LTE Global Pricing Strategies
Frédéric PUJOL
Head of the radio technologies & spectrum practice, IDATE
Expectations and forecasts of the future orientations of the mobile broadband market
Through the analysis of global leading telcos LTE pricing strategies, our team of IDATE analysts have identified four main trends happening in Q1 2013: Multi-device connectivity strategies, Emergence of new high-speed data services, A greater and manageable quality of service resulting in new price plans and the apparition of LTE Advanced, a faster and less costly band for operators.
Multi Device Strategies
Introduced by Verizon Wireless through its shared dataplans, not only is it very successful but also represents a huge opportunity to leverage its LTE network in the long term with two growth opportunities:
- Data consumption growth introduced by the incentive of using “big screen” devices such as tablets, laptops and connected TV’s for HD video watching. The more devices there are, the more data will be consumed and it will make more subscribers to upgrade to larger data cap plans
- Multi-platform approach supporting the new ‘content everywhere’ trend and allowing services ubiquity: a Netflix subscriber can watch the beginning of a video on his mobile and finish it on his tablet or laptop, starting where he left off, with a unique account.
LTE major runners strategic positionning
Source: Digiworld by IDATE
High-Speed data services
LTE allows developing new services that require a large data bandwidth and that could not exist with 3G: some already existed with fixed broadband (HD VoD, cloud services) and some are dedicated to mobile usages (Rich Communications Suite and car black box among the latter). Moreover telcos are starting to propose LTE services so as to counter OTT (over the top) services.
These services are either free or available through additional monthly subscription. Moreover, the Evolved Multimedia Broadcast Multicast Service will allow new video services without the need of a specific frequency layer.
A greater and manageable quality of service
Quality of service is the most important LTE innovation as it can be managed from end to end on a mobile network. Classes of priority can be created and managed allowing Swisscom to segment their offer not by data usage but by bandwidth, which stresses the need of consistent quality over the totality of the network. For example when 100 Mbps are advertised clients are less prone to accept irregularities.
LTE Advanced
Korean operators expect to launch LTE-Advanced by mid-2013, this is the new generation of LTE. Its spectral efficiency is four to five times greater than 3G where LTE is only 3 times greater. This implies that the cost per MB will fall for operators and will orient strategies towards higher or ultimately unlimited data caps and rate plans differentiated trough quality of service.
LTE Revenue Forecast (by Region, in million EUR)
Source : Digiworld by IDATE
Frédéric PUJOL
Head of Mobile & Spectrum Practice at IDATE
f.pujol@idate.org
Satellite broadband : main market trends to 2020
Maxime Baudry
Head of the radio technologies & spectrum practice, IDATE
State of the art of satellite broadband
The scope is put on the satellite ultra broadband with our analysts attending the upcoming Satellite 2013 summit in Washington, USA.
Three to five times more expensive than ADSL offers in the early 2000s, broadband satellite services have long required a sizeable investment from rural residential users interested in this type of access, with some even preferring to opt for “unlimited PSTN”. Prices have come down since then and, even though satellite access is still more expensive than ADSL, the gap has shrunk substantially. At year-end 2012, there were 1.2 million subscribers in North America, 200 000 in Asia Pacific (IPStar service), and roughly 150 000 in Europe.
Drop in the price of broadband satellite terminals
Parallel to the decrease in the price of subscriptions, the price of satellite terminals has also dropped, thanks to technical improvements which have helped bring down production costs, and to the economies of scale generated by the tens of thousands of terminals sold by manufacturers. Current prices vary between 250 and 350 EUR and could drop to 200 EUR by 2015.
Evolution of broadband satellite reception terminal prices (EUR)
Source: Digiworld by IDATE
Industry preparing for ultra-fast broadband via satellite
As part of its ARTES programme, the ESA (European Space Agency) has plans to develop a very high-speed satellite called the Terabit/s Satellite. Based on a very broad platform, the Terabit/s spacecraft will make it possible to achieve speeds of around 200 Mbps with dishes measuring 40 cm in diameter, through the use of the Q and V frequency bands.
