6Jan/170

Investing in content: what are AT&T and Verizon hoping for?

Gassot-Yves

Yves Gassot,
CEO, IDATE DigiWorld
Contact

 

 

2016 turned out to be a relatively mediocre year for the telecom services market in Western countries: an overall trend of stabilisation in Europe’s biggest markets, after suffering a steady decline in revenue since 2008, and an overall decrease in mobile revenue in the United States, breaking with the steady growth that AT&T and Verizon had managed to maintain up until 2015. As a result, operators in Europe are naturally sensitive to any strategic moves from the two American heavyweights, especially with respect to the content industry: what are AT&T and Verizon’s hoping for when investing in content?

Avoid being bypassed by streaming video by moving higher up the value chain, right up to production. Because video has become the prime source of traffic on both fixed and mobile networks, operators can no longer content themselves with merely distributing other companies’ channels and programmes, especially if those companies decide to take the self-distribution route and comply with net neutrality rules. This strategy is akin to classic vertical integration.

Behind this ultimately defensive strategy, there may also be a more aggressive aim at work: play the OTT card for all it’s worth by freeing themselves from their footprint (and the Capex required to continually expand the number of homes passed) and going after customers on every fixed/mobile Internet access network, i.e. not only customers that rely on their own pipes. Therein lies real diversification since physical connectivity becomes secondary.

Beyond this, we have to keep AT&T and Verizon’s current situation in mind. Both are having to contend with a brutal decrease in growth which had been sustained almost singlehandedly by their mobile business for the past 10 years, while also playing second fiddle to cable in the residential fixed access market. With very few attractive prospects abroad – and up until now (under the Obama administration), antitrust bodies blocking M&A deals that would have allowed them to grow their share of the mobile market at home – while still very powerful, both operators have very good reasons for setting their sights on content as a way to maintain revenue and shareholder dividends. But here is where their paths diverge.

Being deliberately simplistic, one Verizon executive recently explained that AT&T wanted to gain a share of today’s TV market, whereas Verizon was going after the future video market that will be fuelled by millennials… in other words, rather than acquiring very expensive assets that are likely to be rendered obsolete by new video habits, Verizon is opting to slowly build up its expertise in the data economy that will underpin video (notably growing programmatic advertising revenue). What is certain is that the amount that AT&T will spend to acquire DirecTV and (provided they get the nod from the Trump administration) Time Warner is infinitely larger than what Verizon laid out for AOL, the Huffington Post, OnCue, several other start-ups (including Vessel) and probably Yahoo! But it is still too early to say which path is the riskiest.

How does this tie in with net neutrality debates?

The future Trump administration has done nothing to hide its radical opposition to net neutrality, up to and including reclassifying ISPs as common carriers under Title II of the Telecommunications Act. In theory, this is great new for telcos who remain hostile to the regulation put into place by the Obama administration: at the very least they can take it as given that, under the new administration, they will be able to maintain their zero rating policies on content, especially content delivered over wireless networks, such as those included in T-Mobile’s Binge On plan, Verizon’s Go90 and AT&T’s DirecTV Now products.
On these last two points, what could a repeal or relaxation of current net neutrality rules mean?

We can posit that, if net neutrality is done away with altogether, operators are back in the driver’s seat when it comes to being bypassed by streaming services sold by channels and SVOD providers. Will this go so far as to quash any desire to invest in content themselves? Not necessarily, as exclusivity can still be a real drawing card, and useful for standing out from the competition. But the biggest operators that are able to amortise massive spending on rights acquisitions thanks to their tens of millions of subscribers, can also enter the content fray with the prospect of being less heavily challenged by broadcasters and OTT heavyweights.

