April 2010


IPTV Perspectives
A collection of analysis and commentary on the
                             global IPTV ind...
Your global research partner
Informa Telecoms & Media delivers strategic insight founded on global market data and primary...
Introduction


The picture looks decidedly mixed for          Forum in London will bring together             all of us fe...
Glimmer of hope for IPTV in select                                                                      Rob Gallagher | Pr...
Viasat hails IPTV as growth driver                                                                                        ...
Games consoles start to define their                                                                                   Gil...
Fig. 2: Global, pay-TV and catch-up services offered                                                      Fig. 3: iPlayer,...
Fig. 4: Australia, iView visits via PS3, Nov-09                                                    broadcasters used Silve...
guaranteeing good quality of service is         Fig. 5: Use of Microsoft Silverlight and Adobe Flash
difficult when both t...
Operator-CDN market blossoms into all                                                            Rob Gallagher | Principal...
Fig. 2: Global, operator CDN services, Nov-09

Operator                                      Service name                 ...
Fig. 3: Operator and vendor predictions about the                                                                        F...
South Korean IPTV numbers on the rise,                                                                    Tony Brown | Sen...
chief telecommunications advisor to            be decided just by providing existing             that the country’s pay TV...
Fig. 3: South Korea, IPTV investments by operator,
2008-2012




Source: Companies



Going it alone                      ...
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teams all over the world: USA, Brazil, UK,
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Informa's Iptv perspectives april2010_lowres

  1. 1. April 2010 IPTV Perspectives A collection of analysis and commentary on the global IPTV industry Featuring contributions from:
  2. 2. Your global research partner Informa Telecoms & Media delivers strategic insight founded on global market data and primary We have offices all over the world research. We work in partnership with our clients, informing their decision-making with practical services supported by analysts.  London  Sao Paulo  Johannesburg  San Francisco Our aim is to be accessible, responsive and connected, both to the markets we serve and to our  Dubai – opening Spring clients’ business goals.  Singapore 2010  Beijing  Boston • Our global analyst teams have a deep understanding of the evolving telecoms and media value  Raleigh  Chicago chain. Our research programme combines local market insight with sector based analysis for a  Brisbane complete, integrated view. • Our research expertise is built on the in-house collection, validation and analysis of primary data. We track and forecast new and established datasets, using proven, robust methodologies. • Our services drive decision-making. Our data, forecasting and analysis, supported by interaction with clients, provides real value. 24/7 access to business-critical insight, Keeping the world’s leading cellular Cutting edge information on all fixed line, analysis and data organisations better informed cable and broadband markets The Intelligence Centre is a focused online World Cellular Information Service (WCIS) World Broadband Information Service (WBIS) is business tool for those in and serving the telecoms combines intelligently sourced primary data from the industry’s leading source of broadband, multi- and media industries. It features all of our expert the leading mobile industry players with reliable channel TV and fixed-line market data. As well as analysis, briefings, data and forecasts on topics, forecasts and an unrivalled analyst support access to a comprehensive, reliable and detailed countries and companies as soon as it is available. service. We have close relationships with the global database of historic market data, KPIs and leading operators, vendors and regulators globally forecasts, clients also receive unlimited access to The Intelligence Centre includes 10 focused and we have a dedicated team of forecasters, a team of dedicated analysts. The data supplied channels, each one providing in-depth primary ensuring that your decisions are underpinned by by WBIS, as well as the online tools and analyst and secondary research aimed at helping you only the most up-to-date and accurate market support help you make those important strategic make better business decisions. data, forecasts and KPIs. and tactical decisions. www.intelligencecentre.net www.wcisdata.com www.wbisdata.com Join us on LinkedIn: Follow us on Twitter: Subscribe to our Connect email: Email us: www.informatm.com/linkedin www.twitter.com/informatm www.informatm.com/connect marketing.enquiries@informa.com
  3. 3. Introduction The picture looks decidedly mixed for Forum in London will bring together all of us featured in this report, with many IPTV in 2010. the IPTV industry to discuss how the of us chairing or speaking during the technology can increase its share of the conference. If you want to know more According to the latest figures from market and the opportunities it presents about our IPTV analysis, insight, KPIs or our World Broadband Information to players from across the technology forecasts then please get in touch and one Service (WBIS), IPTV services from market spectrum. of my colleagues will be happy to take you telecoms operators only had 5% of the through our coverage and services. global multichannel-TV market and 2% Along with a few of my fellow analysts penetration of the world’s households. we’ve put this short report together, They have struggled to win market share selecting content covering key topics, from conventional TV and in the major such as content delivery network (CDN) By Rob Gallagher markets, success stories are unfortunately strategies and games consoles, an – Principal Analyst rare. However, our research highlights that interesting profile on Viasat, which expects IPTV has started to win significant share in IPTV to play a key role in driving subscriber several small and emerging markets. growth, and a detailed look at the lessons to be learnt from the South Korean market. And video-over-broadband is not just This report starts with an overview of our a game telecoms operators can play. latest IPTV market data, which our WBIS The technology is increasingly being team updated the week before the IPTV embraced by conventional cable, satellite World Forum. and terrestrial TV providers as well as Internet firms and consumer electronics We have a large team of analysts manufacturers. This year’s IPTV World attending this year’s IPTV event, including Contributors About Informa Telecoms & Media Contents This report features contribution from: Informa Telecoms & Media delivers analysis Glimmer of hope for IPTV in select and insight into the global IPTV sector, markets 04 Rob Gallagher which is based upon our own primary – Principal Analyst research. Viasat hails IPTV as growth driver 05 rob.gallagher@informa.com Through our World Broadband Games consoles start to define their Julia Glotz Information Service (WBIS) our dedicated roles in the TV ecosystem 06 – Senior Analyst team of analysts are tracking KPIs and julia.glotz@informa.com producing reliable five-year forecasts, all Operator-CDN market blossoms into of which are searchable and exportable, all manner of varieties 10 Giles Cottle enabling you to analyse the data most – Senior Analyst relevant to your business. South Korean IPTV numbers on the giles.cottle@informa.com rise, but questions linger 13 Our Intelligence Centre features 10 Tony Brown topic and geographic-focused channels, – Senior Analyst including one on television and one tony.brown@informa.com on broadband & Internet, which house all of our analysis, insight, opinions and commentary, as well as presentations from Informa’s global conferences. For our clients we are their global research partner, supporting important decisions with actionable intelligence. 03