French space agency CNES also has similar plans. The THDSat project is currently in R&D phase and could supply French households and SMEs with access at 20-100 Mbps starting in 2016. The THDSat initiative would involve satellite constructors EADS Astrium and Thales Alenia Space, and possibly service provider Eutelsat, among others.
Impacts for satellite broadband
Satellite is clearly a viable alternative technology for reducing all t ypes of digital divide. Its development is nevertheless being stunted by the steady progress being made in terrestrial technologies and the need to increase data rates.
Although latest satellites allow access speeds of up to 20 Mbps, they are behind their earthbound rivals as the data rates supplied by FTTx or LTE are closer to 50-100 Mbps. It is only by being able to rival its terrestrial counterparts that satellite can become a credible alternative, which is why projects like the THDSat and the Terabit/s Satellite are now on the table.
Maxime Baudry
Co-Head of Satellite Practice at IDATE
m.baudry@idate.org
Social Gaming: Trends & Markets
Laurent Michaud
Head of Consumer Electronics & Digital Entertainment Practice at IDATE
By 2016, social games will account for nearly as 50% of the video game market
IDATE has just released its new study about social gaming: by the end of 2012 the social gaming market accounted for 36% of the online gaming market and 13% of the overall video game market. In 2016 its share is expected to rise to 46% of the online gaming market and 18% of the overall video game market. This video game market segment is entering the maturity phase. Its estimated revenues in 2012 were EUR 5.4 billion, which is expected to reach EUR 10.7 billion in 2016. Facebook is by a long shot the leading social gaming platform, with 235 million active gamers in August 2012.
World social gaming market, by geographical region (million EUR)
Source: IDATE, Market Insight "Social Gaming", February 2013
The major players in the video game industry have been slow to enter the social games fray
The traditional video game industry players are showing a willingness to adapt to new consumption habits
Publishers are seeking to make their traditional games more "social". They are also making their games available through free-to-play. Game consoles such as Nintendo and Sony are integrating social functionality in their new versions (e.g., Wii U and Xbox 720): video chat to contact friends online, various ways to get in touch with players around the world and ask for help, etc.
Nevertheless, most of the major video game firms are not on Facebook
This might be because they have not truly grasped the importance of deploying their offerings on social networks, or, rather, that they prefer to wait cautiously until the market has reached a certain maturity before entering. It could also suggest that they simply would rather not risk positioning themselves in a sector in which the recipes for success differ in every respect from their traditional sector. Admittedly, a social game's success usually has more to do with its number of players than the quality of the game per se.
In other words, the fact that the big developers who have invested in social gaming rank relatively well in terms of MAU rankings does not necessarily put them ahead of the rest.
Social gaming as a means of attracting new users to console games
The strategy of the six big stakeholders on Facebook can be explained in several ways. They may be seeking to capitalise on a new market segment that represents a growth driver at first and which could become a business sector in its own right down the road. Electronic Arts reported in 2011 that ARPU from EA Sports apps on Facebook was USD 56, exceeding net income per user from its console games.
But social gaming is also a means of bringing in new users to console games. The vast majority of social games of the traditional industry players are in fact "light", social versions of their console games meant to entice players to take it a step further and discover the "real" game.
Presence on Facebook of the major 'traditional' video game publishers
* through its subsidiary 2K Sports
** through its subsidiary Playdom
Source: IDATE, Market Insight "Social Gaming", February 2012
Project Manager Laurent Michaud
Laurent Michaud is the Head of Consumer Electronics & Digital Entertainment Practice. Laurent acts as project manager for market reports on the rise of Smart Home, Game, Music and Electronics. He adresses technological, industrial and strategic issues through a point of view of innovation. He provides his clients with expert technical-economic analysis of strategic issues relating to consumer electronics and entertainment.
l.michaud@idate.org
> More information available at: www.idate.org
Roland Montagne’s take on recent industry moves on the occasion of the MWC 2013
Roland Montagne, Head of Telecom Business Unit at IDATE gives his first impressions about mobile world congress 2013.
Video only available in French.
During Mobile World Congress 2013 which took place in Barcelona from 25th to 28th of February, Arcep's team (French postal and telecommunications regulatory authority) had the chance to interview Roland Montagne, Telecom business unit Director. The interview goes through his opinion on the different main themes of the Congress: mobile and FTTx network convergence, multiplication of devices' uses and data explosion that comes with through 4G especially through video, networks virtualization thanks to IP protocol and last but not least the telcos moves to segment their offer and capture the value created by these new uses.
