Scenarios for a convergent world: Non-linear TV and the online challenge Where is the European TV industry heading?

Transcription

1 Presentation for Circom s 31 st Annual conference Scenarios for a convergent world: Non-linear TV and the online challenge Where is the European TV industry heading? 10 May 2013 Lluís Borrell

2 2 Confidentiality notice Copyright The information contained herein is the property of Analysys Mason Limited and is provided on condition that it will not be reproduced, copied, lent or disclosed, directly or indirectly, nor used for any purpose other than that for which it was specifically furnished

3 3 Agenda Setting the scene Context on linear and non-linear TV The European broadcasting model A structured perspective The evolution so far Linear TV and audience fragmentation The explosion of non-linear TV Putting things in perspective The policy and regulatory debate moving forward Key issues and leading perspectives in EU

4 Contents 4 Setting the scene The evolution so far The policy and regulatory debate moving forward

5 Setting the scene Linear TV and non-linear TV do we understand the difference? How is this evolving? (1/2) 5 Element Traditional or linear TV New TV or non-linear TV (in this presentation) Scheduling Broadcast or scheduled Non-linear TV or non-scheduled TV or on-demand TV Device TV set Time-shifting and PVRs STB EPGs Consumption Primarily laid-back consumption (TV) Primarily family or group Multiple devices (primarily TV sets increasingly PC, smartphones, tablets) that are connected with sufficiently fast broadband connections Search engines, apps Primarily laid-back consumption (TV) and long-format viewing, but also short video clips Transmission Over broadcast networks (multiplatform): terrestrial, satellite, cable, IPTV Multicast streaming over Internet Over two-way broadband Internet networks: streaming TV or over-the-top TV (OTT) Audiovisual social TV

6 Setting the scene Linear TV and non-linear TV do we understand the difference? How is this evolving? (2/2) 6 Element Traditional or linear TV New TV or non-linear TV (in this presentation) Type of service / content Business model Managed service High quality (SDTV, HDTV, UHDTV) Professional (films, sports, news, TV series, etc..) FTA, commercial or PSB, and pay TV Non-managed service Low to high quality (size of screen) Usage driven by professional content but also UGC Pay OTT, online TV, FTA, etc. Also relevant: PPV, VOD and SVOD

7 Setting the scene 7 What will we call the future TV services? (1/2) Complex to define future TV services mainly due to issues associated with the device (the TV set ) Seamless combination of traditional linear TV and non-linear TV Scheduled and unscheduled programmes timely programming and events as well as catalogue-driven Multiple transmission platforms and standards open or closed, oneway and two-way Many layers of service provision scheduled TV channels, EPGs, search engines, apps, etc. Multiple devices (TV, PC, smartphone, tablet, etc.) issues of coherence and compatibility Multiple uses and consumption complementary (simultaneous) or not, individual vs. family or group Generational switch? Us vs. the younger generation

8 Setting the scene 8 What will we call the future TV services? (1/2) We are seeing a change in the paradigm for TV services the old measuring tools are getting obsolete and thus we can only have an unreliable approximation of the scale and timing of the impact of changes Despite this uncertainty, the industry needs to plan commercial strategies, policy and regulation

9 Setting the scene Looking at the pillars of the European broadcasting model what impact will connected TV have? 9 Traditionally dominated by terrestrial distribution and reception; growing importance of cable and satellite TV value chain dominated by broadcasters/platforms, not content producers or studios Relative importance of PSB followed by historical commercial TV channels and the growing importance of pay TV Relatively concentrated from an economic point of view less competitive than the USA

10 Setting the scene Looking at the pillars of the European broadcasting model what impact will connected TV have? 10 From a public policy and regulatory perspective, a focus on consumer welfare, at least in terms of: level of competition levels and types of advertising pluralism, diversity, protection of minors, etc. local and European independent production importance of PSBs debate on scale/funding of PSBs

11 Setting the scene A range of key factors are changing the European broadcasting model 11 STRUCTURAL Changing consumer patterns and a more competitive landscape? Digital (DTT/DSO) multiplication of offerings (diversity) and fragmentation Enhanced TV quality move towards HD and 3D TV Explosion of connected TVs and new devices offering and adoption Lower barriers to entry a shift of power in the value chain CYCLICAL Weaker underlying fundamentals? Advertising downturn in advertising revenues PSB pressure on public financing for PSB Pay TV growing but weaker consumer spending REGULATION AND PUBLIC POLICY Lighter-touch competition law and new targets for regulation? Advertising bans on national PSB channels: imposed in Spain (complete) and France (partial) Advertising limits: higher for commercial thematic channels (France), and debate on asymmetric rules (UK, Ireland, etc.) Greater focus on competition law general guidelines to focus on economic ex-post regulation rather than ex-ante Pay-TV competition rules action on key bottlenecks (UK, France) Public policy open debate across EC

