Premium content: Sport, cinema, fiction TV

Florence Le Borgne-Bachschmidt


Florence Le Borgne
Head of the TV & Digital content Practice, IDATE.


What potential exists for “everything OTT” distribution?

IDATE’s latest report spotlights premium content right holders’ strategies to tap the new internet territories. It provides a benchmark of OTT services launched by major rightholders. The study also provides the analyses and conclusions on these OTT strategies in highlighting their drivers and hurdles: technology, regulation, consumption patterns. Finally, it addresses the question of viability of an exclusive OTT strategy for Sport, Cinema & TV series right holders.

There is not a lot of audiovisual content that can be designated as 'premium'. Only fiction (films and TV series) and certain sporting events (depending on the country) meet the conditions necessary to merit the description: mass appeal, a certain rarity and desirable enough that consumers will pay for it.

Broadcast by a small number of providers (the importance of rights and the relative scarcity of premium content automatically limits the number of possible candidates), premium content belongs to a variety of players, such as in cinema where production is distributed among a large number of smaller players, although a few big US studios produce a large part of the sector's revenue.
The clear lines drawn with rights (by territory, time, medium) aims to maximize the potential value of the content and thus the revenues generated by the rights holders. Although television contributes significantly to revenues generated by film studios and sports leagues (about 20% on average), its contribution varies significantly depending on the country, the licensing fee model in place and the attractiveness of the content itself.

Florence Le Borgne, Head of Study, notes: “OTT-specific services present an obvious opportunity to premium content rights holders: to add value to content that has little or no exposure on television, to generate additional revenue, and to put pressure on traditional distributors and thus 'raise the stakes'.

Premium content distribution value chain and breakdown of value by player according to distribution type :



Source: IDATE, Rightholders turn OTT, April 2014


However, the approaches taken so far have differed considerably:
•    Release windows, either regulatory or contractual, limit opportunities for fiction rights holders to embark on an aggressive OTT strategy, which would probably compete directly with traditional distributors who provide the bulk of their revenues (cinemas, DVD publishers, TV channels). The biggest studios are adopting conservative approaches, working within the constraints and characteristics of specific geographical markets. Independent publishers favour OTT distribution via existing platforms, due to a lack of financial resources to distribute online content themselves.
•    Leagues and sports federations, who are not subject to the same constraints, have invested significantly in the internet to generate more value from redistribution rights of their events, either via a third-party operated platform for sports with little media coverage, or direct distribution for major sports. However, leagues and federations are adopting differentiated strategies per country to favour TV coverage across the board: the more their sport is televised, the less choice offered by proprietary OTT services. Note that the European football leagues focus solely on the sale of TV rights.

As direct distribution via the internet results in disintermediation for some of the players involved in the traditional distribution chain, rights holders could theoretically expect to capture a much larger share of the end market (up to 92% of the value with direct distribution compared with 28% in the current model). However, to date, traditional distribution is still more profitable because revenues from the TV end market are so large and no player has yet exclusively distributed its most premium content. However, models have shown that, for some sports leagues, moving to 'everything OTT' would be a viable option and would generate the same revenues as those of current TV rights.

Apart from the financial risk of moving to 'everything OTT' for rights holders and the lack of internal expertise in broadcasting video services, several obstacles can be identified:
•    limited access to broadband internet in some markets as well as the number of active compatible devices (especially connected TVs with large screens)
•    regulations that favour traditional distribution in some countries, especially regulated release windows
•    the high level of dependence that could involve reintermediation with a dominant web platform
•    the potential unwillingness of users to subscribe to every sport followed on an individual billing basis rather than a household package.

Also, in the current context, only some sporting content would be a realistic candidate for migration from a rights holder's perspective (but not TV channels). OTT distribution of fiction would entail a profound upheaval which the various players in the value chain seem unwilling to accept.

The potential for migrating to ‘everything OTT’ for some sports leagues:

The potential for migrating to ‘everything OTT’ for some sports leagues:
Source: IDATE, Rightholders turn OTT, April 2014

If you want to buy the  study "Rightholders turn OTT".


