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 :
Florence Le Borgne
Head of the TV & Digital content Practice, IDATE.
In summer 2013, the American media made a steady diet of the record drop in pay-TV subscribers in the United States between mid-2012 and mid-2013 (-911,000 subscribers) – giving credence to the cord-cutting scare, whereby pay-TV customers were cancelling their regular plans en masse and turning instead to SVoD services, offering chiefly films and TV series for a very affordable price of less than $10/month.
Still no massive change in the American market
It is true that the second quarter of 2013 was marked not only by another drop in cable TV customer numbers (-159,000 for Comcast and -93,000 for Time Warner Cable, the market’s top two players), but this is not in itself an isolated event as American cablecos have been losing subscribers since 2001. What was exceptional was the drop in customer numbers for the country’s two satellite pay-TV providers, Dish TV and DirecTV, which lost 78,000 and 84,000 subscribers, respectively. If, at the same time, the two IPTV plans continued to enjoy an upswing in customers (+140,000 subscribers for FiOS TV and +231,000 for U-Verse), it was not enough to offset the loses being posted by the main broadcasting networks.
So third quarter results were eagerly awaited. The figures released on 30 September 2013 revealed that satellite subscriptions were back on the up, and IPTV customer numbers had increased slightly. Meanwhile, cable continued to lose customers but in a way that was consistent with third quarter results in previous years.
Video ARPU continues to rise
It should also be mentioned that while cable TV subscriber numbers have decreased, average per user revenue (ARPU) has increased. For Comcast, video ARPU has been rising steadily, standing at $161.07/month in Q3 2013 – which is $10 more than in Q3 2012 and $22 more than in Q3 2011. Charter Communications’ total video revenue rose by 7.4% over the past 12 months, despite a 3.3% decrease in its video subscriber base. While Time Warner Cable saw its video revenue shrink by 4.4% between Q3 2012 and Q3 2013, the decrease is smaller than the 6.1% drop in subscriber numbers during that time.
Equally noteworthy is that cable TV subscribers are also watching premium content supplied by vendors other than their traditional pay-TV provider.
A strategy of alliances with European cable companies
In the UK, where American-born Netflix is also present, it is just as hard to measure the company’s impact on pay-TV subscriptions. Market leader, Sky Digital, reported a slight increase in TV subscribers (+203,000 subscribers) between the time Netflix launched and Q3 2013, whereas cableco Virgin Media reported a slight decrease (-10,000 subscribers) in its pay-TV customers during that time, but an overall increase in paying customers (+200,000).
It seems unlikely that the partnership between Netflix and Virgin Media will drive existing Virgin customers to cancel their pay-TV plans. In fact, for an extra £5.99 a month, Virgin subscribers with a TiVo (i.e. 49% of them) have been able to access Netflix directly on their TV set since mid-November 2013.
Also present on Swedish pay-TV provider ComHem customers’ TiVo since 20 January 2014, Netflix could actually prove an incentive to sign up for a cable pay-TV plan.
Published in COMMUNICATIONS & STRATEGIES No. 92, 4th Quarter 2013
Summary of this issue: "Video cord-cutting" refers to the process of switching from traditional cable, IPTV, or a satellite video subscription to video services accessed through a broadband connection, so called over-the-top (OTT) video. The impact of cord cutting will probably differ among countries, depending on the level of roll-out of digital cable, fibre optic networks, and/or IPTV, on the tariffs of legacy video services, on the quality of broadband access and on national players’ strategies.
Regulation will play a key role in this new environment, as a strict enforcement of net neutrality could prevent network operators from leveraging their access to customer base to market their own video services.
Interview with Craig MOFFETT
MoffettNathanson LLC, New York
Conducted by Raul KATZ,
CITI (Columbia Institute for Tele Information),
C&S: Is cord-cutting affecting equally cable TV and telcos in the US?
There's a fundamental difference between the cord-cutting experienced by the cable operators, which is all about video, and that experienced by telcos, which is all about voice. Video is a high bandwidth service and voice is a low bandwidth one.
Low bandwidth services are the easier target, so up to now we've seen much more aggressive cord-cutting in voice than in video. The fact that the cable operators have a more robust physical plant than the phone companies has left the telcos losing share in broadband as well as in voice, making the losses all the more painful for the telcos.
Video is such a high bandwidth service that video cord-cutting is only just beginning. By our estimates, there are now as many as 2 million households that have cut the Pay TV cord in the U.S. That's only about 2% of the market, but it is a growing segment. In these early numbers you can see the beginnings of a bigger problem.
What are the different retention strategies deployed by each type of player to prevent an acceleration of cord-cutting trends?
