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.
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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
Consultant de l'IDATE
The study on how the online shift is affecting content industries analyse four main segments: books, recorded music, vide0 games and video products. Presentation.
For each sector, it provides readers with detailed market figures, analyses the move to the internet, its impact on industry structure and revenue sharing, and delivers market forecasts up to 2018, both global and for seven key national markets.
Alexandre Jolin, the Project manager for the report remarks that, “the global content market topped €140 billion in 2014, or only just over 1% more than in 2012, which marked a record low since the onset of electronic distribution channels”. Keeping in mind that 37% of content industries’ revenue come from these online distribution channels, or double the amount in 2010, albeit with huge disparities between the segments: 13% for books versus 67% for video games.
Content dematerialisation produces certain common effects to these different segments, despite the characteristics of books, recorded music, video games and video:
• a rise in subscriptions, at the expense of per-unit sales
• lower prices, which, combined with piracy, has an impact on household spending
• simplification of the value chain, with technical costs and intermediaries having less of an influence, which benefits consumers as well as those involved in creating, publishing and producing content
• piracy has a significant effect, although it seems to be stabilising thanks to new unlimited offerings, at least in developed markets
• a trend towards concentration upstream (production/editing) and downstream (distribution)
The various segments of the content industry are expected to follow different trajectories in the next five years:
• Publishing, which has only just started the process of dematerialisation, is likely to see revenues stagnate.
• Music, video and video games are likely to continue to grow or return to growth.
• The overall dematerialisation rate will reach 63% in 2018.
IDATE has identified the following key factors in digital content market development:
• a tighter link between purchase of a physical copy and a dematerialised copy
• the rise of the 'service' function, which allows personalised content recommendations
• innovative pricing models, individualised for each type of content (yield management)
Household spending expected to be back on the up
Falling in recent years, household spending on cultural products and services should start to increase from 2014, reaching 84.20 EUR per year worldwide in 2018. We nevertheless expect to see huge regional disparities, as North American households will continue to be by far the heaviest spenders on cultural goods and services, totalling an average €375 per household in 2018.
Source: IDATE, Content Economics, September 2014
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The "TV Everywhere" Executive Seminar at the 36th annual DigiWorld Summit helped shed some light on new viewer behaviours, the possibilities opened up by hybridisation and cloud technologies, and how they will impact video watching down the road, both inside and outside the home.
TV Everywhere becoming an habit
On-demand viewing has become one of the most widely adopted new behaviours, whether via catch-up, TVoD or SVoD. IDATE nevertheless underscored that on-demand access to content can be limited by regulatory or contractual restrictions, especially when it comes to feature films.
Accessing video content from anywhere is not yet commonplace behaviour, particularly for users on the move. This can be explained in part by technological constraints in certain locations, and by the fact that TV service providers do not make all of their content, particularly live programmes, available for mobile viewing.
• Any device
Despite the proliferation of new screens and the rapid rise in viewing on smartphones and tablets, most users still watch their programmes on their home TV, even in the most mature markets. To achieve a convincing “any device” viewing experience, service providers also need to address the issue of continuity/handover between devices.
François ABBE (Founder & CEO, Mesclado) recalled that Disney had signed an agreement with Google and Apple, thanks to which a Disney video purchased from the iTunes store could be played on an Android device, and vice-versa, which is a good first step towards providing users with a seamless experience.
The television will be the source of different challenges, depending on the broadcaster and their specific distribution issues. Vincent FLEURY (CTO and Deputy CEO for New Media, France Medias Monde), whose core challenge is to deliver the same services to all users, sees the TV as “just one screen among others,” whereas Laurent FRISCH (Vice-President Digital, France Televisions) and Valery GERFAUD (General Manager, M6 Web) believe the television remains the screen of choice for watching live programmes, and for catch-up or time-shifted viewing.
• Any Content
Because the ways for accessing video products are so fragmented, and given the glut of content available, consumers today appear more willing to pay for services that can meet their need for more structured and personalised solutions.
