 3,912 14 11 Deutsche Bank 621 2 12 Grant Thornton Corporate Finance 273 14 12 Numis Securities 290 2 13 Goldman Sachs 5,944 13 13 Drueker & Co. 103 2 14 BNP Paribas SA 2,854 13 14 Berenberg Bank 302 1 15 JPMorgan 6,134 12 15 Lehman Brothers 302 1 16 Merrill Lynch 4,862 11 16 Cenkos Securities 266 1 17 Investec Investment Banking 616 11 17 Veronis Suhler Stevenson 266 1 18 Morgan Stanley 4,161 10 18 Europa Partners 200 1 19 Citigroup 3,476 10 19 PricewaterhouseCoopers 200 1 20 Credit Suisse 4,252 9 20 Carnegie Group 54 1 21 ING 2,491 9 21 Nordea Corporate Finance 54 1 22 Lehman Brothers 2,099 9 22 Acxit Capital Management 52 1 23 Greenhill & Co 1,959 7 23 BHF-Bank 40 1 24 Seymour Pierce Group 116 6 24 KBC Securities 24 1 25 Evolution Securities 88 6 25 Corporate Finance Partners 18 1 Source: Mergermarket (2008), deal value below € 1bn 10
  11. 11. Why goetzpartners? goetzpartners One firm - goetzpartners’ USPs goetzpartners’ USPs … leading to excellent results 1 One Firm – Two Services Comprehensive service portfolio Interdisciplinary thinking and capabilities Creative and client-tailored solutions Excellent network to various market players and experts 2 Our people Focused industry expertise Above average seniority compared to the market based on profound expertise Entrepreneurial spirit 3 Our commitment Value pricing models to reflect success to ensure sustainable Willingness and capability to support implementation competitive advantages 11
  12. 12. Structure of the study goetzpartners Company Profile IPTV – a flop about to make its breakthrough? − Definition of IPTV − Developments in the IPTV market in 2008 − IPTV in Germany and within the international context Barriers and success factors relating to IPTV in Germany – an empirical analysis Quo vadis IPTV? Action strategies for IPTV players IPTV – a future technology on the advance 12
  13. 13. goetzpartners defines IPTV as the broadcast of moving images via Internet protocol goetzpartners definition of IPTV platforms IPTV via Closed IPTV via goetzpartners defines IPTV closed closed networks Classification of German IPTV availability networks as the broadcast of (interactive) moving images via Internet protocol. The image may be Web TV Web TV transmitted as live stream or on Open platforms demand, via closed or open Video-on- Video-on- networks. It is immaterial which Demand Demand broadcast infrastructure is used and on which end device the User User contents are shown. generated generated video content video content 13
  14. 14. IPTV market penetration is influenced by numerous factors IPTV elements Advertising industry has not yet adapted to IPTV Problem of paid content and the fact that the Internet is cost-free IPTV is independent of infrastructure Content procurement is difficult due to Generally speaking 3 Mbit/s allows SD the licensing practice of the studios Revenue and 12 Mbit/s allows HD Content breadth and quality important, t models s Inf Broadband penetration is still too low but also the strong use of UGVC en tru ra t ct - Link with interactive elements still in C on ur e their infancy Most Killer applications for IPTV Addi- Strong increase in the use of important tional Time-shift and PVR most important open IPTV platforms Users elements of func- to users Users especially aspire to tions IPTV Interactive functions offer “time sovereignty” and quality L as eg p- additional revenue pe al cry ct s En tion Tiered permit obligation for End Merging of encryption and digital broadcasting providers (at > 500 devices rights management simultaneous accesses) Challenge to security of digital rights Platform regulation management systems Most promising future for end device enabling Copyright and data protection a combination of PC and set top box in to be factored in living room Wireless technology of increasing importance Plug & Play and simple operation 14
  15. 15. Structure of the study goetzpartners Company Profile IPTV – a flop about to make its breakthrough? − Definition of IPTV − Developments in the IPTV market in 2008 − IPTV in Germany and within the international context Barriers and success factors relating to IPTV in Germany – an empirical analysis Quo vadis IPTV? Action strategies for IPTV players IPTV – a future technology on the advance 15
