Published in COMMUNICATIONS & STRATEGIES No.95
Conducted by Yann MÉNIÈRE
Professor of economics at MINES ParisTech,
head of the Mines-Telecom Chair on "IP and Markets for Technology", France
C&S: Could you please introduce yourself and the organisation you are working for/have been working for?
Ruud PETERS: I first joined the Philips Intellectual Property & Standards (IP&S) organisation in 1977, with a background in physics. After taking various positions in the technology and consumer electronics sectors, I was appointed CEO of Philips IP&S in 1999. There I have been responsible for managing Philips' worldwide IP portfolio creation and value capturing activities, and responsible for technical and formal standardization activities in the fields of consumer lifestyle, healthcare, lighting and technology until my retirement at the end of 2013.
I remain affiliated to Philips as a Strategy & IP adviser reporting to the board member responsible for Strategy and Innovation. I also represent Philips in the board of various companies, which I created or in which I took a share as Philips in the past. Beside my Philips affiliation, I devote about half of my time to other governing and consultancy roles as board member of a number of international companies and organisations related to IP.
C&S: What is your/your organisation's approach to IP and patents from a business perspective?
R.P.: Philips has an integrated approach to IP asset management. This includes trademark, domain names and designs, while they are often treated separately in other companies. Philips also has a proactive view of the role of IP as a creator of value. In this view, building an IP portfolio should not be a goal per se, but a lever to support growth and profitability. Accordingly, Philips IP&S is closely involved in the business decisions being made around IP rights. It is responsible for the creation and management of these rights, but also anti-counterfeiting strategy, financial aspects of licensing agreements and formal standards-setting issues.
C&S: What is your opinion about the role of the patent system in the economy, and the benefits it can bring to the society?
R.P.: Today more than ever, the economy needs people who are prepared to take the financial risk to invest in new ideas and innovative activities that contribute to welfare. Those people need a reward for the risk they take, and it is the role of the patent system to provide such incentives.
This incentive function of patents should be understood in a broad meaning. Patents are highly flexible instruments that open a broad set of strategic choices. Recouping investments by securing an exclusive use of inventions is certainly one of these options, but patents can also be used more proactively. They can be opened up for use by others though licensing programmes or the creation of joint ventures, creating valuable economic activity in the process. In other words, they are the necessary currency for the exchange of ideas and for collaboration.
C&S: Recent years have seen frequent patent battles and controversy in the digital area. Is there something specific to this technology field with respect to patents and IP?
R.P.: Yes and no. On one hand, the digital area has indeed some specific features with respect to patents and IP. It is first subject to a continuous trend towards higher IP density, with many devices each embodying a growing number of patented technologies. It is moreover organized around a limited number of platform products – such as operating systems– that enable devices to interoperate. These platforms are subject to strong network effects: they become more attractive the more users and the more available compatible products (such as apps in the case of smart phones). They can also generate strong economies of scale in manufacturing. As a result, the competition between platforms is “tippy”: only a few companies that manage to quickly capture enough market shares can eventually establish a profitable business. Against this background it is not surprising that companies compete fiercely to promote their platforms. This includes inter alia a heavy use of patents in the first step. One can yet expect patent battles to recede once market positions will be stabilized.
On the other hand, similar evolutions may take place in other sectors – such as the automotive, healthcare or pharmaceutical industries – where digital technologies are becoming pervasive. In the future, I expect products in these sectors to reach substantially higher and in some sectors, like automotive, similar levels of patent density as in the IT industry. Patents may then become a battleground of the competitive process in these areas too. Patent battles are indeed an inevitable consequence of translating innovative merit into a competitive advantage or, conversely, a disadvantage for the company that pays royalties for borrowing a competitor's technology. They are one part of the market forces that eventually shape industries.
C&S: What are the key challenges or trends that the patent system is currently facing?
R.P.: The key challenge for the patent system is to raise the bar for the quality of patents. The last decades have seen a sharp increase of patent filings around the world, inducing backlogs in patent offices and a drop in patent quality. Based on results of recent court decisions and inter parties reviews in the USA, it is estimated by some experts that about 50% of all patents can be assumed to be invalid. As a result, one cannot assume nowadays anymore that a granted patent is a valid right.
This legal uncertainty fuels lawsuits, but also criticism of the patent system. I think that both can be avoided with enhanced patent quality. To raise the bar, better searches for prior art should be a priority. While various other regulations are currently being discussed, this is the most obvious and effective way to improve the patent system.
Innovative, market-based means can help patent offices to fight the abuse of low-quality patents. I am thinking, for example, of crowd sourcing based searches for prior art to help defendants against assertion of low-quality patents. Article One Partners is a good example of a company providing exactly this service.
C&S: Where are the main differences in the patents/IPR thinking and practice between both sides of the Atlantic, and between the Western world and Asia?
R.P.: The basics of the system – that is, patent law – are the same everywhere. Hence there are no significant differences in the way companies obtain IP rights. However, important differences remain at the level of the judicial system, in the way national systems are operated.
The U.S. patent system is more judiciary. It has a very complex judicial system, with high costs of using patents. By contrast, the European system is more balanced. It is less costly for its users despite the persistence of national patent systems. I am confident that this system will further improve in future years with the creation of the unitary patent and patent court.
Asian countries are modernising their patent systems, although not all of them are at the same stage. This is a very important evolution, especially as regards China. As of today, legal uses of IP remain less developed in this country than in the Western world. Local companies and IP institutions are less experienced, but they are catching up rapidly. I expect China to be at the same level as Europe in about five to ten years.
C&S: What will be the most important developments regarding patents for the coming 5-10 years?
R.P.: The evolution of accounting rules towards a better financial valuation of IP should be a major development in future years. Currently, these rules tend to focus on the cash benefits of licensing income while there are many other ways in which IP assets create value in the knowledge economy. IP makes it possible to protect products and markets from competition, enter new markets, facilitate deal making or create freedom to operate and thus enable higher and more profits or less cost. Because such uses of IP rights do not appear explicitly on the P&L account and the value of the IP portfolio is not on the balance sheet, companies ignore the real value of their intangibles. In practice, this means that IP assets are dealt with at the IP department only, while they should be considered as strategic assets at the board level.
Financial valuation is necessary to convince corporate executives of the real value of intellectual assets, just as for other important assets on a company's balance sheet. This requires new international accounting frameworks that better reflect the true economic importance of intangibles. This is a challenging task for the next ten to fifteen years. Eventually, better accounting rules will facilitate IP recognition within companies, but also in society. The way IP works in the knowledge economy is still not well understood. We still apply the rules of the traditional hardware based economy to the knowledge economy. As an example, courts still calculate royalties as a percentage of the cost price of products, while they should consider the value that IP brings to the product. A new framework will be needed for financial, legal, tax and competition rules in the global, knowledge economy.