Online music : Music more social than ever

MICHAUD Laurent 

Laurent Michaud
Head of Consumer Electronics & Digital Entertainment Practice 



Just how much has digital changed the music industry?

The music sector, and especially recorded music sales, have been suffering the impact of piracy since the turn of the century. And it is within this crisis mode that the industry has gradually rebuilt itself around segments like publishing, concerts and new consumption, business and pricing models (based on downloading and streaming), and now through related services available equally and simultaneously on connected platforms, both fixed and mobile. If they have proven their ability to attract a large, if not massive audience, and are sketching out the future shape of the industry, the impact of these changes has not yet been enough to erase the accumulated losses of the past thirteen years.

Momentum driven by digital music and the proliferation of channels

The global recorded music market remains stagnant (+0.2%), inching up from 16.456 billion USD in 2011 to 16.481 billion USD in 2012.

Hard copy sales continue their slow decline, generating only 57% of the sector’s revenue in 2014, compared to 74% in 2008. IDATE forecasts that in 2014 this figure will drop below 50%. Digital music gained 13 points between 2008 and 2012, generating 35% of the industry’s total income in 2012. Revenue earned from synchronisation (i.e. royalties on music used in films, TV programmes and games), and from performance and broadcasting rights accounted for 2% and 6% of industry revenue, respectively, in 2012.

Digital music generated a total 5.8 billion USD in 2012. Worldwide, the bulk of this revenue comes from music downloads (72%), followed by unlimited subscriptions (13%), mobile purchases (8%) and streaming (7%).

Switching to a network-centric approach

So the music industry is reinventing itself around new business models and consumer behaviour driven to a large degree by what goes viral, and the sheer scale of the popular sites and platforms that users spend time on, i.e. app stores and social networking sites.

• The mobile phone is becoming a central device for consuming music products (albums, videos, information on the musicians, concert dates, etc.), both when on the go and at home, listened to through ear buds or nestled in a sound dock. A host of music-related applications have been rolled out, such as Shazam, Discovr and MusicWatch. All aim to enhance the user experience for music lovers, allowing them to discover and listen to new artists (Music Beat), find concert dates (Bandsintown) or get the latest news on their favourite bands (Songkick).

• The “socialisation” of music, and the need for artists to build a community around themselves are both phenomena born of the proliferation of social media and the massive success of smartphones. This creates a greater proximity between artists and their fans, which has also proven key in keeping fans loyal. The second effect is that, thanks to social networking sites, fans communicate more than ever before about the artists they like and their favourite songs. The ability of artists, and the companies responsible for promoting them, to make something go viral has become the key to the kingdom. Video is another key ingredient in the socialisation process: YouTube, Dailymotion and Vevo are crucial parts of both users’ discovery of music, and record labels’ strategies.

• Artists have become brands that are deployed, and developed on several media. They sell themselves, or are called on to sell themselves, well beyond just their music. Their image is becoming at least as important as the music itself, and a main selling point for their products. They need to create a community around themselves, nourish it, and help convert that into sales. By the same token, massive community support for a new artist can kick-start a career, and force a record label to reconsider its marketing strategy.


Content virtualisation: The first signs of market maturity

Florence Le Borgne-Bachschmidt


Florence Le Borgne
Head of the TV & Digital content Practice, IDATE.


Electronic distribution poised to become the mainstay

More and more content is being distributed electronically. If music and video are no doubt the two sectors where digital consumption is the most visible, this phenomenon has pervaded the entire content sector. Video games top the ranks of content that has moved most massively to the Internet and electronic distribution, followed by music, video and, well behind them, books.

In 2013, an estimated 51.4% of video game market revenue was generated by electronic sales – i.e. on smartphones, computers, home consoles and laptops connected to the Web – and by online gaming, which includes item selling, subscriptions and commissions on exchange operations. This figure is forecast to have risen to 68.6% by 2017.

In the recorded music sector, electronic sales are expected to account for 38.4% of total sales in 2013 while, over in the video sector, electronic sales and rentals are expected to represent 33.8% of total sales last year. We predict these figures will have increased to 53.6% and 52.2%, respectively, by 2017.

