By Alexandre Jolin
Introduction by Florence Leborgne
The central question is: Will internet replace TV? More and more users are switching from their television sets to connected devices to watch TV, including their personal portable devices. This trend is at its most prevalent amongst the youngest viewers. Will this disruptive behaviour amongst 16 to 35 year olds become the status quo?
In terms of supply, TV programmes share their screen time with the Internet and its new forms of video content, such as UGC, professional and semi-professional shorts and VoD movies.
Of course, the traditional TV market is feeling the effects of this behaviour. Cord-cutting and cord-shaving are growing in the United States: 10% of TV households in the US are cord-cutters, 7% are cord-shavers and 3% are cord-nevers. Most of them are young people in the workforce who have never subscribed to a multichannel pay-TV service. In Europe, the situation is more mixed, and it is still impossible to say whether cord-cutting is becoming a trend, based on subscriber statistics.
We can, however, confirm that video on demand (VoD) is hugely popular across the board. Consumers still appear to be willing to pay to access the content they want. This willingness to pay is also contingent on price points which, for VoD, vary between 10 and 15 USD a month, compared to an average 60 USD for classic multi-channel cable, satellite or IPTV pay-TV plans.
SVOD services are also contributing more and more to financing TV productions, and becoming key actors in the rights market. In 2014, Netflix spent more than HBO on programming rights.
Even if the approach to marketing the content is completely different, the channels run by YouTubers are attracting as many if not more viewers than most pay-TV services. Moreover, we are seeing a sector of professional and semi-professional content produced specifically for distribution on social media sites emerge.
For now, the revenue generated by on-demand channels, SVOD and video advertising is still a far cry from the revenue generated by traditional linear TV.
But what does the future hold for television? Several models are emerging: syndicated offerings such as Hulu and Freeview Play, online multi-channel platforms such as Molotov TV, multi-channel networks that make it possible to target viewers who are still interested in TV content, but have abandoned classic distribution channels.
Interview – Olivier Huart
OTT services appear poised to oust traditional media in all areas. Should we be afraid of these new entrants, or instead welcome their arrival, and the innovation momentum they are setting off?
"OTT and live TV are bound to complement one another for several more years to come.” Live TV is still by far the most popular mass medium around the globe, including France. Even in the United States people still watch an average 4 hours and 30 minutes of live TV a day, compared to an average 30 minutes of OTT video.
Plus OTT video’s share of screentime far outweighs its market share in terms of value. Linear TV channels account for 96% of spending on TV production in France. Some content also remains fully the dominion of live television, namely sport. To paraphrase Mark Twain (or Steve jobs): "Reports of linear TV's death are greatly exaggerated".
Despite the massive popularity of mobile devices in everyday life, TV is still the device of choice for watching video content: 75% of the content viewed on Netflix is watched on a television. Smartphones, meanwhile, are tending to be used as a controller, a remote control for multi-screen platforms.
From an economic standpoint, there are clear advantages to using alternatives to broadcasting to distribute video content. The terrestrial TV network covers more than 97% of the population in France. Internet connection speeds still do not make it possible to deliver programmes in HD with the same high picture quality as broadcasting networks. Plus TDF was one of the first broadcasters worldwide to conduct trials on 4K UHD broadcasting. But additional spectrum resources will be required. This transition to UHD also depends a great deal on the willingness of channels wanting to monetise this new value proposition.
The future will be a mosaic of solutions, and less and less of a monolithic model. And consumers are the central ingredient. Seventy percent of them want a package that includes live TV and on-demand content they can play on multiple devices. So traditional channels have three paths available to them:
- create proprietary applications, such as myTF1;
- pool the content belonging to several channels onto a single platform, as with Freeview Play;
- have live TV viewers foot the bill for the transition to the open Web.
Round table – Ingredients of an OTT-only success story
François Abbé – Mesclado: moderator / Britta Schewe – gretegrote Interproduktion UG / Luc Reder – producer Page & Images
Luc Reder: Page & Images produces chiefly television documentaries, institutional films and transmedia storytelling systems. For now, the producers are still taking a wait-and-see attitude. “OTT models are seen as not lucrative enough compared to linear TV channels”. A lot of people are working on these avenues, but few on what we are putting out.
Production costs for video content dropped significantly when we made the transition from an analogue to a digital production chain.
Britta Schewe: I began working on the Internet before going to work for VIACOM and Deutsch Telekom, before realising that the Internet was a more dynamic sector. The keys to success on the Web are the same as on TV. “On both the internet and on television, you need to be able to produce attractive content and know how to reach your audience".