At the same time, however, doing away with net neutrality may also make playing the OTT card on third party operators’ networks more challenging…

Finally, let us not forget the other possible effects of the new administration in Washington:

- If corporate tax rates are lowered (from 35% to 20%, or even 15%), AT&T and Verizon’s cash flow will be bolstered from 5 to more than 8 billion USD…

- Meanwhile the rigour of antitrust authorities that blocked the AT&T/Sprint and later Sprint/T-Mobile mergers is likely to become far more accommodating, and so open the way for new M&A deals;

- As a result, consolidation could turn the tide on AT&T and Verizon’s shrinking mobile businesses, and make the process of staking out a claim in the content industry a less pressing concern.

So, here at the dawn of 2017, it really does seem like almost anything could happen…

 

Subscribe to our newsletter and keep up to date with events and latest news.

15Dec/160

Future TV 2025 : who will win?

BAJON_Jacques

Jacques Bajon,
Director of Media and Digital Contents Business Unit, IDATE DigiWorld
Contacter

In developed countries, the audiovisual sector is experiencing a period of relative stagnation, which will probably be long-term and therefore lead to many challenges for players in the ecosystem. Although the Internet is the major cause of disruption, there are many factors at play.

IDATE DigiWorld drew up 4 scenarios in the last report “Future TV 2025” based on the market environment evolution and the new competitive situation analysis:

Landscape  market evolution 

• Fundamental regulatory choices: confirmation of Net neutrality, reconciliation of obligations for linear and non-linear services, reform of regional rights allocation.

• Heterogeneous global growth: emerging markets driving growth.

• IT playing an increasing role in video distribution: 'centralisation' with the cloud, the growth of streaming, the growing role played by captured consumer data.

• Increasingly significant personalised video consumption, on-demand and multi-screen ('TV as a service').

The new competitive situation

With an increasingly influential Internet sector, through pure players quickly establishing themselves in the market, accentuating the phenomenon of disintermediation of established players.

Content is more than ever king and ownership of it is crucial, hence increased competition with exclusive premium content is sending rights prices soaring, and new financial backers of original production are emerging.

Also, the market is experiencing a period of concentration (both horizontal and vertical), driven by restructuring of the telecom operators market and the race for control of content.

In this way, new forms of monetisation are appearing in an environment where pay-TV is experiencing downward pressure due to the polarisation between premium and low-cost, the role of service bundles, the development of programmatic advertising and freemium models.

The Trend scenario: a 2,4% expected global growth per year by 2025

The Trend scenario assumes that 2010-2016 trends will continue. In this scenario, the major determining factors are stable. On-demand consumption of audiovisual services continues to grow without destabilising the linear market. The regulatory status quo maintains a local approach to markets. Finally, we see a steady rise in influence of OTT players.

This scenario corresponds to slow growth of the global market, 2.4% per year on average:

• Growth driven primarily by emerging countries

• Stagnating Western European and North American markets

• An evolving market landscape

Four scenarios forecasted

schema_future_tv

Three others scenarios have been forecasted, each is in favor the stakeholder kind in particular:

“Convergence” scenario: In the Convergence scenario, TV-Internet-telecom bundled offerings predominate. They enable better prices to be offered and provide a complete range of linear TV and on-demand services, as well as music and games services. Multiscreen consumption, fixed and mobile, is pushed by one (or many) of the operators, providing permanent connectivity to the range of services.

“Disruption” scenario: Personalised video consumption predominates in the Disruption scenario, with more uniform consumer tastes on a global scale. The barriers to worldwide content distribution have collapsed, along with local content regulations. Global players controlling content rights have appeared. The leading Internet players (e-commerce, viral platforms and social networks) play a central role, offering a blend of premium and professional UGC content. The value of the market is under pressure within an oligopolistic OTT video sector on a global scale.

“Syndication” scenario: The Syndication scenario is the most cooperative and most favourable to the TV sector. Similar to how local television stations are affiliated with national 'networks' in the United States, television companies could become affiliated with large national and regional 'entertainment operators', relying on the common core of content they provide, and providing market expertise, relationships to national advertisers, local programming, and their brands and customers in exchange. This transformation takes place in both the broadcast and OTT sectors.