For IDATE, one of the biggest challenges for video services is to deliver personalised content that also takes the viewing device and situation into account. Here, the issues surrounding big data and recommendation engines are especially crucial.
Didier LEBRAT (CTO, Sky) also stressed the massive investments that Sky has made in content, and in improving quality to create a sense of value for its customers, and noted that Sky+ On Demand users now watch more pay-TV content than free to air content.
Hybridisation and new video distribution configurations
Vincent GRIVET (Group Head of Broadcast Development, TDF) reminded us that all-IP for video is not yet possible, but that on-demand viewing is on the rise. The two trends thus require hybrid solutions to be deployed. If HbbTV is expected to provide a response to this demand, it does not appear to be quite as hybrid as what was being promised three years ago. Vincent FLEURY believes the industry expected a lot more from connected TV and that, today, it is much easier to access the Web on a TV set via ISPs’ boxes and mobile solutions. His main focus is on bringing connectivity to locations that are today without it.
Darko RATKAJ (Senior Project Manager Technology & Innovation, EBU) focused on the needs of today’s users, and drew a parallel between classic TV viewing, which remains a shared experience, and on-demand viewing which is still a sort of top-up. He believes the issue is knowing whether a video platform truly meets users’ needs, in terms of both quality and coverage – the latter being not just geographical but demographic as well. Ratkaj says that hybrid solutions do exist, but not in the sense that a specific network or a technology can solve all the problems. What is important is delivering the right service under the right conditions, not whether it is delivered over a broadcast or broadband network.
Yves BOUDREAU (VP Mediacom Technology Strategy, Ericsson) has been watching the “prosumer” phenomenon develop: if vendors do not design solutions tailored to users’ behaviour, prosumers will create their own "Frankenstein video" solutions. Broadcasters, programmers and technology providers need to join forces to create products that satisfy consumers’ new demands, even if it means running the risk of it being the solutions provided by Internet giants like Google, Amazon or Apple that gain the upper hand.
We are seeing hybridisation develop around broadcast networks that have no native return path. But the momentum depends on the TV service’s business model:
• pay-TV providers such as Sky or DirecTV are capable of defining the user experience thanks to their DVRs, and so meet customers’ new demands efficiently;
• for free to air TV, the problem of standards currently appears to be a real obstacle to the development and adoption of truly viable hybrid solutions. Broadcasters need to make sizeable investments in developing their applications, which is a direct result of the huge technological fragmentation of application ecosystems. Laurent FRISCH pointed out that, in the multitude of technologies that exist today, not all are equal. TV networks are not necessarily taking a position, but rather waiting for a solution to take hold as the industry standard. Without a single or unified solution, Smart TV will not take off.
Jean-Hubert LENOTTE (Director of Strategy, Eutelsat) notes that network operators are also taking initiatives in the arena of hybridisation, spurred by the fact that, while consumers still watch a great deal of linear TV, the time spent doing so is not increasing, whereas the time spent watching on-demand and time-shifted programmes is on the rise. So market players need to be able of providing live interactivity to boost the appeal of programming. If clients such as Sky and Canal+ want to keep control over their viewers and develop their boxes and products themselves, Eutelsat is developing a smart LNB solution for other clients, in other words two-way LNBs that make it possible to integrate a return path directly in the user’s satellite dish, and so do away with the need to connect the STB to the Internet. He also reminded us that satellite makes it possible to deliver on-demand content in HD and even UHD to locations with no broadband coverage.
For TV channels, hybridisation also means the development of new business models and new partnerships:
• for Didier LEBRAT, marketing the Now TV OTT service allows his company to target consumers who want a lot of flexibility, and do not necessarily want to subscribe to BSkyB’s satellite TV plan;
• Vincent FLEURY believes that hybridisation does not apply only to technical networks but is also a way to access new consumers: he underscored the importance of syndication, and recommended using the means made available by new video platforms such as YouTube and Facebook;
• according to Laurent FRISCH, broadcasters and new entrants will need to create new “hybrid” TV channels that combine linear and non linear programmes, to reinvent their value proposition;
• Valery GERFAUD reported that the percentage of ad revenue generated by catch-up TV for the M6 group is proportionate to the time spent watching the network’s catch-up TV (i.e. compared to their live programming), thanks to a solid monetisation of catch-up TV.
