The Future of Connected TV. Key players, emerging battlegrounds and market disruption

Transcription

1 The Future of Connected TV Key players, emerging battlegrounds and market disruption Reference Code: BI Publication Date: February

2 Tony Glover Tony Glover is an award-winning journalist who has written about Internet technology since the birth of online communications in the early 1990s. He is the former technology editor of the Sunday newspaper, The Business, and has written about technology for publications including the Financial Times, Time magazine and The Independent on Sunday. He has been regularly interviewed on television as a technology expert by channels including the BBC and CNBC and has experience of covering global technology markets, reporting extensively on technology from regions including China, the US, Russia and the Middle East. Disclaimer Copyright 2011 Business Insights Ltd This report is published by Business Insights (the Publisher). This report contains information from reputable sources and although reasonable efforts have been made to publish accurate information, you assume sole responsibility for the selection, suitability and use of this report and acknowledge that the Publisher makes no warranties (either express or implied) as to, nor accepts liability for, the accuracy or fitness for a particular purpose of the information or advice contained herein. The Publisher wishes to make it clear that any views or opinions expressed in this report by individual authors or contributors are their personal views and opinions and do not necessarily reflect the views/opinions of the Publisher. 2

3 Table of Contents Tony Glover 2 Disclaimer 2 Executive summary 11 Introduction to Connected TV 11 Market dynamics 11 The main players changing competitive landscape 12 New players changing competitive landscape 13 Developments in the set top box market 14 Opportunities and challenges in 3D Connected TV 15 The Future of Connected TV 15 Chapter 1 Introduction 17 Scope and interested parties 17 Methodology 17 Primary research 17 Secondary research 17 Glossary/Abbreviations 18 Chapter 2 Introduction to Connected TV 19 Summary 19 Introduction 19 The battle for market share 19 Microsoft already connects to millions of TVs 20 New impetus for connected TV at CES

4 Chapter 3 Market dynamics 24 Summary 24 Introduction 25 Monetization strategies 25 Potential revenue sources: 25 The Walled Garden 26 Revenge of the Couch Potatoes 28 Future growth 29 Connected TV shipment growth 29 Global growth drivers 30 Global growth inhibitors 31 Growth in online video 32 Industry forecasts 32 Widening the TV broadband pipe 35 Global broadband adoption 35 UK broadband adoption 37 Cutting the cord 37 Gaming, shopping and adult content to drive revenues 39 Gaming and retailing 39 Adult viewing 40 Picks and shovels 42 Stakeholders further down the value chain make the most of Connected TV 42 Cisco s Videoscape features 43 European software developers 43 Chapter 4 The main players changing competitive landscape 45 Summary 45 4

5 Introduction 46 Major players 46 Sky versus BT a dispute over content 46 BT enters the social networking arena 48 BT s main rivals 49 Sky improves existing service 50 Sky 3D 53 Sky SWOT analysis 55 Strengths 55 Weaknesses 55 Opportunities 56 Threats 56 BT SWOT analysis 57 Strengths 57 Weaknesses 57 Opportunities 57 Threats 58 Virgin territory 58 Virgin Media SWOT analysis 59 Strengths 59 Weaknesses 60 Opportunities 61 Threats 61 Google TV versus Yahoo Connected TV 62 Yahoo Connected TV to monetize its offering 62 Yahoo Connected TV SWOT analysis 64 Strengths 64 Weaknesses 65 Opportunities 65 Threats 65 Facebook weighs in 66 5