 Discover the perspectives, key trends, and scenarios about the TV market through our dedicated report

Subscribe to our newsletter and keep up to date with events and latest news.

15Dec/160

World Telecom Services market: « Zero rating »

Gassot-Yves

Yves Gassot,
CEO, IDATE DigiWorld
Contact

Provided Q4 results confirm the trend, this would be the first time since 2008 that the market is on an upwards swing.

 

According to the recent ETNO-IDATE report, the telecom services market in Europe (EU-28) is stabilising, and even enjoying a slight uptick in Europe as a whole. Whereas the North American market has been enjoying steady growth over the past decade and Europe has been on a downwards slide, the situation has flipped – with market growth on the other side of the pond hovering around 0%, combining a close to 1% decrease in the mobile market during the first three quarters and very slight growth in the fixed market thanks to cable companies.

Annual telecom services revenue growth (ETNO, % )

schema_world_telecom_services_1

In this rather sombre situation in Western markets, despite the remarkable success with 4G customers, monetising mobile access appears to be wavering between two main options.

- After an initial period where unmetered plans became the norm, using the argument of network congestion operators began selling plans that were tiered based on data caps. The common practice was to encourage customers who were using their smartphones and tablets more and more to upgrade to a larger allowance, while decreasing the price per Gb of data. But fierce competition makes it hard to escape a deflationary trend, particularly in markets where quality metrics do not appear to play a decisive role in differentiating operators.

- We thus saw operators turn to supplying content services, and applying zero rating, either through agreements with third party suppliers (Vodafone, T-Mobile) or with their own content (AT&T, Verizon). If the content is attractive enough, it can set an operator apart from the competition.

Some, however, see the zero rating trend as grounds for reviving the net neutrality debate. So what’s the problem? While it is clearly a good thing for consumers, the opponents of zero rating argue the following. If the service provider has paid the operator, we can expect to see a decline in diversity and innovation in the applications sector that benefits market heavyweights, which are able to finance their access to the market. If the service provider belongs to the operator (or is controlled by it), there can be discrimination if only that service benefits from zero rating. The problem is that there is a disagreement over whether these two suppositions are well founded, and require specific ex ante regulation, and especially whether they fall under the scope of net neutrality. The government of India forbade Facebook from offering a set of basic applications (including its social network) for free to the country’s mobile operators. Despite having been behind the Open Internet Order, which reclassifies ISPs as common carriers as defined by Title II of the Telecommunications Act, FCC Chairman Wheeler has been very circumspect about zero rating up to now, believing that the trend needs to be observed for a period of time before drawing any conclusions. Of course, the incoming Trump administration will shake up the FCC, and everyone expects the Open Internet Order to be challenged.

Subscribe to our newsletter and keep up to date with events and latest news.

14Dec/160

Telcos’ Customer Experience Management: A tech-enabled data-driven revolution

lubrano

Sophie Lubrano,
Director of Studies, "Telecom Strategies" Business Unit, IDATE DigiWorld
Contact

Customer experience draws primarily on customers’ network usage and their perceived quality, as well as their interaction with the telco’s different services (sales, support and administrative), whatever the communication channel.

Customer Experience Management, or CEM, is the term used for the programmes implemented to improve customer experience.

schema_telcos_customer_1

A complex but essential undertaking

In what is now a saturated market, it is essential that operators pay heed to customer experience if they are to retain the loyalty of their subscribers. Yet telcos have fallen behind their counterparts in other sectors, particularly OTT players.

A sophisticated CEM strategy relies on the consolidation of all customer information, not just subscription data and historical contact with the operator, but also network usage, geolocation and even comments posted on forums. Such a complex undertaking is far from being implemented by telcos, who sometimes struggle to reconcile their mixed and mobile databases. Verizon is a typical example of a company with organisational silos, whose fixed and mobile operations are two clearly separate entities.

Customer experience also implies a change in corporate culture, with each employee is required to serve the customer. This implies a sizable managerial undertaking and the involvement of senior management is therefore essential.

