Deputy Managing Director
Director of TV & Digital Content Business Unit
It is no secret that the shift to digital has had a huge impact on the music sector: the multiplication of distribution channels, the shift from owning albums to listening on the fly, along with piracy have resulted in a significant drop in revenue for the sector, the arrival of new unlimited music services and, more generally, the core revenue stream shifting from the sale of recorded music to exploiting all of the rights attached to an artist.
The role of live performance has also changed. While it has always been a special event, providing a venue for fans to meet the bands as well as being a promotional vehicle, concerts had long been a by-product of records. Today, they have become not only essential revenue streams, but also an essential means for music lovers to discover artists, and for artists to develop their careers. In addition to the their growing weight in music industry economics, the live concert market is also being affected by the internet: the use of social media to promote an event, online ticket sales, the importance of metadata in creating and maintaining ties with fans, new forms of interaction during concerts, etc.
Among these many developments, digital technologies open up new opportunities in the realm of recording and broadcasting concerts. As with recorded music, video, news and now books as well, the rise of digital and the web is steadily creating new ways to distribute recordings of live concerts, which had long been the sole dominion of a handful of TV channels, and so confined to only the most popular artists. The proliferation of online distribution channels is already driving up demand. At the same time, on the supply side of the equation, new, cheaper recording and distribution solutions continue to lower the barriers to entry. So more and more players are getting in the game. They are coming from new sectors of the digital ecosystem: pure player concert sites, internet giants, telecom and consumer electronics industry players… but very few live event organisers.
It is within this new environment that IDATE was commissioned by musical, concert and variety show union, PRODISS, to provide an analysis of what impact digital technologies are having on live performance.
> The report and its summary (in French) are available online at: www.proscenium.fr/thinktank/
Deputy Managing Director
Director of TV & Digital Content Business Unit
Original production in the US had long been the fiefdom of the top TV networks and a limited group of premium cable pay-TVs. Today, however, all cable channels are developing an original production policy, operating alongside their reruns of series produced by the big networks.
Some of the most popular series in the United States have been produced not by these heavyweights, or by HBO: Mad Men, Breaking Bad and The Walking Dead (AMC), The Americans (FX), Rectify and Top of The Lake (Sundance).
This new strategy has been especially profitable for AMC which originally aired only reruns: in 10 years, its earnings from cablecos has gone from $0.22 to $0.35 a month per subscriber.
Consultant at IDATE
IDATE estimates that industry losses due to the various forms of illegal video consumption – namely P2P, downloads and streaming – totalled €6.3 billion in Europe in 2013, which translates into 37.8% increase from 2010 to 2013.
The main reason for this rise in online video piracy is the lack of attractive video on-demand (VoD) services in Europe, which is due in large part to:
• a very scattered offering, which is hard for users to navigate through;
• the fact that legacy pay-TV providers have captures the rights for the most premium content, and are taking a defensive approach to new distribution channels;
• very few online sales options;
• certain regulatory restrictions, such as the media chronology in France and Germany for feature films.
The VoD sector’s consolidation, and the inroads being made by American companies, especially in the subscription VoD segment, is expected to breathe some life into Europe’s video-on-demand market, and contribute indirectly to scaling back users’ reliance on piracy. IDATE estimates that industry losses due to piracy should decrease by 6.5% between 2014 and 2018.
Head of Research, Telecoms Business Unit, IDATE
From less than 40 EUR to more than 100 EUR per month for 100 Mbps access
IDATE’s latest report focuses on the services offered by telecom and cable operators via their FTTx infrastructures. It analyses the various speeds offered, the services included in the offering, pricing tiers and also highlights disparities between regions.
The speed race has not yet reached the finish line
Over the past few months, many operators have announced the launch of new offerings with even higher speeds, thanks to their FTTH/B networks. In the space of six months, no fewer than five operators in Europe have launched 1 Gbps offerings! Up until then, 100 Mbps was considered the norm for ultra-fast broadband (UFB), but now there are many offerings with 300, 400 or 500 Mbps speeds. These are not always very visible and are sometimes not even available as part of a bundle (this is the case with Verizon's 500 Mbps offering, which is only available as a stand-alone service). However, this strategy allows telecom operators using FTTH to differentiate themselves better from cable operators whose peak speeds are normally around 150 to 200 Mbps.
