Over the past few decades, TV service providers’ market power guaranteed them a certain leadership in production.
Thanks to a steady relaxation of competition rules in the United States, the resulting vertical integration trend has seen production studios merge with TV networks and cable companies. In other markets, such as France, public authorities have continued to oppose such a trend, underscoring how vital production independent of the top networks is to sustaining diversity and creativity.
A new way of consumption
Here too the Internet is changing the status quo. We watch more and more videos. We watch them more on our own, and from increasingly global sources. Content providers and pay-TV distributors are being penalised both by their costs and their only national footprint, and are having to contend with two major threats: being cut out of the service equation and being cut off from customers. Market heavyweights like the ones found in the United States are having to weigh the pros and cons of working with a platform such as Netflix that is expanding worldwide, versus setting up their own over-the-top solution… and protecting what is still their main source of income, i.e. selling programmes to TV channels (including affiliate stations). But their dilemma is still less dire than the one facing Europe’s independent providers, who have a primarily national footprint and which are often restricted in the extent to which they can exploit the rights to the programmes they help finance.
Ecosystem and legislation
The European Commission likes the idea of having TV rights negotiated for the EU as a whole. It would provide an opportunity to introduce the idea of economies of scale in a lucrative sector, and one that has a tremendous cultural influence. Unfortunately, in its revised version, this plan, which is one of the pillars of the Digital Single Market proposal unveiled in early May, is coming up against Europe’s very disparate set of national TV ecosystems. As national laws – and especially the state of the industry – currently stand, very few companies in the EU can hope to come out winners in any negotiations for rights to all 28 European markets. Bluntly put, a very cut and dried application of such a scheme would more likely be a boon for outsiders such as Netflix, Google, Apple, Facebook, Amazon, etc.
Despite which, our desire to be optimistic leads us to hope that the steady and inexorable development of the OTT video model will drive a change in legislation across Europe, and lead to cross-border and possibly continental deals between Europe’s TV sector players.
For the publication of the last study about "OTT Regulation" and the 15th edition of the DigiWorld Yearbook, IDATE is organizing a conference on the perspectives and key trends that will structure the digital economy for the next decade, DigiWorld Future
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Year after year, the economic and financial power of the GAFA quartet of Internet platforms continues to increase. Which brings two questions back to the fore, again and again: what trends might emerge to counter this seemingly inexorable rise? And do we need regulations that apply specifically to platforms?
A quick reminder of what economists mean by platform economics (digital or not): multi-sided markets (i.e. involving interactions between two or more parties) with reciprocal “network effects”. So the more iPhones that Apple sells, for instance, the more attractive its app store becomes to developers (and so to users), and vice-versa. In digital sectors, this characteristic is typically combined with a reduction in fixed costs (software), generating increasing returns as the platform becomes more successful.
Network effects usually go hand in hand with another property: asymmetrical prices. If Apple is starting to earn substantial income from the App Store, its business model and profits are rooted chiefly in the high price of its iPhones. With ad-funded models, one side of the market operates as a free service. As we have seen with Apple, digital platforms are a very efficient means of fostering open innovation, and capitalising on innovations from third parties. All of these aspects, which go some way to explaining why “winner takes all” when it comes to platforms, naturally need to rely on the ability to maintain the role of intermediary, and continue to become more proficient at it. Otherwise, the platform’s customers and suppliers will begin to adopt multiple homes, before eventually moving on to another, better platform. The efficiency of the leading platforms is the very reason for the current ambivalence over how much they are serving the greater good. On the one hand are concerns that a dominant OS will abuse its position while, on the other, this popularity can also mean an opportunity for developers, and can have positive repercussions for consumers.
The dichotomy needs to be resolved by taking account of the Internet’s dynamics as a whole. Windows has been through a number of anti-trust investigations but, today, this is the mobile Internet which has moved down the priority.
Worth reading on this topic is the recent IDATE report on "The future of the Internet: 2025". It takes a detailed look at the key technologies for the coming years, and especially at how development scenarios will be shaped by key variables, such as the openness of the Internet ecosystems, or the impact of restrictive privacy or security-related public policies. Here, we will add two other events that take us beyond a GAFA-centric environment. First, 2014 saw a number of Internet powerhouses emerge from the shadows of the GAFA quartet: in China (Alibaba, Weibo…) and in Asia’s leading markets in general (Rakuten, Line…).