Customer experience incorporates increasingly cutting-edge technologies

The digitisation of communication channels is gathering momentum, including stores (interactive kiosks, click & collect services) and call centres (agents communicating with customers via chats or messaging).

In order to minimise their costs, operators are installing increasingly intelligent automated solutions. Websites host virtual agents based on artificial intelligence, while call centres use interactive voice servers with speech recognition technology. Telcos can also draw on the technological tools developed by the Internet giants: data analytics, predictive analytics, profiling, event processing and biometric authentication, as well as artificial intelligence, chatbots, machine learning and even blockchain.

Yet the human aspect remains an essential, differentiating factor

Websites offer chat options and social networks are developing in this area. User forums provide an ideal intermediate solution, offering the human aspect but less costly.

Faced with competition from low-cost operators, the big telcos are taking their stores more upmarket with a focus on customer experience, in an effort to enhance customer loyalty and expand the range of subscriber services, particularly connected objects.

Opportunities for innovation: social media, mobile and personalised services

Social networks also represent a new means of communication between operator and subscriber. They offer a wealth of information that can be used to match the best message and solution to each individual customer.

While telcos are clearly aware that mobile is an essential link between operator and subscriber, the applications rolled out so far are seeing only limited success. Mobile represents a considerable opportunity in terms of innovation for telcos, who can combine usage and geolocation data to offer solutions that are both personalised and contextual, and even to position themselves as trusted third parties.

The key challenge of CEM is to incorporate data from customers’ various interactions with the operator and their social networks. Operators can use analytics tools to offer personalised solutions to customers, anticipating and meeting their needs as they gradually wind down the traditional communication channels (which are more costly). In particular, the fine-tuning of contextual solutions based on usage (Vodafone targeting subscribers going skiing abroad, for example) is still a relatively untapped growth outlet.

This process could also be used for other ends: optimising network deployment by closely analysing network usage or evaluating customer experience data (incorporating geolocation data in particular), which could then be sold to third parties.

Delve deeper about Telecom Customer Experience Management with the following IDATE DigiWorld market report

Subscribe to our newsletter and keep up to date with events and latest news.

13Nov/160

Keynote: Trust in the Digital Age

fernandez_ramon_orange_300x300v3

Interview with: Ramon Fernandez,
Deputy CEO, Group Chief Financial and Strategy Officer, Orange

''Trust is a key asset in an ever more complex and digital world.''

Why are trust issues at the heart of conversations today?

Perhaps because it has become so rare! We are in a crisis of confidence, which is global and extends across the whole society, beyond the economy. Today, in Europe and in our industry, many people do not trust our ecosystem players with their personal data that they nevertheless share everyday. More and more services are fully dematerialized. A number of very large digital actors are not present in the physical world, have not set up physical shops and a growing share of customer relationships is performed by robots ... If  data is the fuel of our digital world, trust is essential to succeed in the long term.

Is the « trusted third parties » notion – which is often extended to telecom operators, still meaningful? 

More than ever in our digital world, we are operating in an increasingly open, fragmented and dynamic environment; it is more and more important to have reference points. With the rise of new digital players, trust is built through new and evolving markers, it becomes distributed: for example a sum of other users’ insights about an apartment on Airbnb or about a car on Drivy, or the blockchain algorithm... More than a "trusted third party" strictly speaking, customers are looking for a truly trusted partner. Orange wants to play that role.

What role does the Orange Mobile Banking project play in this positionning as « trusted partner »?

It is based on the "trust capital" we have built and earned over time with millions of customers around the world, that Orange can today be legitimate to manage its customers’ money. It is also its credibility in terms of innovation, which means that Orange is expected to offer a new and fully mobile banking experience. Finally, it is an opportunity to leverage our experience in Africa where we have 20 million Orange Money customers. So there is a real logic for Orange to launch its own financial services and we are doing it in partnership with Groupama.

 

Subscribe to our newsletter and keep up to date with events and latest news.

