The "TV Everywhere" Executive Seminar at the 36th annual DigiWorld Summit helped shed some light on new viewer behaviours, the possibilities opened up by hybridisation and cloud technologies, and how they will impact video watching down the road, both inside and outside the home.
TV Everywhere becoming an habit
On-demand viewing has become one of the most widely adopted new behaviours, whether via catch-up, TVoD or SVoD. IDATE nevertheless underscored that on-demand access to content can be limited by regulatory or contractual restrictions, especially when it comes to feature films.
Accessing video content from anywhere is not yet commonplace behaviour, particularly for users on the move. This can be explained in part by technological constraints in certain locations, and by the fact that TV service providers do not make all of their content, particularly live programmes, available for mobile viewing.
• Any device
Despite the proliferation of new screens and the rapid rise in viewing on smartphones and tablets, most users still watch their programmes on their home TV, even in the most mature markets. To achieve a convincing “any device” viewing experience, service providers also need to address the issue of continuity/handover between devices.
François ABBE (Founder & CEO, Mesclado) recalled that Disney had signed an agreement with Google and Apple, thanks to which a Disney video purchased from the iTunes store could be played on an Android device, and vice-versa, which is a good first step towards providing users with a seamless experience.
The television will be the source of different challenges, depending on the broadcaster and their specific distribution issues. Vincent FLEURY (CTO and Deputy CEO for New Media, France Medias Monde), whose core challenge is to deliver the same services to all users, sees the TV as “just one screen among others,” whereas Laurent FRISCH (Vice-President Digital, France Televisions) and Valery GERFAUD (General Manager, M6 Web) believe the television remains the screen of choice for watching live programmes, and for catch-up or time-shifted viewing.
• Any Content
Because the ways for accessing video products are so fragmented, and given the glut of content available, consumers today appear more willing to pay for services that can meet their need for more structured and personalised solutions.
For IDATE, one of the biggest challenges for video services is to deliver personalised content that also takes the viewing device and situation into account. Here, the issues surrounding big data and recommendation engines are especially crucial.
Didier LEBRAT (CTO, Sky) also stressed the massive investments that Sky has made in content, and in improving quality to create a sense of value for its customers, and noted that Sky+ On Demand users now watch more pay-TV content than free to air content.
Hybridisation and new video distribution configurations
Vincent GRIVET (Group Head of Broadcast Development, TDF) reminded us that all-IP for video is not yet possible, but that on-demand viewing is on the rise. The two trends thus require hybrid solutions to be deployed. If HbbTV is expected to provide a response to this demand, it does not appear to be quite as hybrid as what was being promised three years ago. Vincent FLEURY believes the industry expected a lot more from connected TV and that, today, it is much easier to access the Web on a TV set via ISPs’ boxes and mobile solutions. His main focus is on bringing connectivity to locations that are today without it.
Darko RATKAJ (Senior Project Manager Technology & Innovation, EBU) focused on the needs of today’s users, and drew a parallel between classic TV viewing, which remains a shared experience, and on-demand viewing which is still a sort of top-up. He believes the issue is knowing whether a video platform truly meets users’ needs, in terms of both quality and coverage – the latter being not just geographical but demographic as well. Ratkaj says that hybrid solutions do exist, but not in the sense that a specific network or a technology can solve all the problems. What is important is delivering the right service under the right conditions, not whether it is delivered over a broadcast or broadband network.
Yves BOUDREAU (VP Mediacom Technology Strategy, Ericsson) has been watching the “prosumer” phenomenon develop: if vendors do not design solutions tailored to users’ behaviour, prosumers will create their own "Frankenstein video" solutions. Broadcasters, programmers and technology providers need to join forces to create products that satisfy consumers’ new demands, even if it means running the risk of it being the solutions provided by Internet giants like Google, Amazon or Apple that gain the upper hand.
We are seeing hybridisation develop around broadcast networks that have no native return path. But the momentum depends on the TV service’s business model:
• pay-TV providers such as Sky or DirecTV are capable of defining the user experience thanks to their DVRs, and so meet customers’ new demands efficiently;
• for free to air TV, the problem of standards currently appears to be a real obstacle to the development and adoption of truly viable hybrid solutions. Broadcasters need to make sizeable investments in developing their applications, which is a direct result of the huge technological fragmentation of application ecosystems. Laurent FRISCH pointed out that, in the multitude of technologies that exist today, not all are equal. TV networks are not necessarily taking a position, but rather waiting for a solution to take hold as the industry standard. Without a single or unified solution, Smart TV will not take off.