The telcos seem to have concluded that they are fighting a losing battle to retain wireline voice customers. The residential voice market as a standalone business is vanishing before our very eyes. Unlike in Europe, bundling wireline and wireless therefore isn't really an option. In the U.S., the telcos have regional wireline footprints but also have national wireless ones. Naturally, they are reluctant to make a compelling integrated offering for fear that it will simply reduce the competitiveness of their wireless businesses outside their footprints.
Cable operators have an advantage in that they've got the best physical plant (at least where there is no fiber-to-the-home alternative). So they've been able to bundle video and broadband, and even voice, as a retention strategy. That has proven very sticky. And by tilting the pricing of their services – higher for broadband and lower for video, at least on the margin – they can make it less and less attractive to leave.
And the cable operators have another advantage. It is easier to defend high bandwidth services than it is to defend narrowband ones. The key is whether the cable operators will be able to begin charging for broadband usage. If they can, defending against high bandwidth video streaming becomes relatively easy. Or rather, it becomes a moot point, since a carrier charging the right price for usage is economically indifferent whether video is delivered via traditional Pay TV or via internet-based OTT (over-the-top) alternatives. The question here is entirely regulatory. Whether they will meet regulatory resistance to their early trials is unclear.
Would any changes in the content arena (e.g. sports content) accelerate the cord-cutting trend?
In many ways, sports programming holds the key to how the ecosystem will evolve in the U.S. Today, sports are exclusively available via the traditional model. Cutting the cord is therefore appealing to a relatively smaller segment of the population. If the most popular sports events were to be made available over the Internet you would suddenly begin to see a much more rapid migration to video over the Internet.
Conversely, if traditional cable and satellite operators are ever able to force the unbundling of sports networks by putting them on a separate tier, they would relieve what is otherwise a tremendous pressure point on the system. In theory, that would slow down cord-cutting. Today, cord-cutting is primarily about cost, not technology. And the biggest driver of cost inflation is sports programming. Taking it out of the basic programming tier would lower the cost to non-sports enthusiasts, reducing their incentive to cut the cord.
Would you see that cord-cutting would trigger additional changes in the content value chain (e.g. backward/forward integration, M&A)?
For distributors, the key question is whether the economic value of the video transport function can be preserved in an over the top model. If it can, the distributors will fare relatively well. Even satellite operators would benefit, since the economic benefit of cord-cutting would be mostly eliminated, which would naturally slow down the migration. Again, the real questions here are regulatory, not technological or economic.
For programmers, the key question is whether cord-cutting will necessitate unbundling. Most consumers think that content bundling is driven by the distributors. It is not. It is driven by the programmers. The programmers sell bundles of cable networks to the cable operators, and their contracts require that those bundles be kept intact.
Cord-cutting is typically assumed to entail a move to unbundling, or a la carte, programming, but that doesn't necessarily have to be the case. One can imagine a model where video is delivered over the Internet in the same unwieldy bundles that are today delivered by cable and satellite operators. If things evolve that way, the implications for the programmers will be relatively modest. On the other hand, if programming is ultimately unbundled as it moves to the Internet then the value chain as we know it will be upended. Value in that model would move further and further upstream, ultimately to the actors and artists, accelerating a migration we've been witnessing in slow motion for years. The value of the media conglomerates would radically decline as their revenues declined and as their costs of content acquisition and production rose. At this point, it is too early to say whether this will happen in video. It already has in music, and the results haven't been pretty.
Craig MOFFETT is the founder of MoffettNathanson LLC, an independent institutional research firm specializing in the telecommunications, and cable and satellite sectors. Mr. Moffett spent more than ten years at Sanford Bernstein & Co., LLC as a senior research analyst. He was previously the President and founder of the e-commerce business at Sotheby's Holdings. Mr. Moffett spent more than eleven years at The Boston Consulting Group, where he was a Partner and Vice President specializing in telecommunications. He was the leader of BCG's global Telecommunications practice from 1996 to 1999. While at BCG, he led client initiatives in the U.S. local, long distance, and wireless sectors, in both consumer and commercial services, and advised companies outside the U.S. in Europe, Latin America, and Asia. He was the author of more than 20 articles about the telecommunications industry during the 1990s. He published analyses and forecasts
Published in COMMUNICATIONS & STRATEGIES No. 92, 4th Quarter 2013
- For more information about our activities: www.comstrat.org
COMMUNICATIONS & STRATEGIES
Between competition and complementarity
IDATE newest market insight offers an overview of the pay TV market in the main European countries and in the United States. It describes the different models of subscription-based video on demand offerings (SVoD): supply-side strategies and description of main players’ services. It lastly analyses the SVoD services developments compared to the pay TV global market.