We cannot entirely discount the possibility of these players gradually coming to compete head on with their Western peers. Second, we need to consider the position held by new players moving into vertical markets, many of which have carved out a place of sector-specific intermediary – Uber and Airbnb being two prime examples – and which have no intention of being taken over by Google or Apple or the like.
Nevertheless, faced with the realisation that GAFA continue to become increasingly powerful, the inefficiency of antitrust laws and the regulatory asymmetries compared to those imposed on other players along the chain, the idea of regulation that applies specifically to platforms is gradually coming to the fore. It may not be a good idea. Competition law, even ex post, is not necessarily ineffectual.
Plus it will be no simple matter to define the contours of the platform sector. And extending existing sector-specific laws, such as those that apply to electronic communications, to make OTT companies and telcos subject to the same principles, would take us down a path where, as businesses become more and more digitised, every economic sector would be more or less governed by electronic communications laws. Keeping in mind that the upcoming review of the EU regulatory framework for electronic communications is expected to focus on network access conditions and interconnection – and probably put more emphasis on symmetrical regulation. Should voice and SMS products not be removed from the scope of the telecom sector’s ex ante regulation, rather than adding in competing OTT products such as Skype, Viber, WhatsApp, etc.?
It nonetheless remains that in sensitive areas for digital industry players, such as those governing contract law, taxation, public safety and privacy, we can very easily identify laws that should apply across the board, such as what we find in consumer products and the retail industry. Without having to produce laws that are specific to platforms, the current juncture could provide an opportunity to merge national legal provisions with regional (EU) and global ones, and to ensure that they apply equally to all players along the value chain
For the publication of the last study about "the future Internet in 2025" and the 15th edition of the DigiWorld Yearbook, IDATE is organizing a conference on the perspectives and key trends that will structure the digital economy for the next decade, DigiWorld Future
More informations about IDATE's expertise and events :
Published in COMMUNICATIONS & STRATEGIES No. 97
Chief Economist at Google;
Emeritus professor at the University
of California, Berkeley
C&S: What are the biggest challenges for governance/regulation created by growth of the big data market? Are there big differences between the US/Chinese and European approaches to big data opportunities?
Hal VARIAN: There are policy issues relating to data access and control that arise constantly. This generates a lively debate, to say the least. As an economist, I would like to see serious benefit-cost analysis guide regulatory policy.
What are the most important skills sets for those who need to make sense of results of big data analytics?
Statistics and machine learning are most obvious. But in order to put analysis to work, communication skills are critically important. To be effective, a data analyst needs to turn data into information, information into knowledge, and knowledge into action. You can't do this without communication.
What are the biggest opportunities for business and are businesses able to make effective use of big data to improve their margins?
As in every business, it is imperative to understand your customer. When you can draw on computer mediated transactional data, it is possible to gain a deeper understanding of the customers' needs than was previously the case.
What has big data analytics to learn from mainstream econometrics and what can big data analytics contribute to mainstream econometrics?
Econometrics can draw on some of the powerful techniques of predictive analytics that have been developed by the machine learning community. These tools are particularly helpful when dealing with data involving nonlinearities, interactions, and thresholds.
Econometrics, on the other hand, has focused on causal inference from its very early days. Techniques such as instrumental variables, regression discontinuity, and difference-in-differences have been widely used in econometrics but, to date, have not been used in the machine learning community.
Finally, the statistical field of experimental design will be valuable to both communities, as computer mediated transactions enable true randomized treatment-control experiments, which are the gold standard for causal inference.
What should be added to standard US Ph.D. programs in economics to make the students big data literate?
There are now very good textbooks, online tutorials, and tools that make it relatively easy to put together a course on machine learning. In addition virtually all computer science departments and many statistics departments offer such courses.
Hal R. VARIAN is the Chief Economist at Google. He started in May 2002 as a consultant and has been involved in many aspects of the company, including auction design, econometric, finance, corporate strategy and public policy. He is also an emeritus professor at the University of California, Berkeley in three departments: business, economics, and information management. He received his S.B. degree from MIT in 1969 and his MA and Ph.D. from UC Berkeley in 1973. Professor Varian has published numerous papers in economic theory, econometrics, industrial organization, public finance, and the economics of information technology.