Lastly, Marc LE DAIN (Associate Partner, IBM Consulting Services) stressed that hybridisation also applies to customers whose behaviour differs depending on the type of programme being watched (his presentation on slideshare)
Uncertainties over switching to an unicast only model
Telcos’ and cablecos’ networks both have a return path that enables the development of advanced video products for their pay-TV customers. Plus, their point-to-point networks can use software-based security solutions that are cheaper than the broadcasting world’s conditional access systems.
Yves BOUDREAU reminded us that the Internet was not initially developed to distribute TV, and is currently not capable of taking over from free to air and pay-TV, if ever broadcasting networks were shut down in the near future. There are still lingering questions over how much telcos would need to spend to satisfy consumer demand, under a unicast-only model. For Jean-Hubert LENOTTE, the combination of broadcasting and broadband is still the most efficient solution today, especially from an economic standpoint.
Distributing TV services via LTE broadcast, thanks to eMBMS technology, is another possible new alternative for video distribution. Pierre-François DUBOIS (VP of Product Development, Orange Technocentre) pointed out that all LTE smartphones are already outfitted with an eMBMS chipset capable of receiving broadcast streams.
The technology has already been deployed commercially in South Korea, and expected to develop in other countries soon, even though uncertainties remain over the right business model, especially on mobiles. For Yves BOUDREAU, the combination between broadcasting and LTE does make it possible to create a product that consumers could be willing to pay for.
Cloud technologies’ growing role in video distribution
The development of cloud-based television and video distribution solutions is upending how all of the TV industry’s veteran players operate. Cloud TV technologies make it possible to move steadily to a more flexible model that enables swift rollouts for new services, and which alters the investment structure to an on-demand model.
nPVR technologies, for instance, make it possible to move the intelligence in operators’ networks, which would mean that STBs would no longer need to be equipped with a hard drive. Valery GERFAUD nevertheless pointed out that, should this type of solution develop, it could very well undermine catch-up TV revenue.
Cloud technologies also make it possible to solve new editorial issues tied to Social TV, such as Rising Star, centred around interactivity with viewers. According to Valery GERFAUD, incorporating interactivity into the very heart of a TV programme may be very popular with viewers, but it also creates new technical issues that need to be managed. Only the cloud enables broadcasters to handle such huge surges in traffic, from a flexibility and cost perspective. Mr Gerfaud believes that quality of service remains a very real problem, as users will quickly turn off a poor quality video, which means the provider loses money.
For Xavier POUYAT (Senior Program Manager, Azure Media Services), the cloud also allows content to have an existence that goes beyond the aired programme: e.g. for an interactive episode of the series "Bref", more than a million personalised videos were generated in three days, thanks to the cloud.
Source: Canal Plus
These technologies are also expected to be crucial in the coming years to enabling TV services to make the transition to ultra high definition, which represents both a technological and economic challenge, as Jérôme RENOUX (Regional Sales Director, Digital Media, Southern Europe, Akamai Technologies) reminded us. The introduction of new compression formats, such as HEVC, will no doubt also make a vital contribution to future developments, for both HD and UHD. Pierre-François DUBOIS hopes that, thanks to HEVC, 85% of Orange’s IPTV Orange will have access to HD programming.
They are also likely to play a major role in merging and streamlining workflow for TV industry players all down the line, to be able to tackle live and on-demand viewing on any device imaginable.
Not just a technical, but a legal issue as well
TV Everywhere and the cloud naturally create issues in the realm of user identification, and so of privacy and data protection.
While the trend around the world is towards monetising internet users’ personal data, Alain BENSOUSSAN (lawyer with the firm, Alain Bensoussan) reminded us that the notion of data ownership has no legal status: Facebook has thus given its one billion users a right that, legally speaking, does not exist, as no sovereign state recognises ownership of personal information.