The book sector, meanwhile, has only recently started making the transition to electronic formats. In Europe, for instance, e-book sales will likely account for only 4.5% of total sales in 2013. But the swift rise of tablet penetration rates in households, which of course makes reading electronic books easy, means that e-books could account for as much as 21% of total book sales in Europe in 2017.

The rise of digital starting to offset the decline of the hard copy

Even though digital is widely associated with the destruction of revenue – the music market lost 40% of its revenue between 1999 and 2012, and the video market lost 13% between 2006 and 2012, after having increased by a factor of 3.8 between 2000 and 2006 – we are seeing a growing number of signs that the markets are becoming more stable.
After hitting a record low in 2010, the recorded music market enjoyed a slight recovery worldwide in 2011 and 2012, which will likely carry on through 2013. This has been due in part to a slower rate of decrease in hard copy sales, and to a steadier rate of increase in revenue from digital sales – including downloads, subscriptions, and ad revenue on music sites.

We are also seeing encouraging signs in the video market. The US market has been reporting growth for two years straight (+0.2% in 2012 and +0.7% in 2013), thanks to a steady rise in permanent download sales (+47.1% in 2013), which topped the 1 billion USD mark for the first time last year. The UK market is enjoying the same momentum, reporting 0.5% growth in 2013, thanks to a very healthy increase in digital sales (+40.2%) and a 10% rise in spending on Blu-ray.

The book market in France, where e-books accounted for only 4.4% of sales in 2013, is starting to lose ground (-1.2% in 2012 and -1.3% in 2013), whereas Britain’s book market continues to grow – by 4.9% and 2.5%, respectively, during those two years – despite a decline in printed books sales: -4.7% in 2012 and -5.5% in 2013. The fact that the UK’s e-book and audiobook market kicked off earlier than it did in France, has meant both more readers who have adopted these formats, and a high rate of digitisation for the works themselves (27.5% in 2013). The rise in e-book sales is thus offsetting ailing print edition sales.

Although it is still too early to conclude that digital will open up new growth avenues for the content market, these positive signs in a globally dismal economy do offer some rays of hope.


Post-production in the cloud: a new strategy for technical industries?

Gilles Fontaine

Deputy Managing Director
Director of TV & Digital Content Business Unit


Like with cloud computing that moves computing power and certain applications to remote servers, the post-production industry is also seeing a growing number of cloud-based solutions coming onto the market.

This trend is a response to the growing complexity of the TV value chain. The production of programmes on the one hand, and their distribution on the other, once represented two sequential processes. But now that video on demand – and the distribution of video programmes on the Web in general – are flourishing, distribution strategies can now retroact on content to produce different versions that are better adapted to a given platform, device or target audience.

Media Asset Management: a key link in the chain

This interaction between production and distribution has resulted in the emergence of media asset management systems that consist of storing, archiving, cataloguing, annotating and retrieving programmes for delivery over multiple networks, of inserting targeted ads, and indexing for search engines and social networking sites. Video solutions providers today need to be able to supply producers with centralised and shared management solutions for their content, where the post-production stage interfaces directly with the process of preparing programmes for distribution.

At the same time, technical industries are suffering from the ever accelerated rate of technological innovation which, although improving the performance of their solutions, also require constant expenditures, and give an advantage to new entrants who acquire the latest technologies available, while the competition is still trying to amortise the last round of investments in hardware. Post-production customers are also under tremendous pressure to lower programming costs, due to increased competition in the TV sector which is operating in a climate of economic uncertainty. In addition to centralising the services, a cloud-centric approach allows post-production companies to pool their equipment and to have variable costs, exchanging investments in hardware and licences for computer or application time.

Cloud-based post-production solutions offer different levels of service, ranging from remote storage to the use of editing applications (via lower quality rendering that can be accessed on an ordinary desktop computer) and, possibly down the line, additional functions like indexing. These solutions offer several advantages:

• costs correlate directly to actual use;

• workflow is generally optimised thanks to the use of a single storage location;

• all of the parties involved have access to the programme in production, regardless of their location, and service providers have access to the latest technological developments.