  4. 4. Glimmer of hope for IPTV in select Rob Gallagher | Principal Analyst rob.gallagher@informa.com markets IPTV success stories remain rare in many Fig. 2: Global, top 10 countries by IPTV Fig. 3: Global, top 10 operators by IPTV major markets, as broadband-based subscriptions, 4Q09 subscriptions, 4Q09 TV services from telecoms operators struggle to take share from conventional Rank Country Subscriptions Operator (country) Subscriptions, 4Q09 TV. But IPTV has gained a foothold in 1 France 9,011,000 Free (France) 3,550,000 several small or emerging markets 2 US 4,948,000 Verizon (US) 2,861,000 and begun to win customers in some 3 China 3,550,000 Orange (France) 2,761,000 developed mid-sized ones, albeit at a 4 South Korea 1,713,000 China Telecom (China) 2,740,000 slow pace. 5 Hong Kong 1,172,000 SFR (France) 2,700,000 6 Japan 938,197 AT&T (US) 2,064,000 Subscriptions to IPTV services stood 7 Germany 859,900 PCCW (Hong Kong) 1,001,000 at 29.7 million at the end of 2009, up 8 Italy 855,000 KT (South Korea) 994,000 from 19.4 million a year earlier (see fig. 9 Spain 798,000 NTT Plala (Japan) 830,000 1). The number of quarterly net new 10 Belgium 752,000 China Unicom (China) 810,000 subscriptions, or net adds, reached a Source: Informa Telecoms & Media Source: Informa Telecoms & Media record high of 3.2 million in the last three months of the year. IPTV has gained significant multichannel- Unsurprisingly, the top 10 providers by But IPTV still has a long way to go. TV-market share where one or more forms subscriptions were based in the world’s The technology had only 5% of the of conventional TV is absent or weak, five largest IPTV markets, though there multichannel-TV market and less than 2% particularly in small or less developed was some movement of their rankings penetration of the world’s households, markets, such as Iceland (81.0%), Qatar during the year. despite services being available in over 50 (80.0%), Cyprus (67.0%), Slovenia countries. (35.0%), Croatia (25.0%), Estonia (25.0%), France’s Free kept the top spot, but Verizon Montenegro (23.5%) and Greece (23.5%). of the US overtook China Telecom to reach And just four countries accounted for number two. China Telecom was relegated nearly two-thirds of all IPTV subscriptions: Services also began to take the majority further to number four, after being France, the US, China and South Korea (see of net adds in some more competitive overtaken by Orange France. Germany’s fig. 2). In many other major markets, IPTV mid-sized markets in 2009, including Deutsche Telekom, at number 11, was made slow progress against cable, satellite Switzerland, Belgium, Singapore and the largest provider by subscriptions and terrestrial TV competition. Portugal. outside of the big-five markets, followed by Belgacom of Belgium and Spain’s Telefonica. Fig. 1: Global, IPTV subscriptions and net additions, 4Q07-4Q09 The providers with the highest levels of household penetration were: Hong Kong’s PCCW (43.7%), Iceland Telecom (38.5%), CYTA of Cyprus (23.2%), Estonia’s Elion (22.5%), and Belgacom (16.7%). This article features IPTV data from WBIS and has been taken from the Intelligence Centre, the platform through which Informa delivers all of its topic, country and company insight and commentary. For more information, please visit: www.intelligencecentre.net Source: Informa Telecoms & Media 04
  5. 5. Viasat hails IPTV as growth driver Julia Glotz | Senior Analyst julia.glotz@informa.com Viasat, the pay-television operator Average revenue per user (ARPU) for owned by Sweden’s Modern Times DTH premium subscribers was SEK4,435 Group, expects IPTV to play an (US$620) for the fourth quarter of 2009, a increasingly important role in driving 9% year-on-year increase, which Albrecht subscriber growth in its Nordic said was largely driven by price increases operations over the next year. on some subscription packages and increased uptake in “value-added” services Most of Viasat’s premium subscriber such as digital-video recorders and high- growth in the region in 2009 came from definition channels. IPTV, which accounted for 60,000 of a total of 69,000 net additions with the Albrecht expected premium DTH ARPU to rest coming from direct-to-home (DTH) continue to grow by “low- to mid-single- satellite. digit percentage points” over the next year. During the fourth quarter of 2009, Viasat Operating income for Modern Times added a net 21,000 new premium pay- Group’s Nordic pay-television business was television subscribers – 10,000 DTH and up 5% year-on-year at SEK725 million at 11,000 IPTV. The company ended 2009 the end of 2009. with a total of 823,000 premium pay-TV customers, compared to 754,000 premium Viasat’s “emerging markets” pay-television subscribers at the end of 2008 (see fig. 1). division, which operates DTH services in the Baltic states and Ukraine and which Fig. 1: Modern Times Group, pay TV subscriber also distributes pay-TV packages through growth, Nordic region, Dec-08 to Dec-09 (000s) Estonian IPTV operator Elion, reported a 33% year-on-year increase in net sales Dec-08 Sep-09 Dec-09 to SEK875 million compared to SEK658 Premium subscribers 754 802 823 million in 2008. Operating income for the – Of which DTH satellite 676 675 685 year was SEK 168 million, up from SEK106 – Of which IPTV 78 128 138 million a year ago. Basic DTH satellite subscribers 69 48 45 Premium DTH ARPU (SEK) 4,077 4,401 4,435 Fig. 2: Modern Times Group, pay TV subscriber Note: SEK1=US$0.14 growth, emerging markets, Dec-08 to Dec-09 (000s) Source: Modern Times Group Dec-08 Sep-09 Dec-09 Premium DTH subscribers 218 207 216 Basic DTH subscribers 11 22 24 Modern Times Group president and chief Mini-pay TV subscriptions 36,469 39,620 40,778 executive Hans-Holger Albrecht said that premium-subscription growth in the Source: Modern Times Group fourth quarter had been driven by more households taking digital-satellite services as analog-terrestrial signals were switched Baltic and Ukrainian premium DTH off in Denmark (November 1) and Norway subscriptions increased by 9,000 in the (December 1) as well as by continued fourth quarter of 2009 but were flat demand for IPTV. year-on-year, with 216,000 at the end of December 2009 compared with 218,000 Albrecht expected IPTV to continue to be at the end of 2008. Basic DTH and “mini- a key factor in driving subscriber growth pay” subscriptions were both up, reaching in the Nordic region in 2010. “We expect a respective 24,000 and 40.78 million continuing subscriber acquisitions with subscriptions (see fig. 2). increasing weighting on IPTV in terms of This piece of analysis has been taken from the Intelligence subscriber growth,” he told a telephone Centre, the platform through which Informa delivers all of its conference on Modern Times Group’s full- topic, country and company insight and commentary. For year results. more information, please visit: www.intelligencecentre.net 05