In addition, while some 100 countries have adopted data protection and freedom regulation, it appears that, with big data, individuals have no control over the data that pertain to them, or do not know the data pertain to them. The important thing with big data is not knowing the name of the person behind the screen, but rather the ability to predict with more than 90% accuracy who is there and what they are going to want. So we are moving towards anonymous personalisation.
Lastly, Alain BENSOUSSAN introduced the concept of “privacy by design”, which consists of designing products and services with “privacy inside”, to reduce the anxiety-provoking aspect for users, which is one of Facebook’s chief selling points.
If you want to go further read "Live TV vs. on demand viewing: what does tomorrow’s world have in store for broadcasting?"
> You are interested by our work ? You will find our study about Future TV 2025 in our shop
Our guests' presentation are interesting you ?
> Here is the general presentation of Florence Leborgne, from Idate.
>Here is the presentation from Marc Le Dain (Associate Partner, IBM Consulting Services) : http://fr.slideshare.net/DigiWorldIDATE/tv-everywhere-41808106
> Here, you will find the presentation from Laurent Frish (Vice-President Digital, France Televisions) "TV + Digital").
Published in COMMUNICATIONS & STRATEGIES No. 96
Interview with Jean-Louis MISSIKA, Deputy Mayor of Paris in charge of urban planning
Conducted by Yves Gassot, CEO, IDATE-DigiWorld Institute
C&S: The Smart City concept is often criticized for seeking new markets for digital technology rather than tackling the phenomena that make the management of our cities increasingly complex. What is your view?
Jean-Louis MISSIKA: I do not think it is a fair criticism. Digital technologies have undeniably created the conditions for important changes in our ways of living, inhabiting and consuming. They are now part of our everyday lives and, surely, their impact will increasingly spread throughout the multiple ways we, as humans, interact.
Beyond what they create as opportunities for individuals, digital technologies are fundamental for cities – and among them the city of Paris. Urban systems are confronted with major challenges on the economic, social and environmental fronts. Energy transition, and more generally the management of scarce resources, climate change and the biodiversity challenges drive us to analyze all the solutions available now and in the future to build a more sustainable city - the city of tomorrow. Digital technologies and, in particular, their potential in terms of coordination and rational use of scarce resources, are high on the policy agenda. This is not simply to create a market for them; this is about using all the possibilities offered by technology.
I definitely think it can be a win – win development for both the city and the companies if these firms are working with those involved in the challenges of the city like urban planners and system operators.
Additionally, we are witnessing a boom of young, innovative companies and startups, but also the citizens themselves – both from Paris and outside – who develop digital solutions for the city. This is clear evidence of what is at stake here: it is for local authorities to allow the digital revolution to spread in the society so that innovation does not only occur through large companies but also thanks to citizens' initiatives.
C&S: How would you rate the strategy of Paris, using a broad comparison between the very holistic, top-down approach of projects emerging in the context of new towns and in Asia, and the more bottom-up approach that seems to be primarily based on using multiple data repositories ('open data') associated with urban systems?
J.-L. M: We are definitely leaning towards the "bottom up" approach to building Paris as a smart city.
Collective intelligence is an effective way to source the best ideas. And it does work well in Paris in part because we provide people with the appropriate means to implement projects: workspaces, coaching, financing, public spaces to experiment… and data.
This is one of the pillars of a smart and sustainable city: a place where the technology is used for people, by people, to include them in the life of the city and in the process of public decisions.
Let me refer to a recent project. We have worked over the last 6 months since the election to reach a greater transparency and citizen involvement in the City operations, by creating a platform for the development, discussion and adoption of community projects. These are chosen by the Parisians and are financed through a participatory budget. 5% of the total investment program, which represents 426 million euros, has been flagged for programs chosen directly, through vote, by the Parisians.
Within the next months, Parisians will even be able to share the benefit of their expertise and creativity by suggesting investment ideas directly.
Another way to involve people is crowdsourcing. We have developed the "DansMaRue" mobile application which Parisians use to signal local problems and even identify spots for "urban greening" (buildings, walls, squares, abandoned urban places). It is this type of exchanges with Parisians we want to implement to make our City better.