The Communications & Strategies No. 97 "Big Data : Economic, business & policy challenges" is now available !
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Il décolle ! Le marché du Serious Gaming en forte progression pour atteindre les 12 milliards d’Euros d’ici 2018.
L’innovation est au coeur des préoccupations des entreprises qui développent des Serious Games. Elle porte sur des aspects technologiques (accessoires, terminaux, interfaces, réseaux, logiciel et cloud), sur les contenus (gameplay, graphisme, stratégie éditoriale), et également sur les services d’accès aux SG (conditions d’accès, add-on, modularité de la plateforme, fonctionnalité sociales).
Cette progression du marché offre donc des perspectives très prometteuses aux développeurs de Serious Gaming (SG) sur le territoire français, comme le confirment les cinq sociétés que l'IDATE a invitées à collaborer à ce rapport : Daesign ; KTM Advance ; Groupe Interaction ; Manzalab et Dassault Systèmes.
Aussi, sur la période, on observe une croissance à deux chiffres à partir de 2015 et un pic de croissance sur 2016-2017. Ce pic correspond à un phénomène d’accélération de l’adoption du SG comme outil de formation et d’information par des PME. Aujourd’hui, ces dernières commencent à vouloir adopter ces outils vendus sur étagère.
La formation initiale et continue représentera plus de deux tiers du marché en 2018
Le segment de marché de la formation initiale et professionnelle représente le premier segment de marché du SG. Ce segment offre l’avantage d’avoir des modèles économiques compris et acceptés des commanditaires, de la production à façon à l’acquisition de licences utilisateurs.
Pour rappel, en 2014, ce segment représentait plus de 60% du marché global. Il gagnera 10 point jusqu’en 2018.
À l’image du marché mondial, le pic de croissance concernera davantage les années 2016-2017.
Ainsi, Dans les trois années à venir, le défi des acteurs offrant leurs services dans le SG sera de convaincre les entreprises de plus de 500 salariés, soit près de 2 700 en France. Les experts de l’IDATE s’accordent à dire que ce défi pourra être relevé tant les preuves du concept ont été faites auprès des grands comptes nationaux. Il s’appuiera donc sur différents facteurs clés de succès :
Pour retrouver toutes les informations concernant l’étude Serious Gaming et les études associées, cliquez-ici
Plus d’informations sur l’expertises et les événements de l’IDATE sur :
IoT : The Internet of Things
Connected objects were everywhere and IoT is now becoming the Internet of everything.
Connected cars attracted a lot of attention with connected vehicles on most of equipment manufacturers’ and MNOs’ booths.
Renault’s CEO made a keynote where he presented the timetable for assisted driving. According to Mr. Carlos Ghosn, despite their numerous initiatives and some acquisition rumours, Internet giants are not rivals to car manufacturers but allies, as they consider electric cars and they help car makers to promote electric cars.
Ford had even its own booth presenting the electric vehicles (both passenger and entreprise cars) with dedicated solutions. In the meantime, Vodafone presented a Porsche Panamera model equipped with its new Telematics solution since the Cobra acquisition.
Smart is also getting traction in the IoT space. In the “innovation city” hall (space dedicated to the connected objects), through the AT&T offering (Digital life) where the home could control through the smartphone and even through the connected car (equipped with an AT&T SIM card). When approaching the home, the car can trigger the opening of gate by itself for instance (pre-programmed distance).
While 5G is already in the tracks, very low throughput network technologies are also under the spotlights. After the recent release of its 100 MEUR fundraising campaign among telecom operators, Sigfox was also on everyone’s lips at the MWC. Among the main new shareholders, Telefonica confirmed its strategic investment and its willingness to integrate the technology into its portfolio to address additional verticals and applications.
The GMA (Global M2M Association) also announced a strategic collaboration with Gemalto and Ericsson to provide a Multi-Domestic Service based on a single SIM (using the eUICC technology) helping global enterprises (chiefly from the automotive and consumer electronics segments) capitalize on the growth of connected devices.