  6. 6. Games consoles start to define their Giles Cottle | Senior Analyst giles.cottle@informa.com roles in the TV ecosystem • Informa Telecoms & Media counts 25 Fig. 1: Nongame services offered by the big three third-party pay or catch-up TV services games consoles, Feb-10 that have launched, or will launch, on Console Web service Social Video-on-demand the three major games consoles. Nintendo Wii Offers photo sharing, shopping, In-house services including a Nintendo offers Wii no Maa, a social news and weather forecasts and message board and the Everybody VOD service that offers cartoons and • Sony’s more open approach to a Web browser. Other features, including a food-delivery service, are Votes channel are available; Nintendo has yet to strike any deals other family-friendly shows from major content providers, in Japan. PlayStation means it has been able to included in Japan. with third-party social networks or media providers, however. offer more services than Microsoft’s Sony PlayStation 3 PS3 users can access Home, Home is Sony's PS3-based online Sony sells VOD content via the Xbox 360. the console's virtual world and community. Users can create avatars, PlayStation store in the US, the community, the PlayStation store which live within Home and can UK, France, Germany, Spain and and other services. The service also interact with the avatars of other Japan. VidZone, a service that • The proliferation and use of existing includes a Web browser. users. Users can also access several allows users to watch music videos social-media sites via the PS3's Web free, is available across Europe and technologies and platforms, including browser. Australasia. Microsoft’s Mediaroom and Silverlight Xbox 360 Xbox Live users can play online Twitter and Facebook are available Zune, Microsoft's VOD service, was and Adobe’s Flash, will determine which against each other and download full in the majority of countries in made available across Europe and providers launch on which platforms. games and other additional content. Unlike the PS3 and Wii, Xbox Live which Xbox Live has launched. Music-discovery service Last.fm is Australia, having previously been available only in the US. does not include or support a Web available in the UK and US and will browser. soon launch in Germany. Pioneering • Consoles are unlikely to usurp TV interactive live game show 1 vs 100 platforms as the main method by which is available in the UK and US. services can be accessed. Source: Informa Telecoms & Media Introduction connected home. The headline-grabbing their pay TV platforms – satellite – mean deals have included Facebook and it is difficult to offer a true on-demand The idea of the games consoles as a Twitter, which are available on Xbox Live service. Instantly being able to offer on- connected device that allows for far more in several countries, and Netflix, whose demand content to Microsoft’s estimated than game-playing is not a new idea. Watch Instantly video-streaming service is 2.5 million Xbox Live homes in the UK will After all, it was back in 2002 when Informa available via all three major consoles. be extremely appealing. Telecoms & Media reported on news of a corporate restructuring at Sony that But outside the US, the big move has Multiroom viewing or STB replacement: resulted in the creation of a Broadband been the inclusion of major third-party TV PCCW says that one of the main reasons Strategy Group within the company. services by the main consoles, including it is offering Now TV via the PS3 is that it The group was charged with pushing catch-up TV services provided by will enable people to watch its service on the evolution of Sony’s PS2 console as a broadcasters and pay-TV services usually a second set. This will appeal to customers, broadband-based entertainment-delivery delivered via satellite (DTH) or IPTV (see because such a service is usually medium. fig. 2). something that operators charge for. It is particularly apt in Hong Kong, because Several years and one generation of many users live in small apartments and consoles later, and it’s becoming clear Analysis space is at a premium, meaning any that games consoles will be, if they device providing multiple services usually aren’t already, one of the key players Motivations for offering services via a has an advantage. in the connected home. In no way is console vary greatly this more obvious than in the types of Creating a splash: Well-funded services available via the devices (see fig. There is only ever one ultimate reason communications providers that are new to 1). Microsoft, Sony and Nintendo have for a broadcaster or operator to offer the TV market can use consoles to boost been gradually ramping up the features services via new platforms: to go where their TV efforts. KT of South Korea was of their Xbox 360, PlayStation 3 and Wii its audience is, so it can reach as many the first operator to launch a service via a consoles, including providing their own eyeballs as possible. But beyond this, there games console, but it was something of VOD libraries. are some subtleties and nuances that a TV laggard when it did so. Legislation can hasten an operator’s decision to offer prohibited the operator from launching Where the picture gets really interesting these services: linear services, and its on-demand service is in the provision of third-party services. came after that of rival SK Broadband, Ultimately, the extent to which consoles On-demand on the cheap: Sky in the UK then branded Hanaro Telecom. Launching work with third parties will determine and Canal in France have persevered with over the PS3 was a natural step, given that just how ingrained they become in the the Xbox 360 because the limitations of persuading consumers to install and pay 06