9Nov/160

Creating a single television market: Is harmonising copyright the only issue at hand?

LEBORGNE-Florence_NB

Florence Le Borgne,
Head of the TV & Digital Content Practice, IDATE DigiWorld
Contact

If directive 2001/29/EC harmonise copyright across the European Union, this does not mean that rights owners enjoy a single system of copyright protection throughout the EU. Their coverage is in fact an assembly of national rights whose geographic scope continues to be confined to the Member State that grants them.

At a time when more and more consumers are watching videos on mobile devices, and expect to be able to do so anywhere, anytime, the territorial aspect of copyright creates problems when it comes to cross-border access and the portability of this content. According to the European Commission, the ability to access a video service in another Member State is guaranteed for less than 4% of all VoD content in the EU. Moreover, for copyright reasons, consumers are often unable to continue to access a VoD service they subscribe to at home when travelling in another European Union country.

The territoriality of copyright is, however, far from being the single obstacle to the development of cross-border services. At the top of the list of other hurdles is the national exclusivity imposed by rights owners to secure pre-financing for their content, along with:

• the costs and constraints bound up with the need to employ multilingual staff to provide customer service;
• different national regulations on private copies, consumer protection, the protection of minors, taxation,
distribution windows, etc.;
• subtitling and dubbing costs;
• the cost of localising marketing campaigns;
• the lack of technical standards for distributing content;
• low broadband availability and/or adoption levels in some countries;
• the lack of demand for cross-border services.

A less ambitious plan, which aimed only to guarantee the portability of content across Europe, would seem more realistic. For service providers, this would mean negotiating a clearly defined exception with rights holders, and providing a clear framework for the territoriality of rights, to be able to allow their customers to view their programmes wherever they are in Europe.

flb_insight_tv_video_forum_dws16

 

DELVE DEEPER WITH THE FOLLOWING IDATE DIGIWORLD MARKET REPORTS
TV in the Digital Single Market: Impact of current regulatory changes on the audiovisual value chain, Dec. 2015
World TV & Video Services Markets: Terrestrial - Satellite - Cable - IPTV - DVD - Blu-ray - Video on demand, Dec. 2015
Video-On-Demand: Europe’s main markets in the aftermath of Netflix world conquest, May 2016
Video Solution Providers: Towards Software-Defined Video, Jul. 2016

Subscribe to our newsletter and keep up to date with events and latest news.

25Oct/160

The AT&T–Time Warner deal: what’s pushing telcos to invest in content?

Gassot-Yves

Yves Gassot,
CEO, IDATE DigiWorld
Contact

AT&T had only barely begun integrating DirecTV – the second largest pay-TV provider in the US, behind Comcast – when it announced its plans to acquire Time Warner for more than 85 billion USD (over 105 billion USD including debt).

This is no small chunk of change, as the company had to pay top price for a media conglomerate that is in fairly good shape and boasts a large stable of assets, including major Hollywood studios, the country’s top pay-TV channel, HBO, and several other cable properties such as CNN and TMC. The appeal of these assets has attracted a number of suitors since the spin-off of Time Warner Cable, including Apple.

A less welcoming environment

To assess the rationale for the deal, we should first give a bit of background.

First, we should mention the very abrupt slowdown in the mobile services market in the United States. If AT&T (like Verizon) is a colossal enterprise, with more than 110 million mobile subscribers in the US, the market has become far more difficult following aggressive moves from T-Mobile and Sprint, and as consumer equipment matures. AT&T had sought to anticipate the change by merging with T-Mobile, but the FCC and antitrust authorities quashed the deal. As in Europe, intense competition is weighing on mobile operators’ margins, while the explosion in traffic is still hard to monetise and telcos will need to keep investing heavily in their networks to keep up. On the other side of the equation, the applications generating this explosion in traffic are largely the product of Internet behemoths such as Google, Amazon, Facebook and Netflix.