Jean-Hubert LENOTTE (Director of Strategy, Eutelsat) notes that network operators are also taking initiatives in the arena of hybridisation, spurred by the fact that, while consumers still watch a great deal of linear TV, the time spent doing so is not increasing, whereas the time spent watching on-demand and time-shifted programmes is on the rise. So market players need to be able of providing live interactivity to boost the appeal of programming. If clients such as Sky and Canal+ want to keep control over their viewers and develop their boxes and products themselves, Eutelsat is developing a smart LNB solution for other clients, in other words two-way LNBs that make it possible to integrate a return path directly in the user’s satellite dish, and so do away with the need to connect the STB to the Internet. He also reminded us that satellite makes it possible to deliver on-demand content in HD and even UHD to locations with no broadband coverage.
For TV channels, hybridisation also means the development of new business models and new partnerships:
• for Didier LEBRAT, marketing the Now TV OTT service allows his company to target consumers who want a lot of flexibility, and do not necessarily want to subscribe to BSkyB’s satellite TV plan;
• Vincent FLEURY believes that hybridisation does not apply only to technical networks but is also a way to access new consumers: he underscored the importance of syndication, and recommended using the means made available by new video platforms such as YouTube and Facebook;
• according to Laurent FRISCH, broadcasters and new entrants will need to create new “hybrid” TV channels that combine linear and non linear programmes, to reinvent their value proposition;
• Valery GERFAUD reported that the percentage of ad revenue generated by catch-up TV for the M6 group is proportionate to the time spent watching the network’s catch-up TV (i.e. compared to their live programming), thanks to a solid monetisation of catch-up TV.
Lastly, Marc LE DAIN (Associate Partner, IBM Consulting Services) stressed that hybridisation also applies to customers whose behaviour differs depending on the type of programme being watched (his presentation on slideshare)
Uncertainties over switching to an unicast only model
Telcos’ and cablecos’ networks both have a return path that enables the development of advanced video products for their pay-TV customers. Plus, their point-to-point networks can use software-based security solutions that are cheaper than the broadcasting world’s conditional access systems.
Yves BOUDREAU reminded us that the Internet was not initially developed to distribute TV, and is currently not capable of taking over from free to air and pay-TV, if ever broadcasting networks were shut down in the near future. There are still lingering questions over how much telcos would need to spend to satisfy consumer demand, under a unicast-only model. For Jean-Hubert LENOTTE, the combination of broadcasting and broadband is still the most efficient solution today, especially from an economic standpoint.
Distributing TV services via LTE broadcast, thanks to eMBMS technology, is another possible new alternative for video distribution. Pierre-François DUBOIS (VP of Product Development, Orange Technocentre) pointed out that all LTE smartphones are already outfitted with an eMBMS chipset capable of receiving broadcast streams.
The technology has already been deployed commercially in South Korea, and expected to develop in other countries soon, even though uncertainties remain over the right business model, especially on mobiles. For Yves BOUDREAU, the combination between broadcasting and LTE does make it possible to create a product that consumers could be willing to pay for.
Cloud technologies’ growing role in video distribution
The development of cloud-based television and video distribution solutions is upending how all of the TV industry’s veteran players operate. Cloud TV technologies make it possible to move steadily to a more flexible model that enables swift rollouts for new services, and which alters the investment structure to an on-demand model.
nPVR technologies, for instance, make it possible to move the intelligence in operators’ networks, which would mean that STBs would no longer need to be equipped with a hard drive. Valery GERFAUD nevertheless pointed out that, should this type of solution develop, it could very well undermine catch-up TV revenue.
Cloud technologies also make it possible to solve new editorial issues tied to Social TV, such as Rising Star, centred around interactivity with viewers. According to Valery GERFAUD, incorporating interactivity into the very heart of a TV programme may be very popular with viewers, but it also creates new technical issues that need to be managed. Only the cloud enables broadcasters to handle such huge surges in traffic, from a flexibility and cost perspective. Mr Gerfaud believes that quality of service remains a very real problem, as users will quickly turn off a poor quality video, which means the provider loses money.
