Head of "Video Distribution" Practice
IT services accelerating the transformation
The video distribution environment is changing at an incredible pace, with viewing habits becoming more and more individual and involving multiple screens. Added to which, the growing integration of IP-based solutions is only accelerating the pace of this transformation.
IDATE’s freshly updated TV and video database, and its accompanying market report, provide readers with a complete view of the latest market trends, delivering key figures for 30 countries on TV access modes (terrestrial, satellite, cable, IPTV and broadband) and connected devices (televisions, set-top boxes, home consoles, Blu-ray players, PVR, DMA/R, smartphones, tablets).
Traditional broadcasting networks are being forced to join this new environment to stay in the game. Up until now, competition between the networks had been based primarily on the rate at which infrastructures were being digitised, with satellite and IPTV leading the way over cable and the classic terrestrial network. The progress made by online video, enabled by the increase in user numbers and in connection speeds, has created a whole new ball game. One that will make it harder for digital TV to find new sources of growth.
Breakdown of TV access modes in Europe (million TV households)
A host of new, intertwined challenges are emerging for market players: the advent of new video distribution networks with fixed and mobile LTE broadcasting, the end of uncertainties over the UHD TV market and the integration of IP: an expanded market for CDN, flexibility of cloud TV solutions, creation of hybrid TV or possibly IP broadcasting solutions?
The change in users’ viewing device of choice (connected TV, streaming sticks, tablets, smartphones) only increases the threat of veteran TV providers being cut out of the loop, as Internet giants work to leverage their platforms to secure a central role in managing the user interface.
A selection of platforms’ users and subscribers in Q1 2014 (millions) and YoY growth (%)
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Conducted by Theon van DIJK, Chief Economist, European Patent Office, Munich, Germany
C&S: Could you please introduce yourself and the Intellectual Property Directorate at DG Market?
Kerstin JORNA: I became Director for Intellectual property Directorate at DG MARKET in 2012. An exciting and challenging job! I work with a team of roughly 50 very dedicated colleagues.
Our job is to make sure that inventors and creators in the Single market are successful on the "inventor trail". Inventors and creators turn ideas into innovation: be it a new "green" technology, a lifesaving drug, or a new film. This requires ideas in the first place. But it also requires good laws, efficient registration procedures, the capacity to leverage capital for developing an idea, a framework for branding, a clear and predictable legal environment for distributing and licensing innovations to consumers and customers, efficient jurisdictions for ensuring respect for rights and investments, trade agreements with third countries that offer a stable and predictable environment for exporting innovation. Intellectual property is not a purpose in itself. It is a tool to stimulate innovation and dissemination of knowledge. My team's role is to calibrate the policy and the single market tools in such way that these objectives are achieved. There is clear evidence, that a well calibrated intellectual property system creates qualified jobs and growth in Europe.
The European legislator is currently discussing our proposals for the reform of the European Trademark system and European rules for Trade secret protection. An action plan on a more linked-up approach for ensuring respect for intellectual property rights was presented a month ago. A Green paper on European rules for non-agricultural indications of origin is under public consultation. And we are also working on the review of our copyright rules. Some 9500 respondents replied to our online consultation and the results were published recently. And of course, there is the implementation of the unitary patent!
C&S: What is your opinion about the role of the patent system in the economy and the benefits it can bring to the society? How do you see the European Commission's role here?
K.J.: Knowledge is the currency of the future. A recent study carried out by OHIM and the EPO provides compelling evidence on the economic importance of intellectual property rights (IPR) in Europe. Patent-intensive industries in Europe contribute to 10% of EU direct employment (22 million) and 14% of EU GDP (€ 1.7 trillion).
Today the patent system in Europe is complex, fragmented and costly. And this is also true for litigation. While big companies might be able to afford the price to validate and defend their patent across multiple jurisdictions, small innovative companies cannot. The Commission and Vice-President Michel Barnier have made the unitary patent package a top priority for the single market. After the landmark political agreement in 2012, we work together with Member States and the European Patent Office to ensure that the unitary patent and the unified patent court will become an attractive option for innovative companies.