Global LTE forecasts
Frédéric PUJOL
Head of the radio technologies & spectrum practice, IDATE
Deployments stepping up: 916 million subscribers expected in 2017
IDATE provides regular analyses of the main trends shaping the world’s mobile markets: networks, devices and services. Our Mobile team have teamed up to publish the new edition of its special White Paper: “LTE 2013 - Markets & Trends” to coincide with the Mobile World Congress in Barcelona (25-28 February 2013).
LTE is gaining momentum: IDATE predicts that, by 2017, there will be a total of 916 million LTE subscriptions.
• We expect that, by the end of 2013, a significant portion of LTE devices will support both FDD and TDD duplex modes. TD-LTE deployments in India, China and many other countries in the Asia-Pacific, Latin American, and Middle East regions and, to a lesser extent, Europe will fuel this growth.
• We anticipate that more than 80% of LTE devices will also support 3G and, in most cases, 2G in 2014.
• A limited number of LTE devices will support Mobile WiMAX in order to facilitate smooth transition for operators switching to TD-LTE.
LTE subscription by country
LTE subscription by operator
> Download the White paper - LTE 2013: Markets & Trends
Recent Fiber to the home markets showed a strong dynamism in 2012
Valérie CHAILLOU
Director of Studies, Telecoms Business Unit, IDATE
Inventory of FTTH/B in Europe
Europe (EU-35) reported a solid 15% increase in the number of FTTH/B subscribers during second half 2012. FTTH/B coverage continues to progress fast in Europe with a growth of 12% in the period. There were nearly 7.3 million FTTH/B subscribers in the EU-35 at mid-2012, and 33.8 million homes passed.
During 2012, several countries showed a real dynamism both in terms of coverage and take up rates. Turkey is leading the Top 5 dynamic countries in terms of percentage of new subscribers in the total FTTH/B subscribers' basis, along with Ukraine, Spain, Bulgaria and Russia. The positioning of Spain -only Western European country present in the list- should be noted as the country has entered the European ranking only a few months ago and is facing an important economic downturn. The success of FTTH/B is therefore reinforced in such a tricky context.
Elsewhere in Europe, pioneering Scandinavian countries, sometimes already considered as mature, are still leading the European market. In Denmark, FTTH/B market growth is now higher than the mobile market growth. In Finland, FTTH/B connections are more and more considered as a utility and therefore often included in the apartment monthly rental. In Sweden, new services are benefiting from a large FTTH/B coverage and an important take up rate: customers used to subscribe to a FTTH/B connection to be able to reach e-governance services provided by national entities and they are now turning to other services such as Video On Demand… finally, FTTH/B is a driver for video entertainment!
On the other hand, Italy, which was also a pioneer in FTTH/B rollouts, is beginning to lag behind. Some projects involving several players have been announced but none of them has entered into operation. The strategy unveiled by the incumbent doesn't put a strong accent on FTTH/B. The increase in terms of subscribers during 2012 is one of the lowest in Europe (10%), but the potential is still large (12.7% take up rate at end 2012, far from the EU35 average of 21.6%).
In terms of players involved in FTTH/B projects, there was no upheaval in 2012. Alternative carriers are still leading the way, representing half of the total homes passed in EU35 at end 2012 (nearly 71% considering EU39).
The number of local authorities launching FTTH/B rollout projects on their territory is increasing a little bit more rapidly than other kind of players but they still represent only some 11.6% of homes passed in EU35. However, we have noted some interesting projects in Europe held by those players, such as in the UK where rural cooperatives have succeeded in motivating citizens to be financially and/or "physically" involved in rollouts (e.g. the B4RN / Broadband For the Rural North project).
Then, of course, incumbents are main players in all European countries now; they represent 38.4% of HP in EU35 at end 2012. The quite recent involvement of Turk Telekom in Turkey has largely participated in the dynamism of the country which was clearly dominated by the competitor Turckell/Superonline until then. The competition between those telcos will probably enhance the take up rate which is still lower than the European average at end 2012 (18.7% vs 25.8%).