For Xavier POUYAT (Senior Program Manager, Azure Media Services), the cloud also allows content to have an existence that goes beyond the aired programme: e.g. for an interactive episode of the series "Bref", more than a million personalised videos were generated in three days, thanks to the cloud.
Source: Canal Plus
These technologies are also expected to be crucial in the coming years to enabling TV services to make the transition to ultra high definition, which represents both a technological and economic challenge, as Jérôme RENOUX (Regional Sales Director, Digital Media, Southern Europe, Akamai Technologies) reminded us. The introduction of new compression formats, such as HEVC, will no doubt also make a vital contribution to future developments, for both HD and UHD. Pierre-François DUBOIS hopes that, thanks to HEVC, 85% of Orange’s IPTV Orange will have access to HD programming.
They are also likely to play a major role in merging and streamlining workflow for TV industry players all down the line, to be able to tackle live and on-demand viewing on any device imaginable.
Not just a technical, but a legal issue as well
TV Everywhere and the cloud naturally create issues in the realm of user identification, and so of privacy and data protection.
While the trend around the world is towards monetising internet users’ personal data, Alain BENSOUSSAN (lawyer with the firm, Alain Bensoussan) reminded us that the notion of data ownership has no legal status: Facebook has thus given its one billion users a right that, legally speaking, does not exist, as no sovereign state recognises ownership of personal information.
In addition, while some 100 countries have adopted data protection and freedom regulation, it appears that, with big data, individuals have no control over the data that pertain to them, or do not know the data pertain to them. The important thing with big data is not knowing the name of the person behind the screen, but rather the ability to predict with more than 90% accuracy who is there and what they are going to want. So we are moving towards anonymous personalisation.
Lastly, Alain BENSOUSSAN introduced the concept of “privacy by design”, which consists of designing products and services with “privacy inside”, to reduce the anxiety-provoking aspect for users, which is one of Facebook’s chief selling points.
If you want to go further read "Live TV vs. on demand viewing: what does tomorrow’s world have in store for broadcasting?"
> You are interested by our work ? You will find our study about Future TV 2025 in our shop
Our guests' presentation are interesting you ?
> Here is the general presentation of Florence Leborgne, from Idate.
>Here is the presentation from Marc Le Dain (Associate Partner, IBM Consulting Services) : http://fr.slideshare.net/DigiWorldIDATE/tv-everywhere-41808106
> Here, you will find the presentation from Laurent Frish (Vice-President Digital, France Televisions) "TV + Digital").
Published in COMMUNICATIONS & STRATEGIES No. 96
Interview with Jean-Louis MISSIKA, Deputy Mayor of Paris in charge of urban planning
Conducted by Yves Gassot, CEO, IDATE-DigiWorld Institute
C&S: The Smart City concept is often criticized for seeking new markets for digital technology rather than tackling the phenomena that make the management of our cities increasingly complex. What is your view?
Jean-Louis MISSIKA: I do not think it is a fair criticism. Digital technologies have undeniably created the conditions for important changes in our ways of living, inhabiting and consuming. They are now part of our everyday lives and, surely, their impact will increasingly spread throughout the multiple ways we, as humans, interact.
Beyond what they create as opportunities for individuals, digital technologies are fundamental for cities – and among them the city of Paris. Urban systems are confronted with major challenges on the economic, social and environmental fronts. Energy transition, and more generally the management of scarce resources, climate change and the biodiversity challenges drive us to analyze all the solutions available now and in the future to build a more sustainable city - the city of tomorrow. Digital technologies and, in particular, their potential in terms of coordination and rational use of scarce resources, are high on the policy agenda. This is not simply to create a market for them; this is about using all the possibilities offered by technology.
I definitely think it can be a win – win development for both the city and the companies if these firms are working with those involved in the challenges of the city like urban planners and system operators.
Additionally, we are witnessing a boom of young, innovative companies and startups, but also the citizens themselves – both from Paris and outside – who develop digital solutions for the city. This is clear evidence of what is at stake here: it is for local authorities to allow the digital revolution to spread in the society so that innovation does not only occur through large companies but also thanks to citizens' initiatives.
C&S: How would you rate the strategy of Paris, using a broad comparison between the very holistic, top-down approach of projects emerging in the context of new towns and in Asia, and the more bottom-up approach that seems to be primarily based on using multiple data repositories ('open data') associated with urban systems?
J.-L. M: We are definitely leaning towards the "bottom up" approach to building Paris as a smart city.