C&S: What do you consider to be the main achievements by the European Commission in the area of patents over the past five years?
K.J.: Without a second of doubt: The agreement of the European Parliament and the Member States on the Unitary patent. Unitary patent protection will permit significant cost savings and simplify administrative procedures. In addition, as the single jurisdiction competent for all European patents, the Unified Patent Court will ensure the consistency of judgments, thereby increasing legal certainty. It will also considerably reduce the complexity and cost of patent litigation.
These political decisions now need to translate into reality. We are working together with Member States and the European Patent Office to set up the system for a unitary title that is sufficiently attractive in terms of price and legal certainty, as well as a Court that has the trust of users. The first unitary patent grant in 2015 is possible – if all actors involved collectively continue to deliver on the list of things to do and national parliaments engage the remaining ratification procedures.
C&S: Recent years have seen smart phone patent battles and competition policy scrutiny in the area of electronic communications. How do you see the interplay between IP and the patent system in particular on the one hand, and competition law and enforcement on the other hand?
K.J.: The globalisation of markets and increasing complexity of products with overlapping technology has modified the business environment in certain sectors. Companies have acquired important patent portfolios to safeguard their product lines in a given market segment. This has also led to increasing costs for IPR enforcement and litigation.
As the competition watch dog in the Single Market, the Commission must make sure that companies have a clear understanding on where the dividing line runs between legitimate exercise of intellectual property rights and anti-competitive behaviour.
Standard essential patents are a hot topic. We need clarity for companies that hold standard essential patents, but also for companies that need to use standard essential patents for enhancing innovation. The Samsung and Motorola cases are two recent examples. FRAND license terms should be guaranteed to all market participants. The Commission's intervention has also clarified that a licensee can challenge the validity of the patent object of the licensee agreement at any moment. This is in the public interest.
While competition law enforcement is an effective ex post method to stop anticompetitive behaviours, the Commission is also exploring possible ex ante means to prevent abuses. We are participating in the discussions on guidelines in ETSI and ITU as standard setting organisations.
C&S: What are the key challenges that the patent system is currently facing?
K.J.: We already spoke about the implementation of the unitary patent package. This is not only a challenge for public authorities. It is also a challenge for companies who will have to review their patent strategies and their portfolio policies. Some might be tempted to stay with the old, fragmented and costly system, "because we are used to it and we know it". Still, I hope that the new features of the unitary patent and the unified patent court with a unique combination of international, specialised and multidisciplinary expertise will convince companies to make use of these opportunities in their future innovation strategies. Of course there is no one size fits all and different sectors may see different types of opportunities. However, looking back at the success story of the European Patent Convention, I am confident about the success of the unitary patent "innovation".
Another issue that I see coming to the fore is the question how Intellectual property titles, and patents in particular can leverage capital for further development of the innovation – a recent study called it the "bankable IP's".
And then there are issues around the implications of patent law in biotechnology. We recently created a multidisciplinary expert group to look into this, in the light of the development of recent jurisprudence.
Finally, I also see a need to further explore some basic common features for efficient patent systems globally. Today challenges such as climate change, food security, aging population are global. We need innovation to address these challenges on a global scale. In addition, supply chains for delivering innovation are also increasingly global. WIPO and trade discussions can be instrumental to this.
C&S: Where are the main differences in the IP thinking and practice between both sides of the Atlantic, and between the Western world and Asia?
K.J.: Both the US and the EU increasingly focus on economic evidence as a basis for calibrating their patent systems and its deliveries.
Leaving aside that the EU still is a fragmented market of 28 patent jurisdictions, there are a number of differences in approach. This is true, for example, for the grace period concept, the notion of protected subject matter and the publication of patent applications. Patent quality is a key issue for Europe. We believe in quality patents because they create the right conditions UPstream for bringing innovation to the market. Less is more! Too many low quality patents prompt litigation DOWNstream and stifle innovation because the good patent needs to "weed out" bad patents first.