Second, in those locations where it is a wireline telco, AT&T is having to contend with cable’s growing dominance (66%) of the Internet access market. For several quarters now, AT&T, Verizon and the country’s other telcos (Frontier, Century Link…) that offer connection speeds over 50 Mbps in only a small handful of locations, are losing customers to cable and its ability to deliver increasingly fast connections, thanks to DOCSIS 3.1 – giving it a steadily growing subscriber base and market share. Plus, the top cablecos appear resolved to enter the mobile market, with the belief that “mobile is the new cable!".

Lastly, we need to remember the remarkable success of the deal that led the number one cableco, Comcast, to acquire another TV and movie industry giant, NBC Universal, back in 2013.

How will it maintain its cash-flow?

AT&T does not have that many options for maintaining its cash-flow and dividends.

It is forbidden to engage in mobile market mergers. Of course, it can count on 5G to accelerate and widen its lead over T-Mobile and Sprint, as it managed to do (alongside Verizon) with LTE at the outset. But this lead would only last around 18 months.

Acquiring cable companies could open up certain prospects – as the cable market’s consolidation is not yet complete – but will only be allowed in those areas where the carrier has no footprint.

International investments are still on the menu, with the acquisition of two mobile operators in Mexico in recent years. And even if growth in more or less every telecom market is sluggish, AT&T did also have its eye on opportunities in Europe, and later in India… But, like Verizon, AT&T has been focused largely on its domestic market for more than a decade.

It is true that the acquisition DirecTV is considered largely a success. It creates national cross-selling opportunities between mobile subscribers and satellite customers. DirecTV’s roughly 20 million subscribers bolster the company’s negotiating cloud in Hollywood, well above what it had with its 5 million U-Verse subscribers. With DirecTV, however, AT&T was still just a distributor and so sensitive to the slow but sure cord-cutting trend.

A deal that equals both vertical integration and diversification

So the acquisition of Time Warner would change all that. It would allow AT&T to move one or two notches up the programming value chain, positioned in both TV network operation and the production of premium TV series and films. The new AT&T would thus have a very impressive strike force on the content front, powerful enough to fuel its ambitious DirecTV Now TV streaming project.

This does not mean that AT&T is putting all its eggs in the vertical integration basket. It would be foolish to monetise its films, TV programming and channels only through its own fixed and mobile broadband services. So the deal can also be seen as a diversification move. AT&T has no doubt concluded that, more than ever before, content is indeed king.

We would be wrong take away from this merger the idea that is the pipes that govern broadcasting and content. The new understanding is more that, now that we can watch TV, live or in VOD, through a good quality streaming service, competition at the connectivity level will become more efficient, net neutrality rules will rein in the most direct attempts at discrimination… so it is not the pipes but rather the programmes that will be the decisive factors. Along with data on Internet users’ behaviour and habits.

Telcos do have several cards to play when it comes to the TV and video market. Cards that could allow them to stand out from other telcos, open up cross-selling opportunities, secure customer loyalty… When going head to head with the Internet titans, acquiring TV rights to sport and amortising investments in premium productions will nevertheless be possible only for the wealthiest telcos, with the most ambitious video strategies and tens of millions of subscribers. Like AT&T.

How will antitrust authorities react?

It remains to be seen how the Department of Justice (DoJ) and the FCC will react: they could oppose the deal or impose conditions. AT&T will argue the precedent of the Comcast-NBC merger, and the fact that no media or telecoms industry player would be eliminated or have its market share altered. Industry players and politicians that are against the merger will point to the dangers of having the country’s largest carrier get its hands on one of the largest media conglomerates. Others will see opportunities to strengthen provisions for increasing transparency on ISPs’ use of consumer data, and to expand net neutrality rules.

Check out the DigiWorld Summit programme

 Subscribe to our newsletter and keep up to date with events and latest news.