I also expect the maturation of markets for IP to be an important development for future years. The current system of bilateral negotiations of licensing deals is quite primitive. It is especially opaque and inefficient when the same patent needs to be licensed to multiple companies, with replicated costs of due diligence, negotiation and monitoring for each deal. A transition towards a more transparent and efficient organization of IP markets is possible, just as happened for stock markets in the past. With market-based pricing of unit licence rights, based on centralised due diligence, the creation of international IP exchange IPXI in Chicago is for instance an important step in this direction.
- Ruud PETERS was appointed Chief Intellectual Property Officer (CIPO) of Royal Philips in 1999, in which position he was responsible for managing the worldwide IP portfolio, and the technical and formal standardisation activities of Philips. In this role, he turned the company's IP department from a cost centre into a successful revenue-generating operation, while at the same time integrating all the different IP activities within various parts of the company into one IP centralised organisation. He further developed and introduced a new concept for intellectual asset management, in which all the different forms of IP are handled together in an integrated manner, and advanced methods and systems used for determining the total return on IP investment by measuring direct and indirect profits. Ruud joined Philips in 1977. He retired from his role as CIPO at the end of 2013, but continues to work for the company as a part-time adviser on strategy and IP matters. He is also a board member of a number of technology /IP licensing /trading companies. Ruud has a background in physics (Technical University Delft, The Netherlands). He was inducted into the IP Hall of Fame in 2010 and in 2014 he received an Outstanding Achievement Award for his lifetime contributions to the field of IP from MIP magazine. He frequently speaks at major international IP conferences and also writes articles regularly for leading IP and business magazines.
- Yann MÉNIÈRE is professor of economics at MINES ParisTech (France) and head of the Mines-Telecom Chair on "IP and Markets for Technology". His research and expertise relate to the economics of innovation, competition and intellectual property. In recent years, he has been focusing more specifically on IP and standards, markets for technology and IP issues in climate negotiations. Besides his academic publications, he produced various policy reports for the European Commission, French government, and other private and public organisations. Outside MINES ParisTech, he teaches the economics of ICT Standards at the Imperial College Business School. He is associated as an economic expert with Microeconomix and Ecorys, two consulting firms specialised respectively in economics applied to law, and public policies.
Florence Le Borgne
Head of the TV & Digital content Practice, IDATE.
Can anyone compete against American on-demand vendors?
IDATE is releasing the latest version of its “TV and video services worldwide” market report and database. It provides readers with vital data on a market in the throes of major upheavals, analysing changes in viewer habits, TV access networks (terrestrial, satellite, cable, IPTV) and revenue sources (linear TV, pay-TV, DVD, Blu-ray, VoD) in more than 40 countries.
The report’s project manager, Florence Le Borgne, tells us that, ‘even though we are watching more video than ever before, revenue growth for the global video market is being stunted by the inexorable drop in video hard copy sales, and by the pressure that Over-the-top (OTT) distribution is putting on traditional TV business models’.
According to IDATE, television revenue worldwide will increase from 368.9 billion EUR in 2014 to 424.7 billion EUR in 2018, which translates into an average 3.6% annual growth, compared to the 5% reported between 2010 and 2013:
• pay-TV revenue is forecast to decrease dramatically over the next few years, with average annual growth dropping to 2.8% between 2014 and 2018, compared to 6.1% between 2010 and 2013. Despite which, it will continue to be the main source of TV revenue up to 2018, bringing in 195.9 billion EUR in 2018;
• advertising revenue is expected to enjoy more dynamic growth overall, in line with its trajectory in recent years: 4.8% a year up to 2018, compared to 4.6% per annum over the past four years, to reach 193 billion EUR in 2018;
• funding from TV licensing fees will continue to increase significantly: by an average 1.5% a year, to reach 36 billion EUR in 2018.
The revenue generated by video on demand (VoD) will climb to 34.4 billion EUR in 2018, thanks to a solid and steady increase (+131.5% compared to 2013) and will represent more than double hard copy sales (15.5 billion EUR in 2018) by that time.
• Online (OTT) video is expected to consolidate its dominance of the VoD market, accounting for more than 80% of on-demand revenue.
• VoD rentals will continue to be the central model on managed networks, generating 4.7 billion EUR in revenue in 2018, compared to 3.3 billion in 2014.
• The hard copy market will continue to shrink across the globe, losing close to a quarter of its value in 2014, despite the growth of Blu-ray.
TV revenue growth forecasts by market, 2014-2018 (billion EUR)
Source: IDATE, State of TV & Video Services worldwide, July 2014
Breakdown of TV revenue by source, 2010-2014 (billion EUR)
Video on Demand Focus: Increasingly competitive OTT players
• Despite the popularity of premium cable channels, Netflix now rivals top dog, HBO. Although subscriber numbers for the top premium cable channels in the US (HBO, Showtime, Starz) have remained relatively stable, and are even increasing for some – +13.3% and +14.2%, respectively, for Showtime and Starz between 2010 and 2013 – the real momentum today is behind OTT services, starting with Netflix whose customer base grew by 71.4% between 2010 and 2013. At the end of June 2014, Netflix had 36.2 million residential subscribers, including 35.1 million paying customers, compared to 28.6 million subscribers for HBO in the United States.
• Will the top American SVoD providers dominate the global market? As of October 2014, Netflix is present in 46 countries, and reporting a base of 13.8 million subscribers worldwide. This means that it alone controls two thirds of the globe’s subscription VoD customers. By way of comparison, HBO is present in 61 countries in Latin America, Asia and Europe, and has more than 35 million subscribers, of which a growing percentage to its HBO Go service. Meanwhile iTunes leads the way in electronic sell-through (EST), earning 65% and 67% of movie and TV programme sales revenue, respectively, in 2012. Virtually all European countries have access to the company’s video rental service, while residents in eight countries – Germany, Austria, Spain, France, Italy, Ireland, the UK and Switzerland – can also download to buy from the iTunes store. Only smaller national companies are competing with these heavyweights. And while some are popular – France’s CanalPlay VoD service has 520,000 subscribers – one cannot help but wonder whether they can hold their own against these global titans.
• Also noteworthy is that Netflix outperformed HBO in terms of total SVoD revenue for the first time in Q2 2014: generating 1.146 billion USD vs. 1.141 billion USD for the premium cable channel.