C&S: What will be the most important developments regarding patents and new technologies in Europe for the coming five to ten years?
K.J.: New technologies have a profound effect on the current economic landscape, shaping the way we live and challenging our traditional framework. The internet of things (i.e. connected cars), big data, 3D printing, synthetic biology and robotics offer us unrivalled opportunities to progress. But they also pose challenges and intellectual property is one of them.
With respect to patents more specifically, I see debate about the delay for obtaining patent protection for inventions for fast developing technologies.
The increasing complexity of new innovative products has prompted the activities of Non-practicing entities, sometimes referred to as patent trolls. In certain cases such single component "hold-up" can delay the bringing to the market of innovative products apart from raising the cost for litigation. Europe, with a different policy on patent examination is less affected than the US and I am confident that the unified Patent Court will permit to contain excesses, should they occur.
Another issue is also linked to complexity. How can we promote "match-making" for different but linked technologies and patents. Our proposal for European trade secret protection is part of the answer, because it gives a solid legal framework to exchange information at an early stage of the innovation process. But there is more to consider.
Published in COMMUNICATIONS & STRATEGIES No. 95
Kerstin JORNA is a German national. She joined the Commission in 1990 as a civil servant. During the last 20 years Kerstin held various positions in the internal market directorate, amongst others as assistant of the director general as well as in the secretariat general as member of the negotiating team for the Nice treaty. After a stint as commission spokeswoman for regional policy and institutional affairs, Kerstin joined successively the cabinets of Michel Barnier, Günther Verheugen and Jacques Barrot. Kerstin studied law in Bonn, Hamburg and Bruges.
Theon van DIJK is Chief Economist of the European Patent Office, where he is responsible for carrying out economic research in the area of patents and providing general economic advice to support the various EPO activities. Prior to joining the EPO in August 2013, Theon was an economic consultant specialised in competition and regulation matters. He has held senior positions in leading international economic consultancies in London and Brussels, and founded his own consultancy in 2005. Theon has extensive experience in providing expert economic advice to private companies, competition authorities and government organisations. Theon holds an MA and Ph.D. in Economics from Maastricht University in the Netherlands, where he carried out academic research on the economics of patent protection at the UNU-MERIT institute. Theon was a Postdoctoral Fellow at the Institut D'Économie Industrielle in Toulouse, France. He has published extensively in academic and applied journals in the area of intellectual property, competition policy and regulation.
 Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (COM/2013/0813 final. http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52013PC0813&from=EN
 COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE Towards a renewed consensus on the enforcement of Intellectual Property Rights: An EU Action Plan (COM/2014/0392 final). http://ec.europa.eu/internal_market/iprenforcement/action-plan/index_en.htm
 http://ec.europa.eu/internal_market/indprop/geo-indications/index_en.htm#maincontentSec1. Proposals for a Regulation of the European Parliament and of the Council amending Council Regulation (EC) no 207/2009 of 26 February 2009 on the Community Trade Mark and for a Directive of the European Parliament and of the Council to approximate the laws of the Member States relating to trade marks (recast) – references COM(2013)161 and COM/2013/162
Head of Regulation Practice, DigiWorld by IDATE
Maturing, and putting on weight
We have examined different aspects of the 'light operator' phenomenon. Light operators and their business model are heavily influenced by sector specific regulation. The purpose is also to provide an inventory of the different points of contact between the two. We also discuss the evolution of 'light' approaches in the mobile industry, exploring the different kinds of MVNO and the wholesale operator model. Regarding the fixed sector, we examine the opportunities for light operators arising from the use of next-generation access networks and delivers examples of light operators on open access networks. Finally, we take a brief look at other forms of light operator, such as Wi-Fi operators and over-the-top players providing voice and messaging services.