  16. 16. The development of the IPTV market in 2008 was influenced by six key driving forces IPTV market 2008 – current driving forces Regulatory changes to the 10th and 12th Broadcasting Agreements have brought in new regulations VoD is becoming increasingly important Regulatory changes The number and variety of offers within the value chain as available is growing significantly a discrete usage right Reduction of existing VoD will not only change the General Products price structures DVD market but also the conditions and offers Further development TV market of existing offers IPTV market Numerous Increasing user 2008 Technology innovations in figures demonstrate User behavior and services the end device, increasing popularity technology, software Development of consumer and middleware to prosumer areas Interactive applications The future of possible IPTV are, however, not the sole Infrastructure applications is already driving force behind IPTV reflected in new services Broadband penetration and bandwidths and still not high enough to provide full, area-wide geographical coverage 16
  17. 17. In 2008 the IPTV market was driven by falling prices, the expansion of existing offers and the development of new ones IPTV market 2008 – products and offers (excerpt 1/2) Price reductions for closed offers Telekom reduced the rate for its IPTV package in March to € 49.90 IPTV via Hansenet has marketed Alice home TV since closed networks August 2008 for € 19.90 per month Campaign offers define the market At the same time all providers are extending their services to up to 150 channels Existing web TV providers such as Zattoo are extending their range There is a large number of new offers such as interactive live programs Web TV offers ProSieben has launched a player with a new navigation structure for its web TV TV providers such as ARD with the new Tagesthemen.interaktiv format are expanding their online presence 17
  18. 18. New market participants and formats define the overall look of the IPTV market in 2008 IPTV market 2008 – products and offers (excerpt 2/2) Established providers such as maxdome are successively expanding their range and achieving high access rates Video-on- Apple has been able to position itself as a Demand new market player with Apple TV Cable network providers such as Kabel Baden-Württemberg are intensifying efforts to establish their own VoD platforms There is an ongoing trend towards the professionalization of content User Sevenload cooperates with Telekom by generated integrating professional content video content Professionalization, also in the marketing context, as evidenced by the new tool YouTube Insight, for example 18
  19. 19. The necessary bandwidths and digitization of networks for the distribution of IPTV are still not sufficiently available in 2008 IPTV market 2008 - infrastructure Data rates of screen formats Penetration in Germany Screen format [ths. of TV households] HD 1080/i25 16 8 31,000 DSL 12 19,920 HD 720/p50 connections 6 Broadband 3 MPEG-2 22,000 SD 576/i25 2 Cable MPEG-4 1,350 YouTube 1 Data rate in Mbit/s 35,000 0 2 4 6 8 10 12 14 16 Satellite 114 SVCD DVD video Technical potential of Number of TV households subscribers IPTV via open networks requires a data rate of at least 1 Mbit/s IPTV via open networks requires a data rate of at least 1 Mbit/s In order to broadcast IPTV via proprietary networks, 3 Mbit/s are required for SD quality In order to broadcast IPTV via proprietary networks, 3 Mbit/s are required for SD quality and 12 Mbit/s for HD quality and 12 Mbit/s for HD quality About 60% of the accessible TV households use broadband via DSL About 60% of the accessible TV households use broadband via DSL However, only 28% of all broadband connections have a bandwidth of over 4 Mbit/s2) However, only 28% of all broadband connections have a bandwidth of over 4 Mbit/s2) Digital shutdown planned for 2012, digitization rate of 32% (2008) Digital shutdown planned for 2012, digitization rate of 32% (2008) 1) Connections with a transfer speed of >1 Mbit/s 2) ARD/ZDF online study (2008) Source: goetzpartners analysis; EBU, Federal Ministry of Trade and Industry (2008): ePerformance Report 2008- IKT “Standort Deutschland im europäischen Vergleich”, ANGA – Association of German cable network providers 19