Netflix share of the global SVoD market as of 31 December 2013 (%)
Source: IDATE, State of TV & Video Services worldwide, July 2014
American OTT video providers’ footprint in Europe as of October 2014
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Several of IDATE’s DigiWorld Institute members took a business trip to the United States on 18 and 19 September, to attend the 2014 edition of our Transatlantic Telecom Dialog in New York, an annual event that we co-host with our partner, CITI, which is headed by Professor Eli Noam of Columbia University.
This trip also provided an opportunity to prepare for the launch of a Collaborative Research Programme being conducted in tandem with our Members. This think tank will be held in Brussels and devoted to the topic, “Telecoms USA: role-model or counter-model?" Before attending the Dialog, we travelled to Washington D.C. to meet with several FCC representatives, as well as the Public Affairs and Regulation teams from AT&T, Alcatel-Lucent and Verizon.
Back home at IDATE, I wanted to share a few thoughts on three hot-button issues that are attracting a great deal attention in America’s telecommunications sector:
• Superfast broadband competition rules
• Spectrum auctions and mobile market competition
• Will the net neutrality soap opera ever end?
1. How to prevent cable from having a monopoly over the supply of superfast access in a number of locations a few years from now?
We can start by remembering that, in the early 2000s, the Republicans went a long way in defanging the Telecom Act, banking instead on intermodal competition between telcos and cablecos to sustain the construction of superfast access infrastructure. In doing so, they abandoned the idea of imposing unbundling obligations like the ones we have in Europe. As a result, the leading operators began making sizeable investments around 2005 in deploying fibre and hybrid access networks. At the same time, the cable companies that serve 90% of households upgraded their (DOCSIS 3) systems to deliver ever faster connections. But cable progressed quickly, whereas telcos soon shifted their focus to mobile network rollouts, particularly these past three years as the LTE battle has heated up. The footprint of the leading carriers’ upgraded networks has expanded very little since then. And cable’s share of the broadband access market, which today stands at 60%, continues to increase steadily. In a recent talk, the Chairman of the FCC presented and commented on this following graph that shows that 79% of households have access to a connection of 50 Mbits and up, but that only 17.6% of them are covered by more than one provider.
What trump cards does the FCC hold to “encourage” telcos to step up their superfast broadband rollouts?
• Google? Of course Google does not want to do business with a single ISP. As a result, in Kansas City and later several more cities, the company began to build 1 Gbit/s networks – under the notable condition that residents in the targeted neighbourhoods explicitly express their interest in having it. Nobody thinks that Google plans to deploy fibre across the country. But its initiative has roused the interest of municipalities, in addition to helping set 1 Gbit/s as the new threshold for high-speed access.
• What bout the municipalities? There had been a handful of initiatives from cities in the past, but several of them failed to reach their potential. Added to which a number of states considered that these city-led rollouts constituted unfair competition with the private sector, and virtually forbade them. The FCC’s new chairman now wants to review these bans.
• Quid pro quo negotiations to shut down the (TDM) POTS and transition to an all IP system. This is a sensitive and legitimate part of telcos’ development strategy, but one that the states are watching very closely, and not a little warily. The FCC authorised AT&T to test two TDM network shut downs, one in rural Alabama and the other in suburban Florida. As in Europe, where stakeholders are talking openly about phasing out legacy copper systems (and switching to fibre), the goal is to test the problems encountered by the lines that outfit lifts, security systems, etc.
• The conditions that anti-trust authorities might impose on several mega-mergers that are being examined: Comcast/Time Warner Cable, AT&T/DirecTV…
• The FCC can also underline the competition aspect of 4G and 4G+ (frequency aggregation, MIMO antennae, small cells). Encouraged too by the growing number of announcements in Google’s wake of 1 Gbit/s networks being made available here and there (but especially in areas coveted by Google) in recent months by AT&T, Century Link and Cox Cable. The previous FCC chairman, Julius Genachowski, had called for the deployment of one network per state delivering a minimum 1 Gbit/s by the end of 2015. But these recent deployments do not appear to foreshadow any great increase in wireline telcos’ Capex: a market analyst in fact suggested they could be dubbed FTPR (Fiber To The Press Release) rollouts…
To finish on this point, we will underline that the gap (1) in market growth between Europe and the US, which up until now had been mainly in the mobile sector, appears to be spreading into residential wireline as well. America’s two largest carriers, AT&T and Verizon, are on the verge of putting an end to 10 straight years of shrinking revenue. This is very directly the result of an increase in triple play customers in their upgraded markets (U-Verse and FiOS) and the $150+ ARPU they generate. Provided the video services that are central to this ARPU prove profitable, telcos could decide it is in their interest to step up their spending on wireline networks, and expand their superfast access footprint. This is indeed one of the central aims of the planned mergers between AT&T and DirecTV, like the one between Comcast and Time Warner Cable (2), namely to bolster their power with the studios when negotiating programming rights.
2. How to better monetise spectrum while removing it as a bargaining chip in M&A deals?
The AWS-3 auctions will be taking place on 13 November, and will be the biggest since the 700 MHz band auctions in 2008. On the block are 65 MHz in three frequency bands: 1695-1710MHz (unpaired uplink), 1755-1780Mhz and 2155MHz-2180MHz (these last two are to be paired to provide uplink/downlink operations). The FCC has set a total reserve price of $10.587 billion. This takes into account that the bulk of the first two frequency bands are currently occupied by federal government services, including the DoD, and that it will take several years to complete the handover, or coordinate licensed shared access (LSA) (3). AT&T, Verizon, T-Mobile and Dish Networks, along with local and rural operators, have all expressed their interest in taking part in these auctions. Not so Sprint which, unlike its competitors, has no AWS-3 adjacent frequencies, so will not be taking part.
But discussions in recent months have focused especially on strengthening the competition policies that the FCC could impose on the auctions, and on the spectrum trading market. These provisions currently make up the points of review in the regulator’s 'spectrum screen'. In an order issued in June, the FCC expanded this provisos by stressing the particular value of lower frequency bands, i.e. below 1 GHz, after having recalled that the country’s two largest carriers today control more than 70% of allocated spectrum. For the upcoming AWS-3 auctions, which do not concern these frequencies but rather bands that are currently shared by a host of players, no specific conditions have been defined to limit any given company’s access to them (4). For so-called incentive auctions in the 600 MHz band, however, which are slated for 2015, a reserve of a maximum 30 MHz will be set for each market on the block. The ultimate size of this reserve will nevertheless be contingent on meeting the reserve price set by the FCC for the market. National carriers (as opposed to local and regional ones) that control more than a third of below 1 GHz-band frequencies in this market will not be able to take part in the auctions for this reserved spectrum. The FCC has also set the proviso of precluding secondary market sales of this spectrum, to ensure that parties not eligible to take part in the incentive auctions, or sales that would enable an entity to control more than a third of below 1 GHz spectrum, cannot acquire licences to the reserve frequencies during that time. It should be mentioned that these provisos did not receive unanimous support within the FCC, and that the two Republic commissioners voted against them.