The future of ‘light operators’ is therefore probably nearer the ‘medium-heavy’ point of the scale, rather than the virtually asset-less.
Light operators have often been a catalyst for change
Light operators have had a tremendous impact on telecoms markets, but their traditional business models have not turned out to be very sustainable in the long run. Light operators have often been a catalyst for change (as with low-cost models, or niche segments) but have also often failed to reap the benefits of their innovations as network operators took back their power. Light operators pursuing a pure low-cost approach will find themselves squeezed between network operators' own low-cost sub-brands and abundant bundles as well as OTT's providing 'free' voice and messaging services.
Nevertheless, light operators continue to exist in their niches catering to the needs of well-identified market segments.
The rollout of new NGA and 4G networks creates a number new opportunities for light operators, too. However, open access networks are present in a limited number of markets only, such as the Netherlands and Sweden in Europe and in the Asia-Pacific region. Sector-specific regulation also plays an important role in the market and this will continue for the foreseeable future, creating business opportunities for asset-light business models.
Light operators and the MVNO phenomenon
Looking at the mobile market and certain open access players, it seems that ‘light operators’ investing in their ability to differentiate their services from their host operators are faring better than their resale-focused peers. Full MVNOs such as Telenet in Belgium or Virgin Mobile in France have become serious challengers in their respective markets. The same holds for fixed ISPs of the likes of Myrepublic or Bredband2. By investing in a limited infrastructure rather than being a pure reseller, they are able to propose a service with some unique characteristics without having to go to the effort of rolling out a full network. Asset-lighter bitstream models with a handover closer to the end user than in the case of a very light ISP but still staying short of the capillarity of an access network are certainly the safest bet for challengers in the fixed market.
Yves Gassot Directeur Général, IDATE
‘‘Mobility reloaded” will be the central theme of the 36th annual DigiWorld Summit.
Following through on ‘‘Game Changers’’ (2012) and ‘‘Digital Gold Mines’’ (2013), this year’s theme will allow us to further our examination of current and future upheavals in the digital economy by exploring the issues from a specific angle: mobility and its impact on user behaviour and on the value chain for telecoms, TV, advertising, the Internet, gaming, smart cities, etc.
- What innovations can we expect from mobile Internet disruption?
- Are fixed and mobile superfast access interchangeable?
- What new players and business models will emerge from the Internet of Things and mobile advertising?
- Will mobile devices turn TV into a one-to-one business?
- How can Europe get back in the game?
IDATE Chairman François Barrault points out that, ‘If the cloud, big data and the Internet of things are clearly the major disruptions looming on the horizon, the momentum today lies in the mantra: mobility first!’
IDATE CEO, Yves Gassot, details the key points of this year’s programme: ‘What began with the swift commercial success of 4G is segueing into the spectacular technological leaps expected from LTE-advanced and, beyond that, the prospect of 5G, the widespread adoption of software-driven networking (SDN)… But questions also linger over the accelerated pace of the migration from the fixed to the mobile Internet, spurred by the massive popularity of smartphones and tablets, coupled with the surge of emerging economies. It goes without saying that a great many stakeholders are being affected by these massive changes in the landscape, which we have chosen to explore from three angles: How revenue is progressing for mobile operators and other players, from M2M to the Internet of things and beyond; How the massively mobile Internet will affect the advertising ecosystem; and how TV industry players are positioning themselves now that video accounts for an increasingly large share of mobile traffic’.
The 36th annual DigiWorld Summit will run from 18 to 20 November in Montpellier, France, and play host to a panel of international industry luminaries who will share their views with more than 1,300 participants from 30 countries. IDATE analysts will lend their expertise to the sessions that will be moderated by Digiworld Institute members.