  7. 7. Fig. 2: Global, pay-TV and catch-up services offered Fig. 3: iPlayer, program requests by platform, via games consoles, Jan-10 Dec-09 Country Service provider Service Platform Australia ABC iView PS3 Bulgaria AXN AXN Player PS3 Czech Republic Animax Animax Player PS3 Czech Republic AXN AXN Player PS3 France Canal Canal+ Xbox 360 Germany ZDF ZDF Mediathek PS3 Hong Kong PCCW Now TV PS3 Hungary Animax AXN Player PS3 Hungary AXN Animax Player PS3 Ireland RTE RTE Player PS3 Netherlands NOS NOS Journaal PS3 New Zealand TVNZ TVNZ ondemand PS3 Poland AXN AXN Player PS3 Portugal Vodafone Casa TV Xbox 360 Romania AXN AXN Player PS3 Romania Animax Animax Player PS3 Slovakia Animax Animax Player PS3 Slovakia AXN AXN Player PS3 South Korea KT Qook TV PS3 Spain Antenna 3 Atenna3videos PS3 Spain La Sexta Misexta.tv PS3 Spain RTVE RTVE a la carta PS3 UK BBC iPlayer Wii, PS3 UK BSkyB Sky Player Xbox 360 US AT&T U-Verse Xbox 360 Source: Informa Telecoms & Media Note: Includes services announced but not yet launched Source: Informa Telecoms & Media broadcasters is that they can bring a “lost generation” of viewers back to the for another settop box simply to access third-party broadcasters in these markets TV. Broadcasters reason that if they bring on-demand viewing was also going to will be difficult, because the costs of their services to the console, they will be a hard sell. Vodafone Portugal also offering the service will be high compared be able to win back viewers who have launched its Casa TV service via Xbox Live with their potential benefits. abandoned the TV for gaming. But that is only a few months after it launched the a pretty major assumption to make. Most service. Consoles attract new viewers, but there gamers are technology-savvy people and is some cannibalization from existing are arguably those who would still watch Sony’s vertically integrated approach: sources via the PC. It is likely that many of these Some eyebrows were initially raised when “lost” viewers have abandoned TV because Sony channels AXN and Animax were Viewing catch-up services via games it simply does not interest them as a included as dedicated catch-up services consoles is popular. Months after launch, medium, rather than because they cannot on the PlayStation Network. Informa the PS3 now accounts for a significant access it in the way they want too. estimates that, by the end of 2009, about proportion of iPlayer program requests 2 million PS3 consoles were sold in (see fig. 3). And in Australia, ABC achieved It is also clear that at least some viewers of Europe outside the Big Five countries. The 89,000 views a week only days after the catch-up TV via the console are churning potential audience for viewing Animax iView service officially launched via the from other platforms. An analysis of iPlayer and AXN can therefore be assumed to PS3, having achieved only 83 views when data provided by the BBC shows that be extremely small. These launches most the service was available via the console the number of iPlayer requests via PCs likely represent an opportunity for Sony but not promoted (see fig. 4). and Macs dropped in the month the PS3 to experiment with offering catch-up TV launched. services in smaller markets. Signing up One reason games consoles appeal to 07
  8. 8. Fig. 4: Australia, iView visits via PS3, Nov-09 broadcasters used Silverlight to show live streaming of the Olympic Games, to great acclaim. NOS of the Netherlands uses Flash for its VOD service that is being made available via the PS3. But it uses Silverlight for live streaming because, it says, it is much cheaper. Less settop-box subsidization means lower capex and higher ARPU for operators Although Microsoft Mediaroom customers offering services over the Xbox 360 will Source: Informa Telecoms & Media not be able to let their subscribers use the device as a primary settop box, Qook TV and Now TV subscribers can use the PS3 Technology restraints are underpinning Silverlight’s big competitor, Adobe Flash, as their primary settop box. And of course which services launch on which is not supported on Xbox Live but is the whole reason for satellite providers platforms supported on the Sony PS3, which in turn such as Sky and Canalsat to launch via does not support Silverlight. This means the Xbox 360 is to offer services without Much has been made of the fact that that broadcasters using Flash for online- requiring users to have a conventional Microsoft has launched only paid-for video services can more easily integrate settop box. third-party video services over Xbox Live, their services into the PlayStation Network. while Sony has embraced free catch-up TV This is made even easier by the fact that, Offering content without needing to for the PS3. At first glance, these strategies unlike the Xbox, the PS3 has a browser, provide a box could save operators a mirror both companies’ online strategies via which several services that are not significant amount, since the cost of for their consoles. The Sony PlayStation officially supported are actually watchable. providing settop boxes is a major drain Network is free for all PlayStation users; Although the BBC described its unofficial on opex for TV providers. Sky also charges Xbox 360 users must pay US$50 a year for version of iPlayer as “clunky,” Informa users to access its service via Xbox, Xbox Live Gold membership to access the Telecoms & Media has used several other meaning it can still charge for multiroom majority of the service’s features. But the services via the PSN where the quality services without having to provide the split is not one simply between free and could at least be described as reasonable. device. For satellite operators, however, pay: For a start, Sony offers at least two this saving is not likely to outweigh the pay services – Qook TV in South Korea and The respective strengths and use-cases cost of delivering its linear programming Now TV in PCCW – via the PS3. for Flash and Silverlight also help explain via broadband instead of broadcast, which the reason pay services are on Xbox Live is a far cheaper distribution mechanism. The main issues underpinning which and free services are on the PS3. The vast platform they chose are technical, not majority of free catch-up TV services use Wider footprint or better quality of strategic. Microsoft has two key advantages Flash (see fig. 5). It remains a strong video service? in the online-video and IPTV ecosystems: platform and has much higher penetration Mediaroom, its middleware technology for than Silverlight does, being installed on Whereas Sky Player is available to any managed IPTV providers, and Silverlight, about 98% of all PCs, compared with customers of any broadband operator, its online-video platform, which is used by Silverlight’s penetration of around 50%. the services from PCCW and AT&T will be many service providers offering streaming available only to each operator’s respective video over the Internet. The two IPTV But Silverlight has a key advantage broadband customers. The former providers it is offering services for – AT&T over Flash in offering paid-for content: approach enables the operator to extend and Vodafone Portugal – are Mediaroom Microsoft’s strong heritage in offering its footprint far beyond its customer base. customers. Microsoft will not be able to DRM. Silverlight’s DRM is considered But it also presents problems of delivery, provide IPTV services via the Xbox for extremely robust, whereas Adobe only and it is much more difficult to deliver non-Mediaroom customers. Likewise, Sky’s began adding DRM to Flash in 2008. video content “over the top” than via a Sky Player and Canal’s Foot+ both use managed network. Offering HD to the Silverlight, making integration with Xbox Silverlight is also widely considered a TV set, for example, is difficult over an Live much more straightforward. stronger live-streaming platform; several unmanaged broadband network. And 08