This is a genuine urban revolution in the making: the role of local governments of world-cities is to understand, support and leverage the benefits of this revolution. European cities, I believe, have a major role to play in leading this transformation. Their governance is well geared towards citizen involvement and this should alleviate the risks of the "systemic city" or the "cybernetic city".
C&S: Do you have any models or at least references to guide your project for Paris?
J.-L. M: Many interesting models exist throughout the world and we are discussing extensively with many cities facing the same challenges.
That being said, from our discussions we retain one key conclusion: each of these cities has developed its own good practices with its own cultural frame. I think there is no single model of smart city and it would be ineffective to copy-and-paste alien models or ready-to-use solutions in a fast-changing environment.
We have our own model based on an iterative approach that uses successful experiments in Paris. We have been working for several years to make Paris a strong city in the digital sector and a breeding ground for innovation. I would say that over the last 10 years or so we have created the conditions for the emergence and development of a strong ecosystem. Thanks to all these efforts, Paris has experienced a lot in recent years and is now a world leader in innovation and most certainly the top European city.
There are well-known examples of successes such as Velib ', Autolib', Paris Wifi, among other experiments such as heating a residential building thanks to the energy produced by data centers, data vizualisations of the Paris transport system, smart street furniture, … Many of those locally-grown success stories are helping to build our own project of smart city and to deploy these experiments on a larger scale as standards for the city of tomorrow.
Paris is actually creating international benchmarks for smart city, though it is not as recognized as it should be. Through calls for innovative projects led by the Paris Region Lab at the initiative of the City, we facilitate the emergence of intelligent solutions on subjects as diverse as intelligent street furniture, energy efficiency or assistance home support for seniors. Paris provides entrepreneurs and businesses of all sizes with a single territory and open trials. It also runs a network – an open innovation club – that organizes meetings between the largest companies and startups. We are even deploying this initiative in other French cities, at their own request.
C&S: What priority initiatives have been selected for the Smart City project in Paris?
J.-L. M: One billion euros will be invested by 2020 in order to make Paris the international benchmark in innovation related to land use, the participatory democracy, sustainable development, the digital economy and energy transition.
Our smart city approach is threefold: open city (open data), digital city (potential of digital technologies and their application to improve the quality of life of Parisians) and the inventive city (which is built by transversal networks and innovation).
Each of these pillars shall contribute to our 4 main targets.
One of the most important is the food supply because no city in the world is capable of ensuring its food self-sufficiency in the present state of our know-how and our food is responsible for almost 40% of our ecological footprint. We have recently launched a call for projects titled: "Innovative Urban Greening" which consists, among other objectives, in experimenting with the urban agriculture of the future.
Another challenge is the energy of the city. 90% of the energy of the Paris metropolis is provided by fossil fuel or nuclear energy. From a territorial point of view, it is an imported energy. In addition to the on-going effort on renewable energies (with a certain success for geothermal energy), the focus is increasingly on energy recovery. We must go ahead and draw from their hidden resources. These resources are at the core of the circular economy: a waste produced by someone is a resource for someone else.
An example in Paris is the Qarnot Computing start-up which has invented a radiator-computer: by dissipating all the energy consumed by data processors in the form of heat, the Q-rads make it possible to heat free of charge and ecologically any type of building (housing, professional premises, collective buildings) according to the needs of their users. A low rent housing building has been fitted out with these Q.rads radiators: the inhabitants do not have to pay for their heating anymore and their ecological footprint is zero.
The third challenge is urban mobility. This can no longer be dealt with through the option of car versus collective transport. New systems of mobility are emerging: they concern the technology of vehicles (electric cars, rubber-tired tram), but above all the technology of services (rental among individuals, sharing, car-pooling, multi modal applications, etc.), and they often open the way for the emergence of new chains of values and new players.
In Paris, the massive adoption of Autolib' and Velib' shows the power of attraction of sharing and self-service.