DigiWorld Week: the DigiWorld Summit broadens its horizons
This year’s DigiWorld Summit will kick off DigiWorld Week: a new initiative from IDATE and its key partners to explore the many facets of the digital society’s core economic issues. A series of exciting events will be taking place from 16 to 21 November on either side of the core two-day Summit:
- The Connected Things Forum
- The Game Summit
- MIG (Montpellier In Game)
- Industry Oracles
- Economic Club on m-payment
> Find the latest programme updates at www.digiworldweek.com
More than 140 speakers on hand
This year, we are delighted to welcome speakers from the four corners of the globe, come to share their views on the future of mobility:
- Mikael BÄCK, Vice President Global Strategy & Portfolio Management of Ericsson will share some of the chief findings of the “Mobility report”.
- Jean-Michel FOURNIER, CEO & Co-Founder of BitGym, a San Francisco-based start-up and winner of the prestigious Auggie Award at AWE 2014, will talk about the “quantified self” phenomenon.
- Kayvan MIRZA, CEO & Co-Founder of Optinvent will unveil his approach to new generation smart glasses.
- Patrick PELATA, EVP & Chief Automotive Officer of Salesforce.com will speak with Thierry VIADIEU, New Mobility Program Director from Renault, about the future of connected cars.
- Christophe WILLEM, Senior VP of Strategy & Marketing at Thales Alenia Space, will tell us if drones, balloons and mini-satellites offer viable solutions for connecting huge swaths of the population to the Internet.
- Michel COMBES, CEO of Alcatel-Lucent will close the “Road to 5G” session, whose speakers include Selina LO, President & CEO of Ruckus Wireless, and Atsushi TAKESHITA, President & CEO of DOCOMO Communication Laboratories Europe.
- Pierre LOUETTE, Deputy CEO of Orange and Carlos LOPEZ-BLANCO, Global Head Public & Corporate Affairs for Telefonica, will discuss how telco business models will evolve in Europe, against the backdrop of market consolidation.
- Laurent SOLLY, Facebook’s Managing Director France, and Benny ARBEL, Founder & CEO of MyThings, a rising star in retargeting, will discuss the challenges that advertising faces as it makes the transition to mobile.
- Luc JULIA, VP & Innovation Fellow of Samsung and Co-authored Apple Siri's core patents, Erick TINICO, Director of Mobility at AT&T, one of the world’s most advanced telcos and Axel HANSMANN, Gemalto’s VP of M2M Strategy & Marketing, will share their analysis of new business models for M2M and the IoT.
- Fu SHENG, CEO of Cheetah Mobile, a growing mobile Internet powerhouse in China, with 340 million users.
- Abigail KHANNA, Head of Digital and Future Media Business Development at the BBC, Steve McCAFFERY, GM & SVP of sales for Europe Arris, Eric SCHERER, Director of Future Media, France Télévisions, and Valery GERFAUD, General Manager, M6 Web, will explore what the future holds for television, now that mobile devices are becoming users’ screen of choice.
- Guillaume de FONDAUMIERE, Co-CEO of Quantic Dream, Susan O’CONNOR, a writer whose script credits include the games BioShock 1 & 2, Far Cry 2, Tomb Raider and Star Wars 1313, along with Charles CECIL, co-founder of Revolution Software, creator of Broken Sword, are among our video game Oracles.
- Meng LI, Director of China Telecom’s Mobile Business Department Europe, will talk to us about the development outlook for mobile in its various forms in the world’s biggest market.
- Jean-Ludovic SILICANI will talk about his time as Chairman of France’s telecoms and postal regulator, ARCEP, and share his insights into key issues going forward.
- Vincent LE STRADIC, Managing Director of Lazard, will provide a financier’s perspective on the health of Europe’s digital economy. And…
- Axelle LEMAIRE, French Ministry of State for Digital Affairs will deliver the Summit’s closing remarks.
Published in COMMUNICATIONS & STRATEGIES No. 94
Conducted by Laurent MICHAUD, IDATE, Montpellier, France
C&S:How do you see the video game industry today?