But there are risks involved as well:

• the content’s security;

• the need for a telecommunications network (between the service provider and the cloud service, and on the service provider’s premises) with a guaranteed level of quality;

• lack of compatibility between the different cloud solutions.

Integrating key functions in the cloud

We are seeing a growing number of post-production solutions, being marketed by companies like Grass Valley, Adobe, Aframe, Sony and Avid. The solution being sold Avid is an ambitious one, offering a service platform in the cloud that combines all of the essential functions of programme production and management. The platform is intended to be employed not only with Avid editing and post-production solutions, but also solutions that help customers monetise their content (producing different versions of programmes, integration of Consumer Analytics) and those that enable the creation and management of metadata. The company also has plans to create a marketplace. Not all of the applications hosted on this open platform will be developed by Avid, as some could be supplied by partner companies. This approach is nevertheless an expression of Avid’s desire to build on its core business, i.e. post-production solutions, to expand into content distribution. In doing so, it hopes not only to generate new revenue steams, but also and above all, to secure the loyalty of its customers who, once they have embraced the platform, will have no need to switch to another provider.

The cloud-based service platform according to AVID

Avid Everywhere - A Vision for the Future of the Media Industry

Source: Avid: Avid Everywhere - A Vision for the Future of the Media Industry

Fewer barriers to entry

The development of cloud-based solutions, which are still in their infancy, indeed appears to be in line with customers’ needs for solutions that are both more centralised and more collaborative. It is also an expression of the emergence of media asset management as a key stage in programme production and distribution. Lastly, it is a reflection of the need of technical industries grappling with a tough economic equation to seek out complementary business opportunities along the technical video chain. But these solutions also represent a threat to existing service providers: the cloud lowers the barriers to entry into the post-production market, and so ushers in more competition, based not on the financial ability to acquire the necessary hardware and licences, but rather on creative excellence.


Comcast, Time Warner, Netflix, Verizon: redrawing America’s TV landscape

Gilles Fontaine

Deputy Managing Director
Director of TV & Digital Content Business Unit


Three recent deals are reshaping the video distribution landscape in the United States. The first is Verizon’s takeover of Intel’s media division, after the latter decided not to launch its own OTT service. The carrier will use Intel technologies to better integrate OTT solutions into its own internet plans, but perhaps and above all to roll out its own internet TV service, which would be available even outside the carrier’s service area.

The second is US cable market leader Comcast’s acquisition of Time-Warner cable, which still needs to be approved by anti-trust authorities. The deal would increase the new entity’s market clout in both OTT services and with American studios. The third major deal is the agreement between Netflix and Comcast, whereby the cableco would be paid to guarantee high quality network access for Netflix customers.

Cable High-Speed Internet and video subscribers in the USA

These three deals are milestones in that:

• They take net neutrality debates to a commercial negotiation between services and network operators. If Netflix and Comcast managed to reach an agreement, there is no longer a need for specific regulation, provided network access is still supplied under non-discriminatory conditions.

• They attest to the pressure that triple play operators are under to protect their place in the video distribution chain. Cable TV customers in the United States are a shrinking population, whereas broadband cable customers constitute the majority. As a result, securing good terms from the TV networks has become vital to video distributors’ economic well-being.

• They reveal that size does matter when going head to head with increasingly globalised internet companies. A portion of competition in video distribution today is playing out in the realm of technological innovation. Comcast has been spending heavily on R&D on new video services for the past several years – investments that need to be amortised over a larger number of customers than what it has now.

• Ubiquitous online distribution heralds the disconnection, first between video access services and, second, the supply of premium services, and could augur a future split in the companies that currently supply them both.


Edito by Yves Gassot

Yves Gassot


Round-up for 2014

It’s hard, in the first editorial of the year, to avoid laying out the overriding themes that we expect to see play out over the next twelve months. But it is still too early for me to deliver a complete summary of the year gone by, which has become the much-anticipated task of our DigiWorld Yearbook.
You will also need to wait until the next Executive Note to find out the central topic selected for this year’s DigiWorld Summit (but you can already mark your calendars for November 18, 19 and 20).