In the UK, the situation is totally different. The incumbent BT has decided to deploy FTTC on the national scale. FTTH (mostly referred as FTTP in the UK) will now only be deployed "on demand". BT has been really aggressive in the past year and has now reached the same level of coverage than its main competitor, the cableco VirginMedia (13 million homes passed with FTTC+VDSL). A part from local projects, we do not see a very bright future for FTTH/B in the country.
Number of FTTH/B subscribers per country in Europe
(countries with more than 200 K subscribers)
= 286px
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
A few months ago, we didn't note important changes in the leading countries. Russia and Ukraine are the main markets, both in terms of subscribers and homes passed. This is mostly due to the demographic context in those countries, as well as the rhythm for rollout. In Russia, several players are present on the national scale (Beeline, MTS, ERTelecom, Rostelecom), enhancing competition and driving tariffs down. Moreover, end users are migrating more rapidly because previous access solutions (copper networks) were not efficient enough.
Then Sweden is still a leading FTTH/B market. E-governance is a real success there and citizens are now very confident in their FTTH/B connections to now pay for new kind of services such as Video on Demand. Other TV services (linear TV) are most of the time included in the apartment monthly rental but customers are now ready to subscribe to new kind of services that they can reach whenever they want. In Sweden, the take up rate reaches 48.4% at end 2012, largely higher than European average.
Regarding the technology deployed, Ethernet is still players’ first choice across the EU-39, and represented 78% of all FTTH/B rollouts at end 2012.
As concerns network architecture, the gap between FTTH and FTTB has increased during last semester 2012 and now FTTB architecture represents 70% of rollouts at end 2012 (compared to 62% six months earlier). Players are favouring an FTTB 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.
Valerie CHAILLOU
Director of Studies, Telecoms Business Unit, IDATE
v.chaillou@idate.org
World TV Market
Florence Le Borgne-Bachschmidt
Head of the TV & Digital Content Practice
More than 1.5 billion TV households worldwide in 2017
The TV market is a sector on the precipice of unprecedented upheaval. IDATE publishes every six months an observatory of the traditional TV market and our study reveals the chief forces driving the industry’s growth and transformation – exploring key market trends and supplying volume and revenue forecasts up to 2017.
Accessing TV
According to IDATE, the number of TV households worldwide will reach 1.544 billion in 2017 (+9.1% in 5 years).
• Cable will the remain the chief access channel (554.0 million households in 2017) but will gradually lose ground to satellite and IPTV which will account for 32.1% and 8.6% of TV households, respectively, at the end of 2017.
• Despite the development of hybrid TV solutions, terrestrial TV will continue its decline and drop down to number three spot by 2017, with a roughly 23% 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.
IDATE's take on current industry moves
"The current acquisition of Virgin Media by Liberty Global underlines the strategy of internationalisation in the Pay-TV Market. More globally, the United States continue to set the trends and consolidate their leadership in this market," says Florence Le Borgne-Bachschmidt, head of the TV & Digital Content Practice at IDATE. She insists: "Pay-TV is nearing saturation in the world’s more developed TV markets. The emergence of new OTT video services on televisions and other connected devices increases the threat of cord-cutting. For a great many pay-TV providers in the West, emerging markets therefore represent vital sources of future growth."
Spotlight on the breakdown of Pay-TV: TV access and premium pay-services
In some of cable TV’s traditional strongholds, access services still account for the bulk of pay-TV subscriptions with e.g. 57.1% of pay-TV households in Japan & 74.6% of pay-TV households in Germany.
In France, the development of multi-play services including access to a basic IPTV package tends to increase the share of households subscribing to an access only service.
In contrast, in the United Kingdom or Italy, this type of offer tends to be disappearing, which is in the UK visible by stopping to sell the Virgin Media M package.