Segmentation of services: speeds and TV/video services prioritised
UFB players do not always go for strong segmentation based on available speeds. As a general rule, plans are built around 3 to 4 speeds, but for some, the offering is limited to 1 or 2 speeds, continuing on from the positioning they adopted in the traditional broadband market.
As for TV and video services, segmentation is sometimes stronger due to providing customers with themed packages (sports, movies, kids), especially for players from English-speaking countries. Generally speaking, telecom and cable operators from English-speaking countries have a very specific approach because they mainly promote video services and TV channels. Speed is only a secondary selling point. Their offerings are characterised by an increasing number of plans available with the ability to customise bundles (or, for more pragmatic players, to help select a pre-configured bundle).
In other regions, the approach seems more pragmatic, with fewer bundles and a more limited choice for end users.
With a lack of innovative services, prices are remaining stable
None of the players studied here offers a particularly innovative service. Most bundle add-ons, such as new set-top box features, cloud-based storage, antivirus, etc., are systematically added to the basic offering. Therefore, operators are unable to differentiate themselves from each other. A very small number of players, such as Altibox in Norway and HKBN in Hong Kong, are exploiting the technical characteristics of FTTH networks to offer genuinely differentiated services with symmetric upload/download speeds. In the short term, it seems very likely that speed (including symmetry, guarantees, faster speeds) will remain the main area to exploit for UFB operators.
This should impact prices offered, which have remained relatively stable in each of the major regions over the past year.
Jacques Bajon, Head of "Video Distribution" Practice
Cloud TV solutions being developed in a new video consumption environment that is having a profound effect on distribution modes.
In its latest report published in its monitoring service “Cloud & Infrastructure”, IDATE analyses Cloud TV solutions the advantages and the issues that still remains.
The cloud TV phenomenon is part of the massive changes taking place in our TV and video viewing habits and, by extension, in video distribution. This cloud-based approach to distributing TV programming refers to the fact of offering services from a central platform connected to the Web, and which can serve any user device.
A cloud platform can be operated by OTT (over the top) content providers who deliver their solution directly over the Web, or by telecom operators who use their own networks. In this second instance, the service is typically not assimilated with the cloud per se, even if we will include it in our field of analysis.
What cloud TV brings to the industry
• It is above all a response to a growing demand among consumers to have access to TV everywhere.
• It paves the way for more personalised video viewing and targeted advertising.
• The fact of centralising the solution enables more flexible rollouts and the abilty to offer a broader array of services.
• The growing move towards virtualisation allows vendors to achieve more cost-effective capital and operating expenses for their video distribution business.
• And brings vendors one step closer to deploying concept of TV as a service, so creating ties with users, or of operator as a service, for distributors looking to achieve more operational flexibility.
But certain unknowns remain
In addition to increasing quality of service (QoS) to meet users’ demands, the gradual switch to cloud-based video solutions will no doubt also generate a sizeable increase in traffic on the Internet and managed networks, and with it the inevitable challenges of maintaining a steady level of quality.
New challenges are arising as barriers to entry into video distribution are being lowered, through expansive platforms that are not subject to any network coverage, device compatility or geographical imperatives.
• We could thus see an acceleration in the rise of independent video offerings, which could include libraries of self-distributed content. This type of configuration could result in telecom operators being cut out of the loop and losing control of consumers.
• In addition, service providers and broadcasters will be going head to head with their TV Everywhere applications, offering potentially identical content but being delivered by pay-TV providers and TV networks, for instance.
• The traditional TV distribution industry runs the risk of being marginalised by these developments. But it has developoled its own solutions to meet some of viewers’ new demands and, above all, has begun to integrate these new options into its own environment.
• And, finally, cloud TV represents a major gateway for the Internet giants that are currently competing against pay-TV providers and programme aggregators for a foothold in this new market.
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The global Real Time Bidding market to grow to 17 billion EUR by 2018, up from an estimated 4 billion EUR in 2013.