Luc Reder: The economic equation of TV production is still very much tied to the TV screen. Some of the content we are seeing on the Internet is either experimental or just what’s in fashion. Web documentaries, for instance, are tending to disappear. On the other hand, we are seeing a growing maturity in the production of video content for the Web.
Britta Schewe: The future of OTT distribution as a whole is hard to predict. I think that some TV channels will disappear. “The more a television channel bases its programming grid on purchasing broadcasting rights, especially to American shows, the greater its chances of going off the air.” “In the future, in-house production will be the dominant business model for channels.” Content is still king!
The issue of content discovery is key to successful online distribution.
Keynote Speaker – Nicolas Weil – AKAMAI TECHNOLOGIES
Our message is one of inverting yield curves between linear TV and on-demand services, mainly on the open internet. Every day, Akamai delivers 30% of the world’s internet traffic. Akamai believes in fully OTT channels, but picture quality is a crucial criterion. As the number of available 4K services grows, the bandwidth needed to receive these programmes increases dramatically.
The user experience is the central consideration, especially on mobile devices. Lag time affects usage. “50% of users are lost if a video does not launch within 10 seconds.” Only around 10% of households in Europe are able to receive video content in 4K over the open internet.
As the datarates required for online video increase exponentially, the investments that ISPs need to make in content delivery networks are becoming far too high. So the logic that governs CDN needs to be extended to users’ devices. There are several technical solutions that address this: Peer-Assisted Delivery (P2P), Store and Play Later and Multicasting.
Round table – From live TV to OTT: an inexorable shift for veteran players
Moderator: Eric Scherer – Director of Future Media – Groupe France Télévisions / Matthias Buechs: Director of Online – RTL Interactive / Roux Joubert: General Manager Platform – BBC Digital / Richard Lucquet: Verizon onCue – Director, Business Development Technology, Partnership & Licensing.
Eric Scherer: The road to OTT will be slippery for broadcasters. Linear TV start to show decreasing aspects. Cord-cutting appears to be real. Among young people in the US, 65% of video consumption happened on demand and mostly online. The online traffic on CBS news has shifted from 6% on mobile devices in 2011 to 60% in 2015. SVOD is surging everywhere but its growth remains lower in France and Germany.
The consumer is now at the centre of a new demand side driven economic paradigm. Consumers are now involved in the editorial process. They can help to fund the production of content with crowdfunding solution or even deciding of the deprogramming of a TV Show.
New internet players aren't only distributors. They tend to become producers & content creators including the creation of new format and story-telling schemes.
Matthias Buechs:Television is highly under pressure in Germany but still profitable. Amazon is the dangerous competitor as the service doesn't need to be profitable by itself. Video sharing platforms are competitors in terms of time consumption but not yet on consumer spent market.
Roux Joubert: The BBC has always been an innovator. Last year, it has been the first broadcaster to stop airing a linear TV channel to transfer it on Internet on an on demand format. It also provides pre-TV programs on BBC i>Player and broadcasted content available until 30 days after being aired.
Richard Lucquet: "Millennials are spending more time using their mobile devices than sleeping" on a daily base. To reach that audience, Verizon launched the go90 application, a service melting the best of TV and of online content on just one platform including social features. Verizon is planning than go90 could generate as much revenues as Fios TV within 5 years. "Internet is alive because of video".
Nouveau cycle de conférences de prospective numérique sur les enjeux de l’Internet, de la télévision et des télécoms à 2025
A l’occasion de la sortie de la nouvelle édition de son DigiWorld Yearbook, l’IDATE présente son nouveau cycle de conférences de prospective numérique sur les enjeux de l’Internet, de la télévision et des télécoms à 2025 !
A partir des analyses des experts de l’IDATE, les débats seront animés par Marjorie Paillon, Journaliste, Tech 24, Philippe Escande, Rédacteur en Chef, Le Monde et Gilles Babinet, avec les contributions exceptionnelles de :
Head of "Video Distribution" Practice
The market report entitled, “Hybrid TV: challenges and opportunities for telcos and cablecos” published as part of IDATE’s video distribution series, explores the biggest changes that wireline operators are facing today, and the options available to them. It details the three main strategic options that operators will need to choose from: strengthen their video service provision business, charge for OTT traffic or focus on internet connectivity.
Project Manager Jacques Bajon says that, “how telcos’ and cablos’ video strategy evolves is becoming an increasingly important issue, as the growth of OTT video and its impact on internet traffic will change the balance of power for video distribution on wired networks”.