Growing market but still key challenges though
During his keynote, if AT&T Wireless CEO predicted that the smart phone will be the remote control of everything in the next few years, he also pointed out the key challenges to address in order to make the IoT market grow significantly:
• Privacy concerns
• Effortless (ease of use)
Data about devices and their users is generated in real-time, often by default and without the user being aware or having choice (especially for free apps). There is a need for a different approach to giving users transparency, choice and control over their data and privacy.
Generally user has a single choice : accept or not using the service, there should be gradual approach (like sharing some id attributes but not all of them).
Privacy could be a competitive stick for service providers, as users are becoming more aware of privacy.
Facebook in emerging countries
• Airtel: “Operators and Facebook are like the beauty and the beast, but the beast (facebook) is becoming more human nowadays”. Airtel was reluctant to introduce Facebook because of VoIP threat. Is looking at it like the “boiling milk”.
• Millicom, Telenor: have seen ARPU rise thanks to facebook launching, very promising for them.
• Wikipedia has the same approach of “Wikipedia zero”, dealing with operator to provide data access for free.
More informations about IDATE's expertise and events :
Valérie CHAILLOU Head of Research, Telecoms Business Unit, IDATE
Accelerated growth in FTTH/B coverage from incumbents and enhancement in competition from new entrants, even in mature markets
In 2014, the dynamism of European markets (EU-35) was impressive: the number of subscribers reported the highest growth since end 2010 (nearly 55% increase). In terms of coverage, the increase reached 43%. This dynamism is led by countries such as Spain, where players have clearly played an important role and finally overpassed their initial objectives. There were nearly 14.6 million FTTH/B subscribers and more than 59 million homes passed in the EU-35 at end 2014.
In Spain, the incumbent Telefonica has decided to accelerate its rollouts aiming at covering 10 million households at end year, compared to less than 4 million at end 2013. This impressive growth and associated commercial strategy had a concrete impact on the Spanish market where, during the year, there were nearly 800,000 new FTTH subscribers.
Another noteworthy country is Romania where the leading players have decided to change their strategy and finally deploy FTTH/B when they were firstly focused on FTTx/LAN architecture in previous years. Therefore, the number of subscribers has considerably increased taking into account a total churn from end users. Those countries are followed by France, Turkey and the Netherlands (where, respectively, 25%, 24% and 39% of FTTH/B subscribers are new 2014 subscribers).
Elsewhere, Sweden still devotes to be highlighted: the latest trend in the country is to focus more and more on the single-dwelling units market which was not the first target of players involved in FTTH/B. The demand is steadily increasing since 2013 and, even if more complex and costly to deploy, FTTH to single-dwelling units is becoming a commodity. This is even truer for local fibre network players, involved in local scale rollouts, which have devoted half of their investments in targeting single-dwelling units in 2014. The Swedish incumbent was also very active in 2014, with more than 300,000 new Homes Passed yoy and an increase of around 31% in terms of FTTH/B Broadband subscribers. Then, the competitive landscape is also moving thanks to the involvement of smaller players that have strong ambition and get involved by acquiring local fibre networks previously owned by municipalities. Such trend should help Sweden keep a leading position on the European FTTH/B market.
On other markets, FTTH/B subscriptions also increased significantly. A part from Spain, the most performing country in 2014, we can mention the Netherlands where the number of FTTH/B subscribers has increased by 65%. France, Portugal, Turkey and Switzerland have also shown steady growth, in line with the trend we had already noted in 2013, with between 32 and 79% growth rate in the subscribers basis.
In terms of players involved in FTTH/B projects, alternative carriers are still leading the way, representing a 45% of the total homes passed in EU35 at end 2014 (67% considering EU39, which shows the important role of those players in Russia and Ukraine!). Among them, we can note this year the interesting role of recently entered players in countries considered as mature such as in Sweden and the Netherlands. Most of those players are backed with investment funds that help them strengthen their FTTH/B strategies.
The number of local authorities launching FTTH/B rollout projects on their territory has decreased a little bit in 2014 but they still represent only 9% of homes passed in EU35. Few new projects have been concretely launched by local authorities noted during 2014. There are some interesting rollouts in France, still in the context of the national program for superfast broadband, but most of them are still in the very beginning of the process. They represent some 600,000 homes passed end 2014.