Soichi NAKAJIMA, Senior Consultant
IDATE forecasts the global Real Time Bidding (RTB) market to grow to 17 billion EUR by 2018, up from an estimated 4 billion EUR in 2013, representing a Compound annual growth rate (CAGR) of 36% from 2013 to 2018. RTB is a form of programmatic buying, and forms a part of the display-advertising market.
It is complementary to targeted advertising which is refined through the use of personal data, where RTB gives this targeted advertising the real-time added value. RTB was the fastest-growing segment within the advertising market in 2013.
The growth is RTB is driven by several factors, the most obvious being the increase in ROI which RTB brings for both advertisers and publishers. From the publisher point of view, they see an increase in eCPM, since RTB can provide better-targeted advertising space in real-time, which is more effective than traditional inventory. From the advertiser point of view, the increase in eCPM means that they have to pay more to advertise in that inventory. However, the use of RTB means that the advertisers have access to much more targeted, relevant, and thus effective inventory, which compensates for the increase in eCPM.
Today, RTB is used almost exclusively for indirect inventory. IDATE estimates that in 2013, at least half of all indirect display inventories were sold though RTB technology, and that by 2018 the leading countries will see almost full RTB penetration for indirect inventory. But it is also expected that RTB will expand into direct, premium inventory sales, in conjunction with increased personal data use (targeting) to further increase the premium value of the inventory. This is already starting to happen with the concept of guaranteed upfront sales entering RTB. The concept here is to trade direct, premium inventory on an RTB platform, whilst giving publishers a high amount of control and also advertisers the trading real-time benefits of RTB. This is done by the buyers (typically DSPs) sending a request for certain types of inventory, typically audience demographics (such as age, sex, income or place) and allocated budget to SSPs. The SSPs then provide the buyers with a packaged premium offer aggregating various publishers to meet the buyer request. This is different to standard indirect RTB trading, as indirect inventory is sold as spots rather than packages. The buyers then purchase this package upfront, together with guarantees from the publisher.
Another growth driver for RTB is how big brands have embraced the technology. In display advertising Google and Facebook are number one and number two respectively, and by a long way, and that RTB has been embraced by these two juggernauts has certainly helped spread the technology in the market. The Facebook launch of FBX was arguably a defining moment, adding inventory and thus liquidity into the market. This also meant increased competition in RTB, and more urgency for other large brands to embrace the technology, either as publisher or RTB provider. Also notable are commercial giants Amazon and eBay who have started to provide RTB on their sites, and the acquisition of MoPub by Twitter in September 2013. The leading specialist players along the display- advertising value chain, such as DSPs, SSPs and ad exchanges are also all embracing RTB, to maintain their value within the ecosystem.
From the perspective of personal data use, RTB does not in itself increase the use of personal data. However, it does provide real-time and further automation capabilities within the display-advertising value chain, and thus used as a tool, RTB is expected to further increase the use of personal data for targeted advertising. Since RTB is also provided as a single interface, this also means potential disintermediation of the middlemen within the value chain, especially those such as ad networks who have traditionally worked in the non-automated environment. Market consolidation may also follow, with increased competition and maturity.
Global RTB revenues and regional breakdown, 2012-2018 (million EUR)
Source: IDATE, Real Time Bidding, April 2014
Samuel Ropert, Project Leader of this report :"On the market side, in 2018, 420 million automobiles will be connected; representing a 57% CAGR on the 45 million connected vehicles in 2013."
In its latest report, IDATE analyses the connected car strategies of manufacturers, mobile carriers and application providers. The study provides the main drivers and barriers for connected car market take-off. It describes the connected car ecosystem, in terms of applications, implementation techniques and also related business models.
A ‘connected car’ is one equipped with access to the Internet (the network of networks) whereby it can communicate with the outside world. This allows the car to share Internet access to other devices both inside and outside around the vehicle.
“The strategy of most manufacturers is to make their cars connected.” Says Samuel Ropert, Project Leader of this report. “The main driver here is based on the regulation related to safety issues in Europe and the underlying revenue opportunity for them. In the USA, the recent GM announcement to embed 4G modules in all new cars is seen as a key trigger for market take-off.”
