OTT video disruption: market environment, competitive challenges and future evolution

Transcription

1 Webinar OTT video disruption: market environment, competitive challenges and future evolution 31 October 2012 Cesar Bachelet and Nico Flores

2 2 Contents The nature of the threat Our forecasts The OTT video provider s perspective Strategies for operators Summary Questions & answers

3 Device The focus of OTT video services is gradually moving from the PC to the TV Now TV User-generated Professional NOW TV Free Short-form Paid-for Long-form BBC iplayer Netflix YouTube PC-based TV-based PC Low Value of content High

4 4 The result is a potential substitute for pay-tv Principal paths for video consumption DVD Examples of players in the value chain Universal RTL TF1 Mediaset Sky Traditional pay-tv Panasonic Hulu Sony Vudu Tivo Roku Over-the-top (OTT) VoD bypass Apple YouTube Netflix Orange Google TV Samsung OTT providers can compete without capex but still create significant traffic for ISPs while allowing device providers a greater role in the value chain.

5 which can disintermediate operators from the content business 5 Content and rights Programming Aggregation and packaging Distribution Consumer devices Programmes Channels Channel retailing Last-mile networks Set-top-boxes $ Pay-TV Producers Broadcasters Operators Managed CPE $ Arrows denote payments

6 which can disintermediate operators from the content business 6 Content and rights Programming Aggregation and packaging Distribution Consumer devices Programmes Channels Channel retailing Last-mile networks Set-top-boxes $ Pay-TV Producers Broadcasters Operators Managed CPE $ OTT video to the TV Vertical integration optional Operators competitive advantage unclear Producers Broadcasters OTT aggregators Operators Unmanaged CPE $ Endemol Universal iplayer Hulu Netflix itunes Blinkbox Google $ Sony Panasonic Samsung Apple Roku Arrows denote payments

7 7 Contents The nature of the threat Our forecasts The OTT video provider s perspective Strategies for operators Summary Questions & answers

8 Services (million) We anticipate strong growth in take-up of paid-for OTT video to the TV services in Europe and North America 8 OTT video services to the TV, Europe and North America, 2012 and 2017 [Source: Analysys Mason, 2012] in Europe 2.6 in North America Europe North America

9 EUR (million) with an even higher increase in spend on these emerging services in both regions 9 Spend on OTT video services to the TV, Europe and North America, 2012 and 2017 [Source: Analysys Mason, 2012] in Europe 3.5 in North America Europe North America

10 Share of primary services However, we do not anticipate high levels of cord-cutting because of OTT video services 10 Share of primary pay-tv services by platform, Europe and North America, 2012 and 2017 [Source: Analysys Mason, 2012] 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Europe North America Analogue cable Digital cable IPTV Pay-DTT Satellite OTT video

11 Share of secondary services But we do expect the impact of OTT video to be much bigger on additional TV sets, particularly in Europe 11 Share of secondary pay-tv services by platform, Europe and North America, 2012 and 2017 [Source: Analysys Mason, 2012] 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Europe North America Analogue cable Digital cable IPTV Pay-DTT Satellite OTT video

12 Share of primary services Share of secondary services Usage of OTT video services will be more complementary than substitutive Share of primary pay-tv services by platform, Europe and North America, 2012 and 2017 [Source: Analysys Mason, 2012] Share of secondary pay-tv services by platform, Europe and North America, 2012 and 2017 [Source: Analysys Mason, 2012] % 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% % Europe North America Europe North America Analogue cable Digital cable IPTV Analogue cable Digital cable IPTV Pay-DTT Satellite OTT video Pay-DTT Satellite OTT video

13 Share of spend OTT video services share of spend will remain low throughout the forecast period 13 Share of total pay-tv spend for OTT video services, Europe and North America, 2012 and 2017 [Source: Analysys Mason, 2012] 7% 6% 5% 4% 3% 2% 1% 0% Europe North America

14 EUR per month because users spend much less on these services than on traditional pay-tv ASPS for OTT video services, Europe and North America, 2012 and 2017 [Source: Analysys Mason, 2012] Europe North America Europe 2012 Europe 2017 North America 2012 North America 2017

15 15 Contents The nature of the threat Our forecasts The OTT video provider s perspective Strategies for operators Summary Questions & answers

16 The fragmentation of the OTT video model is a weakness as well as a strength 16 Content and rights Programming Aggregation and packaging Distribution Consumer devices Programmes Channels Channel retailing Last-mile networks Set-top-boxes Pay-TV Producers Broadcasters Operators Managed CPE OTT video to the TV Producers Broadcasters OTT aggregators Operators Unmanaged CPE Two parties have billing relationship with consumers and they don t talk to each other. The result is no single point of accountability. Arrows denote relationships