Verizon recently announced its upcoming takeover of Intel’s Media Assets, a division devoted to developing cloud OTT video products and services, as part of the carrier’s bid to step up the rollout of new generation video services for all devices.
While the impact of these changes will vary depending on the region, the state of competition, the influence of the market leaders and the strategies adopted by operators, broad policies and choices are nevertheless becoming clear. Operators will be able to choose their positioning from, increasingly hybrid, strategies.
Strengthening the role of video service provider
Many telcos have joined cable operators in a providing 'traditional TV' services. The underlying reasons are varied and often non-exclusive, and include improved ARPU, triple-play subscriptions and reduced churn. This strategy can be extended, allowing operators to:
• provide new OTT services,
• become a publisher of TV services,
• go beyond their technical network coverage by relying on broadcast partner networks or 'public Internet'.
Charging for OTT video traffi
With the net neutrality debate still hanging over this option, where discrimination is being tolerated only for operators’ OTT services targeting their customer base:
• The first grey area agreements have been made between some service providers generating large volumes of traffic and telcos
• Development of operator or telco CDNs can help with internet traffic optimisation and can also become a traffic quality solution for third-party service providers.
Relying on online connectivity
With this option, operators can rely primarily on internet subscription revenues by assuming the role of neutral distributor of IP services, including video. For telcos, this is a case of returning to their incumbent business, but is a change of role for cable operators.
• More information on Hybrid TV market insight : Challenges and opportunities for telcos and cable operators
Head of Distribution Video Practice at DigiWorld IDATE
Montpellier, 24 January 2012 – IDATE provides readers of its recently published market report “Hybrid TV Prospects, Impacts of Connected TV”. This study aims to position the hybrid solutions in this new context and to measure their impact on the "big" TV markets.
“Hybrid TV is now a reality. The appealing for OTT video content, amplified by the development of connected TV solutions, is further spurring this trend”, says Jacques Bajon, Head of Distribution Video Practice at DigiWorld Institute. “These developments are attracting the attention of the big Internet companies who will throw themselves into the trend and surely have an impact on the key segments in the video distribution chain.”
IDATE estimates the market for OTT video services on the TV at EUR 3.4 billion in 2015
The market for video services on connected TVs is still only taking shape, as we see the first hints of how players are positioning themselves and how they are structuring their service offerings. Though virtually non-existent in 2010, this market is set to explode. IDATE estimates the market for OTT video services on the TV will be EUR 3.4 billion in 2015, with the following geographic breakdown:
- United States: 40%
- Europe: 24%
- Rest of the world: 36%
Trends in hybrid’s development and positioning of hybrid solutions
Hybrid solutions seem to be positioned in one of four ways:
- Two-way broadcast: The DTT/broadband or satellite/broadband hybrid network is becoming the leading network for distributing packaged on-demand and linear offerings.
- Cable and IPTV extension: DTT/broadband or satellite/broadband hybrid solutions provide additional coverage to the TV offerings of managed network operators.
- Competition with cable and IPTV: The DTT/broadband or satellite/broadband hybrid network offers an alternative to cable and IPTV services.
- Optimization of wired networks: Hybrid solutions help alleviate congestion on wired networks, which prioritize Internet access quality over the distribution of managed video services. The potential of hybrid TV distribution varies by market:
- · In the US, the trade-offs made by cable and IPTV operators will determine the direction the hybrid market takes. Satellite may still capitalize on this solution to counter these operators’ triple play offerings.
- · In Germany, the hybrid TV landscape will primarily depend on how quickly cable migrates to digital and IP. If the current trend plays out, these operators will play a central role along the same lines as their American counterparts. If not, FTA satellite operators will have the trump card.
- · In France, where IPTV penetration is extremely high, hybrid could take multiple forms, depending on operators’ strategies. The situation could go one of two ways—cooperation between wired and broadcast operators to provide additional coverage or close competition between networks where the full IP migration of the wired operators would go up against hybrid’s vague efforts in the FTA DTT TV segment.
- · The UK is the most advanced hybrid market today thanks to the broadcast/OTT combination. This trend will continue, and FTA TV operators will reap the rewards.
- · In Spain, DTT will play a central role. The DTT + OTT combination will dominate, with additional opportunities for wired operators to expand their coverage using the terrestrial network.
- · Italy is the country with the most potential for gain from hybridization. The "absence" of two-way TV networks clears the way for partnerships between OTT and broadcast (DTT and satellite) to dominate.
OTT & Hybrid distribution chain: war-time?
More informations on http://www.Idate.org
Head of Distribution Video Practice at DigiWorld IDATE.
|PR- Emmanuelle Renauld
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