Collective intelligence is an effective way to source the best ideas. And it does work well in Paris in part because we provide people with the appropriate means to implement projects: workspaces, coaching, financing, public spaces to experiment… and data.
This is one of the pillars of a smart and sustainable city: a place where the technology is used for people, by people, to include them in the life of the city and in the process of public decisions.
Let me refer to a recent project. We have worked over the last 6 months since the election to reach a greater transparency and citizen involvement in the City operations, by creating a platform for the development, discussion and adoption of community projects. These are chosen by the Parisians and are financed through a participatory budget. 5% of the total investment program, which represents 426 million euros, has been flagged for programs chosen directly, through vote, by the Parisians.
Within the next months, Parisians will even be able to share the benefit of their expertise and creativity by suggesting investment ideas directly.
Another way to involve people is crowdsourcing. We have developed the "DansMaRue" mobile application which Parisians use to signal local problems and even identify spots for "urban greening" (buildings, walls, squares, abandoned urban places). It is this type of exchanges with Parisians we want to implement to make our City better.
This is a genuine urban revolution in the making: the role of local governments of world-cities is to understand, support and leverage the benefits of this revolution. European cities, I believe, have a major role to play in leading this transformation. Their governance is well geared towards citizen involvement and this should alleviate the risks of the "systemic city" or the "cybernetic city".
C&S: Do you have any models or at least references to guide your project for Paris?
J.-L. M: Many interesting models exist throughout the world and we are discussing extensively with many cities facing the same challenges.
That being said, from our discussions we retain one key conclusion: each of these cities has developed its own good practices with its own cultural frame. I think there is no single model of smart city and it would be ineffective to copy-and-paste alien models or ready-to-use solutions in a fast-changing environment.
We have our own model based on an iterative approach that uses successful experiments in Paris. We have been working for several years to make Paris a strong city in the digital sector and a breeding ground for innovation. I would say that over the last 10 years or so we have created the conditions for the emergence and development of a strong ecosystem. Thanks to all these efforts, Paris has experienced a lot in recent years and is now a world leader in innovation and most certainly the top European city.
There are well-known examples of successes such as Velib ', Autolib', Paris Wifi, among other experiments such as heating a residential building thanks to the energy produced by data centers, data vizualisations of the Paris transport system, smart street furniture, … Many of those locally-grown success stories are helping to build our own project of smart city and to deploy these experiments on a larger scale as standards for the city of tomorrow.
Paris is actually creating international benchmarks for smart city, though it is not as recognized as it should be. Through calls for innovative projects led by the Paris Region Lab at the initiative of the City, we facilitate the emergence of intelligent solutions on subjects as diverse as intelligent street furniture, energy efficiency or assistance home support for seniors. Paris provides entrepreneurs and businesses of all sizes with a single territory and open trials. It also runs a network – an open innovation club – that organizes meetings between the largest companies and startups. We are even deploying this initiative in other French cities, at their own request.
C&S: What priority initiatives have been selected for the Smart City project in Paris?
J.-L. M: One billion euros will be invested by 2020 in order to make Paris the international benchmark in innovation related to land use, the participatory democracy, sustainable development, the digital economy and energy transition.
Our smart city approach is threefold: open city (open data), digital city (potential of digital technologies and their application to improve the quality of life of Parisians) and the inventive city (which is built by transversal networks and innovation).
Each of these pillars shall contribute to our 4 main targets.
One of the most important is the food supply because no city in the world is capable of ensuring its food self-sufficiency in the present state of our know-how and our food is responsible for almost 40% of our ecological footprint. We have recently launched a call for projects titled: "Innovative Urban Greening" which consists, among other objectives, in experimenting with the urban agriculture of the future.
Another challenge is the energy of the city. 90% of the energy of the Paris metropolis is provided by fossil fuel or nuclear energy. From a territorial point of view, it is an imported energy. In addition to the on-going effort on renewable energies (with a certain success for geothermal energy), the focus is increasingly on energy recovery. We must go ahead and draw from their hidden resources. These resources are at the core of the circular economy: a waste produced by someone is a resource for someone else.
An example in Paris is the Qarnot Computing start-up which has invented a radiator-computer: by dissipating all the energy consumed by data processors in the form of heat, the Q-rads make it possible to heat free of charge and ecologically any type of building (housing, professional premises, collective buildings) according to the needs of their users. A low rent housing building has been fitted out with these Q.rads radiators: the inhabitants do not have to pay for their heating anymore and their ecological footprint is zero.