  20. 20. Existing revenue models are not yet fully developed, representing an obstacle to the further advance of IPTV IPTV market 2008 – a lack of revenue models Willingness to pay1) Insights [% of interviewees] 10% 3% > 20 € 22% 18% 17% Business models based on 52% expensive price structure are not 52% accepted 52% 51% < 20 € 55% Additional costs for necessary not willing 45% hardware are an entry barrier to pay in 38% 23% 30% 32% general Refinancing of IPTV offers via development of advertising-based Live Document- Movie Series Erotic sport aries library revenue models Advertising revenue2) [mill. €] +6% Online Above-average rise in All advertising media +154% 20,761 expenditure on online advertising 20,350 19,884 Platform operators profit primarily 19,583 from moving image advertising 495 689 on the Internet 271 332 Numerous future challenges 2004 2005 2006 2007 (1) Source: goetzpartners consumer survey (2) Source: goetzpartners analysis, PWC (2008) : German Media and Entertainment Outlook 20
  21. 21. Structure of the study goetzpartners Company Profile IPTV – a flop about to make its breakthrough? − Definition of IPTV − Developments in the IPTV market in 2008 − IPTV in Germany and within the international context Barriers and success factors relating to IPTV in Germany – an empirical analysis Quo vadis IPTV? Action strategies for IPTV players IPTV – a future technology on the advance 21
  22. 22. Low level of cable penetration shows strong correlation with high level of IPTV penetration IPTV distribution in selected countries (2008) Penetration infrastructure Penetration infrastructure Users of closed IPTV platforms3) Users of closed IPTV platforms3) [% of TV households] [ths. of users] 18,0% Hong Kong 76,0% Hong Kong 1.019 44,3% 17,6% France 25,0% France 4.690 20,4% cable 28,0% Sweden 29,0% broadband1) Sweden 320 8,0% IPTV2) 33,0% UK 24,0% UK 318 1,3% 67,0% USA 53,0% USA 1.126 1,0% 55,7% Germany 24,0% Germany 300 0,9% Broadband penetration does not give The user figure of four million in France any indication of IPTV penetration indicates future market potential Source: Deloitte, (2008): “Next Generation TV- Der Kunde im Zentrum der IPTV- Welt”, (1): Connections with transfer rate of >1 Mbit/s, in % of the population www.worldscreen.com (2008), Federal Ministry of Trade and Industry, (2008): ePerformance Report 2008- (2): goetzpartners analysis IKT “Standort Deutschland im europäischen Vergleich“, company information, (2nd quarter, 2008) 22 (3): Company information, (2nd quarter, 2008)
  23. 23. France is the world’s largest market for IPTV via closed networks Case study: France 2008 (1/3) Market shares of TV platforms1) Market shares of TV platforms1) Media landscape (number of channels)4) Media landscape (number of channels)4) [% of TV households] France2) 117 IPTV Germany3) 78 20% 18% 51 54 Cable 11% 20 5 7 5 Satellite 51% Terrestrial Free TV Free TV Pay TV Pay TV Short Tail Long Tail Premium Basic [A] [B] [C] [D] Limited free TV offer creates ideal conditions for IPTV penetration Limited free TV offer creates ideal conditions for IPTV penetration High pay TV penetration (49%) shows high willingness to pay High pay TV penetration (49%) shows high willingness to pay Aggressive roll-out of ADSL2+ and FTTH in conurbation centers with average Aggressive roll-out of ADSL2+ and FTTH in conurbation centers with average bandwidths of 44 Mbit/s bandwidths of 44 Mbit/s Digital shutdown planned for 2011, digitization quota 56% (2008) Digital shutdown planned for 2011, digitization quota 56% (2008) France has always had an innovative media market (e.g. Minitel) France has always had an innovative media market (e.g. Minitel) Directives issued by regulatory authority promote competition Directives issued by regulatory authority promote competition (1) goetzpartners analysis based on Deloitte (2008): “Next Generation TV- Der Kunde im Zentrum der IPTV- Welt” (2) [A] chaînes nationales; [B] not including promotional and very small-scale stations; [C] Canal+ [D] ABSat and CanalSat not including Canal+ (3) [A] Full channels and third channels; [B] private special interest channels and public digital channels [C] Premiere; [D] additional digital package, cable and satellite (4) Source: Websites Astra, Eutelsat, CanalSat, ABSat, Canal+, Premiere, various cable network providers, http://www.tg-satellit.de 23
