This document discusses trends in digital content and dematerialization. It notes that 37% of content is now dematerialized and consumed via streaming services. Video viewing is shifting to on-demand multi-screen access across devices. Subscription video on demand services like Netflix have seen strong growth with 67 million subscribers. However, piracy remains an issue and physical media sales declines have not been fully offset by digital growth. Content owners receive a larger share of revenue from dematerialized versus physical content sales. The media landscape is consolidating around a few large players and services in most regions and content remains the primary investment area for distributors.

1. Trends in digital content
NEM SUMMIT
30 September 2014
 Gilles Fontaine g.fontaine@idate.org +33 (0)6 70 70 85 92

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37% of the content market is dematerialized
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31%
43%
13%
67%

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On-demand multiscreen video…
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Dexter S1 2006 Live: 69%
Homeland S3 2013
Live: 32%
TV-screen
Desktop
Smartphone
Tablet
Laptop
Video viewing time: 2013 VS 2012
Source: Ericsson ConsumerLab TV and Media, 2013

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…on a subscription model
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SVOD 67 m subs
Music streaming 21 m subs
Online libraries 2 m subs

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Markets under pressure: volume does not offset decrease in prices…
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Book
11.4 EUR
e-book
6.8 EUR
Average price, in Europe, in 2013
DVD
10.6 EUR
VOD
9.7 EUR

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…and piracy
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0
2
4
6
8
10
12
14
16
2010
2011
2012
2013
2014
2015
2016
2017
2018
Physical Video revenues
On demand video revenues
Total video revenues
Tendancial increase of spending in audiovisual services and products
The piracy gap: dematerialization does not compensate for decrease in physical sales

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Distribution challenged: bundling at stake
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0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2007
2008
2009
2010
2011
2012
Total company margin
Video Margin
Comcast total and video margins
Higher margins for broadband than for video
US Cable has more broadband subscribers than video subscribers
US households watch 17 out of 189 available channels

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Distribution challenged: self distribution
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Source : IDATE, Future TV 2025, juillet 2014

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Delivery networks: IP convergence, Cloud
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IP Convergence Contribution Broadcast to IP Hybrid networks
Cloud-based delivery
How Tivo migrated to the cloud

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Content is king (again): Cord cutting…not for TV services
While Netflix reached 30 m subs in the US…
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Penetration rate
March 2012 and Sept 2013
29%
28%
21%
23%
20%
22%
11%
14%

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Average retail price
Content is king (again): Self-distribution means more investments in programming
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15US$
39%
Share of consumer spendings invested in content
9 US$
67%

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Content is king (again): Dematerialization means a higher share for content
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41%
Rightholders/producers share of the final market:
Physical Vs Dematerialized
58%
46% 49%
39% 59%
21% 54%

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Consolidation: winner takes all ?
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ITunes market share of the US music download market: 63%
US Market share of the top 4 rental VOD services: 90%
Netflix market share of the World SVOD market: 66%
World market share of the top 3 streaming services: 80%

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A fragmented Europe
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145
98
62
42
27
39
52
53
83
77
47
38
10
7
46
106
Catch-up TV
VoD films/series
Source : Observatoire Européen de l’Audiovisuel
VOD: 3 key US players in Europe
VOD: 500+ national players in Europe

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To sum-up: productivity gains needed all along the chain
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Production Big data Post-production in the cloud International distribution and formats
Marketing Big data Yield management
Advertising Real Time Bidding Integration of mass advertising and one-to-one marketing
Delivery Cloud Networks cooperation