  9. 9. guaranteeing good quality of service is Fig. 5: Use of Microsoft Silverlight and Adobe Flash difficult when both the network and the by selected online-video services, Feb-10 settop box are in the hands of third parties. Service Country Free or pay Technology RTL Now Germany Free Flash Rai TV Italy Free Silverlight The Informa view TVE Spain Free Flash SVT Play Sweden Free Flash Service providers will choose the path Viasat on Demand Sweden Free Flash of least technical resistance 4oD UK Free Flash BBC iPlayer UK Free Flash Although service providers want to reach Demand Five UK Free Flash as many users as possible, some will M6 Reply UK Free Flash choose technical simplicity over eyeballs TV2 Denmark Pay Silverlight when it comes to deciding which console Canal Foot+ France Pay Silverlight they want to offer a service via. Mediaset Italy Pay Silverlight Sky Player UK Pay Silverlight The fates of Adobe’s Flash and Microsoft’s Silverlight and Mediaroom will therefore Source: Informa Telecoms & Media decide which services will launch where and which platforms become dominant in offering paid-for services. The next Expect Microsoft to start offering some a pay TV platform can reasonably be IPTV service offered over Xbox Live will free video services on Xbox Live assumed to be 100%, whereas many be another Mediaroom customer, with games-console users will not have German incumbent Deutsche Telekom It will take a fairly large shift in market plugged their consoles in – only 59% of a likely target. Sony, meanwhile, has a dynamics for numerous free services PS3 homes are connected to the Net – or number of Flash-powered catch-up TV to appear on Xbox Live. It would be might simply not be interested. services it can still woo. inconceivable for Microsoft to support Flash on Xbox Live, and it is equally The pay TV audience is also bigger than The Nintendo Wii is likely to remain more inconceivable for service providers across the console audience. In no country in peripheral, simply because of the efforts Europe to offer services in both Flash Europe can the most popular games broadcasters must make to get their and Silverlight or to switch en masse console claim to have a larger user base services on the platform. to Silverlight, simply to reach console than the most popular games pay TV audiences. platform. Offering services via the PS3 is relatively cheap for catch-up TV providers. The But Informa believes that some free Finally, it is technically simpler and BBC, for example, rebuilt its application to services will launch. The stumbling cheaper to deliver services via IPTV than optimize it, but it was based on the same block for iPlayer’s appearing on Xbox via a console. To deliver services via Virgin underlying technologies – Flash and HTML 360 is not that it cannot be charged for Media, broadcasters simply need to – as the Web version. but that the service cannot be used to upload their content into the broadcaster’s upsell a product – in this case, Microsoft’s system, as opposed to creating a new With the Wii, the BBC had to abandon Xbox Live. Commercial broadcasters will application or coding. It is simply another HTML completely, because the console not have this concern. And some free TV program delivered on-demand. One was not powerful enough to provide a Silverlight-powered services, such as Italian indication of this is that although cash- good user experience. Instead, the BBC broadcaster Rai’s catch-up service, could strapped ITV has gone on record as saying had to develop a new application using be offered via Xbox Live. it is cost-prohibitive to develop for lots FlashLite and integrate it with the Wii’s of platforms, it does appear on cable H.264 video player. The maximum level Consoles will play second fiddle to TV operator Virgin Media’s VOD service. the Wii could deliver was 700Kbps – less platforms in offering services This piece of analysis has been taken from the Intelligence than the speed at which regular-definition Centre, the platform through which Informa delivers all of its iPlayer content was delivered – so a lot of Broadcasters, especially smaller ones topic, country and company insight and commentary. For work also had to be done on encoding the without the resources to develop more information, please visit: www.intelligencecentre.net video. for multiple platforms, will turn to TV platforms first for one of three reasons. First, the audience for catch-up TV via 09
  10. 10. Operator-CDN market blossoms into all Rob Gallagher | Principal Analyst rob.gallagher@informa.com manner of varieties Content-delivery-network (CDN) services Fig. 1: Global, number of operator CDN services, promise to address one of the most 2006-2009 pressing problems facing the broadband industry: How network operators can work with Internet and media firms to support the growing burden of video and other bandwidth-hungry services traveling over their infrastructure. Several new models have emerged over the past year, suggesting there’s no one- size-fits-all approach for operator CDNs. Content-delivery-network (CDN) services aim to help content providers deliver their content in the most effective way possible. CDN providers place servers on networks around the globe, which Source: Informa Telecoms & Media content providers use to store, or “cache,” their content. These servers then deliver the content to nearby Internet users, Market drivers with the highest-speed connections rather than the content provider’s servers. into “supernodes” for serving content to This enables content providers to save Offering CDN services is a necessity other users, causing network congestion significantly on bandwidth, while users get for operators, according to speakers and higher transit costs for operators. a better quality of service. at Informa Telecoms & Media’s CDN This problem will only get worse as Strategies Summit, held in London in operators migrate subscribers to superfast The CDN market was pioneered by October 2009 (see fig. 3). connections based on fiber-to-the-x Internet startups including Akamai, infrastructure, BT Wholesale says. Limelight Networks and CDNetworks. Most operators and vendors at the event Telecoms operators have historically agreed that Internet traffic would grow But speakers at the summit also agreed allowed these companies to place caching at a compound annual growth rate of that online-video services present a servers on their networks free of charge, over 40% over the next five or so years, valuable opportunity to operators looking because it reduces their own bandwidth largely because of the growing popularity to enter the CDN market. Whereas the burden. of online video services. The resulting Web services that drove the first wave congestion could force operators into of growth for traditional CDNs – such But a number of major operators are costly upgrades at all levels of their as Akamai – were aimed at a global taking a more hands-on approach to the networks if they seek to address the audience, a growing number of online- CDN market. 