  24. 24. Free is the most successful provider in France, the world’s largest IPTV market Case study: France 2008 (2/3) Users of closed IPTV networks [in mill.] Users of closed IPTV networks [in mill.] IPTV as offered by Free IPTV as offered by Free 23 mill. TV-households Over 250 national and TV TV international channels, 100 +90% included in flat rate 20.4% 2.40 7 VoD 2.10 VoD VoD platforms 1.54 1.26 1.10 User-generated video content 0.75 TV Perso TV Perso platform for subscribers 0.42 0.13 Adapted Internet offer for use 2006 2007 Q2 2008 Télé sites Télé sites via Freebox Free is the most successful provider Can be used on a TV and in the world’s largest IPTV market Multimedia Multimedia several PCs Sources: Deloitte, (2008): “Next Generation TV- Der Kunde im Zentrum der IPTV- Welt”, company information, (2nd quarter, 2008), www.worldscreen.com 24
  25. 25. Free has become the world’s largest provider of closed IPTV by way of penetration pricing of interesting content Case study: France 2008 (3/3) – Free as a success model Penetration pricing with free IPTV entry packages since July 2007 with Penetration pricing with free IPTV entry packages since July 2007 with USP USP interesting content as a DSL add-on interesting content as a DSL add-on Large customer base as market leader for broadband connections, used Large customer base as market leader for broadband connections, used Sales Sales for cross-selling (basic IPTV package for all broadband customers) for cross-selling (basic IPTV package for all broadband customers) Use of all sales channels for the offer of the triple-play product Use of all sales channels for the offer of the triple-play product Benefit-oriented communication Benefit-oriented communication Marketing Marketing Marketing of free hardware to lower entry barrier Marketing of free hardware to lower entry barrier Interesting content packages in HD quality Interesting content packages in HD quality Offer Offer Offer of features subject to charge Offer of features subject to charge Interactive services closely geared to TV program (EPG) Interactive services closely geared to TV program (EPG) Market standard for set-top boxes Market standard for set-top boxes Technology Technology Hybrid set-top boxes (incl. DVB-T) Hybrid set-top boxes (incl. DVB-T) Source: Company information, Deloitte, (2008): “Next Generation TV- Der Kunde im Zentrum der IPTV- Welt” 25
  26. 26. The structural preconditions of almost unlimited infrastructure account for the very high IPTV penetration level in Hong Kong Case study: Hong Kong 2008 (1/3) Market share of TV platforms1) Market share of TV platforms1) Media landscape (number of channels)4) Media landscape (number of channels)4) [% of TV households] Hong Kong2) 108 IPTV Germany3) 78 20% Cable 44 54 44% 30 20 Satellite 4 5 33% 3% Terrestrial Free TV Free TV Pay TV Pay TV Short Tail Long Tail Premium Basic [A] [B] [C] [D] IPTV has replaced cable and satellite as the leading TV distribution platform IPTV has replaced cable and satellite as the leading TV distribution platform Limited free TV favors high IPTV penetration Limited free TV favors high IPTV penetration Pay TV penetration of 60% shows a high willingness to pay for content which is subject Pay TV penetration of 60% shows a high willingness to pay for content which is subject to charge to charge 76% broadband penetration with average bandwidth of 93 Mbit/s 76% broadband penetration with average bandwidth of 93 Mbit/s Digital shutdown planned for 2012, digitization quota 75% (2008) Digital shutdown planned for 2012, digitization quota 75% (2008) Dense urban development facilitates next generation network roll-out Dense urban development facilitates next generation network roll-out (1) goetzpartners analysis based on Deloitte (2008): “Next Generation TV- Der Kunde im Zentrum der IPTV- Welt” (2 [A] Full program channels; [B] not incl. promotional and very small-scale stations; [C] i- Cable, TVB Pay and TV- Star [D] additional digital package, cable and satellite (3) [A] Full channels and third channels; [B] private special interest channels and public digital channels [C] Premiere; [D] additional digital package, cable and satellite (4) Source: Astra, Eutelsat,i- Cable, TVB- Pay Vision, Premiere, various cable network providers 26