SVOD seems ready to compete with traditional VOD offerings
Brought to the spotlight thanks to the success of services like Netflix and Hulu, SVOD seems poised to compete with traditional VOD offerings, and even position itself as a true rival of pay TV, the audiovisual market's leading revenue generator.
Mainly originating in the United States, SVOD services are starting to gain ground elsewhere, in part through the expansion of the US services (note the growth of Netflix in Latin America and in several European countries), and in part thanks to the reaction of local stakeholders who are structuring their own SVOD offerings in addition to existing stand-alone services.
Comparison of changes in the number of subscribers to a pay TV offering, Hulu Plus and Netflix in the United States(Millions of suscriber households)
Source: IDATE, Market Insight "Pay-TV vs SVoD", March 2013, based on operators' data
Many video market actors are highly involved in the development of on-demand services
Although the pay TV operators themselves appear to be highly involved in the development of on-demand services, allowing them to broaden the range of services offered to their subscribers and/or reach out to new audiences, many other players are also positioning themselves in this niche, such as free-to-air TV channels, special-interest TV channels, content producers, DVD and Blu-ray rentals players, and Internet industry players.
These services stand out owing to the size of their catalogues, but also their accessibility closely linked to their role in operators' strategies.
Will SVoD offers create a cordcutting effect and replace traditional Pay-TV offers ?
Current discussions concerning the cord-cutting risk that these SVOD services could induce lead us to wonder about their potential to replace traditional pay TV offerings. But apart from the pricing element (which clearly plays in favour of SVOD services), the type of content offered and its positioning in the media chronology, the modes of accessing the content and these services' ability to hold copyrights seem to highlight the fragility of these offerings in comparison to those of linear television. Despite the popularity of these SVOD services and the soul searching they are inducing among traditional pay TV industry players, they still account for a very weak share of the market (less than 2 % of total pay TV and SVOD revenues). Between now and 2017, even if their market share does increase, it should not exceed 4 % of global sales, of which over half will continue to be generated in the United States market. The competition between SVOD and pay TV is undeniable; however, it hinges more on the new players' ability to induce traditional players to overhaul the sector than on their ability to threaten the sector in the medium term.
Florence Le Borgne-Bachschmidt, Head of the TV & Digital content Practice, IDATE. 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).
> More information available at: www.idate.org
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.
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).
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.
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.
Florence LE BORGNE-BACHSCHMIDT
Head of the TV & Digital content Practice, DigiWorld by IDATE
The penetration of digital television in TV households passes the 50% mark
Publication of the twenty-fifth edition of the “World Television Market” report, is an opportunity for IDATE’s Media team to put into perspective the fundamental changes in the audiovisual industry, in France, in Europe and worldwide. For Florence Le Borgne-Bachschmidt, "It is particularly important to put into context the transformational movements in television, which have never been greater than they are today, in order to measure the revolution taking place”. This report, founded on a very detailed database, provides key information (terrestrial TV, satellite, cable, IPTV, pay-TV etc.), for nearly 40 countries and 5 geographical areas.
TV access modes
According to IDATE, the number of TV households worldwide will reach 1.502 billion in 2016 (+9.4% in 5 years).
- Cable will the remain the chief access channel but will gradually lose ground to satellite and IPTV which will account for 30.0% and 7.3% of TV households, respectively, at the end of 2016.
- Despite the development of hybrid TV solutions, terrestrial TV will continue its decline and drop down to number three spot by 2016, with a roughly 26% 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.
According to IDATE, the penetration of digital TV households worldwide will come to 77.6% of TV households in 2016. Three factors in particular will shape the development of digital TV:
- Governments’ ability to steer the digital switchover of national terrestrial broadcasting networks
- Cable companies’ investments in upgrading their infrastructure
- How popular IPTV and satellite pay-TV services are with TV households.
According to IDATE, the global TV industry’s revenue will come to €340.1 billion in 2012:
- Pay-TV revenue will grow by 12.1% between 2012 and 2016, or by an average 2.9% annually.
- Ad revenue will enjoy even stronger growth of 21.2% between 2012 and 2016.
- Public financing/licensing fees will continue to increase significantly (+7% in 5 years).
Pay-TV providers going international
- 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.
Florence LE BORGNE-BACHSCHMIDT
Head of the TV & Digital content Practice
> Executive seminar "Content in the Cloud" within the frame of the DigiWorld Summit 2012 – 14 November 2012
> More information about this study available on our website