2009 has been a particularly problem simply by expanding bandwidth video services are restricted to a particular busy year, with at least 13 launching or alone, they said. Telefonica International country or region for reasons to do with announcing plans to offer services (see Wholesale Services added that this would language, culture and content licensing. fig. 1). There is now an array of different include upgrades to some submarine In Europe, for example, many of the most products from a variety of operators, cables, once notorious for their abundance popular online-video services are offered including major national telecoms of spare capacity after the dot-com boom. by TV broadcasters, which are allowed to incumbents, regional and international provide their content only within their carriers and even some cable operators But merely throwing bandwidth at the national borders because of regulations (see fig. 2). problem would not address some of the or agreements with program makers (see fundamental challenges posed by the way fig. 4). And operator interest is unlikely to modern online-video services operate, diminish. Telecom Italia and TDC are according to BT Wholesale. Many use Operators say they have three main interested in entering the market. Jet so-called bit-rate-adaptive technologies, advantages over the likes of Akamai in Stream, a Netherlands-based provider of which adjust the level of service to use terms of serving these types of customer. CDN services and software to operators the maximum amount of bandwidth First, they can place caching servers closer KPN, Telenet and Ziggo, says all telecoms available. Several also use technologies to consumers than the traditional CDNs operators will sooner or later have their borrowed from the world of peer-to-peer could ever hope to, and thereby offer a own CDNs. file-sharing to turn broadband subscribers greater quality of service. 10
  11. 11. Fig. 2: Global, operator CDN services, Nov-09 Operator Service name Type of operator Home market CDN coverage AT&T Intelligent Content Distribution Service Regional incumbent and international US US, European Union, Japan, Hong carrier Kong, China, Taiwan Bell Canada Bell Content Delivery Network Regional incumbent Canada Canada BT Wholesale Wholesale Content Connect National incumbent wholesale UK UK operator Deutsche Telekom n/a National incumbent Germany Germany Deutsche Telekom ICSS Content Delivery Solution International carrier Germany North America, Europe, Asia, Australia France Telecom n/a National incumbent France France Global Crossing CDN Solution International carrier US Global Interoute Media Services International carrier UK Europe KPN n/a National incumbent Europe, US, Asia Western Europe, US Level 3 Content Delivery Network International carrier US North America, Europe NTT Communications Smart Content Delivery International carrier Japan US, Europe Pacnet Media Delivery Service International carrier Hong Kong and Singapore Asia Pacific PCCW Solutions Content Delivery Network Integration International carrier Hong Kong Asia Pacific Solutions Reliance Globalcom Application Delivery Network/Content International carrier India India Delivery Network Tata Communications CDN Services International carrier India Europe, Asia, North America, India Telecom Italia Sparkle Content Acceleration Network International carrier Italy Europe Telefonica International Wholesale Services n/a (under construction) International carrier Spain Europe, US, Americas Telenet n/a Cable operator Belgium Belgium TeliaSonera International Carrier Media Distribution Service International carrier Sweden and Finland Europe, US Verizon n/a Regional incumbent and international US US carrier Ziggo n/a Cable operator Netherlands Netherlands Source: Companies, Informa Telecoms & Media Second, they can design their CDNs from into their networks, to save costs on both Market segmentation scratch to handle online-video traffic. sides. BT Wholesale’s trial of its Wholesale CDN-system vendor Velocix says that Content Connect service involves caching There are already signs that there is no traditional CDNs were built largely to content from the BBC’s iPlayer online one-size-fits-all strategy for operator CDNs. accelerate the delivery of Web pages and catch-up-TV service. Telecom Italia is Aside from the more marked difference file downloads and that some have had discussing a similar arrangement with in network assets, operators are taking to construct separate CDNs to deal with Italy’s national TV broadcasters. different approaches to the national CDN online video. market depending on their position in the But two of the most high-profile online broadband and content markets. Finally, the operators’ costs will be based video services, the BBC’s iPlayer and NBC’s on operating regional rather than global Hulu, both use Akamai for CDN services. Orange France, for example, is building infrastructure, so they might be able to offer And operators admit that the limited a CDN largely to support the growing more-attractive pricing to regional content reach of their networks could become a burden of traffic from its highly successful providers. “Why would a content provider weakness in future. IPTV service. Because its on-demand choose for a global CDN if 90 percent of his platform is popular with consumers, it traffic stays in one region?” Jet Stream says. Already a number of national and is under less pressure from over-the-top international operators are looking into video providers seeking to bypass it, There is some evidence that operators interconnecting or peering their CDNs though the operator does plan to also are making some progress in this regard. to extend the reach of their respective offer a range of wholesale services to third Telenet and Ziggo are using their CDNs to services. But much of this work is parties. offload traffic from broadcasters deeper fragmented and embryonic. 11
  12. 12. Fig. 3: Operator and vendor predictions about the Fig. 4: Europe, on-demand audiovisual Internet impact of internet video, Nov-09 services by country of reception, Dec-08 Country No. of services Austria 6 Deutsche Telekom: Internet traffic will increase at a compound annual growth rate of 43% between 2008 Belgium 14 and 2014, reaching 63.5 million terabytes (TB) a month. Traffic from PC- and TV-based Internet video services will grow at a CAGR of 72%. Bulgaria 1 Cisco: Consumer Internet traffic will grow at a compound annual growth rate of 41% between 2007 and Cyprus 1 2012, reaching just under 20,000 petabytes (PB) a month. By 2012, 90% of this traffic will be generated by PC- and TV-based Internet video services and video communication services. Czech Republic 3 BT Wholesale: The BBC iPlayer online catch-up TV service is consuming 12GB of data every second. Denmark 13 Broadband peak throughput per UK consumer grew from 18Kbps in March 2007 to 33Kbps in Estonia 2 March 2009. Web video traffic is predicted to grow at a rate equal to tripling current traffic by 2010 to greater than 140Kbps per line. Finland 10 Huawei: To cope with the growth of online video, an operator would have to multiply the bandwidth of its France 72 network by four at the edge layer, by 20 at the regional layer, and by 120 at the core. By using caching, the Germany 49 operator would have to multiply the bandwidth of the regional and core layers by only six and 12, respectively. Telefonica International Wholesale Services: Existing submarine cable capacity will be depleted on Hungary 7 some routes by 