Alain LE DIBERDER: The industry is facing a deep shift of its main business model. It’s not a problem of overall market size. Even if the macroeconomic environment is rather dull, even if the new mobile market works with very low price levels, most of the firms are able to adapt themselves to the new revenue framework. Instead the main issue is the changes needed in the corporate organizations. Yesterday, AAA products were king and the sales department was king of the AAA market. Today the whole process starting from an idea and ending in an actual consumer needs to be reshaped. Unfortunately marketing, technology and price policy are far more flexible than human behavior.
C&S:Video games are reaching their full potential online with multiplayer or massively multiplayer, social, viral, flash and ubiquitous components. What do these developments inspire for you?
A.L.D: All these technologies are impressive and improving very quickly. But I’m not sure that they actually drive the industry to a new era. Videogamers were “social” from the start, and videogames were “viral” far before Facebook or Tweeter. Even in the Eighties, schools and universities were an effective “social media” in which gamers and game reputations were debated, built and destroyed. And they still are. The new phenomenon is that the “social” dimension is now included in the code. And there are opportunities to make money with it. But the videogame industry, for the moment, is not able to catch the main part of this market, which is dominated by “transversal” companies like Facebook, Twitter, Apple and so on.
C&S:What are the effects of globalization on the creation of content, on the creators?
A.L.D:The videogame industry is probably the first entertainment business being born global. The movie industry was partly global relatively soon (say around 1910), but even today national and regional components remain important. It’s the same for music industry. The reason why the videogame industry is different is quite simple: during the first ten years of its history, there was barely no text inside the games. Remember Pong, Pacman, Space Invaders, or even the first Mario. Without any words the only text to be translated was the cartridge sleeve or the instruction sheet on the arcade cabinet. The need for text and localization only came with PC games in the eighties, but it was too late for local cultures: the industry DNA was definitively global. Even the word “localization” tells the truth. The industry can’t be more global than it was at its birth, and the only thing that could happen in the future is less globalization, not more. But it probably won’t.
C&S:Hardware vs. software: are home consoles set to disappear in favor of streamed games? More generally, won't hardware be reduced to a "stupid” screen?
A.L.D:I don’t believe that the console industry holds a strong future. Consoles are expensive, non-durable and challenged pieces of hardware. Competition from set-top boxes and mobile devices is stronger and stronger. But hardware won’t be reduced to a stupid screen. There is a bright future for hardware if you compare the specifications (and price) of a present smartphone to those of a home computer or a home console from ten years ago. Hardware is more and more smart, not stupid. In fact the new hardware standards and the telecommunication networks live together in an ecosystem in which smart networks need smart home equipments, not dumb.
C&S:Oculus Rift, Google Glass, holographic technology ... what do you think the next disruptive gaming experience will be?
A.L.D:I can’t see such a thing as a disruptive technology in the videogame history. Technology is an additive process in the videogame industry not a subtractive one. For instance when the home console began, in 1974, the arcade market didn’t disappear. The computer games started slowly at the end of the seventies and added their sales to the console market. When the PC market was mature, in the beginning of the nineties, the console market exploded too in the 16 bits era. Online games began to be popular before the web. I remember having wasted many hours playing Microprose Grand Prix on line in 1992 with a 14.4kbs modem. Today the online market is strong, but more than 20 years after, between 60 and 80% of the overall market, depending on what you consider as a videogame « sale » is still offline. We could also think of 3D games, Virtual reality helmets, streamed games and so on. But the truth is that during 40 years many technologies have been introduced, many have failed (especially with 3D, beware Oculus!) and many have contributed to the Harlequin suit in which the videogame industry is dressed.
C&S:What are the issues in which the French industry still needs to progress?