Three main technical solutions exist. The embedded module system (in the car itself) is the most technically advantageous system as it has a dedicated system for connected services. The next option consists of the use of the smartphone for connectivity tethering, with the technical limitation (use of the miniature antenna). The last model is a combination of the first two other models (use of embedded system for telematics and smartphone tethering for entertainment (mobile Internet-like services). Ultimately, it is an opportunity for a fundamental shift from a largely capex model to a more opex-oriented one, even potentially shifting the focus of manufacturers’ core businesses to embrace a new focus on car-based products and services.
For telcos, the revenue opportunity could be interesting as the connected car will generate traffic that telco will charge indirectly (through the automobile manufacturer). All main M2M mobile carriers are involved in the connected car space, as the connected car represents one of the major markets in volume. In a context where their traditional mobile revenues are flat and even declining in some regions, providing mobile connectivity in cars is a key business opportunity for telcos. Beyond car-related applications in driver assistance, from the perspective of a telco, the car can be seen as an additional cellular device, with a potential high-consumption service profile with such usage as the mobile Internet, entertainment on demand and mobile hotspot features.
The prime business model remains the traditional wholesale relationship (B2B2C), even though AT&T unveiled a retail data plan for Audi A3 in early March and AT&T is expected to announce a new version of its share plan by the summer 2014 which includes the connected car.
For Internet players, the strategy here is clear: the automobile is an additional connected device just as smartphones, tablets and laptops and needs to be addressed. However, Apple and Google do not have really the same approach. Indeed, whereas Apple aims to introduce its technology to interface with its products, Google is promoting the embedment of its technology into the car as a regular device. Google also wants to collect data to provide the most accurate advertising as possible, such as a related point-of-interest, based mainly on location.
On the market side, according to IDATE, in 2018, 420 million automobiles will be connected; representing a 57% CAGR on the 45 million connected vehicles in 2013. Nevertheless, this growth is not homogeneous for each category of connected cars. The embedded systems will lead the market with 222 million units by 2018.
In 2018, the connectivity revenue for connected cars will exceed 8 billion EUR. This encompasses direct connectivity through embedded systems but also the indirect revenue related to smartphone usage. The major issues to be raised here are on the real willingness of the user to pay for such services. To encourage users to subscribe, telcos and manufacturers are already contemplating different revenue models including share plans. All the same, adoption is likely to remain limited over the next five years.
If you want more information on the study "Connected Cars".
Jacques Bajon, Head of "Video Distribution" Practice
In developing countries and emerging economies, wireless broadband represents a fundamental path to eradicating the digital divide that exists in regions that are still not covered by wireline infrastructure, and especially sparsely populated rural areas.
The digital switchover of terrestrial networks and the associated digital dividend provide a unique opportunity for broadcasters to expand their services, for consumers to gain access to a broader selection of programming, for the market to meet the growing demand for new wireless communications services, and for governments to optimise the overall use that is made of the scarce resource that radio spectrum represents. All for the sake of socioeconomic progress. In developing countries and emerging economies, wireless broadband represents a fundamental path to eradicating the digital divide that exists in regions that are still not covered by wireline infrastructure, and especially sparsely populated rural areas.
Is integrated broadcast-broadband the answer?
Despite the existence of several international agreements, the transition process is not progressing at an even pace across the global. New arrivals to the process are up against tremendous challenges, while also benefitting from the experience of their predecessors and technological leaps forward – such as the combination of DVB-T2 and MPEG-4 – which help alleviate some of the hurdles. Key ingredients of successful planning include consideration of the national situation, along with clear policies and objectives from the government and real cooperation between the various stakeholders.
It is a well-known fact that the digital dividend is a driving force between the transition, but new questions have arisen recently over a second digital dividend in the 700 MHz band in Region 1 (i.e. Europe, Africa and the Middle East). So the telecommunications and media industries will need to cooperate more closely on the spectrum issue.
The digital transition: global scorecard
A global economic approach needs to be taken in the planning stage to tackle the goals of the transition, and the means being deployed to achieve them.
In developing countries where the switch to digital terrestrial television (DTT) has yet to begin, digital set-top boxes represent the biggest cost item. A large percentage of households in these countries will need to receive subsidies to be able to buy these new devices.