Last challenge is planning for the future of urban spaces and architecture. In order to take into account new ways of working, living or trading we need to be able to test multifunction buildings that combine housing, offices, community spaces, show-rooms and services to people. This mixed use on the scale of a building implies more flexible Local Urban Plans and an adaptation of safety rules. The new way of working implies home-office, mobile office, co working and remote working centers. The new way of living requires community spaces in the building, a greater use of roofs, community gardens, shared utility rooms, services to the person, sorting and recycling. New trading methods integrate ephemeral shops, shared showrooms and fablabs.
C&S: Paris as a city, and you in particular, have worked hard to ensure that digital is also an opportunity to redevelop business in Paris, which is threatened to become a purely residential city. What connection do you see between support for start-ups, incubators and nurseries, and a policy of the Smart City type?
J.-L. M: The City of Paris is an innovative city at the forefront of digital technology, as evidenced by the ranking of PricewaterhouseCoopers. The emergence of Silicon Sentier in the heart of Paris in recent years, or important events such as Futur en Seine and the Open World Forum illustrate the growing dynamism of our city in terms of digital innovation.
Notably, in our incubators, many innovations are related to digital technologies. They create value in all areas of the city and aim to serve people in a better way.
As an example, the Moov'in city competition launched in June 2013 by the City of Paris in partnership with the RATP, SNCF, JC Decaux and Autolib' aimed at bringing out new web-based and mobile services focused on mobility in Paris and the Ile de France region. One hundred ideas were generated through this process; seven of them were awarded a prize. Among them, the Paris Moov' solution is a route calculation application that integrates all public transport modes available in the Ile de France region and suggestions of activities once arrived at destination.
Some incubators and clusters that we support are directed specifically to the city and urban services (energy, transport, water, logistics, etc.).
This is for example the case of the Paris Innovation Massena incubator where we work with large corporations like SNCF or Renault. We help them and they accompany us to build our Smart City project.
In addition, the creation of incubators or Fab Lab continues with determination and ambition displayed, particularly with the MacDonald converted warehouse or the Halle Freyssinet, the future world's largest incubator (1000 start-up companies). New places at the forefront of innovation combining incubators, coworking spaces will continue to be created and its ecosystem of innovation will be internationalized. This is the only way for Paris to be in the top attractive and competitive cities in the world.
C&S: How do you pilot a 'Smart City' project? (Is it through a task force outside the main city services? Or through a cross-functional structure involving all the services?) How did you structure management of the Paris project?
J.-L. M: The smart city is a cross-cutting subject, which means we have no other way to do it than keeping good interaction among the administrative units.
All large cities are confronted with the issue of finding the appropriate scale of governance and new governance tools. The model of organization of local administrations is outdated. The large vertically-organised departments (urban planning, roadways, housing, architecture, green spaces) are facing the challenges of intelligent networks, project management, citizen participation that require a much more cross-cutting and horizontal coordination.
Paris has historically been organized in large vertical services to deal, for example with roads, architecture, urban planning and so on. For this reason, we have chosen to address the question of the Smart City within the City of Paris through a steering committee composed of elected officials and a cross-cutting taskforce driven at the General Secretariat - the body that oversees all directions.
This "smart city" mission is a project accelerator. Its aim is to raise awareness on this subject within and throughout the services but also to manage the relationship with our key partners of major urban infrastructure. It supports the deputy mayors on each of their missions and brings global thinking to structure a coherent overall strategy in the multiplicity of initiatives and concrete actions led by all the services.
C&S: On a more mundane level, the deployment of digital applications in the city is also organized on the basis of a telecommunications infrastructure (fiber access, 4G, WiFi, ...). Are you satisfied with the existing equipment and deployments underway at the initiative of private operators? How do you cooperate with them particularly in light of concerns over radio transmitters?
J.-L. M: While the City of Paris has no formal jurisdiction over this subject, we consider it is our role to ensure that all Parisians can access clear and transparent information on the deployment of base stations, and to take their concerns into account while ensuring the development of new technologies. This led us to sign a mobile telephony charter in 2003 with the telecom operators. His latest release in 2012 has set maximum exposure levels to radiofrequency fields and clear procedures for consultation with residents.