It is interesting to note that while the FCC is concerned about local and rural cellular operators’ future, which probably serve less than 5% of mobile users today but can cover a much higher percentage of the physical landmass, we are seeing more and more roaming agreements being signed between the four national operators and these smaller regional carriers. In the race to expand their footprint, the big national operators are in fact leasing their spectrum to small rural operators so they can provide LTE coverage. So there is at once an agreement on the terms and conditions for leasing spectrum and on roaming prices, which has enabled one million national ISP subscribers to enjoy coverage in rural areas, while the tens of thousands of users who subscribe with local operators have access to national operators’ infrastructure. We understand that the FCC does not currently regulate these agreements. Verizon and Sprint have apparently got a head start here, having signed 21 agreements for 2.3 million PoP, including 18 for LTE in the 700MHz and AWS-1 bands, and around 30 agreements for 4 million PoP in the 2.5MHz band, respectively.
We will wrap up this quick summary of the latest news from the US mobile market by listing some of the other topics that are attracting attention:
• cable companies’ ongoing investment in Wi-Fi hot/home spots, with roaming agreements between the two, and the prospect of entering the cellular market by positioning themselves as MVNO to complete their infrastructure;
• the debate triggered by Qualcomm on using LTE (vs. Wi-Fi) on open (i.e. licence-free) spectrum;
• confirmation of the onset of, if not a price war, increasingly lively competition in the mobile market since the Sprint/T-Mobile merger was cancelled. While we were there, Sprint rolled out an unlimited voice-SMS-data plan priced at $50 a month;
• the massive queues outside the Apple store in Manhattan, and the huge boost that VoLTE could give to iPhone 6 sales.
3. Will the net neutrality soap opera ever end?
Here again, we need to go back to the 2002 decision that classified cable modem access as an “information service” rather than a Title II service under the Telecom Act, which would make it subject to common carriage obligations – a designation that was then abolished for all access services in 2005, including telcos’ ADSL services. This decision snowballed, and the FCC’s successive bids to enforce net neutrality –Chairman Powell’s four Internet freedoms in 2004, the Internet Policy statement in 2005 and the Open Internet Order in 2010 – had to be defended in court, following law suits filed by Comcast and Verizon.
Today, and following the ruling handed down early this year by the Federal Court in Washington, there are no longer any regulatory provisions that prevent an ISP from being a gatekeeper.
It was under these circumstances that the FCC began a 120-day consultation on the future of net neutrality this past spring. It received more than 3 million responses. The ensuing debates in the blogosphere and at industry conferences are focusing on several issues.
A legal decision needs to be found that avoids disqualifying the FCC’s core principles. There are two options here: either agree to repeal the earlier decisions, and reclassify Internet access as a Title II service under the Telecom Act, or enforce Section 706 of the Telecom Act more extensively. Section 706 vests the FCC with the authority to encourage the deployment of broadband infrastructure, and eliminate the barriers to development and competition in this market.
In addition to these interpretations of the Telecom Act, approval for the Comcast-Time Warner Cable and AT&T-DirecTV mergers could carry case-by-case obligations aimed at preserving the Open Internet. It is worth remembering that the FCC used the Comcast-NBC merger as an just such an opportunity.
Alongside these somewhat technical questions, debates over the past few weeks have also focused on the following points:
• Should mobile access also be subject to net neutrality rules (which it has always managed to avoid)?
• After this summer’s polemics over the paid peering deals struck between Netflix and the top ISPs, should interconnection between content providers and ISPs be covered by net neutrality rules?
Also noteworthy is the debate that followed AT&T’s sponsored data API proposal, i.e. to have content/service providers sponsor the traffic delivered to consumers’ devices – an idea that was more less picked up by T-Mobile.
We will end by mentioning that all of these unresolved issues are fostering a certain curiosity in how things are being handled in Europe.
Perhaps because he was the head of the cable lobby, and later a CEO for mobile operators, which was pointed out repeatedly during his nomination hearings, in his many pronouncements the new FCC Chairman (5) has been keen to impress that he wants to strengthen competition policies. He has addressed all aspects of the debate relatively explicitly. While nonetheless taking the chance of dashing some of the hopes that he himself kindled, within a complicated political and institutional situation – and one where he is regularly reminded that the FCC has to answer to Congress.
1 There is also a gap in terms of market structure. Even though there are four national mobile operators in the United States, AT&T and Verizon are only very large regional residential carriers. The idea of fixed-mobile convergence, typified by merger and acquisition deals in Europe such as SFR/Numéricable and Vodafone/Deutsche Kabel-Ono, do not appear to be in the cards for the US market. Nor, as far as we can tell, are quadruple-play bundles.
2 It is not the only one. The deal would enable immediate synergies in managing bundles, including DBS for customers not covered by U-Verse. It also has an international diversification component, given DirecTV’s sizeable footprint in South American markets that AT&T is interested in.
3 Licensed Shared Access, or ASA (Authorized Shared Acess) in US. Worth noting is that debates continue ver what form ASA will take in the 3.6 GHz band.
4 If there is no reserve spectrum in the AWS-3 auctions, certain provisions, such as dividing frequency bands into 2 X 5 MHz blocks, are aimed at satisfying the needs of smaller regional operators.
5 Tom Wheeler was nominated for Chairman of the FCC by President Obama, and confirmed by the Senate in November 2013.
Online advertising expected to account for 33% of all media advertising by 2018
IDATE has just released its report and database dedicated to the world online advertising market. This report provides an analysis of today’s key online advertising trends and technologies (including privacy issues, retargeting, VRM, new data measurement techniques, etc.) and includes an overview of the world leaders and their KPIs (Amazon, Apple, Facebook, Google, Microsoft, Twitter and Yahoo!). It takes a look at they key markets for monetizing online advertising, including search, display, mobile, RTB, social networking and video in 15 countries, including Brazil, China, France, Germany, Italy, Japan, India, Russia, Spain, South Africa, South Korea, Switzerland, Turkey, UK and the United States.
The global online advertising market will be worth more than 160 billion EUR by 2018, enjoying an 11.4% annual growth rate from 2010 to 2014. IDATE expects a steady increase in this market for the coming years: 9.7% annual growth up to 2018.
IDATE Consultant Soichi Nakajima, who managed the production of this report, points out that “we expect the breakdown of advertising formats to remain unchanged in the five coming years. Whilst the search market is already a stable market, largely dominated by Google across the globe, overall revenue for the display market is expected to increase slightly over time, with much more competition in terms of players fighting for market share.”