2012, with those running between Europe and Asia most likely the first to be affected. Iceland 2 Submarine cables and core-network equipment haven’t sufficienly evolved over the past few years, meaning new cables that use exisiting technology may provide capacity for only a few years and with no positive Ireland 8 return on investment. Italy 16 Luxembourg 5 Netherlands 34 Norway 11 Poland 6 Portugal 2 Russia 2 Source: Informa Telecoms & Media Slovakia 4 Slovenia 2 Spain 20 Similarly, cable operators Telenet and CDNs, but others have taken on the Sweden 15 Ziggo are using their CDNs mostly to ambitious task of building their own. Switzerland 10 support their own video services, such as Vendors and operators that have built Turkey 2 GarageTV and Zizone. Verizon, meanwhile, their own CDNs say resale will prove to be UK 76 developed its CDN largely to bundle third- a short-term option, since the operator’s party online-video services with its IPTV involvement will add little in the eyes of packages. content providers that a traditional CDN Source: European Audiovisual Observatory provider couldn’t offer already. The operators’ ability to pull off such strategies will depend on their strength A number, meanwhile, have gone for was “under water,” according to Velocix, in the content market. Certainly, the low the halfway-house option of establishing meaning that each service cost more to penetration of IPTV in most countries partnerships to integrate traditional provide than the customer was paying. suggests that many telecoms operators CDNs into their networks. Operators of And toward the end of last year, Internap will have to accept that the content all varieties are looking to team up with wrote off US$99.7 million in goodwill from providers will dictate how they use their video- and content-management-system the value of its CDN unit, which it created CDNs. vendors to add an extra layer of value on by acquiring VitalStream for about US$217 top of their basic CDN services. million in October 2006. This piece of analysis has been taken from the Intelligence Market entry Perhaps surprisingly, few operators Centre, the platform through which Informa delivers all of its have chosen to buy their way into the topic, country and company insight and commentary. For Operators’ belief in the opportunities CDN market, with the only recent such more information, please visit: www.intelligencecentre.net presented by CDN services is reflected move being Tata Communications’ in their urgency to enter the market, US$11.5 million investment in BitGravity. but each has taken a slightly different Today’s CDN market is widely held to be approach. overcrowded and in need of consolidation, but there are questions about the value of Some, eager to start competing, have some companies. Every single deal of one decided to resell the services of traditional CDN provider recently acquired by a rival 12
  13. 13. South Korean IPTV numbers on the rise, Tony Brown | Senior Analyst tony.brown@informa.com but questions linger South Korea’s three IPTV players are Fig. 2: South Korea, IPTV-platform comparisons gaining momentum, having shown Operator Service Linear channels VOD programs Interactive applications strong subscription growth recently. KT Qook TV 86 72,000 57 But the operators remain frustrated SK Broadband HanaTV 89 46,000 60 by their inability to access about 40 of LG Dacom MyLGTV 75 10,000 4 the country’s leading cable channels, a restriction that will most likely hinder Source: Companies their long-term growth prospects. On the face of it, IPTV looks to be doing operator SK Broadband offers 89 live the government should intervene and nicely in South Korea, with take-up channels. Digital cable services typically force the program providers to supply growing strongly (see fig. 1) and at a faster offer well over 150 channels. their channels, while market leader KT is rate than digital-cable or DTH services. still against the idea of legislation. South Korea’s trio of IPTV players – KT, SK The cable-program providers and their Broadband and LG Dacom – had more allies in the cable MSO market have J. Sebastian Lee, vice president of KT’s than 1.7 million subscriptions at end-2009. argued that they are not intentionally media-business-planning department, However, the refusal of the country’s withholding the channels from the told Informa Telecoms & Media that KT leading cable-program providers to supply IPTV operators. Instead, they say they was still talking to the program providers IPTV operators with some of their key are not supplying the channels simply and that he was still hopeful of being able channels is still a serious concern. because IPTV does not have cable’s to secure carriage of the channels before market penetration and is therefore a less too long. In all, the program providers are desirable distribution platform. withholding about 40 channels, including “We are still trying to get those important several crucial sports channels and local A counterview, suggested by many IPTV- cable channels, and we are getting very news channels, and their absence is operator executives, is that the program close,” he says. “The main reason that being keenly felt by IPTV operators. Not providers are deliberately withholding their we are getting closer to an agreement only does it block IPTV operators from channels to try to hold back IPTV growth is that the IPTV subscriber base is competing on a level playing field with and protect the cable MSOs’ digital rollouts. growing strongly, which is having an cable TV operators in terms of content, impact on changing the view of the but it also forces them to charge lower cable-program providers. In addition, we subscription prices. Cat and mouse have also resolved some of the financial disagreements that we had with the KT offers 86 live channels and more than The country’s IPTV operators are divided cable-program providers.” 70,000 VOD programs on its Qook TV over what course of action should be service (see fig. 2), while second-ranked taken on the contentious issue. Some say Even if KT and its fellow IPTV operators are unable to secure a carriage deal for Fig. 1: South Korea, full IPTV subscriptions by the missing cable channels, Lee says it is operator, 4Q08-4Q09 unlikely that the Korean Communications Commission or any other government body will step in to end the long-running dispute. “The KCC uses the US regulator, the Federal Communications Commission, as a benchmark for its own policies,” he says. “If you look at the US market, you will see that the FCC does not directly involve itself in programming deals between companies in the cable or DTH markets, so, as a result, I really don’t see any intervention forthcoming from the KCC on this issue.” Source: Companies, Informa Telecoms & Media That view is echoed by, Yoo S. Yang, the 13