Jean-Louis MISSIKA is deputy mayor of Paris in charge of urbanism, architecture, projects of Greater Paris, economic development and attractiveness. From 2008 to 2014, he was deputy mayor of Paris in charge of innovation, research and universities. Prior to his local mandates, his professional career included various managerial positions in the public and private sectors.
Florence Le Borgne
Head of the TV & Digital content Practice, IDATE.
Can anyone compete against American on-demand vendors?
IDATE is releasing the latest version of its “TV and video services worldwide” market report and database. It provides readers with vital data on a market in the throes of major upheavals, analysing changes in viewer habits, TV access networks (terrestrial, satellite, cable, IPTV) and revenue sources (linear TV, pay-TV, DVD, Blu-ray, VoD) in more than 40 countries.
The report’s project manager, Florence Le Borgne, tells us that, ‘even though we are watching more video than ever before, revenue growth for the global video market is being stunted by the inexorable drop in video hard copy sales, and by the pressure that Over-the-top (OTT) distribution is putting on traditional TV business models’.
According to IDATE, television revenue worldwide will increase from 368.9 billion EUR in 2014 to 424.7 billion EUR in 2018, which translates into an average 3.6% annual growth, compared to the 5% reported between 2010 and 2013:
• pay-TV revenue is forecast to decrease dramatically over the next few years, with average annual growth dropping to 2.8% between 2014 and 2018, compared to 6.1% between 2010 and 2013. Despite which, it will continue to be the main source of TV revenue up to 2018, bringing in 195.9 billion EUR in 2018;
• advertising revenue is expected to enjoy more dynamic growth overall, in line with its trajectory in recent years: 4.8% a year up to 2018, compared to 4.6% per annum over the past four years, to reach 193 billion EUR in 2018;
• funding from TV licensing fees will continue to increase significantly: by an average 1.5% a year, to reach 36 billion EUR in 2018.
The revenue generated by video on demand (VoD) will climb to 34.4 billion EUR in 2018, thanks to a solid and steady increase (+131.5% compared to 2013) and will represent more than double hard copy sales (15.5 billion EUR in 2018) by that time.
• Online (OTT) video is expected to consolidate its dominance of the VoD market, accounting for more than 80% of on-demand revenue.
• VoD rentals will continue to be the central model on managed networks, generating 4.7 billion EUR in revenue in 2018, compared to 3.3 billion in 2014.
• The hard copy market will continue to shrink across the globe, losing close to a quarter of its value in 2014, despite the growth of Blu-ray.
TV revenue growth forecasts by market, 2014-2018 (billion EUR)
Source: IDATE, State of TV & Video Services worldwide, July 2014
Breakdown of TV revenue by source, 2010-2014 (billion EUR)
Video on Demand Focus: Increasingly competitive OTT players
• Despite the popularity of premium cable channels, Netflix now rivals top dog, HBO. Although subscriber numbers for the top premium cable channels in the US (HBO, Showtime, Starz) have remained relatively stable, and are even increasing for some – +13.3% and +14.2%, respectively, for Showtime and Starz between 2010 and 2013 – the real momentum today is behind OTT services, starting with Netflix whose customer base grew by 71.4% between 2010 and 2013. At the end of June 2014, Netflix had 36.2 million residential subscribers, including 35.1 million paying customers, compared to 28.6 million subscribers for HBO in the United States.
• Will the top American SVoD providers dominate the global market? As of October 2014, Netflix is present in 46 countries, and reporting a base of 13.8 million subscribers worldwide. This means that it alone controls two thirds of the globe’s subscription VoD customers. By way of comparison, HBO is present in 61 countries in Latin America, Asia and Europe, and has more than 35 million subscribers, of which a growing percentage to its HBO Go service. Meanwhile iTunes leads the way in electronic sell-through (EST), earning 65% and 67% of movie and TV programme sales revenue, respectively, in 2012. Virtually all European countries have access to the company’s video rental service, while residents in eight countries – Germany, Austria, Spain, France, Italy, Ireland, the UK and Switzerland – can also download to buy from the iTunes store. Only smaller national companies are competing with these heavyweights. And while some are popular – France’s CanalPlay VoD service has 520,000 subscribers – one cannot help but wonder whether they can hold their own against these global titans.