Then, of course, incumbents are important players in all European countries. They represent 46% of HP in EU35 at end 2014, +3% compared to 2013. Several incumbents have considerably accelerated their rollouts in 2014. As in 2013, the most dynamic is Telefonica in Spain, but with a much more impressive growth: from 1.7 new Homes Passed in 2013, Telefonica reached more than 6 million new Homes Passed in 2014. Then come Orange in France (+897,000 HP), TeliaSonera in Sweden (+416,000 HP), KPN/Reggefiber in the Netherlands (+312,000 HP) and Turk Telekom in Turkey (+300,000 HP). It is also very interested to note the quite recent involvement of Bezeq in Israel, which decided to upgrade its infrastructure to FTTB: more than 1 million homes are now passed with FTTB but no services are available yet on the network. The operator is still focused on providing VDSL2 based services to end users for the moment, but it is betting on the need for higher speed rates in the near future and it is preparing itself to be able to provide required solutions very rapidly.
Number of FTTH/B subscribers per country in Europe (countries with more than 200 K subscribers)
Source: IDATE for FTTH Council Europe
Number of FTTH/B homes passed per country in Europe (countries with more than a million homes passed)
Source: IDATE for FTTH Council Europe
When enlarging the analysis to EU39, Russia and Ukraine are still very specific markets. Their respective demographic characteristics are so different from other countries that the comparison is not always very relevant. However, both markets are quite dynamic, with respectively +50 and +15% in terms of subscribers basis.
Regarding the technology deployed, Ethernet is still players’ first choice across the EU-39, and represented 66% of all FTTH/B rollouts at end 2014.
As concerns network architecture, most new deployments concerned FTTH which now represent 41% of homes passed at end 2014 (vs 34% one year ago). However, FTTB is still the favourite configuration as it allows them to avoid the issues that come with installing fibre on private property, and especially MDUs – i.e. having to negotiate with each property owner.
1 The term EU-35 refers to the EU-28 countries –Cyprus + Andorra, Iceland, Israel, Macedonia, Norway, Serbia, Switzerland and Turkey.
The EU-39 refers to the EU-35 + the four CIS Countries: Belarus, Kazakhstan, Ukraine and Russia.
>> Our study about FTTH/B are interresting you ? Go on our store.
Deputy CEOs of IDATE
Deputy CEOs of IDATE
A point of view published in Les Echos 12th of february 2015
There is quite a crowd of candidates jostling to become our entertainment operators, our personalised content access platform. Heading the ranks is the famous GAFA foursome, i.e. Google, Apple, Facebook and Amazon. Each of these four giants has managed to grow its business by leveraging their initial disruptive innovation, which quickly expanded into other arenas: a search engine that became the world’s biggest ad broker, a genius hardware manufacturer that invented the app store, a social networking site now poised to become a viral content distribution platform, and an online bookshop that has become a global one-stop-shop for every product imaginable. A power that is measured in superlative figures: billions of users, record-breaking revenue, the biggest cash flows and the highest market caps… Not to mention the advantages of being a ubiquitous global brand: the ability to create local versions of online products quickly across the planet, and an apparently unquenchable thirst for diversification that today includes robots, online banking, virtual reality, cloud computing services and, so, content.
The virtuous circle of Netflix
Can Netflix carve itself a place alongside these giants? Its success lies is keeping the promise of unlimited video, with a strong emphasis on TV series. A simple and efficient product that seduced American viewers with its ultra competitive price, compared to what cable companies charge. And it now appears poised to be embraced by Europeans as well, even the younger ones who are used to getting their videos for free via streaming, but seem to be willing to pay €8 a month to access the service.
But the power of the model also lies in a service that is built around the Web’s most popular content: video, which already accounts for close to 60% of open Internet traffic in France. Added to this is Netflix’s ability to invest massively in the most sought-after creative content today: TV series. Avoiding the distribution costs of a commercial intermediary, which account for close to 50% of HBO’s business model, Netflix can finance the production of original TV series. Starting out as just one content distributor among many, the firm from Los Gatos, in the heart of Silicon Valley, soon became a true master of the genre. A genre that may well become the emblem of the early part of this century, in the same way that theatre, the novel or cinema were for previous centuries – with the potential to lay claim to the moniker of major art form, attracting the finest writers, the best actors and huge production budgets. Much as stories serialised in the written press were once amalgamated into popular novels, television series are now being binge watched, and no longer viewed by a single episode a week. In the hands of the teams at Netflix, the series is becoming a precious weapon, at once capable of securing customer loyalty with popular series like House of Cards, of opening up new markets as with the brand new series, Marco Polo, which is aimed squarely at the Asian market, and negotiating their local bona fides, as they have in France with their commitment to produce a series like Marseille locally.