17 Providers of OTT video services to the TV will have to negotiate some important hurdles 17 Infrastructure Fixed broadband coverage Fixed broadband speeds Backhaul capacity ISP market ISP market concentration / fragmentation ISP traffic management policies Net neutrality regulations Content market Pay-TV operator strategies Availability of high-quality FTA content Content rights / exclusivity User adoption and behaviour Fixed broadband penetration Pay-TV penetration Connected TV device penetration and usage

18 For new entrants, the picture varies significantly from one country to the next Environment for OTT video The OTT TV scorecard 18 USA UK NL Chile South Korea Infrastructure Fixed broadband coverage Fixed broadband speeds Backhaul capacity ISP market ISP market concentration / fragmentation ISP traffic management policies Net neutrality regulations Content market User adoption and behaviour Pay-TV operator strategies Availability of high-quality FTA content Content rights / exclusivity Fixed broadband penetration Pay-TV penetration Connected TV device penetration and usage Figure sources: Akamai, ITU, OECD and Analysys Mason

19 Users of paid-for OTT video services currently represent a small sub-segment of all owners of connected TVs 19 Owners of connected TVs Owners of physically connected TVs Users of connected TV services Users of OTT video services Users of paidfor OTT video services

20 20 Contents The nature of the threat Our forecasts The OTT video provider s perspective Strategies for operators Summary Questions & answers

21 We identified five strategies that operators can choose for OTT video 21 Operator OTT video strategies Strategy Examples Strengthen pay-tv Multi-screen initiatives (TV Everywhere, Belgacom s TV Partout, Sky Go, Viaplay, UPC s Horizon, Iris by Zon Fibra) Differentiation through customer/user experience (la nouvelle TV d Orange; UPC s Horizon, Iris by Zon Fibra, Virgin Media TiVo service) Reduce incremental cost of individual core services through bundles (BSkyB, Belgacom, SFR, UPC) New business models (Mediaset Premium Ricarica, TeliaSonera, TnK) Launch own OTT Launch of own OTT video proposition (EpicTV, NOW TV, Viaplay) Partner with OTT Channel to market for OTT services (RCS & RDS and Voyo, TalkTalk and LOVEFiLM) Sell QoS, CDN to OTT providers (many telco CDNs) Profit from OTT Tiered pricing/data caps (many operators) Limit OTT Data caps/traffic shaping (KT vs. Samsung)

22 These strategies can be combined and implemented in response to changes in the environment Operator OTT video strategies 22 Operator Strategies Belgacom TV Everywhere launched in July 2011 MovieMe on Samsung smart TVs in October 2011 Personalised recommendations introduced in June 2012 BSkyB Triple-play launched in 2006 Sky Go launched in January 2006 Acetrax acquired in May 2012 NOW TV OTT video service launched in July 2012 Mediaset Mediaset Premium initially launched as a prepaid DTT service in 2005, using rechargeable cards Premium Play multi-screen service launched in February 2011

23 ISP market competitiveness but the right combination of strategies will depend on the operator s strength in the ISP and content markets 23 Strong ISP power Limited competition No net-neutrality regulations Profit from OTT Limit OTT Net neutral ISP market Fragmented industry Net neutrality enforced Partner with OTT providers Strengthen pay-tv Own OTT services Weak Limited or no exclusive content Other operators are dominant Strong Exclusive content rights Limited pay-tv competition Position in content market

24 24 Contents The nature of the threat Our forecasts Strategies for operators The OTT video provider s perspective Summary Questions & answers

25 25 Key points The emergence of OTT video services has created a new paradigm for delivering and consuming video services However, in spite of the disruption to the ecosystem, the impact on traditional pay-tv operators has been limited to date Based on the evidence we have seen so far, we do not anticipate substantial levels of cord-cutting over the forecast period. What concerns us more is the lost future opportunity for traditional pay- TV services However traditional pay-tv operators can minimise the impact of third-party OTT video services by adopting the right combination of strategies which reflects their position both in their individual content and ISP markets.

26 26 Additional related content and services Subscription Research Pay-TV in Europe: forecasts and analysis at: ntent/reports/paytv-europe-forecasts- RDMB0-Aug2012 Pay-TV in North America: forecasts and analysis at: ntent/viewpoints/na-paytv-forecasts- Oct2012-RDMB0 Custom Research and Consulting Our Custom Research team delivers tailored research that addresses specific business needs Our Media Consulting practice has worked with operators, content owners and regulators on a wide range of questions related to the growth of OTT video services Our Fixed Broadband & Media research programme covers key developments in the pay-tv market.

27 27 Contents The nature of the threat Our forecasts Strategies for operators The OTT video provider s perspective Summary Questions & answers

28 28 Contact details Cesar Bachelet Senior Analyst Nico Flores Manager Bush House, North West Wing Aldwych, London WC2B 4PJ United Kingdom