Florence Le Borgne-Bachschmidt, Head of the TV & Digital Content Practice
More information on our regulary published World TV Observatory available here
About Florence Le Borgne: She joined IDATE in July 1998 and is now head of our TV & Digital content Practice. Florence’s prime area of focus is the development of digital media technologies (terrestrial, cable and satellite TV, digital cinema, video and TV on the web) and specifically the economic, strategic and micro-economic aspects of these sectors. Her analyses also cover media company strategies in general. Before coming to IDATE, Florence worked as the Head of Research in the Nord-Pas-de-Calais Regional Development Agency's Economic Observation department, where she devoted herself primarily to issues relating to the Information Society, the development of telework and the mastery of key technologies. Florence is a graduate of the Lille school of management EDHEC (Ecole of Hautes Etudes Commerciales).
Cord Cutting
Jacques Bajon
Head of "Video Distribution" Practice
Cordcutting: Is Europe ready?
Cord-cutting, which describes the phenomenon of traditional television services' customer drain, is at the heart of the new competence in the audiovisual landscape. IDATE recently published an in-depth market report dealing with this topic and it proposes a complete benchmark of new video offers in the United States and analyses the best practices. The study provides also conclusions on potential impacts of this phenomenon in Europe.
The phenomenon of cord-cutting can be regarded in a broader perspective of evolution in access to television and video services. This threat to the established MVPDs1 is in fact symptomatic of a broader set of upheavals in the television industry. Various factors contribute to these changes: the economic crisis, which fuels tensions surrounding the primary income of the established players (advertising and subscription); an underlying trend of on-demand video consumption and changing usage habits that threaten to shatter lucrative TV packaging schemes; the entry of Internet players who master these new usage habits and are a step ahead when it comes to user interfaces, a key element in the future.
The traditional television players – channels and distributors – are thus facing a scissor effect. TV channels are seeking alternative growth models that include enhanced B2B with distributors and entry into the online market to serve as a springboard for advertising growth. For their part, distributors are seeing Internet players encroach onto their networks, while rights holders and TV channels continually weigh the benefits of partnering with them. The instability is constant. For Jacques Bajon, report’s project manager: “The key issue at stake is this process of disintermediation, and the TV industry's inability to team up only reinforces the trend.”
In the United States, players' strategies are thus primarily defensive:
• Rights holders and TV channels still hesitate between choosing traditional distributors and the new ones (i.e. Internet-based);
• Distributors are attempting to retain their subscribers with multi-screen offerings and by focusing on the Internet access growth engine (itself a vehicle for disintermediation!) and – in a new trend – by working together.
Quarterly changes in video subscribers (net additions) of US MVPDs, Q1 2010 –
Q2 2012 (thousands subscribers)
Europe, with a subscription TV market that still has its growth drivers, may think that it is preserved from the tension across the pond, but its dependency on the US industry is twofold. Europe lags behind in many ways in terms of content and technology. It is dependent on US audiovisual products, and the entrants in the Internet market that master technology and interfaces come from the United States.
What is the solution? Risky changes.
• Rights holders must make the release windows and network-centric agreements model suppler to make content available. In Europe, the production industry must structure itself without further delay. In Europe, and to a lesser extent in the United States, TV channels fund audiovisual production and thus play a video library management role that must be strengthened, as in the film industry.
• TV packagers must do away with their lucrative but ossifying model of packaging channels and instead offer consumers what they want.
• Distributors must distribute, whether over managed networks or the Internet, and they should be paid for this service (and not the contrary, which is currently the case for wireline operators).
OTT video services will continue to grow and influence the TV access market because this is what users are demanding: flexibility and richness of content offerings, prices (a monthly subscription to Netflix equals the purchase price of a DVD), "anywhere, any terminal" usage habits – unlike operators' segmented offerings, and user-friendliness (these new entrants usually offer much more accomplished consumption interfaces).
Jacques BAJON, Head of "Video Distribution" Practice
More information on our website about the in-depth market report dealing with this topic
About Jacques: He joined lDATE in November 2000, working as a Director of Studies. His assignments primarily involve strategic and sector-specific examination of the television/video and its distribution modes, from broadcast to telecoms/IP. He more specifically addresses digital delivery ecosystems and linked services. Jacques’s previous experience includes freelance analyst for the Eurostaf / Les Echos group, carrying out market research and analysis of media and telecommunications industry companies, in addition to gaining experience in market analysis working for Ericsson. Jacques holds a post-graduate research degree (DEA) in International Economics (Université Paris X Nanterre) , a Master in Strategic Management of Innovation (Toulouse Graduate School of Management), and followed a training session in Investments in Telecom Networks from Télécom ParisTech.
