Yves Gassot CEO, IDATE
IDATE, Europe’s premiere digital economy think tank, maps out the changes at work in the telecoms, Internet and media industries. The DigiWorld Yearbook 2014 is out.
IDATE has published the 14th edition of its DigiWorld Yearbook, the international reference for the current state of the digital world, including key data, the latest developments and insights into the telecoms, Internet and digital media markets.
This year’s Yearbook answers questions such as:
• How are the key digital sectors such as telecom, digital media or Internet of things evolving?
• Can Europe’s ailing telcos turn things around?
• What does the future hold for content industries?
• What forces will influence the Internet’s development towards 2025?
IDATE Chairman François Barrault, points out that, “The DigiWorld Yearbook has become a report of reference for obtaining a concise understanding of what makes the digital ecosystem tick – identifying the chief game-changers of mobility, cloud and big data, the top players’ strategies and the changes at work along the value chain.”
IDATE CEO, Yves Gassot comments, “A bumper crop of events unfurled in 2013 and the early months of 2014, hinting at what the future might hold for digital industry markets. Mobility, the cloud and big data are,, the core issues up for debate amongst digital ecosystem stakeholders.”
DigiWorld markets reported a slight uptick in growth in 2013: going from 2.8% in 2012 to 3.2%, generating close to 3,500 billion EUR in revenue.
DigiWorld Yearbook’s editor-in-chief, Didier Pouillot, commented “This modest improvement is a reflection, first, of the ongoing healthy momentum in key sectors and, second, a still bleak economic climate, especially in Europe”.
The first trend is driving a continual rise in consumption, traffic, and a steady rate of device (smartphones, tablets, smart TVs) replacement and upgrades, and is forcing hardware suppliers to work hard to keep up with demand. The second trend is tempering the first as businesses and consumers are feeling the pinch and being careful with their spending. Suppliers too are being cautious about their investments, especially since, in a number of instances, the current state of the market and competition are cutting into their revenue and more importantly, their margins. Ultimately, it is the balance between these two opposing forces – inflationist in terms of volume and conservative in terms of value – that creates the biggest challenges for the ICT industry today.
• Internet services are clearly enjoying the strongest rate of progress at present – reporting growth rates of around 20% a year. At this pace (we expect it to slow slightly: to 16% in the coming years), online services’ weight in the equation compared to core DigiWorld markets will increase from 5% in 2012 to 10% in 2017. In addition to a shift in the balance of power between the two sides, the markets are also being changed from the inside, from both a sectoral and geographical standpoint.
• Equipment: global growth in core DigiWorld markets in 2013 varied from segment to segment: ranging from +6.2% for telecommunications hardware to -5% for consumer electronics. Between the two, computer hardware markets grew by 4.2% last year.
• Internet services: taken as a whole, Internet services enjoyed double-digit growth during this same period, but we can also distinguish several sub-groups. Social media sites, mobile apps and OTT video are the most dynamic today: all reporting over 30% growth in 2013 – and more than 40% and even 50% for social networking sites, on average, over the past three years. Together, they account for around 20% of OTT markets. The cloud is another source of growth, with revenue rising by close to 30% per annum, and singlehandedly accounts for more than a quarter of online revenue, followed by search and e-commerce which are growing by around 20% a year.
• Telecom and TV services: telecom services continue to linger on the bottom, with a growth rate that has been shrinking for the past five years and dropping to +2.5% in 2013. The other two services segments performed virtually on par: +4.5% for IT and software and +4.4% for TV services.
Telecoms: the three challenges
A long journey still lies ahead for Europe in its bid to achieve a single telecommunications market. To be successful, the regional consolidation that now appears to be properly underway will need to rise to three main challenges:
• price wars that threaten telcos’ ability to invest in new generation infrastructure;
• a single European telecoms market, which includes cross-border deals and the creation of truly pan-European players;
• achievement of the margins and critical mass needed to reinvent the telco business model, in an environment being dictated by powerful Internet companies.
Over-The-Top (OTT) making the rules
Any discussions about the future of the digital economy must focus on coming up with business models that are compatible with an all-IP value chain that places most applications and services outside the network. Despite the balance of power being obviously tipped in favour of the top Internet platforms, we believe the future is still relatively open for the taking.
Will TV go full OTT?
Despite its demise being announced on a near daily basis, linear television will be with us for some time to come – not least because it generates more than 90% of all TV revenue. But profound changes, which are putting tremendous pressure on industry players, are redrawing the global TV landscape. These changes include:
• the swift development of on-demand services, and notably SVOD;
• the gradual disappearance of the technical distinction between distribution on managed networks and online distribution, which will open the way to increased competition for control of retail distribution;
• the IPTV model being called into question, and cord-cutting leading to the emergence of broadcast + OTT solutions.
The DigiWorld Yearbook was launched in three European capitals - Paris, Brussels and London. The London event took place on 3rd June, opening with a keynote address by Rt Hon. Edward VAIZEY, MP, Minister for Culture, Communications and the Creative Industries. IDATE experts along with those from the industry were also on hand to debate the DigiWorld themes during the course of the evening.
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