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The Video Markets Prospects IDATE
 

The Video Markets Prospects IDATE

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Disruptions in the TV business

Disruptions in the TV business

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    The Video Markets Prospects IDATE The Video Markets Prospects IDATE Presentation Transcript

    • The video markets prospects February 2008 IDATE Contacts Gilles FONTAINE [email_address]
    • Short term and medium term challenges for the video content industry Audience fragmentation Increased competition Piracy Personal TV New drivers on the video market
        • Since early 2003, the S&P European media index has underperformed the Eurostoxx 50 by 40% (143% vs. 103%)
        • Leading European TV franchises such as TF1 have performed much worse (+33% over the same period
        • The European cable industry has seen massive consolidation in most major markets (France, UK, Germany, Netherlands)
        • Continuous growth of online video usage; switch from a trafic model to an audience model
        • Google buys You Tube; seeks agreements with studios and introduces advertising
        • All studios/TV channels launch online services; strong momentum on catch-up TV
      Competition for advertising New competitors New content Internet migration 1 2
    • New drivers on the video content market
    • The video content market so far TV by far the major market segment. Direct paiement = 70% of commercial income The growth challenge: Growth rate under 4%; TV growing faster than DVD and theatres Subscription growing faster than advertising
    • Further segmenting the video content market: premium vs non premium content; program vs packaging
      • Premium content= exclusive, first window(s), high value proposition programs
      • Either stand-alone programming or premium pay-channel
      • Basic pay-packages= choice, service, non exclusive rerun programs
      • Free-to-air major channels = “event makers”, sport, TV reality
      Value proposition DVD, Theatres Premium pay-TV Free to air Basic pay packages Premium Pay-TV Packaging Content Theatres, DVD Basic pay Major FTA channels Premium pay TV
    • Time spent and advertising
    • Reviewing the TV video market key drivers: audience Daily TV audience in Europe Eurodata TV/EAO TV time on the TV set is stagnating, no evidence that Europe will catch-up US daily viewing But…multichannel television increases television time But…PVR increases TV programming time, other terminals yet to be included in metrics But…Mobile TV conforts personal viewing and opens up nomadism
    • Reviewing the TV video market key drivers: from audience to advertising Negative driver: below the line ad spending gaining market share vs above the line Positive driver: TV increases market share vs other traditionnal media, better resist vs internet
    • Reviewing the TV video market key drivers: from audience to advertising But audience fragmentation is not a winning game ! Viewing share of top channels constantly decreasing as multichannel television develops Advertising not proportionate to audience Strong premium for leading channels due to higher CPM in prime time Will not transfer to other TV channels ? TV ad share/Audience share ratio
    • Reviewing the TV video market key drivers: from audience to advertising Major FTA channels refocusing to consolidate mass media position, increasingly relying on events (Reality TV, sport…) France: Top 20 programs
    • Packaged premium the strongest pay market segment
    • Reviewing the TV video market key drivers: consumers willingness to pay DVD directly hit by piracy, will note fully migrate to VOD The piracy effect ? New forms of VOD aiming at advertising, help convert subs to digital services, increase market share, reduce reduce churn
      • COMCAST (US Cable):
      • 10 000 hours of TV channels branded content
      • 95% is free (for digital subs)
      • Key to competition with satellite
      • Consider advertising
      • “ Premium VOD” disappointing results
    • Reviewing the TV video market key drivers: consumers willingness to pay DTT: 15-20 channels 0 € IPTV, FTA sat 30-70 channels 0 -10 € Pay Satellite, cable 100 channels 30-40 € Tarif #channels Low end pay-tv threatened by free/near to free multichannel DTT and IPTV services Premium pay-TV may prove a stronger model, based on exclusivity and premium programming
    • The new deal
    • Year 1 for Internet video ?
      • Enablers
      • Premium content + new original content now available on the Internet
      • Video usage massively increase audience
      • New technologies to include ads in video available
      • Strong aggregators to market services
      • Efficient Content Delivery Networks
      • Internet video:
      • Migration of the existing video services or potential additional new services ?
      • Value creation or value destruction ?
      • A switch in the video market business models
      • A transfer for “the old media” world to Internet pure players ?
    • Internet usage switching to video
        • A few metrics:
        • Google= c. 2% of time spent
        • Content= c. 50% of time spent on the Internet
        • Video = c. 10% of time spent on the Internet
        • 16% of US Internet users watch TV shows on-line
        • Internet video becomes mainstream for 15-24 yo
    • Internet video is both TV content and original content TV content, either available as stand alone, simulcast or catch-up TV Specific content, only available on the Web Back catalogue content either demonetized or broadcast by niche channels Internet video content: On demand UGC Simulcast VOD premium Catch-up High VOD catalogue Low Web TV Linear Value per program
    • There is more to Internet content than UGC
      • Professional, repurposed content
      • User Generated:
      • Amateur
      • “ Motion maker”
      • Rework
      • Professionalised
      Specific, low cost content Back catalogues The “mid tail”
      • The mid-tail strategy:
      • Aggregating long tail content to build sustainable niche markets sellable to advertisers (1 x 1000 viewers generate more revenues than 1000 x 1 viewer)