18Oct/160

Total SDN and NFV market valued at 19 billion EUR in 2020

RAMAHANDRY_Tiana

Tiana Ramahandry
Senior Consultant, IDATE DigiWorld
Contact

 

A mini share of the global telecom and IT equipment market, but a maximum impact on the networks’ capabilities

 

72 telco SDN/NFV projects benchmarked

The latest IDATE report – “State of the SDN/NFV market” – spotlights the main pioneering players in terms of SDN/NFV implementation, and what they are doing today. The report provides a separate dataset with 72 detailed project fact sheets as of August 2016, as well as an analysis of major stakeholders – telcos and vendors – and their strategies to evolve and transform their networks to a software-based infrastructure.

“These projects are at different stages, ranging from trial to deployment, but a few (36%) have achieved a commercial launch. Whatever their level of development, most of these projects are taking place in developed countries: Europe, the US, Japan, South Korea and China,” says Tiana Ramahandry, the report’s project leader.

SDN/NFV projects per status

schema_sdn-nfv

Source: IDATE DigiWorld, State of SDN/NFV and network investments, September 2016

Telcos’ adoption of SDN and NFV over the long term

IDATE DigiWorld analysts provide SDN/NFV market sizing data, with coming investment forecasts up to 2020. Even this market, which is expected to reach almost 19 billion EUR by 2020, remains very marginal compared to the telecom and IT equipment market, which itself is estimated at over 300 billion EUR, transformation potential in network management will be huge, as will telcos’ opportunities to adopt new services and innovative business models.

While a modest part of the global SDN and NFV market will be captured by telcos in 2020, NFV is being implemented more and more with the growing number of cloud and SDN solutions being introduced for new business services. Telcos’ large-scale deployments are expected to begin in 2016, and their CAGR over the next five years is projected to stand at 47%.

Indeed, the vast majority of the market will come from enterprises and cloud service providers that were the first to adopt SDN for use in datacentres, for both internal operations and connections with other datacentres.

Discover the perspectives,  key trends, and scenarios about "SDN & NFV market" and contact Tiana Ramahandry for further information.
Subscribe to our newsletter and keep up to date with events and latest news.

18Oct/160

World television market: OTT services keeping American players in the lead

LEBORGNE-Florence_NB

Florence Le Borgne
Head of the TV & Digital Content Practice, IDATE DigiWorld
Contact

 

“For the first time ever, an OTT company – Netflix – made it into the world’s 20 top earning media groups in 2015.”

 

The United States: global OTT market leader

Still overshadowed by Netflix, which is present in 190 countries, and iTunes with services in 112 countries, Amazon is steadily building up its global OTT footprint through its e-commerce platform.

American OTT video services’ global footprint as of 31 December 2015

schema_ott

schema_ott_2

Source: IDATE DigiWorld, World TV market, July 2016

The United States: world’s largest OTT video market

With the exception of Starz, which lost 900,000 subscribers between 2014 and 2015, the top premium cable channels in the US continue enjoy a steady increase in subscriber numbers, and this despite stiff competition from OTT services. Between 2012 and 2015, HBO reported a 16.4% increase in subscribers to its linear channel, while Showtime and Starz reported a +1.3% and +0.7% increase, respectively.

But the momentum for signing up new customers is clearly with OTT services. During that same period, Netflix paying customers grew by 70% while Hulu Plus subscribers rose by an impressive 269%.

The top OTT services’ subscriber numbers in the United States in 2015 (million)

schema_ott_3

Source: IDATE DigiWorld, World TV market, July 2016

With its extremely dynamic national market, populated by consumers who are willing to pay for their TV content, the United States has become the world’s largest video on demand (VOD) market. Thanks to the popularity of Netflix, as well as Hulu Plus, Amazon Prime Video and more recently HBO Now, the US singlehandedly accounts for 57.5% of global VOD subscription revenue. If download to rent/own (DTR/DTO) are less popular with American viewers, the country still accounts for 47.8% of all DTO and DTR revenue.

Also noteworthy is that the United States continues to generate more than half of the world’s pay-TV revenue.