Additionally, the size of the network investment will depend on several factors, such as the number of multiplexes involved. By the same token, technical coverage will need to be adapted to each country according to the geographical distribution of its citizens, as costs can increase exponentially when seeking to cover a large swathe of the population.
Communication campaigns are also vital, to educate the public on the digital transition. They need to be rolled out gradually, and be especially concentrated during the period immediately prior to the transition from one technology to the next.
In addition to financing set-top boxes and running information campaigns promoting the transition to digital, public monies may be required to help TV channels during the transitional phase. The period of simulcasting will be one of additional broadcasting expenses that will not necessarily be compensated by revenue and, for incumbent channels, will also be a time of increased competition. Veteran broadcasters will have to upgrade all of their equipment and installations when the switchover occurs.
The revenue earned on the sale of licences to digital dividend spectrum can help meet the public financing needs created by the transition. It is vital that a global approach to the process be taken – one that involves both the television and telecoms universe. These two sectors can enter into a mutually beneficial virtuous circle.
Public-private partnerships to allocate digital dividend revenue to the transition
Governments need to be financially involved in DTT rollouts, and in the transition process as a whole. The economic surplus generated by a better allocation of frequencies and related services creates solid prospects for ROI in the medium term.
The digital switchover is thus an ideal opportunity to create public-private partnerships. The foundations are already in place, with the arrival of new private sector players from the world of both telecommunications and broadcasting.
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:
Source: IDATE, Rightholders turn OTT, April 2014
Head of Research, Telecoms Business Unit, IDATE
Telcos have ambitious Vectoring rollout plans, with some aiming to have between 25% and 30% of VDSL2 lines covered by 2017.
Vectoring and bonding are starting to be deployed in certain countries, even if the technical and regulatory constraints would seem to point to only small-scale rollouts. G.Fast is the next generation standard being examined today. The report we released provides readers with an update on the latest technological developments in VDSL2.
VDSL2 & Co: ever more promising technological developments
VDSL2 has begun to be implemented, and several telcos have based their ultra-fast broadband strategies squarely on copper infrastructure right up to the customer premises. If VDSL can deliver theoretical speeds of around 50 Mbps near the exchange or cabinet, Vectoring, which consists of reducing noise among the lines, makes it possible to double that speed to 100 Mbps. Bonding, meanwhile, consists of using several copper pairs, either to double speeds for users in the vicinity of the exchange, or double the distance at which a 50 Mbps connection is available. In both cases, however, performances are very quickly affected by the subscriber’s distance from the exchange or cabinet.
G.Fast, which is the future standard currently under examination, and due to be approved in
2014, offers a theoretical speed of 1 Gbps, but noise cancellation capabilities are even stronger.
Growth of VDSL subscribers worldwide between December 2010 and June 2013 (million)
Still only small-scale implementation of VDSL2 and its successors
In mid-2013, customers subscribing to a VDSL2 ultra-fast broadband service represented 19% of the world’s FTTH/B subscribers. The vast majority of deployments have been performed by AT&T in the United States, which is reporting 26 million VDSL2-ready households and more than 9 million subscribers. AT&T continues to bank on these solutions, and is now offering pair bonding to eligible customers.
Western Europe is the second biggest VDSL market, accounting for 35% of the world’s subscribers as of mid-2013.
Will this drive a shift in the ultra-fast broadband market?
VDSL2 and its successors have a clear set of advantages, starting with savings on rollouts. Telcos would not need to deploy optical fiber from end to end, and can use the existing last mile of their networks. They would also save on customer premises installations, which cost them a great deal of time and money.
The performances offered by these new solutions appear to be coming more and more in line with those delivered by FTTH (at least in its current iteration), but only under optimal conditions. So this is not a solution that can be made available to everyone. Plus, VDSL Vectoring does not enable physical sub-loop unbundling, in which case bitstream remains the only option for sharing access to the network – something that not all market players want, as is the case in France, for instance.
As a result, even if the development prospects for the VDSL market remain optimistic for the coming years, we do not expect it to cause a major upheaval in the ultra-fast broadband hierarchy, with FTTH/B continuing to be the architecture of choice.