      • Providing a new distribution channel for back catalogues
    • The competition for service provision: who will be the aggregator ? The scenarios
      • Partnering with new distributors (B2B) or maintaining direct customer relationship (B2C) ?
      The content industry The contenders: The telcos (pipe providers) Monetizing the network or integrating for service provision ? The Internet aggregators (YouTube, Joost, itunes…) Building on mid-tail new markets or becoming mainstream distributors ? The scenarios:
      • Brave new world
      • Content providers partner with Internet aggregators for open Internet distribution
      • Telcos and TV aggregators by passed
      • Internet players active on premium programming
      • Competition
      • Telcos become content aggregators and distributors of premium content on managed networks
      • TV aggregators by-passed
      • Internet players active on mid-tail services only
      • Cooperation
      • The content industry keeps control of distribution.
      • Telcos provide high QoS network services.
      • Internet players active on mid-tail services only
    • First evidences: media groups keep control of premium, open up distribution of back catalogue
      • B2B
      • Generally non-exclusive online content supply for distribution platform.
      • Revenue sharing
      • Back catalogue
      • B2C
      • Direct distribution , capitalising on the leading channels’ / programs brand name
      • Getting a share of Internet advertising to substitute pay revenues
      • In USA : ad financing for the top channels’ online services.
      • In Europe ?
      B2B B2B2C B2C Consumer relationship Advertising Pay ing services Content Syndication Direct to consumer Pay VOD services (streaming/download) Free catch up (streaming) US networks launched free catch up TV services after prime time airing Among others, TF1, Pro7Sat1 launched VOD services on the Web Content distribution to pay plat for ms Content Syndication Platform agnostic
    • First evidences: Internet aggregators intend to create value leveraging UGC and back catalogues
      • Volume is critical (and not exclusivity) for building massive audience
        • Ex: Dailymotion: 20 M unique visitors / month in France, 20 minutes average time.
        • 15 000 videos uploaded per day
        • 4 million video programs.
      • 3 content categories :
        • « true » UGC generating almost no advertising revenues
        • « motion maker » contents (top ranking, semi professional)
        • « official user » contents . Professional partners from MTV to sports’ association.
        • No premium content ( Google exits Video on Demand Business )
      • Business model
        • Low programming costs: revenue sharing is only proposed to professional top audience contents
        • Aggregate audience to sell advertising
        • Advertising revenues come from motion makers and official users.
        • Today the split is 50%-50%,
        • Tomorrow “official user” will increase (audience and advertising revenues generating)
      The Internet video service case
    • First evidences: telcos follow different paths Market approach Strategic imperatives for ROIC optimization Value added application provider Enhanced connectivity provider Primarily allocating resources to the proliferation of applications targeting niches and short-lived opportunities to increase customer base and/or revenue per customer. Network no longer considered a strategic asset and outsourced to reduce invested capital base. Maximizing utilization of best-of-breed network to enable economies of scale, at the lowest possible cost per Mb provisioned. Revenues generated from leased capacity of enhanced connectivity. End user service creation and commercialization left to 3rd party providers. Converged services integrated operator Leveraging owned fixed and mobile networks to offer truly converged and seamless multimedia-rich premium services in addition to over the top content.. Incremental revenues by targeting the premium digital content opportunity and tight cost control through converged IP network architectures. Converged services integrated operator 1 2 3 Revenues Invested capital Likely candidates Operations Network 1 3 Customers & services Value added application provider Converged services integrated operator 2 Enhanced connectivity provider Opex
    • The competition for service provision: who will be the aggregator ? The scenarios The scenarios:
      • Brave new world
      • Content providers partner with Internet aggregators for open Internet distribution
      • Telcos and TV aggregators by passed
      • Internet players active on premium programming
      • Competition
      • Telcos become content aggregators and distributors of premium content on managed networks
      • TV aggregators by-passed
      • Internet players active on mid-tail services only
      • Cooperation
      • The content industry keeps control of distribution.
      • Telcos provide high QoS network services.
      • Internet players active on mid-tail services only
      Optimum for telcos and content industry
    • The 6 key takeaways for today
        • The video content industry is facing an unprecedented accumulation of major challenges profoundly reshuffling the industry’s structure and dynamics
        • The content industry will experiment both value destruction (lower end paid content threatened by piracy and free offers) and value creation (new advertising revenues deriving from increased video usage).
        • “ Old” media groups have a stronghold on premium content and will likely keep in on the Internet market. Quality of service will be key to differentiate with non premium content.
        • Beware of VOD hype ! Catch-up TV is a key service.
        • There is a business case for Internet “new video” services building on UGC and back catalogues.
        • Cooperation between the content industry and pipe providers provides a superior optimum for content and pipe providers vis-à-vis direct competition.
      • THANK YOU
      • [email_address]