But the North American market is also showing the first signs of flagging, while growth in other parts of the world is progressing steadily.

Popularity of on-demand viewing in the US providing a global springboard for local players

If OTT services have not been adopted to the same extent in other parts of the world as they have in the United States, viewers across the planet are watching more and more on-demand programming and less and less live TV.

Although the balance between the two still tips heavily in favour of “classic” linear TV programming, which accounts for 86% of viewing time in the US, it is by now a foregone conclusion that VOD is not a passing phase, nor confined only to millennials.

Consumers in Europe, as well as in South America and in certain Asian and African markets, are also embracing OTT video. If national services have developed in most corners of the world, very few have managed to hold their own against the global juggernauts that are Netflix for SVOD and iTunes for DTO and DTR.

It does indeed appear that series are the main incentives for signing up for SVOD services. Which means the ability to attract new subscribers and keep them depends on being able to offer exclusive, high quality programming, which is something few players can do.

Netflix became the world’s second largest investor in programme production and acquisition in only a few years, outdone only by sport channel ESPN. Netflix spent 5.8 billion USD on content acquisitions and original productions in 2015, compared to the 5.5 billion USD that ESPN spent on acquiring TV rights and HBO’s budget which is estimated at 2 billion USD. At the same time, the company’s spending on original series continues to rise. Netflix invested 120 million USD in 2016 on its new series, The Get Down, or 7.5 million USD per episode, which makes it the new American titan’s most expensive show to date, ahead of Marco Polo which had a budget of 90 million USD.

But growing budgets coupled with slowing growth at home are making the search for outlets outside North America imperative. Clearly, the wealth of its library is one of the main reasons for Netflix’s global success, although international development costs and especially marketing costs are in no way detracting from the company’s profitability.

If Amazon and HBO are following, albeit more discreetly, in Netflix’s footsteps, it is hard to see what European player today could rival them, and most are put off by the size of the investment required and the meagre prospects for ROI in the short term. Vivendi appears to be struggling to build a pan-European offering, while Sky is advancing cautiously with plans to launch its Now TV streaming service in Spain by the end of the year, which would make the country the only market where it only sells an OTT product, with no satellite service to back it up.

The TV market did not enable the emergence of any major pan-European service. Will OTT give Europe’s industry a second chance?

To find out more about our forecasts for the TV content market and the future of television, read our latest report or contact Florence Le Borgne

To keep up with the latest digital industry news, sign up for our newsletter

13Oct/160

The Mobile Ecosystem’s Evolution

BONNEAU_Vincent-84x126NB

Vincent Bonneau,
Project Leader, IDATE DigiWorld
Contact

Benefits and impact on mobile industry competition of Android and iOS

Have mobile OS helped create a mature and more open mobile ecosystem?

The study, commissioned by Google, illustrates the paradigm shift in the mobile industry introduced by iOS and Android, due to decreased fragmentation. It analyses the clear benefits that new OS bring to the digital economy, with more affordable and more powerful devices, and providing access to a host of applications and services. Lastly, it assesses the impact that new OS have on competition, arguing that they have not reduced consumer or developer options, and have actually enabled the rise of new players (Samsung) and even of major competitors such as Facebook.

Highlights:
iOS and Android have helped to reduce fragmentation in the mobile industry and so were quick to attract developers.
 iOS and Android are the real driving force behind the rise of the smartphone and mobile Internet markets, where previous attempts with WAP and walled gardens failed.
 This has led to a thriving mobile app economy in Europe, with close to 1.5 million jobs and 13 billion EUR in revenues (paid apps, advertising) in 2016.
 We have seen a great many success stories independent from iOS and Android, especially in the mobile gaming industry (e.g. Rovio’s Angry Bird) or around Facebook.
 Competition is stronger in the device market than before the launch of iOS and Android. Android has even opened the way for newcomers thanks to low prices.
 Developers are using multiple platforms, especially by leveraging cross-platform tools.

> Download the White Paper