Global online advertising revenue (billion EUR) and its share (%) of total media advertising revenue, 2010-2018
Major trends in the advertising market include:
• Mobile advertising expected to account for 20% of online advertising by 2018 with an expected +50.1% annual growth rate from 2014 to 2018.
• Social advertising forecast to account for 14% of online advertising by 2018, with a +39.8% annual growth rate from 2014 to 2018.
• OTT video advertising expected to account for 9% of online advertising by 2018 with +21.8% annual growth rate from 2014 to 2018.
• Global RTB advertising market accounting for 30% of display advertising, thanks to an annual growth rate of 32.7% from 2014 to 2018.
Close-up on mobile advertising: mobile ad market an extension of the fixed
The tools and technologies of fixed online advertising can be re-used for mobile, which means that Google could easily carry its dominance of the fixed market over to mobile. On the other hand, in-app tools and technologies have to be created from scratch. In-app advertising, which is unique to mobile, makes up 20% of the current market. Plus a great many apps are games, promoting their paid services rather than displaying actual ads.
Current global market breakdown: search vs. display advertising on the fixed and mobile Internet, in 2014
- If you want to come to our seminar "TV Everywhere" during the Digiworld Summint 2014 wednesday november 18.
Head of "Video Distribution" Practice
IT services accelerating the transformation
The video distribution environment is changing at an incredible pace, with viewing habits becoming more and more individual and involving multiple screens. Added to which, the growing integration of IP-based solutions is only accelerating the pace of this transformation.
IDATE’s freshly updated TV and video database, and its accompanying market report, provide readers with a complete view of the latest market trends, delivering key figures for 30 countries on TV access modes (terrestrial, satellite, cable, IPTV and broadband) and connected devices (televisions, set-top boxes, home consoles, Blu-ray players, PVR, DMA/R, smartphones, tablets).
Traditional broadcasting networks are being forced to join this new environment to stay in the game. Up until now, competition between the networks had been based primarily on the rate at which infrastructures were being digitised, with satellite and IPTV leading the way over cable and the classic terrestrial network. The progress made by online video, enabled by the increase in user numbers and in connection speeds, has created a whole new ball game. One that will make it harder for digital TV to find new sources of growth.
Breakdown of TV access modes in Europe (million TV households)
A host of new, intertwined challenges are emerging for market players: the advent of new video distribution networks with fixed and mobile LTE broadcasting, the end of uncertainties over the UHD TV market and the integration of IP: an expanded market for CDN, flexibility of cloud TV solutions, creation of hybrid TV or possibly IP broadcasting solutions?
The change in users’ viewing device of choice (connected TV, streaming sticks, tablets, smartphones) only increases the threat of veteran TV providers being cut out of the loop, as Internet giants work to leverage their platforms to secure a central role in managing the user interface.
A selection of platforms’ users and subscribers in Q1 2014 (millions) and YoY growth (%)
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- If you want to come to our seminar "TV Everywhere" during the Digiworld Summint 2014 wednesday november 18.
Conducted by Theon van DIJK, Chief Economist, European Patent Office, Munich, Germany
C&S: Could you please introduce yourself and the Intellectual Property Directorate at DG Market?
Kerstin JORNA: I became Director for Intellectual property Directorate at DG MARKET in 2012. An exciting and challenging job! I work with a team of roughly 50 very dedicated colleagues.
Our job is to make sure that inventors and creators in the Single market are successful on the "inventor trail". Inventors and creators turn ideas into innovation: be it a new "green" technology, a lifesaving drug, or a new film. This requires ideas in the first place. But it also requires good laws, efficient registration procedures, the capacity to leverage capital for developing an idea, a framework for branding, a clear and predictable legal environment for distributing and licensing innovations to consumers and customers, efficient jurisdictions for ensuring respect for rights and investments, trade agreements with third countries that offer a stable and predictable environment for exporting innovation. Intellectual property is not a purpose in itself. It is a tool to stimulate innovation and dissemination of knowledge. My team's role is to calibrate the policy and the single market tools in such way that these objectives are achieved. There is clear evidence, that a well calibrated intellectual property system creates qualified jobs and growth in Europe.
The European legislator is currently discussing our proposals for the reform of the European Trademark system and European rules for Trade secret protection. An action plan on a more linked-up approach for ensuring respect for intellectual property rights was presented a month ago. A Green paper on European rules for non-agricultural indications of origin is under public consultation. And we are also working on the review of our copyright rules. Some 9500 respondents replied to our online consultation and the results were published recently. And of course, there is the implementation of the unitary patent!
C&S: What is your opinion about the role of the patent system in the economy and the benefits it can bring to the society? How do you see the European Commission's role here?
K.J.: Knowledge is the currency of the future. A recent study carried out by OHIM and the EPO provides compelling evidence on the economic importance of intellectual property rights (IPR) in Europe. Patent-intensive industries in Europe contribute to 10% of EU direct employment (22 million) and 14% of EU GDP (€ 1.7 trillion).
Today the patent system in Europe is complex, fragmented and costly. And this is also true for litigation. While big companies might be able to afford the price to validate and defend their patent across multiple jurisdictions, small innovative companies cannot. The Commission and Vice-President Michel Barnier have made the unitary patent package a top priority for the single market. After the landmark political agreement in 2012, we work together with Member States and the European Patent Office to ensure that the unitary patent and the unified patent court will become an attractive option for innovative companies.
C&S: What do you consider to be the main achievements by the European Commission in the area of patents over the past five years?
K.J.: Without a second of doubt: The agreement of the European Parliament and the Member States on the Unitary patent. Unitary patent protection will permit significant cost savings and simplify administrative procedures. In addition, as the single jurisdiction competent for all European patents, the Unified Patent Court will ensure the consistency of judgments, thereby increasing legal certainty. It will also considerably reduce the complexity and cost of patent litigation.
These political decisions now need to translate into reality. We are working together with Member States and the European Patent Office to set up the system for a unitary title that is sufficiently attractive in terms of price and legal certainty, as well as a Court that has the trust of users. The first unitary patent grant in 2015 is possible – if all actors involved collectively continue to deliver on the list of things to do and national parliaments engage the remaining ratification procedures.
C&S: Recent years have seen smart phone patent battles and competition policy scrutiny in the area of electronic communications. How do you see the interplay between IP and the patent system in particular on the one hand, and competition law and enforcement on the other hand?
K.J.: The globalisation of markets and increasing complexity of products with overlapping technology has modified the business environment in certain sectors. Companies have acquired important patent portfolios to safeguard their product lines in a given market segment. This has also led to increasing costs for IPR enforcement and litigation.
