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  • 1. Video-on-Demand: the End of the Beginning Marie Bloomfield Research Analyst PEVE 2005 www.screendigest.com global media intelligence
  • 2. PPV Video-on-Demand TV-based services PC-based services www.screendigest.com global media intelligence
  • 3. The European digital pay TV market continues to grow. Satellite dominates but cable is now competing Western Europe: total digital pay TV subscribers 35 30 subscribers (m) 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 digital cable digital satellite digital terrestrial www.screendigest.com global media intelligence
  • 4. PPV is a key facet to digital pay TV packages • There are 32 PPV services in Europe, almost twice the number available in 1998 • But less than the number of services in operation in 2003 thanks to consolidation amongst the key players, notably in the cable sector • There are four business models… www.screendigest.com global media intelligence
  • 5. …all of which simulate VoD • Traditional PPV: where users call up customer service centre to order a single programme. • IPPV: where users can order PPV content instantaneously via the remote control. This requires a return path to the operator. • NVoD: where users can choose from multiple channels simultaneously broadcasting a programme at staggered times • PVR-assisted VoD: where users record content to a PVR. Users can then play back with full VCR functionality. www.screendigest.com global media intelligence
  • 6. PPV spending is a long way off video rental spending, equating to 16% in 2005. But the gap is narrowing… Western Europe: PPV spending vs. video rental spending 3 spending (€bn) 2 1 0 2000 2001 2002 2003 2004 2005 Video rental PPV www.screendigest.com global media intelligence
  • 7. PPV vs. video rental • Video rental spending is in decline • Between 2004 and 2005 it is expected to fall by around €50m (-2%). • Downturn might be steeper but online DVD rental has stemmed decline in several key territories • Such services have slowed the gradual shift in spending from video rental to PPV • But ultimately, these only bridge the gap between physical and non-physical rental whilst VoD services become established • Borne out by the rentmailers’ attempts to migrate their business to VoD www.screendigest.com global media intelligence
  • 8. The video rental market in Europe has a windows advantage over PPV, but in recent years the video-to-PPV window has been shrinking… Video-to-PPV windows – months after first video release 1997 2001 2003 2005 UK 6 6 4 (3) 2-5 France 6 (3) 4-6 (3) 3 (2) 3 (2) Germany 6 6 6 6 Spain 6 (3) 4-6 (3) 4-6 (3) 4-6 (3) US 1.5 1.5 1-1.5 1-1.5 Brackets indicate occasional shortening www.screendigest.com global media intelligence
  • 9. Every new release DVD sale generates over 6x the gross revenues of VoD or any other form of movie consumption Gross studio-level movie revenues per new release transaction (UK example) 10 8 6 (£) 4 2 0 Cinema DVD retail DVD rental PPV/VoD Pay TV www.screendigest.com global media intelligence
  • 10. Even after studio costs - DVD retail is 3.5x more profitable than PPV/VoD Net studio-level movie revenues per new release transaction (UK example) 6 4 (£) 2 0 Cinema DVD retail DVD rental PPV/VoD Pay TV -2 www.screendigest.com global media intelligence
  • 11. But the DVD market is running out of steam… Between 2004 and 2006 CAGR in Western Europe is expected to be 6.4%, falling to 2.4% in 2006-09 Western Europe: retail DVD spending 2000-2009 12 10 8 (€bn) 6 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Western Europe www.screendigest.com global media intelligence
  • 12. PPV Video-on-Demand TV-based services PC-based services www.screendigest.com global media intelligence
  • 13. VoD services are arriving TV-based VoD: PC-based VoD: • Walled Garden • No gatekeeper (open Internet) • Single service provider • Multiple service providers • Direct to TV via STB • Direct to PC, or indirect to TV • Selected range of titles • Wider range of titles Both require a broadband connection to enable constant dialogue (cable, DSL, fibre) Satellite can at best offer ‘Virtual VoD’ (IPPV, NVoD, PVR-assisted VoD) www.screendigest.com global media intelligence
  • 14. Hollywood majors’ reluctance to embrace VoD fully means premium content not widely available in Europe • Arrival of such content is further slowed by rights issues. • Rights to content in the pay TV window seem to be implicitly held by pay TV giants. • These companies are looking to implement VoD offerings of their own, and are therefore increasingly determined to retain exclusivity. • Even if the Majors do explore VoD, they may opt to cut out middlemen, as was illustrated with the now defunct MovieBeam service, and PC-based platform Movielink which, following Fox’s endorsement, now has support of all 6 majors www.screendigest.com global media intelligence
  • 15. PPV Video-on-Demand TV-based services PC-based services www.screendigest.com global media intelligence