Telecommunications versus Over-The-top communications
Soichi Nakajima
Senior Consultant at IDATE
OTT communication service
will account for 6% of total
communication service revenues by 2020
will account for 6% of total
communication service revenues by 2020
In 2020, for the USA and EU5 combined, OTT communication service revenues will have increased to 15 billion EUR from 7 billion EUR in 2012. Yet they will still only account for 6% of total communication service revenues, with telcos accounting for the remaining 94%. The total market will decline, mainly due to the telcos’ devaluation of the market, rather than the OTTs taking their revenues.
Drawing on IDATE’s extensive work on the latest trends in communication services, this latest study, “Future of Communication 2020: Telco & OTT communication - market forecasts” delves deeper into our analysis and forecasts the paths which the market is expected to take between now and 2020.
The six key trends shaping the market
In this study, IDATE outlines the 6 key trends happening in the communication services market which will shape the market through to 2020.
1. The aggregation of communication types: IDATE notes that most communication service providers are aggregating and providing several communication types to the market. For example, Facebook is primarily a social network (which is a communication tool in itself), but also offers voice, messaging and file sharing services too. In the case of operators, they of course traditionally offer voice and messaging as their core product, but are now looking to diversify into file sharing too, either through cloud products or the GSMA-led RCSe (Rich Communication Suite enhanced) initiative, marketed as ‘joyn’.
___________
* EU5: France, Germany, Italy, Spain, United-Kingdom
2. Beyond traditional communication for telcos: The telcos are now looking to offer more than simply voice and messaging, in order to remain competitive in the market and to remain more than a dumb pipe. IDATE sees three main ways in which telcos are striving to achieve this: providing their own OTT communication service (such as Telefonica with their TU Me app and Orange with their Libon app); partnering with OTT communication service providers (such as Verizon and H3G UK with Skype and H3G HK with WhatsApp); and joining the GSMA-led ‘joyn’ initiative, launched by the three principle operators in Spain (Orange, Telefonica and Vodafone), which aims to offer enhanced communication services across all mobile phones in the same simple way as traditional voice and SMS today.
3. Voice and messaging becoming a telco commodity: The need for telcos to offer more than the traditional voice and messaging service is largely due to the commoditisation of such services. These services are today taken for granted, and virtually all telcos offer them in abundance; that is to say for a certain fee, users get massive amounts of minutes and messages that in reality are hard to use all up, and there are also many cases of unlimited offerings. This means that the value of such services is decreasing. Another trend for telcos is bundling, from double to quadruple play. Whilst such marketing strategies are intended to increase user appeal and also reduce churn, the fee itself is normally reduced and hence further devalues the standard voice and messaging services.
4. Mobile data and WiFi makes strong case for OTTs: For OTT communication services to work on mobile, there needs to be Internet connectivity on the mobile. Especially with the exploding popularity of smartphones, this Internet connection is increasingly provided by both mobile data plans and WiFi. Unlike voice and messaging, unlimited mobile data packages are relatively rare with at the very least throttling usually involved. Especially in the case of messaging there are only small amounts of data involved and thus this poses no problem. Video communication, on the other hand, is often banned by operators, but is possible through WiFi; and in many situations where one wants to use video communication, the user is stationary anyway (such as calling loved ones far away).
5. The rise of video communication: IDATE also notes the increased interest in the market for video communication. The concept is hardly new since operators have in the past tried to market the service, but with limited success. In particular, one of the demerits of operator video-calling propositions was the high cost for users, but now OTTs have come in with a free proposition using WiFi, including the likes of Apple and Facebook. Further, the concept of WebRTC, which allows video calling directly from the browser to any other browser could potentially boost video calling; there is no need for users to download software as WebRTC is an API for developers.
6. Genuinely free OTT offers in exchange of user data: One of the obvious advantages of OTT services is that it often comes for free, or in some cases, a very low fee. As an overall trend in the Internet market, the advertising model is becoming standard and the advertising market is set to grow with better tools and analytics, especially for mobile. The communication market is no exception, and is set to profit from advertising. However, generally speaking, users see advertising as a nuisance, and there is also a market for low-cost services with no advertisements, as demonstrated by the highly successful WhatsApp application.