• Also noteworthy is that Netflix outperformed HBO in terms of total SVoD revenue for the first time in Q2 2014: generating 1.146 billion USD vs. 1.141 billion USD for the premium cable channel.
Netflix share of the global SVoD market as of 31 December 2013 (%)
Source: IDATE, State of TV & Video Services worldwide, July 2014
American OTT video providers’ footprint in Europe as of October 2014
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Consultant at IDATE
Average household spending on cultural goods worldwide decreased from €75.50 to €71.60 between 2010 and 2013
Electronic distribution allows households to spend less on any cultural products they buy or rent individually. The gap in price is especially significant in those industries where the cost of producing a hard copy heavily influences its retail price.
As a result, between 2010 and 2013, average household spending on cultural goods worldwide decreased from €75.50 to €71.60 a year. This figure nevertheless includes sizeable regional disparities:
• in North America, average annual spending on all types of content combined has actually increased, going from €327.30 per household in 2012 to €328.40 in 2013;
• households in Asia/Pacific and Latin America are also spending more, with average entertainment budgets rising, respectively, from €35.80 per household/year to €39.10 per household/year, and from €31.70 per household/year to €34.10 per household/year between 2010 and 2013;
• meanwhile Europe and Africa/the Middle East are reporting a sizeable decrease in average household spending on cultural products: -10.6% and -15.6%, respectively, over the past three years.
Deputy Managing Director
Director of TV & Digital Content Business Unit
It is no secret that the shift to digital has had a huge impact on the music sector: the multiplication of distribution channels, the shift from owning albums to listening on the fly, along with piracy have resulted in a significant drop in revenue for the sector, the arrival of new unlimited music services and, more generally, the core revenue stream shifting from the sale of recorded music to exploiting all of the rights attached to an artist.
The role of live performance has also changed. While it has always been a special event, providing a venue for fans to meet the bands as well as being a promotional vehicle, concerts had long been a by-product of records. Today, they have become not only essential revenue streams, but also an essential means for music lovers to discover artists, and for artists to develop their careers. In addition to the their growing weight in music industry economics, the live concert market is also being affected by the internet: the use of social media to promote an event, online ticket sales, the importance of metadata in creating and maintaining ties with fans, new forms of interaction during concerts, etc.
Among these many developments, digital technologies open up new opportunities in the realm of recording and broadcasting concerts. As with recorded music, video, news and now books as well, the rise of digital and the web is steadily creating new ways to distribute recordings of live concerts, which had long been the sole dominion of a handful of TV channels, and so confined to only the most popular artists. The proliferation of online distribution channels is already driving up demand. At the same time, on the supply side of the equation, new, cheaper recording and distribution solutions continue to lower the barriers to entry. So more and more players are getting in the game. They are coming from new sectors of the digital ecosystem: pure player concert sites, internet giants, telecom and consumer electronics industry players… but very few live event organisers.
It is within this new environment that IDATE was commissioned by musical, concert and variety show union, PRODISS, to provide an analysis of what impact digital technologies are having on live performance.
> The report and its summary (in French) are available online at: www.proscenium.fr/thinktank/
Deputy Managing Director
Director of TV & Digital Content Business Unit
Original production in the US had long been the fiefdom of the top TV networks and a limited group of premium cable pay-TVs. Today, however, all cable channels are developing an original production policy, operating alongside their reruns of series produced by the big networks.
Some of the most popular series in the United States have been produced not by these heavyweights, or by HBO: Mad Men, Breaking Bad and The Walking Dead (AMC), The Americans (FX), Rectify and Top of The Lake (Sundance).
This new strategy has been especially profitable for AMC which originally aired only reruns: in 10 years, its earnings from cablecos has gone from $0.22 to $0.35 a month per subscriber.