As the competition watch dog in the Single Market, the Commission must make sure that companies have a clear understanding on where the dividing line runs between legitimate exercise of intellectual property rights and anti-competitive behaviour.
Standard essential patents are a hot topic. We need clarity for companies that hold standard essential patents, but also for companies that need to use standard essential patents for enhancing innovation. The Samsung and Motorola cases are two recent examples. FRAND license terms should be guaranteed to all market participants. The Commission's intervention has also clarified that a licensee can challenge the validity of the patent object of the licensee agreement at any moment. This is in the public interest.
While competition law enforcement is an effective ex post method to stop anticompetitive behaviours, the Commission is also exploring possible ex ante means to prevent abuses. We are participating in the discussions on guidelines in ETSI and ITU as standard setting organisations.
C&S: What are the key challenges that the patent system is currently facing?
K.J.: We already spoke about the implementation of the unitary patent package. This is not only a challenge for public authorities. It is also a challenge for companies who will have to review their patent strategies and their portfolio policies. Some might be tempted to stay with the old, fragmented and costly system, "because we are used to it and we know it". Still, I hope that the new features of the unitary patent and the unified patent court with a unique combination of international, specialised and multidisciplinary expertise will convince companies to make use of these opportunities in their future innovation strategies. Of course there is no one size fits all and different sectors may see different types of opportunities. However, looking back at the success story of the European Patent Convention, I am confident about the success of the unitary patent "innovation".
Another issue that I see coming to the fore is the question how Intellectual property titles, and patents in particular can leverage capital for further development of the innovation – a recent study called it the "bankable IP's".
And then there are issues around the implications of patent law in biotechnology. We recently created a multidisciplinary expert group to look into this, in the light of the development of recent jurisprudence.
Finally, I also see a need to further explore some basic common features for efficient patent systems globally. Today challenges such as climate change, food security, aging population are global. We need innovation to address these challenges on a global scale. In addition, supply chains for delivering innovation are also increasingly global. WIPO and trade discussions can be instrumental to this.
C&S: Where are the main differences in the IP thinking and practice between both sides of the Atlantic, and between the Western world and Asia?
K.J.: Both the US and the EU increasingly focus on economic evidence as a basis for calibrating their patent systems and its deliveries.
Leaving aside that the EU still is a fragmented market of 28 patent jurisdictions, there are a number of differences in approach. This is true, for example, for the grace period concept, the notion of protected subject matter and the publication of patent applications. Patent quality is a key issue for Europe. We believe in quality patents because they create the right conditions UPstream for bringing innovation to the market. Less is more! Too many low quality patents prompt litigation DOWNstream and stifle innovation because the good patent needs to "weed out" bad patents first.
C&S: What will be the most important developments regarding patents and new technologies in Europe for the coming five to ten years?
K.J.: New technologies have a profound effect on the current economic landscape, shaping the way we live and challenging our traditional framework. The internet of things (i.e. connected cars), big data, 3D printing, synthetic biology and robotics offer us unrivalled opportunities to progress. But they also pose challenges and intellectual property is one of them.
With respect to patents more specifically, I see debate about the delay for obtaining patent protection for inventions for fast developing technologies.
The increasing complexity of new innovative products has prompted the activities of Non-practicing entities, sometimes referred to as patent trolls. In certain cases such single component "hold-up" can delay the bringing to the market of innovative products apart from raising the cost for litigation. Europe, with a different policy on patent examination is less affected than the US and I am confident that the unified Patent Court will permit to contain excesses, should they occur.
Another issue is also linked to complexity. How can we promote "match-making" for different but linked technologies and patents. Our proposal for European trade secret protection is part of the answer, because it gives a solid legal framework to exchange information at an early stage of the innovation process. But there is more to consider.
Published in COMMUNICATIONS & STRATEGIES No. 95
Kerstin JORNA is a German national. She joined the Commission in 1990 as a civil servant. During the last 20 years Kerstin held various positions in the internal market directorate, amongst others as assistant of the director general as well as in the secretariat general as member of the negotiating team for the Nice treaty. After a stint as commission spokeswoman for regional policy and institutional affairs, Kerstin joined successively the cabinets of Michel Barnier, Günther Verheugen and Jacques Barrot. Kerstin studied law in Bonn, Hamburg and Bruges.
Theon van DIJK is Chief Economist of the European Patent Office, where he is responsible for carrying out economic research in the area of patents and providing general economic advice to support the various EPO activities. Prior to joining the EPO in August 2013, Theon was an economic consultant specialised in competition and regulation matters. He has held senior positions in leading international economic consultancies in London and Brussels, and founded his own consultancy in 2005. Theon has extensive experience in providing expert economic advice to private companies, competition authorities and government organisations. Theon holds an MA and Ph.D. in Economics from Maastricht University in the Netherlands, where he carried out academic research on the economics of patent protection at the UNU-MERIT institute. Theon was a Postdoctoral Fellow at the Institut D'Économie Industrielle in Toulouse, France. He has published extensively in academic and applied journals in the area of intellectual property, competition policy and regulation.
 Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (COM/2013/0813 final. http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52013PC0813&from=EN
 COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE Towards a renewed consensus on the enforcement of Intellectual Property Rights: An EU Action Plan (COM/2014/0392 final). http://ec.europa.eu/internal_market/iprenforcement/action-plan/index_en.htm
 http://ec.europa.eu/internal_market/indprop/geo-indications/index_en.htm#maincontentSec1. Proposals for a Regulation of the European Parliament and of the Council amending Council Regulation (EC) no 207/2009 of 26 February 2009 on the Community Trade Mark and for a Directive of the European Parliament and of the Council to approximate the laws of the Member States relating to trade marks (recast) – references COM(2013)161 and COM/2013/162
Head of Regulation Practice, DigiWorld by IDATE
Maturing, and putting on weight
We have examined different aspects of the 'light operator' phenomenon. Light operators and their business model are heavily influenced by sector specific regulation. The purpose is also to provide an inventory of the different points of contact between the two. We also discuss the evolution of 'light' approaches in the mobile industry, exploring the different kinds of MVNO and the wholesale operator model. Regarding the fixed sector, we examine the opportunities for light operators arising from the use of next-generation access networks and delivers examples of light operators on open access networks. Finally, we take a brief look at other forms of light operator, such as Wi-Fi operators and over-the-top players providing voice and messaging services.
The future of ‘light operators’ is therefore probably nearer the ‘medium-heavy’ point of the scale, rather than the virtually asset-less.