  14. 14. chief telecommunications advisor to be decided just by providing existing that the country’s pay TV market is likely the president, who told Informa that the broadcasting services but also by the to be big enough for the rival technology government was not keen on legislating various interactive services that they platforms to coexist. its way out of the problem by forcing the can provide that are not available in the program providers to supply their content current cable TV market,” he says. “If you look at the situation in the market, to the IPTV operators. the number of cable TV subscribers has In response, KT’s Lee says that although not really changed that much since “Because the IPTV operators have relatively interactive applications provide IPTV full IPTV services entered the market in a small number of subscribers compared operators with a point of difference January 2009,” he says. “In fact, over that to cable operators, cable-program with cable MSOs, the absence of some time we have seen the IPTV market and providers are cautious in supplying their channels – particularly sports channels – is the DTH market increase their subscriber best channels to the IPTV operators,” Yang a big disadvantage for the IPTV operators. numbers, so it does not seem that the pay says. “Each program provider makes its TV market is being damaged by the entry decision mainly based on its cost-benefit- “Along with SKB and LG Dacom, we of IPTV services.” analysis result, so it really is a matter of produce our own sports channel, IPSN, how quickly the IPTV operators can secure but the problem is that we cannot get Yang concedes, however, that the enough subscribers to attract the program the exclusive content that is on the cable digitization efforts of the country’s providers. Therefore, it really depends on sports channels,” he says. “We don’t have cable TV operators, along with the IPTV the state of the market as to whether the the rights for all of the really major sports operators’ determination to expand their refusal continues or not.” events that are popular with viewers, so subscription bases, will lead to fiercer people do not really see IPSN as a major competition. He said the government would not act sports channel, and that is a real problem “as long as there is no anticompetitive for us.” “The entire pay TV market is showing signs behavior among the program providers.” of steady growth, and going forward it is likely that the increased competition in Yang says that the government is planning How big can IPTV get? the market will create a change in market to introduce new amendments to the share amongst the players,” he says. Broadcasting Act explicitly outlawing IPTV operators’ entry into the pay TV anticompetitive behavior from the cable- market was fiercely opposed by the cable It is the subject of market share that is of program providers or MSOs but that the TV operators, which said the government most interest to the IPTV operators. KT current situation does not constitute would be fragmenting the pay TV market says that although its full IPTV services anticompetitive behavior. just as they were trying to increase have gotten off to a strong start, taking penetration of their digital cable-TV significant market share from the well- “The government deems it more desirable services. established MSOs will be difficult. KT had to leave it up to market players for just under 1 million full IPTV subscriptions decision-making with regard to content Their fears appear to have been at end-2009, and Lee says the company is sharing rather than to intervene with largely unfounded, with Ben Way, hoping to have 2 million by end-2010. regulations,” he says. “At the moment representative director for Macquarie the IPTV operators do have access to Korea, the major shareholder of MSO C&M “The cable TV operators already hold most of the cable channels, and they Communications, telling Informa that around 80 percent of the pay TV market, are still in talks in progress between the the launch of IPTV services has had little and it is hard to imagine that they will IPTV operators and the cable-program impact on C&M’s business. lose very much of that market share,” KT’s providers to supply some of the key Lee says. “At the moment we have 6.8 missing channels, such as the sports “Our churn rate is the lowest that it has million broadband subscribers, and we are channels.” been for the last five years, so the advent trying to expand those numbers. And we of IPTV to date is really just increasing the are trying to get 50-percent-plus of our Yang also says the IPTV operators are size of the market,” he says. “It is not in any broadband subscribers to take the IPTV by no means doomed to failure if they way taking away from our numbers. The service. When you think of how strong are unable to gain carriage right for the launch of IPTV has not really had a direct the cable TV operators are, just getting 50 missing channels from the cable-program effect on our business. In fact, our ARPU percent of our broadband subscribers to providers. has actually expanded again this year.” take our IPTV service still represents a very big challenge for us.” “The key thing to remember is that That view is echoed by Yang, who says the success of IPTV operators will not the evidence from the market suggests 14
  15. 15. Fig. 3: South Korea, IPTV investments by operator, 2008-2012 Source: Companies Going it alone but they must not fall into the trap of overpaying for the missing channels Some cable operators have mischievously and thereby making it impossible to suggested that the IPTV players are not run their IPTV operations profitably. It serious about staying in the market on would be unwise for the IPTV operators a long-term basis and that they are only to feel that they only need gain carriage in the IPTV business to appease the of the missing cable channels to make government, which sees the technology everything right again in the world. as a potentially big export product for the country’s technology firms. Even if they possess the cable channels, KT and its fellow IPTV operators still face Lee scoffs at such suggestions, pointing a tough challenge to win subscribers in a out that KT has already invested over market that is still basically dominated by US$450 million in its IPTV business (see fig. cheap analog cable services and where 3) and is poised to spend another US$1 many people still view cable TV as a utility. billion over the next three years. The challenge for KT, SK Broadband and The problem for KT and its fellow IPTV LG Dacom is to figure out how to take players, which are set to invest an IPTV beyond the traditional cable TV additional US$1.3 billion themselves in the offering and offer a genuinely different next three years, is that although they are and compelling service. Once they do serious about a long-term future in the that, the cable MSOs will really have reason pay TV market, they need to ensure that to worry. their encouraging start does not blind This piece of analysis has been taken from the Intelligence them to the long-term problems they face. Centre, the platform through which Informa delivers all of its topic, country and company insight and commentary. For Although KT is making encouraging more information, please visit: www.intelligencecentre.net noises about securing carriage of the missing cable channels, it remains far from certain that a deal will be done and – more importantly – on what terms a deal would be struck. The IPTV operators – especially KT – have far deeper pockets than their cable rivals, 15
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