6 Facebook SWOT analysis 67 Strengths 67 Weaknesses 68 Opportunities 68 Chapter 5 New competitors changing competitive landscape 70 Summary 70 Introduction 71 Google gets tough 71 Clampdown on search results for potentially illegal content 71 File sharers fight back 72 Claim to offer legitimate competition 72 New free services offer wide choices as an alternative to file sharing 73 BitTorrent versus Google 74 Google blocks BitTorrent, but BitTorrent has governmental seal of approval 74 Google s ban is strategic, not altruistic 74 BitTorrent s position depends on the outcome of the net neutrality debate 75 BitTorrent exclusive Q&A becoming a central pillar of connected TV 75 BitTorrent SWOT analysis 78 Strengths 78 Weaknesses 79 Opportunities 79 Threats 79 Google SWOT analysis 80 Strengths 80 Weaknesses 80 Opportunities 81 Threats 81 New competitor SWOT analyses 82 YouView SWOT analysis 82 Strengths 82 6

7 Weaknesses 82 Opportunities 83 Threats 83 Netflix SWOT analysis 83 Strengths 83 Weaknesses 84 Opportunities 84 Threats 84 Hulu SWOT analysis 85 Strengths 85 Weaknesses 86 Opportunities 86 Threats 87 Chapter 6 Developments in the set top box market 88 Summary 88 Introduction 89 Advantages over connected TV sets 89 Set top box market growth 90 Total shipments 90 Connected set top box shipments 91 Console shipments 92 Microsoft sell more set top boxes than Apple 94 Apple TV 94 Apple SWOT analysis 96 Strengths 96 Weaknesses 97 Opportunities 98 Threats 98 Microsoft SWOT analysis 99 Strengths 99 7

8 Weaknesses 99 Opportunities 100 Threats 101 Beyond Apple and Microsoft 102 Pace shows strong growth 102 Mobile convergence encourages competition 102 Rivals such as Roku and Boxee benefit from Apple TV s publicity 102 The set top box middleware market 103 Microsoft leads the market but competitors form partnerships to fight back 103 Low cost Asian developers threaten western incumbents 104 Chapter 7 Opportunities and challenges in 3D Connected TV 105 Summary 105 Introduction 105 New 3D TVs in New 3D TVs rolled out but uncertain to make an impression 106 Consumer attention, equipment, cost and content all provide challenges 106 3D requires full attention 106 Shutter glasses are a costly nuisance 106 Cost is an issue for the majority of consumers 107 There needs to be sufficient 3D content to make it a valuable proposition 107 Walled garden approach counteracts piracy 108 Health fears 109 Drivers and inhibitors to investing in 3D TV 110 Drivers 110 Inhibitors 110 Chapter 8 The future of Connected TV 112 Summary 112 8

9 The shape of things to come 113 Social networking and interaction with content 113 Mobile services combine with the TV to create disruption 113 Increasingly interactive services 114 Consumer meta-themes driving adoption of Connected TV 115 Convergence 115 Personalization 116 Social networking 116 Conclusion 116 9

10 Table of figures Figure 1: IPTV subscriber share by region, Figure 2: Connected TV shipments by region (m), Figure 3: Internet video users by region (m), Figure 4: Top 10 broadband countries by fixed lines (m), Q3 09-Q Figure 5: Global broadband technology market share (%), Q3'10 38 Figure 6: Global total set top box shipments (m), Figure 7: Global connected set top box shipments (m), Figure 8: Global connected set top box shipments as % of total, Figure 9: Global fixed console shipments (m), Figure 10: Consumer meta-themes shaping the Connected TV market 115 Table of tables Table 1: IPTV subscriber share by region, Table 2: Connected TV shipments by region (m), Table 3: Internet video users by region (m), Table 4: Top 10 broadband countries by fixed lines (m), Q3 09-Q Table 5: Global broadband technology market share (%), Q3'10 39 Table 6: Global total set top box shipments (m), Table 7: Global connected set top box shipments (m), Table 8: Global connected set top box shipments as % of total, Table 9: Global fixed console shipments (m),