The third challenge is urban mobility. This can no longer be dealt with through the option of car versus collective transport. New systems of mobility are emerging: they concern the technology of vehicles (electric cars, rubber-tired tram), but above all the technology of services (rental among individuals, sharing, car-pooling, multi modal applications, etc.), and they often open the way for the emergence of new chains of values and new players.
In Paris, the massive adoption of Autolib' and Velib' shows the power of attraction of sharing and self-service.
Last challenge is planning for the future of urban spaces and architecture. In order to take into account new ways of working, living or trading we need to be able to test multifunction buildings that combine housing, offices, community spaces, show-rooms and services to people. This mixed use on the scale of a building implies more flexible Local Urban Plans and an adaptation of safety rules. The new way of working implies home-office, mobile office, co working and remote working centers. The new way of living requires community spaces in the building, a greater use of roofs, community gardens, shared utility rooms, services to the person, sorting and recycling. New trading methods integrate ephemeral shops, shared showrooms and fablabs.
C&S: Paris as a city, and you in particular, have worked hard to ensure that digital is also an opportunity to redevelop business in Paris, which is threatened to become a purely residential city. What connection do you see between support for start-ups, incubators and nurseries, and a policy of the Smart City type?
J.-L. M: The City of Paris is an innovative city at the forefront of digital technology, as evidenced by the ranking of PricewaterhouseCoopers. The emergence of Silicon Sentier in the heart of Paris in recent years, or important events such as Futur en Seine and the Open World Forum illustrate the growing dynamism of our city in terms of digital innovation.
Notably, in our incubators, many innovations are related to digital technologies. They create value in all areas of the city and aim to serve people in a better way.
As an example, the Moov'in city competition launched in June 2013 by the City of Paris in partnership with the RATP, SNCF, JC Decaux and Autolib' aimed at bringing out new web-based and mobile services focused on mobility in Paris and the Ile de France region. One hundred ideas were generated through this process; seven of them were awarded a prize. Among them, the Paris Moov' solution is a route calculation application that integrates all public transport modes available in the Ile de France region and suggestions of activities once arrived at destination.
Some incubators and clusters that we support are directed specifically to the city and urban services (energy, transport, water, logistics, etc.).
This is for example the case of the Paris Innovation Massena incubator where we work with large corporations like SNCF or Renault. We help them and they accompany us to build our Smart City project.
In addition, the creation of incubators or Fab Lab continues with determination and ambition displayed, particularly with the MacDonald converted warehouse or the Halle Freyssinet, the future world's largest incubator (1000 start-up companies). New places at the forefront of innovation combining incubators, coworking spaces will continue to be created and its ecosystem of innovation will be internationalized. This is the only way for Paris to be in the top attractive and competitive cities in the world.
C&S: How do you pilot a 'Smart City' project? (Is it through a task force outside the main city services? Or through a cross-functional structure involving all the services?) How did you structure management of the Paris project?
J.-L. M: The smart city is a cross-cutting subject, which means we have no other way to do it than keeping good interaction among the administrative units.
All large cities are confronted with the issue of finding the appropriate scale of governance and new governance tools. The model of organization of local administrations is outdated. The large vertically-organised departments (urban planning, roadways, housing, architecture, green spaces) are facing the challenges of intelligent networks, project management, citizen participation that require a much more cross-cutting and horizontal coordination.
Paris has historically been organized in large vertical services to deal, for example with roads, architecture, urban planning and so on. For this reason, we have chosen to address the question of the Smart City within the City of Paris through a steering committee composed of elected officials and a cross-cutting taskforce driven at the General Secretariat - the body that oversees all directions.
This "smart city" mission is a project accelerator. Its aim is to raise awareness on this subject within and throughout the services but also to manage the relationship with our key partners of major urban infrastructure. It supports the deputy mayors on each of their missions and brings global thinking to structure a coherent overall strategy in the multiplicity of initiatives and concrete actions led by all the services.
C&S: On a more mundane level, the deployment of digital applications in the city is also organized on the basis of a telecommunications infrastructure (fiber access, 4G, WiFi, ...). Are you satisfied with the existing equipment and deployments underway at the initiative of private operators? How do you cooperate with them particularly in light of concerns over radio transmitters?