What I can share with you, however, is our belief in the profound relevance of certain issues, by summarising three topics that we have chosen to explore in this year’s Collaborative Research Programme (CRP 2014). These are think tanks open to existing IDATE member companies and those wanting to join, who will work for close to a year with a dedicated team of our analysts on the following subjects:

Telecoms USA: model or counter-model?

Following thorough on the two projects carried out in Brussels in 2012 and 2013 on telcos’ new business models, and the new European policy options being considered, we will work to deepen our understanding of the specific points that explain the different directions being taken on either side of the Atlantic.

The internet of things: will everything be connected?

We are going to analyse the true potential of the internet of things, by taking account of the developments that need to occur in the technical environment, difficulties in generating income from both consumer objects and industry applications and, finally, governance and personal data ownership issues, with tie-ins to our 2013 think tank on personal data

What will tomorrow’s TV and video networks look like?

Here we are building on the 2013 Video as a Service think tank by exploring issues surrounding the future of television and video distribution networks, and by analysing long-term scenarios for the delivery of TV and video products, taking particular account of the cooperation and convergence between networks, i.e. hybridisation involving both fixed and cellular networks

Other topics may be added to the CRP. For instance, we are contemplating an ambitious project that aims to define what could be a comprehensive, metropolitan area-scale digital investment strategy, going beyond marketing clichés and segmented vertical approaches.

I can also tell you that the next issue of Communications & Strategies (DigiWorld Economic journal) will be published in March, and is shaping up to be a promising one. It will be devoted to scoring Europe’s telecommunications sector, and examining potentially clashing policies.
And, finally, a reminder that the best way to delve into the subjects that are consuming our teams is though the reports that we publish every month as part of our annual Market Research programme.


What will the video industry look like 10 years from now?

Gilles Fontaine

Deputy Managing Director
Director of TV & Digital Content Business Unit


Some views on the future of video from the IDATE think tank

The “Video As A Service” programme, which was managed by IDATE experts as part of the DigiWorld Institute’s Collaborative Research Programme, brought together 25 audiovisual industry professionals to explore what the future holds for the sector.

Over the course of three seminars held from September to November 2013, they discussed their views and those of the guest speakers, before establishing a consensus on the future of consumer behaviour, services and distribution. Although the complete results of the programme are available only to the think tank’s participants, we can share some of the more interesting ideas to emerge.

Lower barriers to entry

The leading media industry companies’ competitiveness used to be based on their control over three things: content, the networks and the devices. But video-on-demand offers are coming to undermine the exclusive content model, and the internet does away with the need to obtain a DTT broadcasting licence, or to negotiate with network operators that package pay-TV solutions. Added to which, the television is becoming an open access device.

Arrival of global players

If content production is already a relatively global business, distribution is still largely a national affair, controlled by national companies. But new entrants have a global footprint in mind.

Accelerated rate of technological development

For a long time, technological innovation in the audiovisual sector advanced at a snail’s pace. But the growing complexity of programme distribution today requires solutions that evolve as quickly as the internet does.

Software excellence becoming a key competitive edge

Intelligence centralised in the cloud to optimise the network, understanding where and how users are consuming their content, catering to a variety of devices, customising offers, offering the best possible user interface, making IT expertise a central part of media operators’ business.

More complex regulatory framework

Regulation that is specific to the audiovisual market, which in France is particularly strict, is not the only regulation to apply to the industry’s companies. With the increasing globalisation of both the markets and the companies that populate them, new sector-specific regulations, such as those concerning data privacy and net neutrality in some instances, or more generally the growing role played by common competition law, can result in a greater disconnect between cultural and economic regulation.

2014 Collaborative Research Programme: “What will tomorrow’s TV and video networks look like?”

In terms of screen time, traditional broadcasting networks are still the top distributors of TV programming. Depending on the country, terrestrial, satellite, cable and IPTV networks account for the majority of viewers’ screen time. But on-demand viewing is becoming increasingly popular with users, and increasingly available on portable devices.