A.L.D:There are French developers, French magazines, excellent French videogame schools, some French companies, but the “French industry” doesn’t exist. Of course there is Ubi Soft. But Ubi began to develop games in Asia or Morocco 25 years ago, and regarding the workforce, is more a Canadian company than a French one. Vivendi invested in big US companies but they remained American companies reporting to French shareholders. And Vivendi sold the main part of the shares to Activision. Infogrames bought many British and American companies and the glorious brand of Atari, but it failed. From the beginning, the golden era of Ere Informatique or Loriciels, the French (little) companies have always sold more than 80% of their products in the world market. Almost all the titles, such as “Another World” or “Alone in the Dark” were in English, even in the French market. Many French guys have succeeded in the videogames industry, but as it’s a global industry, they were and still are involved in a non-national world. A national videogame industry is a nonsense, except maybe in Asia.
C&S:What remains for us to (re) invent in terms of gaming experience?
A.L.D:Maybe the next frontier could be the physical experience. The Wiimote and the Ki-nect were a first step, and now the “connected object” is blooming. It will probably take time, but I feel that the gamification of personal care is a strong trend.
Alain LE DIBERDER holds a Ph.D. in Economics. After advising French Minister of Culture Jack Lang (1989-1991), he moved to France Télévision under CEO Hervé Bourges (1991-1994) and then on to Canal + as Head of New Programmes (1994-2000), while he contributed to establishing several landmark cultural portals. He created Allociné TV, a channel devoted entirely to cinema, in 2010, and joined Arte as Head of Programmes on 1 January 2013. He has published several books and papers on digital technology and the media.
Deputy Managing Director
Director of TV & Digital Content Business Unit
While DVD revenue continues its inexorable decline, transactional video – i.e. streaming and downloading to rent (DTR) or own (DTO) – is only barely picking up the slack. Online video rental cannot single-handedly offset the drop in DVD sales and rental.
So studios are focusing their energy on creating a new distribution window just for Direct To Own, also known as electronic sell through (EST), which falls before not only VoD rental (Direct To Rent) but also two to four weeks before any type of DVD release.
They are also imposing a window between online sales and online rentals. This new approach, which was introduced in late 2012, appears to be giving EST a boost. While VoD rentals are growing slowly (no doubt due in part to competition from SVoD), online sales are enjoying a solid uptick.
Consultant at IDATE
TV households in the United States still watch an average of 17 channels, despite steady increase in the number to choose from.
The high price of cable pay-TV packages in the United States is justified in part by the huge number of channels they include, even with basic packages. This pay-TV model operates under a system of bundles, i.e. subscriptions to popular channels are usually bundled with a host of less popular ones.
Under this model, it can be more expensive and harder for a customer to subscribe to a single premium channel rather than a whole package. This especially interesting when we know that TV households in the United States only watch an average 17 channels from among the host available to them.
This stagnation in the number of channels that users actually tune in to underscores to some degree that specific content is more important than choice. Moreover, Internet technologies have bolstered the development of on-demand viewing. Now that users have more and more ways to access programmes, they also want to be able to access them on their own terms (à la carte) rather than be beholden to their multichannel video programming distributors’ (MVPD, aka pay-TV providers) commercially-motivated decisions.
To adapt to these new behaviours, MVPD are gradually starting to test new products that meet the needs of these “never cords” and “cord-shavers”. America’s leading cable company, Comcast, thus tested a temporary plan that included Internet access, access to its Xfinity Streampix streaming service and premium channel HBO. The plan was launched at around $50, which is well below the price that most users pay for a complete pay-TV package.
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
At a time when Netflix is shaking up classic video distribution models, IDATE is delivering an analysis of ongoing disruptions in TV content distribution.
The television industry is having to contend with a major game changer, namely increasingly individualised viewing. This change is upending the industry’s longstanding mass media model, but also paving the way for new business models and a new period of growth.
Individual TV viewing also represents a dual opportunity: to transform the household market into individual markets, and to capitalise on the shift from mass advertising to more relevant targeted advertising.