Light operators have often been a catalyst for change
Light operators have had a tremendous impact on telecoms markets, but their traditional business models have not turned out to be very sustainable in the long run. Light operators have often been a catalyst for change (as with low-cost models, or niche segments) but have also often failed to reap the benefits of their innovations as network operators took back their power. Light operators pursuing a pure low-cost approach will find themselves squeezed between network operators' own low-cost sub-brands and abundant bundles as well as OTT's providing 'free' voice and messaging services.
Nevertheless, light operators continue to exist in their niches catering to the needs of well-identified market segments.
The rollout of new NGA and 4G networks creates a number new opportunities for light operators, too. However, open access networks are present in a limited number of markets only, such as the Netherlands and Sweden in Europe and in the Asia-Pacific region. Sector-specific regulation also plays an important role in the market and this will continue for the foreseeable future, creating business opportunities for asset-light business models.
Light operators and the MVNO phenomenon
Looking at the mobile market and certain open access players, it seems that ‘light operators’ investing in their ability to differentiate their services from their host operators are faring better than their resale-focused peers. Full MVNOs such as Telenet in Belgium or Virgin Mobile in France have become serious challengers in their respective markets. The same holds for fixed ISPs of the likes of Myrepublic or Bredband2. By investing in a limited infrastructure rather than being a pure reseller, they are able to propose a service with some unique characteristics without having to go to the effort of rolling out a full network. Asset-lighter bitstream models with a handover closer to the end user than in the case of a very light ISP but still staying short of the capillarity of an access network are certainly the safest bet for challengers in the fixed market.
Yves Gassot Directeur Général, IDATE
‘‘Mobility reloaded” will be the central theme of the 36th annual DigiWorld Summit.
Following through on ‘‘Game Changers’’ (2012) and ‘‘Digital Gold Mines’’ (2013), this year’s theme will allow us to further our examination of current and future upheavals in the digital economy by exploring the issues from a specific angle: mobility and its impact on user behaviour and on the value chain for telecoms, TV, advertising, the Internet, gaming, smart cities, etc.
- What innovations can we expect from mobile Internet disruption?
- Are fixed and mobile superfast access interchangeable?
- What new players and business models will emerge from the Internet of Things and mobile advertising?
- Will mobile devices turn TV into a one-to-one business?
- How can Europe get back in the game?
IDATE Chairman François Barrault points out that, ‘If the cloud, big data and the Internet of things are clearly the major disruptions looming on the horizon, the momentum today lies in the mantra: mobility first!’
IDATE CEO, Yves Gassot, details the key points of this year’s programme: ‘What began with the swift commercial success of 4G is segueing into the spectacular technological leaps expected from LTE-advanced and, beyond that, the prospect of 5G, the widespread adoption of software-driven networking (SDN)… But questions also linger over the accelerated pace of the migration from the fixed to the mobile Internet, spurred by the massive popularity of smartphones and tablets, coupled with the surge of emerging economies. It goes without saying that a great many stakeholders are being affected by these massive changes in the landscape, which we have chosen to explore from three angles: How revenue is progressing for mobile operators and other players, from M2M to the Internet of things and beyond; How the massively mobile Internet will affect the advertising ecosystem; and how TV industry players are positioning themselves now that video accounts for an increasingly large share of mobile traffic’.
The 36th annual DigiWorld Summit will run from 18 to 20 November in Montpellier, France, and play host to a panel of international industry luminaries who will share their views with more than 1,300 participants from 30 countries. IDATE analysts will lend their expertise to the sessions that will be moderated by Digiworld Institute members.
DigiWorld Week: the DigiWorld Summit broadens its horizons
This year’s DigiWorld Summit will kick off DigiWorld Week: a new initiative from IDATE and its key partners to explore the many facets of the digital society’s core economic issues. A series of exciting events will be taking place from 16 to 21 November on either side of the core two-day Summit:
- The Connected Things Forum
- The Game Summit
- MIG (Montpellier In Game)
- Industry Oracles
- Economic Club on m-payment
> Find the latest programme updates at www.digiworldweek.com
More than 140 speakers on hand
This year, we are delighted to welcome speakers from the four corners of the globe, come to share their views on the future of mobility:
- Mikael BÄCK, Vice President Global Strategy & Portfolio Management of Ericsson will share some of the chief findings of the “Mobility report”.
- Jean-Michel FOURNIER, CEO & Co-Founder of BitGym, a San Francisco-based start-up and winner of the prestigious Auggie Award at AWE 2014, will talk about the “quantified self” phenomenon.
- Kayvan MIRZA, CEO & Co-Founder of Optinvent will unveil his approach to new generation smart glasses.
- Patrick PELATA, EVP & Chief Automotive Officer of Salesforce.com will speak with Thierry VIADIEU, New Mobility Program Director from Renault, about the future of connected cars.
- Christophe WILLEM, Senior VP of Strategy & Marketing at Thales Alenia Space, will tell us if drones, balloons and mini-satellites offer viable solutions for connecting huge swaths of the population to the Internet.
- Michel COMBES, CEO of Alcatel-Lucent will close the “Road to 5G” session, whose speakers include Selina LO, President & CEO of Ruckus Wireless, and Atsushi TAKESHITA, President & CEO of DOCOMO Communication Laboratories Europe.
- Pierre LOUETTE, Deputy CEO of Orange and Carlos LOPEZ-BLANCO, Global Head Public & Corporate Affairs for Telefonica, will discuss how telco business models will evolve in Europe, against the backdrop of market consolidation.
- Laurent SOLLY, Facebook’s Managing Director France, and Benny ARBEL, Founder & CEO of MyThings, a rising star in retargeting, will discuss the challenges that advertising faces as it makes the transition to mobile.
- Luc JULIA, VP & Innovation Fellow of Samsung and Co-authored Apple Siri's core patents, Erick TINICO, Director of Mobility at AT&T, one of the world’s most advanced telcos and Axel HANSMANN, Gemalto’s VP of M2M Strategy & Marketing, will share their analysis of new business models for M2M and the IoT.
- Fu SHENG, CEO of Cheetah Mobile, a growing mobile Internet powerhouse in China, with 340 million users.
- Abigail KHANNA, Head of Digital and Future Media Business Development at the BBC, Steve McCAFFERY, GM & SVP of sales for Europe Arris, Eric SCHERER, Director of Future Media, France Télévisions, and Valery GERFAUD, General Manager, M6 Web, will explore what the future holds for television, now that mobile devices are becoming users’ screen of choice.
- Guillaume de FONDAUMIERE, Co-CEO of Quantic Dream, Susan O’CONNOR, a writer whose script credits include the games BioShock 1 & 2, Far Cry 2, Tomb Raider and Star Wars 1313, along with Charles CECIL, co-founder of Revolution Software, creator of Broken Sword, are among our video game Oracles.