In addition, the different networks are undergoing, and will continue to undergo performance-boosting upgrades, including the switch to DVB-T2 or DVB-Sx, the adoption of HEVC and VP9, and increased throughput on both fixed and mobile networks. Fixed and mobile internet networks want to incorporate linear multicasting.

All of which is creating new video distribution configurations. Hybrid solutions are already making the most of broadcast and unicast systems by combining fixed broadcasting and internet networks, and will soon include mobile broadcasting and internet systems as well. From a more general perspective, fixed and mobile internet networks can appear to be increasingly interchangeable, or at the very least complementary.

Further down the road, the dividing lines between the different types of network are bound to dissolve more and more: cellular networks providing last mile connections for fixed networks, the (already begun) convergence of fibre and cable, and the first forays into a unified wireless terrestrial network, capable of delivering both broadcast TV channels and unicast video services.

The longstanding configuration of TV broadcasting silos and services appears to be giving way to a more expansive view of hybrid systems, combinations that can be reconfigured according to the type of service being supplied and how mature the market is. Bringing this vision to full fruition would involve a sizeable change not only in the way spectrum is managed, but also in how technical distributors operate and how they interact with service providers.

To explore these various topics in depth, one of the IDATE think tanks in 2014 will be devoted to the question: “What will tomorrow’s TV and video networks look like?”


Cord-cutting: can Netflix revive the cable industry?

Florence Le Borgne-Bachschmidt


Florence Le Borgne
Head of the TV & Digital content Practice, IDATE.


In summer 2013, the American media made a steady diet of the record drop in pay-TV subscribers in the United States between mid-2012 and mid-2013 (-911,000 subscribers) – giving credence to the cord-cutting scare, whereby pay-TV customers were cancelling their regular plans en masse and turning instead to SVoD services, offering chiefly films and TV series for a very affordable price of less than $10/month.

Still no massive change in the American market

It is true that the second quarter of 2013 was marked not only by another drop in cable TV customer numbers (-159,000 for Comcast and -93,000 for Time Warner Cable, the market’s top two players), but this is not in itself an isolated event as American cablecos have been losing subscribers since 2001. What was exceptional was the drop in customer numbers for the country’s two satellite pay-TV providers, Dish TV and DirecTV, which lost 78,000 and 84,000 subscribers, respectively. If, at the same time, the two IPTV plans continued to enjoy an upswing in customers (+140,000 subscribers for FiOS TV and +231,000 for U-Verse), it was not enough to offset the loses being posted by the main broadcasting networks.

So third quarter results were eagerly awaited. The figures released on 30 September 2013 revealed that satellite subscriptions were back on the up, and IPTV customer numbers had increased slightly. Meanwhile, cable continued to lose customers but in a way that was consistent with third quarter results in previous years.

Video ARPU continues to rise

It should also be mentioned that while cable TV subscriber numbers have decreased, average per user revenue (ARPU) has increased. For Comcast, video ARPU has been rising steadily, standing at $161.07/month in Q3 2013 – which is $10 more than in Q3 2012 and $22 more than in Q3 2011. Charter Communications’ total video revenue rose by 7.4% over the past 12 months, despite a 3.3% decrease in its video subscriber base. While Time Warner Cable saw its video revenue shrink by 4.4% between Q3 2012 and Q3 2013, the decrease is smaller than the 6.1% drop in subscriber numbers during that time.

Equally noteworthy is that cable TV subscribers are also watching premium content supplied by vendors other than their traditional pay-TV provider.

A strategy of alliances with European cable companies

In the UK, where American-born Netflix is also present, it is just as hard to measure the company’s impact on pay-TV subscriptions. Market leader, Sky Digital, reported a slight increase in TV subscribers (+203,000 subscribers) between the time Netflix launched and Q3 2013, whereas cableco Virgin Media reported a slight decrease (-10,000 subscribers) in its pay-TV customers during that time, but an overall increase in paying customers (+200,000).