This growing individualisation is part of the "cloudification" of the technical chain that makes it possible to better serve multi-network and multi-device behaviours, and of the process of adapting services to find the right interplay between linear and on-demand TV, to re-monetise catch-up TV, and to develop the SVoD and electronic sell-through (EST) markets.
IDATE has developed three scenarios to describe and quantify the potential impact of this tremendous change in video content markets:
• a growth scenario: "the new golden age" where the increasing individualisation of video consumption and Internet access leads to the creation of a market for individual subscriptions, and where video – both linear and on-demand – becomes a medium of choice for advertisers;
• a scenario of stagnation: “business as usual” wherein pay-TV plans remain largely monolithic, where on-demand products hold little appeal and TV’s ad revenue suffers from advertisers moving a portion of their spending over to the Web;
• a negative scenario of "commoditisation," characterised by an accelerated migration from a paid to a free model, and TV losing its relevance as an advertising medium.
The three TV/video market development scenarios applied to the US (billion €)
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Published in COMMUNICATIONS & STRATEGIES No. 94, 2nd Quarter 2014
Video game business models and monetization
Daniel KAPLAN, Business Developer at Mojang
Conducted by Peter ZACKARIASSON, University of Gothenburg, Sweden
C&S: Minecraft is, by any standard, a very successful game. How much of this success do you ascribe to your business model?
Daniel KAPLAN: I think it played quite a big role since it was discounted for quite a long time. The game was discounted from day one, since it was “released” during very early development. The whole idea was to release it early to see if there was an interest and to see if the project could bear fruit. A lot of people who bought it initially, I think, felt that they had somewhat invested into the project and the ones who were on from the beginning made quite a good deal.
C&S: Do Minecraft exploit any specific previous business model, or has it paved its way with a unique model to generate profit?
D.K.: There are other games that were the inspiration for this model, Mount and Blade from TaleWorlds for instance. They also released their game before it was finished for a discounted price and continued the development with the community.
C&S: Today Minecraft has become a phenomenon that is not only tied to the game itself, but there are many physical product spin-offs. How important is this brand extension for Mojang?
D.K.:We are still a game company but it definitely helps. I think there is a fine line in between how much you can do with a brand before it feels too stretched. We try to create merch/products that we would like to have ourselves, rather than try to fill gaps with our brand with various products. It is sure a fine line and I think a brand can be too exposed and become too stretched.
C&S: Is it possible to become too successful? That is, having produced Minecraft – is it possible to repeat that success? What about the next game of Mojang?
D.K.: I think the problem with becoming too successful is that you will always be compared with your success, regardless of what you produce after that. It is important to not lose focus and continue to deliver things regardless of what they are so you don’t stagnate.
I think that it is almost impossible to create a success like Minecraft again. A lof of the “cred” Mojang got was because it was an up and coming company/person during the initial development of Minecraft, and the whole story around Notch (the founder of Mojang) was a classic David and Goliath story, which we can’t reproduce anymore. We have a whole different starting point now in comparison from where we started.
The next game we are working on, Scrolls, is already profitable and was released in a similar manner to Minecraft. We are super happy about the game being profitable even though it is not close to the success of Minecraft. It is a bit silly to try to compete/compare our projects with Minecraft to be honest.
C&S: What directions do you see the video games industry taking when it comes to generating sustainable business models? Last year Minecraft was one of the two pay per play games in the US top 20 mobile games. Not adopting a free to play business model, is it a conviction or the best way to be different within a serious competitive framework?
D.K.:I don’t know what will happen in the future. You see different trends all the time and you see companies not following the trends and they are successful. I think that the mobile business will continue growing and will continue to have different business models for various types of games or apps. I think it is hard to say that everything will be x or y. Considering the widespread presence of mobile devices, it allows for more niche products too which will let you create products that don’t follow the trends and can still be successful.
Daniel KAPLAN is Mojang's business developer since October 2010. He was born and raised in Skövde, Sweden. He founded ludiosity.com
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