J.-L. M: While the City of Paris has no formal jurisdiction over this subject, we consider it is our role to ensure that all Parisians can access clear and transparent information on the deployment of base stations, and to take their concerns into account while ensuring the development of new technologies. This led us to sign a mobile telephony charter in 2003 with the telecom operators. His latest release in 2012 has set maximum exposure levels to radiofrequency fields and clear procedures for consultation with residents.
Jean-Louis MISSIKA is deputy mayor of Paris in charge of urbanism, architecture, projects of Greater Paris, economic development and attractiveness. From 2008 to 2014, he was deputy mayor of Paris in charge of innovation, research and universities. Prior to his local mandates, his professional career included various managerial positions in the public and private sectors.
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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Consultant at IDATE
Average household spending on cultural goods worldwide decreased from €75.50 to €71.60 between 2010 and 2013
Electronic distribution allows households to spend less on any cultural products they buy or rent individually. The gap in price is especially significant in those industries where the cost of producing a hard copy heavily influences its retail price.
As a result, between 2010 and 2013, average household spending on cultural goods worldwide decreased from €75.50 to €71.60 a year. This figure nevertheless includes sizeable regional disparities:
• in North America, average annual spending on all types of content combined has actually increased, going from €327.30 per household in 2012 to €328.40 in 2013;
• households in Asia/Pacific and Latin America are also spending more, with average entertainment budgets rising, respectively, from €35.80 per household/year to €39.10 per household/year, and from €31.70 per household/year to €34.10 per household/year between 2010 and 2013;
• meanwhile Europe and Africa/the Middle East are reporting a sizeable decrease in average household spending on cultural products: -10.6% and -15.6%, respectively, over the past three years.
Deputy Managing Director
Director of TV & Digital Content Business Unit
It is no secret that the shift to digital has had a huge impact on the music sector: the multiplication of distribution channels, the shift from owning albums to listening on the fly, along with piracy have resulted in a significant drop in revenue for the sector, the arrival of new unlimited music services and, more generally, the core revenue stream shifting from the sale of recorded music to exploiting all of the rights attached to an artist.
The role of live performance has also changed. While it has always been a special event, providing a venue for fans to meet the bands as well as being a promotional vehicle, concerts had long been a by-product of records. Today, they have become not only essential revenue streams, but also an essential means for music lovers to discover artists, and for artists to develop their careers. In addition to the their growing weight in music industry economics, the live concert market is also being affected by the internet: the use of social media to promote an event, online ticket sales, the importance of metadata in creating and maintaining ties with fans, new forms of interaction during concerts, etc.
Among these many developments, digital technologies open up new opportunities in the realm of recording and broadcasting concerts. As with recorded music, video, news and now books as well, the rise of digital and the web is steadily creating new ways to distribute recordings of live concerts, which had long been the sole dominion of a handful of TV channels, and so confined to only the most popular artists. The proliferation of online distribution channels is already driving up demand. At the same time, on the supply side of the equation, new, cheaper recording and distribution solutions continue to lower the barriers to entry. So more and more players are getting in the game. They are coming from new sectors of the digital ecosystem: pure player concert sites, internet giants, telecom and consumer electronics industry players… but very few live event organisers.
It is within this new environment that IDATE was commissioned by musical, concert and variety show union, PRODISS, to provide an analysis of what impact digital technologies are having on live performance.
> The report and its summary (in French) are available online at: www.proscenium.fr/thinktank/
Deputy Managing Director
Director of TV & Digital Content Business Unit
Original production in the US had long been the fiefdom of the top TV networks and a limited group of premium cable pay-TVs. Today, however, all cable channels are developing an original production policy, operating alongside their reruns of series produced by the big networks.
Some of the most popular series in the United States have been produced not by these heavyweights, or by HBO: Mad Men, Breaking Bad and The Walking Dead (AMC), The Americans (FX), Rectify and Top of The Lake (Sundance).
This new strategy has been especially profitable for AMC which originally aired only reruns: in 10 years, its earnings from cablecos has gone from $0.22 to $0.35 a month per subscriber.
Consultant at IDATE
IDATE estimates that industry losses due to the various forms of illegal video consumption – namely P2P, downloads and streaming – totalled €6.3 billion in Europe in 2013, which translates into 37.8% increase from 2010 to 2013.