An all-in-one subscription for content?
Netflix being propelled to the rank of Internet giant also rests on the supposition that the success of the all inclusive subscription to TV programmes can be expanded to include other content, in the near future. We already have unlimited subscriptions to music (Spotify and Deezer), print media (Relay.Com), video games (OnLive) and books (Oyster and Amazon, of course). But we should also note that the lines are shifting, as Pascal Nègre, President and CEO of Universal Music France, recently touted these services as the ultimate means of saving the revenue of one of the first industries in the firing line of the digital revolution. Meanwhile publishers are still debating the wisdom of applying the model to books, with most coming out against it.
As veteran specialists struggle to introduce viable subscription plans, an outside player, armed with a cross-media universal subscription model could emerge. Netflix could be the promoter in chief, buoyed up by the success of its video-centric model. It could carry that model over to other content, and overtake not just traditional players, but even Amazon, Apple and Google which, although already well entrenched in this market, have thus far failed to demonstrate any great skill. This would mark a true disruption. By dominating the universal content subscription, in the same way that Amazon has become an all-in-one store, Netflix would become our main provider of paid access to all content. A veritable earthquake that would completely shake up the way culture industries’ value chains are organised. It would also undoubtedly pave the way for a whole series of changes: cross-cutting recommendations covering all manner of content, accessing an article in the press the way we currently access songs, paying authors according to the size of their readership…
Netflix stepping into this closed circle of giants would confirm one of the Internet’s key maxims: winner takes all. In a globalised market, a single player dominates each segment. But the GAFA foursome have not yet lost the content battle, nor are they ready to lay down their arms.
Jean-Dominique Séval and Gilles Fontaine, Deputy CEOs of IDATE
Head of "Video Distribution" Practice
IDATE has released its White Paper on personalised video consumption, explored through the development of network based programme recording made possible by network PVR (nPVR) technology.
For Jacques Bajon, Head of IDATE’s Video Distribution Practice and author of this report, “consumers are taking control and shifting gradually from passive viewers to active participants in their consumption of TV services. Recording programmes is a major example of this shift. Network based recording and storage functions thanks to nPVR systems is a solution that makes it possible to strengthen the synergies between linear and on-demand TV services, paving the way for a win-win model for consumers, rights holders and network operators”.
The cloudification of TV
The network PVR (nPVR) is an evolution of PVR which moves the storage of programme recordings to operators’ servers.. It is thus part of a wider process of deployment of platforms in the area of video distribution into “the cloud”, i.e. the moving of distribution features from the home television to remote servers. This “cloud” approach to managing video content is being progressively adopted due to the flexibility given to the editors of TV services, network operators and consumers.
Distributors around the world that have implemented this solution are many, especially in Europe, seeking to capitalise on the positive externalities for all of the parties involved:
• The user benefits from an improvement of the recording feature, now available on all viewing devices. In addition, a new population is becoming eligible for the facilities of digital recording, without bearing the cost of expensive equipment.
• Rights holders rely on networking solutions to better monitor the use of their content outside linear programming, create a new link with television viewers/users and thus better monetise that content. Influential in terms of programmes, TV channels can then promote the relationship between linear and non-linear offers and find new revenue leverage based on cumulative audiences. This evolution applies more and more in a secure environment that does not necessarily question the rights holders’ remuneration systems.
• The network operator sees in the deployment of nPVR the possibility of an optimisation of the costs of digital recording solutions in comparison with hard drives deployed in homes. These gains could allow operators to invest in the ergonomics and functionalities of the services, which are now the heart of the added value of video content distribution.
With the consumer gaining flexibility in video use, rights holders transforming the threat of delinearisation into an opportunity for better exploitation of their content and operators able to better manage those services operationally, there is the possibility of creating a virtuous circle, made possible through nPVR solutions.
Map of nPVR deployments in Europe