  27. 27. With exclusive package content and individually adaptable package options, PCCW successfully dominates the highly developed IPTV market in Hong Kong Case study: Hong Kong 2008 (2/3) Users of closed IPTV networks [in mill.] PCCW as success model 2,3 mill. TV-households TV packages, with 30 free TV TV TV and 136 pay TV channels +38% 0.85 0.88 Á la carte Á la carte Individually configurable offer 44.3% model model of channels 0.64 Premium strategy Exclusive Exclusive highlights quality and content content content 0.12 0.13 0.14 Integration of innovative Additional Additional 2006 2007 2008 additional services such services services as sports betting PCCW dominates the highly developed IPTV market Can be used on a TV and Multimedia Multimedia several PCs Source: goetzpartners analysis, company information, (2nd quarter, 2008), Deloitte, (2008): “Next Generation TV- Der Kunde im Zentrum der IPTV- Welt”, www.worldscreen.com 27
  28. 28. With exclusive package content and individually adaptable package options, PCCW successfully dominates the highly developed IPTV market in Hong Kong Case study: Hong Kong 2008 (3/3) – PCCW as a success model Exclusive content with individually adaptable Exclusive content with individually adaptable USP USP package options package options Sale of triple play and stand-alone offer Sale of triple play and stand-alone offer Sales Sales packages possible packages possible Exclusive content supports sales Exclusive content supports sales Hardware barrier is overcome by means of Hardware barrier is overcome by means of Marketing Marketing free set-top boxes free set-top boxes Marketing of qualitative premium strategy Marketing of qualitative premium strategy 1) Attractive individually adaptable program packages Attractive individually adaptable program packages offer Offer Offer (à la carte system) (à la carte system) Accompanying interactive services (live sports betting) Accompanying interactive services (live sports betting) Low development costs of the set-top boxes (originally a DVD Low development costs of the set-top boxes (originally a DVD Technology Technology recorder-based development) recorder-based development) (1) Average package price from à la carte offer Source: goetzpartners analysis, Deloitte, (2008): “Next Generation TV- Der Kunde im Zentrum der IPTV- Welt”, Lfm, (2008): IPTV- Über Internet anders fernsehen?!- Mehrwert oder nur mehr Kosten? 28
  29. 29. By international comparison, use of closed IPTV offers in Germany lags far behind International benchmark summary IPTV penetration of closed platforms (in % of Explanatory hypotheses TV households)1) 1. Market penetration of broadband Internet connections in Germany is not high enough by comparison with other countries Hong Kong 44.30 2. There is no need for customers to change due to the extensive free TV offerings available in Germany. France 20.40 3. Many IPTV offerings simply copy conventional broadcast TV and do not offer any added value 4. The high degree of cable penetration in Sweden 8.00 Germany limits the development of IPTV in Germany 5. Closed and open IPTV offerings are marketed Germany 0.86 insufficiently 6. The advertising market is not yet geared towards IPTV financed by advertising (1) Sources: goetzpartners analysis, company information for 2nd quarter 2008, www.worldscreen.com 29
  30. 30. Structure of the study goetzpartners Company Profile IPTV – a flop about to make its breakthrough? Barriers and success factors relating to IPTV in Germany − Changing TV usage behavior − IPTV technology − Sales and marketing of IPTV offers Quo vadis IPTV? Action strategies for IPTV players IPTV – a future technology on the advance 30
  31. 31. Due to the high appeal of the existing TV offerings, market penetration is difficult for IPTV in Germany High appeal of TV offer Media landscape Regular media use3 [% of interviewees] Germany has the largest range of free TV in Europe: Internet 85,9% Virtually all the relevant sporting events are broadcast live or in extensive summary via public channels (protection list) Free TV 79,3% High-quality fiction content (series, documentaries, feature films) is available every day on free TV channels Video/DVD 18,8% In comparison to the western European average Pay-TV 11,0% (41%2) there is a low level of pay TV penetration especially due to the appeal of free TV Major increase in diversity of offerings – in addition to Premiere there are now 4 large-scale basic pay TV IPTV 0.6% (VoD) – 20,0% (UGVC) providers on the market (cable) (1) Short and long-tail channels; there are also very small-scale channels and promotion channels (2) ∅ of pay TV penetration calculated (3) = several times a week or daily Sources: goetzpartners consumer survey 31