It seems unlikely that the partnership between Netflix and Virgin Media will drive existing Virgin customers to cancel their pay-TV plans. In fact, for an extra £5.99 a month, Virgin subscribers with a TiVo (i.e. 49% of them) have been able to access Netflix directly on their TV set since mid-November 2013.

Also present on Swedish pay-TV provider ComHem customers’ TiVo since 20 January 2014, Netflix could actually prove an incentive to sign up for a cable pay-TV plan.


Print media in the digital era: analogue dimes and digital cents

Gilles Fontaine

Deputy Managing Director
Director of TV & Digital Content Business Unit


Let’s begin with a few figures that give an idea of the beating that print media, and especially news publications, are taking. Print media’s global advertising revenue decreased by 40% between 2007 and 2001, which represents a loss of $52 billion in revenue. The news for single issue sales and subscriptions is less dramatic. Print media sales revenue actually increased slightly in the United States in 2012, but this was not the case in all corners of the globe.

The readers of print publications are not a thinning herd. But, as publications take to the web, this readership is becoming more volatile. Once daily readers of print newspapers now read the online version less often and more briefly. Less often because there is such a plethora of information available on the internet, and more briefly because sites with a great deal of video content generate longer visits than text-centric ones. As a result, papers’ share of the news delivery market continues to shrink. In 1991, in response to the question, “How did you get your news yesterday?” 56% of Americans answered, “from the newspaper”. This percentage has dropped to 33% today, while 39% cite the internet as their main source of news.

Digital readership growing, but still not solving the monetisation problem

Although print media publications are losing their share of the news delivery market, they do have a sizeable share of the online news market. Reader numbers for some papers have actually increased if we combine print and online figures. What remains, however, is to monetise their digital readership through ad revenue. The adage “analogue dimes and digital cents” applies perfectly here: internet users generate much less ad revenue than print readers do. Little time spent on the site, combined with stiffer competition on the web which cuts into ad rates, are the two main culprits for the automatic loss of ad revenue.

Moreover, traditional ad agency/broker techniques are being threatened by fact that advertisers are spending less on traditional mass media ads – which deliver a single message to all readers or viewers, well ahead of the sales transaction, and involving a relatively small number of companies – and more on the internet and its targeted adverts, its direct link to sales and large number of advertisers. Achieving a critical mass of qualified leads requires reaching beyond one’s own medium, while adopting advanced, live ad space auction technologies and processing masses of reader data require a tremendous overhaul in publications’ expertise, and possibly the creation of an in-house ad brokerage. In other words, newspapers lack the critical mass to take on the top online ad brokers. Some are working to remedy this by joining forces with other media (TV, radio) and pooling their audiences, one case in point being La Place Media in France.

Regardless of print media’s ability to monetise their online audience with advertisers, the fully ad-funded model does not seem tenable. Continuing to opt for an essentially free model therefore requires that traffic be monetised, not only through advertising but also through services. Print media, and especially the regional press, always provided various services, starting with classified ads – a market that it has lost almost entirely to online companies that do only that, once again due to a lack of critical mass, but also to their having taken a very defensive position. So print publications need to develop and distribute services that have a connection with the editorial content in their online publication, such as a price comparison engine for used cars for Automotive section readers, links to the online shops that sell the products mentioned in an article, etc.

Can papers recreate their paid model on the internet?

Another possibility, which is not incompatible with the development of online services, consists of recreating the classic pay to read model. In addition to direct subscription revenue that the model generates, it also allows the publication to reforge closer ties with readers: an online subscriber will visit the paper’s website more often, will spend more time on it, and will have greater exposure to the services available to her. The question of how much to charge for online access is a tricky one: online subscriptions are cheaper than hard copies, due to the economies of scale enabled by electronic distribution, but also because competition on the internet is much more fierce. There is also the temptation to bundle a print and online subscription, to ease the transition from one to the other, but at the risk of undercutting the value of the digital edition which is sold very cheaply, used as a lost leader to secure subscriber loyalty.