The main reason for this rise in online video piracy is the lack of attractive video on-demand (VoD) services in Europe, which is due in large part to:
• a very scattered offering, which is hard for users to navigate through;
• the fact that legacy pay-TV providers have captures the rights for the most premium content, and are taking a defensive approach to new distribution channels;
• very few online sales options;
• certain regulatory restrictions, such as the media chronology in France and Germany for feature films.
The VoD sector’s consolidation, and the inroads being made by American companies, especially in the subscription VoD segment, is expected to breathe some life into Europe’s video-on-demand market, and contribute indirectly to scaling back users’ reliance on piracy. IDATE estimates that industry losses due to piracy should decrease by 6.5% between 2014 and 2018.
Jacques Bajon, Head of "Video Distribution" Practice
Cloud TV solutions being developed in a new video consumption environment that is having a profound effect on distribution modes.
In its latest report published in its monitoring service “Cloud & Infrastructure”, IDATE analyses Cloud TV solutions the advantages and the issues that still remains.
The cloud TV phenomenon is part of the massive changes taking place in our TV and video viewing habits and, by extension, in video distribution. This cloud-based approach to distributing TV programming refers to the fact of offering services from a central platform connected to the Web, and which can serve any user device.
A cloud platform can be operated by OTT (over the top) content providers who deliver their solution directly over the Web, or by telecom operators who use their own networks. In this second instance, the service is typically not assimilated with the cloud per se, even if we will include it in our field of analysis.
What cloud TV brings to the industry
• It is above all a response to a growing demand among consumers to have access to TV everywhere.
• It paves the way for more personalised video viewing and targeted advertising.
• The fact of centralising the solution enables more flexible rollouts and the abilty to offer a broader array of services.
• The growing move towards virtualisation allows vendors to achieve more cost-effective capital and operating expenses for their video distribution business.
• And brings vendors one step closer to deploying concept of TV as a service, so creating ties with users, or of operator as a service, for distributors looking to achieve more operational flexibility.
But certain unknowns remain
In addition to increasing quality of service (QoS) to meet users’ demands, the gradual switch to cloud-based video solutions will no doubt also generate a sizeable increase in traffic on the Internet and managed networks, and with it the inevitable challenges of maintaining a steady level of quality.
New challenges are arising as barriers to entry into video distribution are being lowered, through expansive platforms that are not subject to any network coverage, device compatility or geographical imperatives.
• We could thus see an acceleration in the rise of independent video offerings, which could include libraries of self-distributed content. This type of configuration could result in telecom operators being cut out of the loop and losing control of consumers.
• In addition, service providers and broadcasters will be going head to head with their TV Everywhere applications, offering potentially identical content but being delivered by pay-TV providers and TV networks, for instance.
• The traditional TV distribution industry runs the risk of being marginalised by these developments. But it has developoled its own solutions to meet some of viewers’ new demands and, above all, has begun to integrate these new options into its own environment.
• And, finally, cloud TV represents a major gateway for the Internet giants that are currently competing against pay-TV providers and programme aggregators for a foothold in this new market.
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Deputy Managing Director Director of TV & Digital Content Business Unit
Pricing models for digital content were originally inspired by the models used for hard copies: the sale of books, CDs and DVDs were replaced by the sale of digital files. Prices were lowered of course, to factor in not only the savings in production costs but also the stiffer competition on the Web.
But setting prices for cultural content online is still a very empirical matter today. If the price of an MP3 album has settled in at around half the price of a CD, pricing for books is much more scattered: an e-book costs around 40% less than a hardback but (almost always) more than the paperback version. Meanwhile, VoD film rental rates have not factored in the steady decrease in DVD prices, and so are not very competitive.
Unlimited plans and advertising
But this first period of copying brick-and-mortar models is now giving way to the creation of more original pricing schemes. They are a reflection of the profound changes in consumer habits fuelled by two aspects of the internet: first, the fact that the Web is synonymous with abundance and, second, the fact that piracy spread the idea that everything could be had for free. The first response to this upheaval in consumer expectations was the arrival of unlimited subscription services such as Netflix, Spotify, Oyster and PlayStation Plus. These unlimited plans, who share piracy as a common rival, are low-price offers that leverage affordability to persuade consumers to opt for a lawful service. A second response involves the use of advertising, to counter illegal free offerings. But the advertising model quickly encountered its limitations, and the different cultural segments are now introducing freemium models that combine a free, basic plan and a premium for-pay one (Hulu+, free-to-play, Spotify, Deezer).