  32. 32. IPTV accounts for only a small part of moving image use in Germany, especially since many offers are only used sporadically IPTV in Germany - status quo IPTV offer diversity Germany Insights Number of Users according to gp offers consumer survey 98.2% [% of interviewees] IPTV via Free IPTV offerings such as closed 3 UGVC and Web TV are already 0.6% networks 1.2% used regularly by consumers 49.7% On the other hand, VoD and 8.2% closed IPTV offers subject to a Web TV offers 1771) 42.1% fee have not yet been accepted by consumers 83.8% Only 16% and 2% of consumers Video-on- 261) 0.6% respectively make use of VoD and Demand 15.7% closed IPTV offers The main reasons here are to be User- 35.4% 20.0% found in the insufficient generated 122) 44.6% differentiation of existing moving video content image offers Non-users Irregular users Regular users (1) German language (2) Selection of the top online video websites in Germany with over 100,000 visitors/month (Comscore Media Trend Report, 2008) Sources: ARD/ZDF online study, (2008) , goetzpartners consumer survey 32
  33. 33. Additional functionalities are the central success factor for IPTV offers IPTV additional factors – consumers interest Interest in additional IPTV functionalities Insights [% of interviewees] A high level of quality in terms of quality and content and High quality 6.7% 10.2% 22.3% 60.1% “time sovereignty” in TV usage 0.8% Personal video are the most important additional 14.1% 17.8% 21.1% 46.8% recorder functions for the consumer 0.2% Time-delayed Low interest in additional 0.6% 18.0% 18.4% 17.0% 46.0% viewing interactive services is due to lack of offers and interviewees' Range of 0.2% 20.2% 25.6% 17.2% 36.8% low information levels language versions Electronic Time sovereignty thanks to Program 0.2% 25.2% 21.5% 19.8% 33.3% freely accessible, attractive Guide content is among the most Video on important arguments in favor of 0.8% 25.6% 22.1% 19.8% 31.7% Demand IPTV according to experts Additional interactive 0.6% 22.7% 27.6% 22.9% 26.2% The basic precondition for IPTV services success is to eliminate the information deficit and clearly 50.0% convey the added value provided No Not interesting Not very Interesting Very information at all interesting interesting by additional IPTV services 33
  34. 34. Structure of the study goetzpartners Company Profile IPTV – a flop about to make its breakthrough? Barriers and success factors relating to IPTV in Germany − Changing TV usage behavior − IPTV technology − Sales and marketing of IPTV offers Quo vadis IPTV? Action strategies for IPTV players IPTV – a future technology on the advance 34
  35. 35. Distribution in the consumer survey and low level of willingness to change infrastructure reflect poor infrastructure Infrastructure and willingness to change Infrastructural distribution Willingness to change Current means of reception DSL connection [% of interviewees , satellite and cable customers] Committed 6% Satellite customers [% of interviewees] No 84% Satellite 18% 50 yes Yes 7% (21.5%) 19 Cable 47% (8.2%) no Haven’t Satellite 46% 164 don’t know/ considered 9% yet Terrestrial 24% (70.4%) no info No info. 0% DSL 6% No 65% Committed 9% Cable customers 64 yes e 52% Cable 41% (30.6%) 15 Yes 21% no (7.2%) Haven’t Cable 5% 130 don’t know/ considered 13% (62.2%) no info. yet Terrestrial 25% Others/ 14% No info. 1% DSL 9% no info. Bandwidths, compression procedures and Due to the higher costs of a cable connection, the transmission protocols determine the reception main area showing willingness to change is channel - infrastructure can become a limiting from cable to satellite factor for IPTV Planned change DVB-T impedes IPTV, since Many satellite and cable TV households already DVB-T is poorly suited for distribution of IPTV due have the necessary infrastructure for IPTV to low bandwidths 35