11 Existing Internet TV subscribers are concentrated in Europe and Asia, implying that these markets have the greatest revenue potential in the short to medium term. Europe alone represents 46.3% of the global IPTV subscriber base (see Figure 1). Figure 1: IPTV subscriber share by region, 2010 Middle East & Africa Americas Europe Asia Source: Broadband Forum BUSINESS INSIGHTS Table 1: IPTV subscriber share by region, 2010 Europe 46.30% Asia 35.27% Americas 17.93% Middle East & Africa 0.50% Source: Broadband Forum BUSINESS INSIGHTS The Walled Garden The Walled Garden refers to the content distribution strategies of leading players such as Sky and BT. It refers to the process of offering customers a growing choice of content while ring fencing off access to uncontrolled sites or illicit file sharing services. 26

12 Google will act on reliable copyright takedown requests within 24 hours. It is developing software tools to improve the submission process to make it easier for rights holders to submit DCMA takedown requests for Google products (starting with Blogger and web Search). And for copyright owners who use the tools responsibly, Google promises to reduce its average response time to 24 hours or less. At the same time, it says it will improve counter notice tools for those who believe their content was wrongly removed and enable public searching of takedown requests; Google will prevent terms that are closely associated with piracy from appearing in Autocomplete. While it admits it is hard to know for sure when search terms are being used to find infringing content, Google intents to do its best to prevent Autocomplete from displaying the terms most frequently used for that purpose; Google will improve its AdSense anti-piracy review. Google says it has always prohibited the use of its AdSense program on web pages that provide infringing materials. Building on its existing DMCA takedown procedures, Google will be working with rights holders to identify, and, when appropriate, expel violators from the AdSense program; Google will experiment to make authorized preview content more readily accessible in search results. Google claims to be big fans of making authorized content more accessible on the Internet and makes the claim that most users want to access legitimate content and are interested in sites that make that content available to them (even if only on a preview basis). Google says it will be looking at ways to make this content easier to index and find. File sharers fight back Claim to offer legitimate competition RapidShare, BitTorrent and Megaupload are among the most popular file-sharing sites on the Web and are regarded by many in the US entertainment industry as copyright violators. The US Congressional Anti-Piracy Caucus also lists RapidShare on its annual copyright watch list. But the file sharing service providers are now criticizing Google s anti-copyright theft strategy, claiming it represents an attempt to regulate the Internet and stifle legitimate competition. 72

13 A major hurdle currently inhibiting the rapid adoption of 3D TV is the lack of content available. Even those early adopters willing to invest in the first 3D TV models will find an extremely limited range of 3D content. There are only a handful of 3D Blu-ray titles currently available and these are mostly animations and horror movies. Until 3D technology is cheaper and provides a far wider range of content, it will not be attractive to the mass consumer market. But this has been true of TV technology since the first walnut wood boxes with one channel and tiny black and white screens went on sale in the 1950s. Given the current cost of 3D TV some of the more bullish predictions for 3D adoption are likely to be over optimistic. It will not be until the price of 3D TVs comes down and the technology is incorporated into a wider range of TV sets that 3D TV will be given its real test. Walled garden approach counteracts piracy If the public do as media giants like Sky and TV makers such as Sony and Panasonic hope, 3DTV could play a crucial role in the rollout of Connected TV. Services such as interactive gaming and 3D movie blockbusters such as Avatar would help enable the walled garden business model. The dovetailing of 3D TV manufacturing technology and software with encrypted 3D Blu-ray discs and interactive gaming gives Connected TV service providers and hardware makers ample opportunity to build all kinds of security measures into their offering. This would have the effect of countering one of the biggest threats now facing the rollout of paid-for Connected TV services, the illicit file sharing websites that steal customers from legitimate service providers by breaching content producers to offer visitors to their websites movies, programmes, games, software and anything else that can be sent over a broadband connection. The problem facing the content providers in trying to enforce their copyright is two-fold. The legal area of international copyright is weak and notoriously complex; a ruling that might apply in France, for example, might have no relevance in the US and visa versa. The illicit websites are also hosted across borders, often situated in locations where controls are lax. 108