Recreate the link between the hard and digital copy
A number of factors have led to the inexorable loss of revenue when moving from the tangible to the intangible: sales of single songs rather than complete albums, increased competition, the weight of piracy and the plethora of content on offer. One trend that we are seeing in the industry’s bid to turn the tide on the inevitable seeks to create a link between hard copies and digital files. So Ultraviolet (a consortium whose members include most of the top TV and film studios and distributors) for video, and Audiorip (Amazon) for music, provide consumers with free access to a digital copy when they purchase a DVD or a CD, respectively.
Yield management for cultural goods?
In addition to the necessary streamlining, a new approach needs to be ushered in: one where the price of cultural goods adapts continually to demand. While today a book, an album or a game will change price only once or twice during its shelf life, the online sale of digital goods provides infinitely greater flexibility. Without going quite so far as the yield management famously employed by airlines, i.e. adjusting the price of tickets to demand (as there is no scarcity when it comes to a piece of digital content), one likely path for the future will be to adjust the price of a cultural product according to its popularity and/or how fresh it is.
Key trends in content digitisation
Jacques Bajon, Head of "Video Distribution" Practice
In developing countries and emerging economies, wireless broadband represents a fundamental path to eradicating the digital divide that exists in regions that are still not covered by wireline infrastructure, and especially sparsely populated rural areas.
The digital switchover of terrestrial networks and the associated digital dividend provide a unique opportunity for broadcasters to expand their services, for consumers to gain access to a broader selection of programming, for the market to meet the growing demand for new wireless communications services, and for governments to optimise the overall use that is made of the scarce resource that radio spectrum represents. All for the sake of socioeconomic progress. In developing countries and emerging economies, wireless broadband represents a fundamental path to eradicating the digital divide that exists in regions that are still not covered by wireline infrastructure, and especially sparsely populated rural areas.
Is integrated broadcast-broadband the answer?
Despite the existence of several international agreements, the transition process is not progressing at an even pace across the global. New arrivals to the process are up against tremendous challenges, while also benefitting from the experience of their predecessors and technological leaps forward – such as the combination of DVB-T2 and MPEG-4 – which help alleviate some of the hurdles. Key ingredients of successful planning include consideration of the national situation, along with clear policies and objectives from the government and real cooperation between the various stakeholders.
It is a well-known fact that the digital dividend is a driving force between the transition, but new questions have arisen recently over a second digital dividend in the 700 MHz band in Region 1 (i.e. Europe, Africa and the Middle East). So the telecommunications and media industries will need to cooperate more closely on the spectrum issue.
The digital transition: global scorecard
A global economic approach needs to be taken in the planning stage to tackle the goals of the transition, and the means being deployed to achieve them.
In developing countries where the switch to digital terrestrial television (DTT) has yet to begin, digital set-top boxes represent the biggest cost item. A large percentage of households in these countries will need to receive subsidies to be able to buy these new devices.
Additionally, the size of the network investment will depend on several factors, such as the number of multiplexes involved. By the same token, technical coverage will need to be adapted to each country according to the geographical distribution of its citizens, as costs can increase exponentially when seeking to cover a large swathe of the population.
Communication campaigns are also vital, to educate the public on the digital transition. They need to be rolled out gradually, and be especially concentrated during the period immediately prior to the transition from one technology to the next.
In addition to financing set-top boxes and running information campaigns promoting the transition to digital, public monies may be required to help TV channels during the transitional phase. The period of simulcasting will be one of additional broadcasting expenses that will not necessarily be compensated by revenue and, for incumbent channels, will also be a time of increased competition. Veteran broadcasters will have to upgrade all of their equipment and installations when the switchover occurs.
The revenue earned on the sale of licences to digital dividend spectrum can help meet the public financing needs created by the transition. It is vital that a global approach to the process be taken – one that involves both the television and telecoms universe. These two sectors can enter into a mutually beneficial virtuous circle.
Public-private partnerships to allocate digital dividend revenue to the transition
Governments need to be financially involved in DTT rollouts, and in the transition process as a whole. The economic surplus generated by a better allocation of frequencies and related services creates solid prospects for ROI in the medium term.
The digital switchover is thus an ideal opportunity to create public-private partnerships. The foundations are already in place, with the arrival of new private sector players from the world of both telecommunications and broadcasting.