  • 16. The TV-based VoD landscape in Europe • Most of today’s VoD services operate over IP • Unlike US, where TV-based VoD is primarily a cable product • Market was built by telcos looking to sustain revenues, with their core business model facing competition from mobile and cable operators • Unlike cable and satellite, two-way DSL infrastructure was already in place • Cable sector endured financial struggle after heavy investment in network upgrading • It is now recovering and, after much consolidation, may offer renewed competition www.screendigest.com global media intelligence
  • 17. Telcos have stolen an early lead with average two-way DSL connectivity over 90% Western Europe: DSL network connectivity 2004 100 80 60 % 40 20 0 en m k y d nd Sw in itz en a Fr d ly Po ay al er e K ds an ar an an i c U et Ita tr a ug u an an Sw ed la w Sp gi m s m el nl or er rt Au rl l Ir Be Fi N he G D N www.screendigest.com global media intelligence
  • 18. Compared to two-way digital cable connectivity of just 58% Western Europe: 2-Way cable network connectivity 2005 100 80 60 % 40 20 0 en m k y d nd Sw in itz en a Fr d ly Po ay al er e K ds an ar an an i c U et Ita tr a ug u an an Sw ed la w Sp gi m s m el nl or er rt Au rl l Ir Be Fi N he G D N www.screendigest.com global media intelligence
  • 19. Leading TV-based VoD services in the Big 5… Operator Platform Region MaLigne TV France Telecom IPTV France T-Online Vision Deutsche Telekom IPTV Germany Alice Movie Hansenet IPTV Germany Fastweb Fastweb IPTV Italy Imagenio Telefonica IPTV Spain Homechoice Video Networks IPTV UK KIT Kingston IPTV UK Film Flex NTL/Telewest Cable UK Coming soon… Telecom Italia IPTV Italy BT Freeview Plus BT IPTV UK www.screendigest.com global media intelligence
  • 20. Case study 1: Fastweb • Fastweb, launched in 2001, is most successful VoD service in Europe to date. • By the end of 2005, it is anticipated that the full IPTV service will boast around 217,000 subscribers. • Service offers premium content from Fox, Universal, and DreamWorks, as well as with Discovery and the BBC. • There are over 5,000 titles in total, priced between €4 and €6. • Service also offers free content, mostly children’s programmes. www.screendigest.com global media intelligence
  • 21. Not only is Fastweb’s subscriber base increasing rapidly, its ARPU is also growing Fastweb: progression 2002-2005 100 250 95 200 90 150 m € 85 100 80 50 75 0 2002 2003 2004 2005 ARPU Subscribers www.screendigest.com global media intelligence
  • 22. Case study 2: T-Online Vision • T-Online Vision has distinguished itself from other VoD services through its innovation. • Service is integrated into the Microsoft Windows Media Center. • In March 2005 it expanded its service to portable media devices. • T-Online Vision currently offers around 350 movie titles on a PPV basis - priced between €3 and €5 - including titles from Universal, MGM, Fox, Paramount and DreamWorks, as well as local distributors • Service also secured new releases and at least 100 catalogue titles from Warner in August 2005 • Discovery, Paramount and CBS provide TVoD content www.screendigest.com global media intelligence
  • 23. T-Online Vision has vast potential if it can capture some of T-Online’s broadband customer base T-Online Vision’s growth prospects 2003-2007 7 6 subscribers (m) 5 4 3 2 1 0 2003 2004 2005 2006 2007 T-Online DSL T-Online IPTV www.screendigest.com global media intelligence
  • 24. PPV Video-on-Demand TV-based services PC-based services www.screendigest.com global media intelligence
  • 25. Broadband adoption is growing rapidly in Western Europe, with over one third of households equipped in 2005 Western Europe: broadband market 2000-2005 60 35 30 50 25 40 20 30 % m 15 20 10 10 5 0 0 2000 2001 2002 2003 2004 2005 Households Average penetration www.screendigest.com global media intelligence
  • 26. Characteristics of European movie download services • ISPs, third-party services, online DVD rentailers • Backed by sizable content rights holders, telecoms operators or cable operators • PPV window (except France, emerging Internet VoD window) • Windows Media (encoding, DRM) • Three business models: - PPV - SVoD - Download-to-own or ‘digital sell-through’ www.screendigest.com global media intelligence
  • 27. PPV dominates as rights deals are easier to negotiate than for SVoD or download-to-own Western Europe: total VoD revenue - 2005 4 3 (€m) 2 1 0 2003 2004 2005 PPV SVoD www.screendigest.com global media intelligence
  • 28. Germany is the biggest PC-based VoD market in Europe, accounting for half of total volume in Europe Western Europe: total VoD downloads - 2005 Other 25% Italy 6% Germany 48% UK 7% France 14% www.screendigest.com global media intelligence
  • 29. Leading PC-based VoD services in the Big 5… Territory Titles Content Models T-Online Germany 450 All Hollywood majors PPV Vision Rosso Alice Italy Warner, CBS, independents PPV, SVoD CinemaNow Worldwide 2,000 Independents PPV, SVoD Download- to-own MovieFlix Worldwide 3,000 Independents PPV/FVoD Canal Play France 1,500 Sony, Disney, Pathé PPV Arcor Germany Sony, Discovery, BBC PPV LoveFilm UK 500 Majors and independents PPV Sky Movies UK 300- All Hollywood majors SVoD/ Broadband 1,500 except Warner FVoD www.screendigest.com global media intelligence
  • 30. Thank you Marie.Bloomfield@screendigest.com www.screendigest.com global media intelligence