- Meng LI, Director of China Telecom’s Mobile Business Department Europe, will talk to us about the development outlook for mobile in its various forms in the world’s biggest market.
- Jean-Ludovic SILICANI will talk about his time as Chairman of France’s telecoms and postal regulator, ARCEP, and share his insights into key issues going forward.
- Vincent LE STRADIC, Managing Director of Lazard, will provide a financier’s perspective on the health of Europe’s digital economy. And…
- Axelle LEMAIRE, French Ministry of State for Digital Affairs will deliver the Summit’s closing remarks.
Published in COMMUNICATIONS & STRATEGIES No. 94
Conducted by Laurent MICHAUD, IDATE, Montpellier, France
C&S:How do you see the video game industry today?
Alain LE DIBERDER: The industry is facing a deep shift of its main business model. It’s not a problem of overall market size. Even if the macroeconomic environment is rather dull, even if the new mobile market works with very low price levels, most of the firms are able to adapt themselves to the new revenue framework. Instead the main issue is the changes needed in the corporate organizations. Yesterday, AAA products were king and the sales department was king of the AAA market. Today the whole process starting from an idea and ending in an actual consumer needs to be reshaped. Unfortunately marketing, technology and price policy are far more flexible than human behavior.
C&S:Video games are reaching their full potential online with multiplayer or massively multiplayer, social, viral, flash and ubiquitous components. What do these developments inspire for you?
A.L.D: All these technologies are impressive and improving very quickly. But I’m not sure that they actually drive the industry to a new era. Videogamers were “social” from the start, and videogames were “viral” far before Facebook or Tweeter. Even in the Eighties, schools and universities were an effective “social media” in which gamers and game reputations were debated, built and destroyed. And they still are. The new phenomenon is that the “social” dimension is now included in the code. And there are opportunities to make money with it. But the videogame industry, for the moment, is not able to catch the main part of this market, which is dominated by “transversal” companies like Facebook, Twitter, Apple and so on.
C&S:What are the effects of globalization on the creation of content, on the creators?
A.L.D:The videogame industry is probably the first entertainment business being born global. The movie industry was partly global relatively soon (say around 1910), but even today national and regional components remain important. It’s the same for music industry. The reason why the videogame industry is different is quite simple: during the first ten years of its history, there was barely no text inside the games. Remember Pong, Pacman, Space Invaders, or even the first Mario. Without any words the only text to be translated was the cartridge sleeve or the instruction sheet on the arcade cabinet. The need for text and localization only came with PC games in the eighties, but it was too late for local cultures: the industry DNA was definitively global. Even the word “localization” tells the truth. The industry can’t be more global than it was at its birth, and the only thing that could happen in the future is less globalization, not more. But it probably won’t.
C&S:Hardware vs. software: are home consoles set to disappear in favor of streamed games? More generally, won't hardware be reduced to a "stupid” screen?
A.L.D:I don’t believe that the console industry holds a strong future. Consoles are expensive, non-durable and challenged pieces of hardware. Competition from set-top boxes and mobile devices is stronger and stronger. But hardware won’t be reduced to a stupid screen. There is a bright future for hardware if you compare the specifications (and price) of a present smartphone to those of a home computer or a home console from ten years ago. Hardware is more and more smart, not stupid. In fact the new hardware standards and the telecommunication networks live together in an ecosystem in which smart networks need smart home equipments, not dumb.
C&S:Oculus Rift, Google Glass, holographic technology ... what do you think the next disruptive gaming experience will be?
A.L.D:I can’t see such a thing as a disruptive technology in the videogame history. Technology is an additive process in the videogame industry not a subtractive one. For instance when the home console began, in 1974, the arcade market didn’t disappear. The computer games started slowly at the end of the seventies and added their sales to the console market. When the PC market was mature, in the beginning of the nineties, the console market exploded too in the 16 bits era. Online games began to be popular before the web. I remember having wasted many hours playing Microprose Grand Prix on line in 1992 with a 14.4kbs modem. Today the online market is strong, but more than 20 years after, between 60 and 80% of the overall market, depending on what you consider as a videogame « sale » is still offline. We could also think of 3D games, Virtual reality helmets, streamed games and so on. But the truth is that during 40 years many technologies have been introduced, many have failed (especially with 3D, beware Oculus!) and many have contributed to the Harlequin suit in which the videogame industry is dressed.
C&S:What are the issues in which the French industry still needs to progress?
A.L.D:There are French developers, French magazines, excellent French videogame schools, some French companies, but the “French industry” doesn’t exist. Of course there is Ubi Soft. But Ubi began to develop games in Asia or Morocco 25 years ago, and regarding the workforce, is more a Canadian company than a French one. Vivendi invested in big US companies but they remained American companies reporting to French shareholders. And Vivendi sold the main part of the shares to Activision. Infogrames bought many British and American companies and the glorious brand of Atari, but it failed. From the beginning, the golden era of Ere Informatique or Loriciels, the French (little) companies have always sold more than 80% of their products in the world market. Almost all the titles, such as “Another World” or “Alone in the Dark” were in English, even in the French market. Many French guys have succeeded in the videogames industry, but as it’s a global industry, they were and still are involved in a non-national world. A national videogame industry is a nonsense, except maybe in Asia.
C&S:What remains for us to (re) invent in terms of gaming experience?
A.L.D:Maybe the next frontier could be the physical experience. The Wiimote and the Ki-nect were a first step, and now the “connected object” is blooming. It will probably take time, but I feel that the gamification of personal care is a strong trend.
Alain LE DIBERDER holds a Ph.D. in Economics. After advising French Minister of Culture Jack Lang (1989-1991), he moved to France Télévision under CEO Hervé Bourges (1991-1994) and then on to Canal + as Head of New Programmes (1994-2000), while he contributed to establishing several landmark cultural portals. He created Allociné TV, a channel devoted entirely to cinema, in 2010, and joined Arte as Head of Programmes on 1 January 2013. He has published several books and papers on digital technology and the media.
Deputy Managing Director
Director of TV & Digital Content Business Unit
While DVD revenue continues its inexorable decline, transactional video – i.e. streaming and downloading to rent (DTR) or own (DTO) – is only barely picking up the slack. Online video rental cannot single-handedly offset the drop in DVD sales and rental.
So studios are focusing their energy on creating a new distribution window just for Direct To Own, also known as electronic sell through (EST), which falls before not only VoD rental (Direct To Rent) but also two to four weeks before any type of DVD release.
They are also imposing a window between online sales and online rentals. This new approach, which was introduced in late 2012, appears to be giving EST a boost. While VoD rentals are growing slowly (no doubt due in part to competition from SVoD), online sales are enjoying a solid uptick.