Project Manager: Soichi Nakajima
Soichi joined IDATE as a senior consultant in January 2009. His main area of endeavour is the mobile communications market, such as the mobile Internet, applications, contents and services, the analysis of strategies employed by the various players, scenario building and forecasts. He also works on other business potentials for the mobile Internet, such as smart grids and VoIP. Before coming to IDATE, Soichi worked for NTT DoCoMo, Japan’s largest mobile network operator by subscriber numbers, where he played a leading role in the strategic planning of the roll-out of Japan’s first 3G M2M data-only tariffs. Soichi holds a Bachelors degree in mathematics, from the University of Nottingham in the UK.
To learn about more about this topic and our related market report please visit our website
World Video Game Market
Laurent Michaud
Head of Consumer Electronics & Digital Entertainment Practice at IDATE
In 2013, hardware & games will represent 60 billion EUR in revenues, against 53bn EUR in 2012
Despite the profound changes that are going through it, the global market for hardware & video games will grow up from 2013 to attain 79 billion Euro in 2016. This study follows the development of key indicators for the sector over five years and makes an appraisal of the key markets: Home consoles - Handheld consoles - Offline games - Online games - Mobile phone games.
Following the recent announcements at the CES 2013 can we believe in a recovery of the hardware market in short or mid-term?
In 2012, the home consoles market segment (hardware and software sales) could generate 37% of total video game revenues. Given the regular growth of the online games and mobile platform games market segments, the home console segment is expected to shrink in the coming years. Let us recall that the latter accounted for nearly 60% of total market revenues in 2004. In spite of the arrival of a new generation of consoles, resulting in double-digit growth over several years, the home console segment will account for a "mere" 41.1% of the total global market by 2016.
Three factors are bringing about a shift in the home consoles market segment:
1. The arrival of Nintendo's Wii U, its first new generation console – pending the likely release of competing devices by Microsoft in 2013 and Sony Computer Entertainment in 2014 – is without a doubt the most pivotal event as the year approaches its end. Like its big brother, the Wii U will deliver a new gaming experience to the fickle and much sought-after consumers, be they experienced or casual gamers. This machine introduces pioneering features, and there is no doubt game designers will put them to use and conjure up new gameplay. Nintendo's machine should prove to be a winner. Yet it is still too early to know whether the Wii U console will enjoy the same degree of success as the Wii.
Worldwide home console forecast sales (in million units)
Source : IDATE, World Video Game Market, edition January 2013
2. Competitors Sony and Microsoft will be paying particular attention to the Wii U's sales figures, given how off-guard they were caught by the Wii's success.
They now realise that their health will be determined by the level of innovation they bring to the gaming experience. The question remains as to which part of the console they will focus their innovation efforts on. 4K resolution could be an option, although this would require that gamers replace their TV sets, and 4K home cinemas are still quite pricy. The most likely path would be to beef up their machines' ubiquitous and multiscreen functionality, and rethink the interaction peripherals with an emphasis on voice recognition and motion sensing. As for infrastructures for delivering services, they have no choice but to invest in the cloud as done by Sony Computer Entertainment, which acquired Gaikai for USD 380 million in mid-2012.
3. According to IDATE, revenues from digital sales via home consoles will reach EUR 2.9 billion in 2012. These include video games, video and music. This represents one fifth of all turnover generated by the sale of content for platforms. By 2016, IDATE reckons that income from the digital sale of content via home consoles will account for 60% of income generated by these platforms.
Changes in digital/physical sales revenues(billion EUR)
Source : IDATE, World Video Game Market, edition January 2013
Project Manager Laurent Michaud
Laurent Michaud is the Head of Consumer Electronics & Digital Entertainment Practice. Laurent acts as project manager for market reports on the rise of Smart Home, Game, Music and Electronics. He adresses technological, industrial and strategic issues through a point of view of innovation. He provides his clients with expert technical-economic analysis of strategic issues relating to consumer electronics and entertainment.
l.michaud@idate.org
> More information available at: www.idate.org
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