But the main problem facing newspapers today is probably an only indirectly a financial one: having to contend with a dramatic drop in revenue, publications have implemented cost-cutting programmes which, after overhead, are now targeting the production of their raw material: news. A new generation of journalists is emerging on the web, more specialised in (re)processing and regurgitating news than in analysing it, a generation that is capable adapting to the new fragmented patterns of online reading. The danger for newspapers lies in turning away from the production of original news and opinion pieces, and opting instead to aggregate news provided by a range of other sources. This would only lump them in with their main competitors, i.e. the top online news aggregators. Which is why some papers have adopted the opposite strategy, namely devoting the bulk of their resources to producing exclusive content, which will prove a huge asset if newspapers were to be completely cut out of the equation by online players.

Growth of print media ad revenue in the United States (mUS$)

Evolution of print media ad revenue in USA, online and offline advertising

Source: Newpaper Association of America

The new territories of the TV market

Florence Le Borgne-Bachschmidt


Florence Le Borgne
Head of the TV & Digital content Practice, IDATE.

Global TV market revenue to grow
at a steady pace: up 23% by 2018


At a time when video has become pervasive across all of our screens, most national TV markets are losing steam: shrinking viewership and pressure on advertising markets, especially in Europe. Although pay-TV seems to be holding its own, the fast-growing popularity of OTT offerings is shaking up the traditional pay-TV model, while the demise of physical media is virtually a foregone conclusion.

If the decline of physical media now seems inevitable, television still has a chance to reinvent itself in a way that takes into account changes in viewer behaviour and competition from new online vendors.

Accessing TV

According to IDATE, the number of TV households worldwide will reach 1.675 billion in 2018 (+9.6% in 5 years), with the number of digital TV households worldwide being 1.542 billion in 2018, which translates into 92% of TV households

Cable will the remain the chief access channel (592.3 million households in 2018) but will gradually lose ground to satellite and IPTV which will account for 32.9% and 10.9% of TV households, respectively, at the end of 2018.

• Despite the development of hybrid TV solutions, terrestrial TV should continue its decline on the first TV set and drop down to number three spot by 2018, with roughly 21% share of the global market.

• The development of hybrid solutions that combine live programming on broadcast networks (terrestrial and DTH) and OTT video services over the open Web is a key variable in the future development of the various TV access modes, and may well shake up current trends.

TV: top money-maker

Breakdown of audiovisual market revenue in 2013

Audiovisual market revenue worldwide

Source: IDATE, December 2013

TV revenue

According to IDATE, the global TV industry’s revenue will come to €374.8 billion in 2013 and €459.2 billion in 2018.

Pay-TV revenue will grow by 21.3% between 2013 and 2018, or by an average 3.9% annually, to reach €220.2 billion in 2018.

Ad revenue will enjoy even stronger growth of 27.3% between 2013 and 2018, to reach €201.1 billion in 2018.

Public financing/licensing fees will continue to increase significantly (+7.7% in 5 years) to reach nearly €38 billion in 2018.

Video revenue

According to IDATE, physical media sales will total €16.3 billion in 2018, when video on demand (VoD) revenue will reach €35.4 billion in 2018, which is 90% more than in 2013.

• This means that the global market will have shrunk to more than a quarter of what it was in 2013 (-27.2%).

Blu-ray will be the most common format and help temper plummeting physical media sales.

OTT video will continue to be the biggest earner, generating 51% of total revenue.

VoD will still be the dominant model on managed networks. It will generate €6.9 billion in 2018 versus €2.3 billion for subscription video on demand (S-VoD).

American OTT video providers' footprint in Europe as of 31 December 2013

American OTT vendors in Europe

Source: IDATE, December 2013

American OTT vendors already have a solid foothold in Europe

Netflix is already present in seven European countries: Britain, Ireland, the Netherlands, Denmark, Norway, Finland and Sweden. The service had 1.6 million subscribers in the UK and Ireland at the end of 2013.

• LoveFilm was reporting 1.9 million subscribers in the UK and Germany at the end of 2013.

• At the end of 2013, iTunes’ VoD rental service was available in close to 110 countries, and permanent downloads in 14 countries, chiefly in North America and Europe.

• More information on TV and new video services market report & database