  36. 36. Simple operation and reusability are the main end device properties that consumers value Properties of IPTV end devices Desired end device properties Insights [% of interviewees] Important The equipment level of German Fairly important TV households in terms of 22% Fairly unimportant technical reception devices for 45% Unimportant media consumption is quite high No information A rather low willingness to pay 65% 21% 70% 69% for end devices contrasts with 78% the desire for functionality and quality For consumers, simple 39% 43% operability, low price, reusability and simple installation are the main properties a receiver 20% 19% 29% should feature 17% 13% Among older respondents (age 6% 9% 14% 4% 1% 4% 2% 1% 5% 1% 3% 50 – 69), simple operation and plug & play installation are Simple Re- Simple Price Integrated Design operation usability installation hard drive becoming increasingly important (plug & recorder play) 36
  37. 37. Experts forecast increased use of combined devices consisting of a TV set and a set-top box for consumption of IPTV content over the next 3-5 years Expert forecast – development of IPTV end devices Development of the use of IPTV end devices Insights [% of interviewees] Experts forecast that a Expert forecast for the next 3 to 5 years combination of TV set and set- top box will see the most TV set + 33% 60% widespread use in the years to 7% set-top box come Portable multimedia receivers are PC/notebook 13% 60% 27% predicted to find only moderate use, since consumers will become increasingly accustomed to the Game consoles 47% 40% 13% comfort of large screens and will not want to do without this comfort Mobile phones with multimedia In order to win over users for mobile 13% 47% 27% 13% capability/ IPTV, innovative business smart phones models are required which are Portable multimedia designed for small screens, 20% 60% 20% receivers offering genuine added value over applications and formats for stationary devices Not at all Very few Widespread Very widespread use use 37
  38. 38. Structure of the study goetzpartners Company Profile IPTV – a flop about to make its breakthrough? Barriers and success factors relating to IPTV in Germany − Changing TV usage behavior − IPTV technology − Sales and marketing of IPTV offers Quo vadis IPTV? Action strategies for IPTV players IPTV – a future technology on the advance 38
  39. 39. Telecommunication providers and TV broadcasting companies are the preferred providers of IPTV offers from the consumer’s point of view Provision of IPTV offers Preferred IPTV providers Insights [% of interviewees] Telecommunication IPTV offers are made 24% 25% 19% 29% 3% available by various providers companies The goetzpartners consumer TV broadcasting survey shows clearly that 15% 34% 21% 26% 4% companies consumers place their greatest trust in telecommunications Internet access 14% 15% 26% 40% 5% providers, television providers broadcasting companies Software and Internet access 10% 15% 27% 43% 4% companies providers in terms of the use/purchase of an IPTV offer Internet 7% 16% 31% 42% 4% By contrast, pure Internet providers providers and media companies have difficulty in Media companies 9% 38% 46% 3% successfully positioning 3% themselves as IPTV providers Probably Fairly probable Not very Improb- No in the eyes of consumers probably able information 39
  40. 40. Complexity of IPTV products results in the need for expert consultation in the purchase of offerings subject to a charge Sales outlets for IPTV offers Preferred sales outlets for IPTV offers Insights [% of interviewees] In addition to the provider, the Specialist store such point of sale is also a key as consumer 25.8% electronic store factor for consumers in purchasing IPTV offerings Internet 20.8% Specialist stores are cited here as the most important source, both by experts and Stationary shop of consumers themselves 20.0% a provider For IPTV offers subject to a charge, the relevant market Retail 16.6% presentation can only be realized via a presence in Online shop stationary sales – i.e. in 13.1% of a provider specialist stores or shops The study shows the Telephone sales 3.7% consumers’ need for expert consultation in purchasing an IPTV offer 40
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