12 Contents 12 Setting the scene The evolution so far Linear TV Non-linear TV Putting things into perspective The policy and regulatory debate moving forward

13 Evolution so far Linear TV 13 Key trends in linear TV over the last 10 years Element Scheduling Device Transmission Consumption Type of service / content Business model Key trends over last 10 years Groups of families instead of single TV channel scheduling Evolution in complexity of STBs, DVRs and EPGs zapper, thick box, thin box, gateways, etc. DTT/DSO as catalyst multiplication of TV channels and fragmentation of audiences all Western European countries have completed DSO, while some Central and Eastern European countries are yet to follow Growing/sustained consumption average viewership of linear TV has been increasing in most countries and is expected to continue to increase Multi-room services High quality emergence of HDTV transmission (simulcast) and 3D TV Professional sophistication in production to increase quality, participation Evolving business model in terms of revenue, we see a different trend: overall growth in TV revenues PSBs are suffering most from the economic crisis lower growth or decline in advertising-based broadcasters medium/high growth in subscription-based TV

14 Evolution so far Linear TV DTT/DSO has been a major driver of change in Europe, with marked variations in its impact 14 DSO was completed in most European countries by 2012 Progress of DSO in Europe DTT/DSO has had a significant effect on the structure of the TV market, particularly in markets where terrestrial is dominant multiplication of TV channels fragmentation of audiences Terrestrial remains the most important TV distribution platform in the EU mainly due to the UK, France, Spain and Italy, where the DSO effect has been most notable DSO not formally launched Some DTT services launched Analogue switch off (ASO) underway ASO complete Source: DigiTAG, Ofcom, Analysys Mason

15 Evolution so far Linear TV In terms of new devices and formats, penetration of HDTV and DVRs/time shift have grown to similar levels Take-up of HDTV and DVR in larger EU countries in 2012 (% of households) 45% 40% 35% 30% 15 25% 20% HDTV Claimed DVR 15% 10% 5% 0% France Italy Germany UK Spain Source: Ofcom, Market report 2012

16 PSBs fragmentation of audiences and groups of TV channels TV market share DTT penetration Evolution so far Linear TV PSBs share of linear TV viewing has fallen, especially in countries with high DTT penetration 16 Change in TV viewing share of selected PSB channels between 2001 and % 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Source: EAO, Analysys Mason -13.6pp -10pp -8.6pp -13.7pp -11.8pp -6.4pp Low DTT penetration 2001 May 2001 May May RTVE BBC RAI FT SVT TV2 ZDF Historical New channels DTT penetration -1pp 80% 70% 60% 50% 40% 30% 20% 10% 0% In most cases DTT/DSO has cut the share of major PSB channels by 9 14 percentage points, this has only been partly compensated by new TV channels (family of channels)

17 TV market share DTT penetration Evolution so far Linear TV Historical commercial channels have suffered similar erosion where DTT penetration is high Change in TV viewing share of selected commercial channels between 2001 and % 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% -8.7pp -11.6pp May 2011 A3 ITV Reti Televisive Italiane May TF1 TV4 RTL Historical New channels DTT penetration Source: EAO -8.1pp -9.1pp -8.3pp Low DTT penetration +0.6pp 80% 70% 60% 50% 40% 30% 20% 10% 0%

18 Evolution so far Linear TV Overall consumption of linear TV increased at a CAGR of 0.4% 1.4% over the last decade and remains strong Average minutes of TV viewing per day in larger EU countries, /11 growth CAGR 2011/ % 3.9% 7.1% 0.9% 2.8% 2.1% 0.0% 1.1% 1.4% 1.3% 1.4% 1.4% Source: EAO, Analysys Mason Austria France Germany Italy Spain UK Consumption of linear TV is strong in countries with the strongest growth in non-linear TV

19 EUR million Evolution so far Linear TV Total TV revenues increased at a CAGR of 1.6% 3.7% over the last few years despite recent declines during the crisis Total TV revenues in larger EU countries, (EUR million) 19 15,000 12,000 9, /11 growth 3.0% -2.5% 3.6% 2.7% -4.0% CAGR 2011/ % 3.3% 1.6% 2.8% 6, % 3,000 0 France Italy Germany UK Spain Source: EAO, Analysys Mason Stronger crisis

20 EUR million Evolution so far Linear TV Commercial broadcasters seem to have suffered the most from the economic crisis Revenues of selected major advertising-based TV groups, (EUR million) 20 7, /11 growth 4% 2.7% -12.5% 6, % 0.0% -7.9% 5,000 4, % 3, % 0.2% 2,000 1, % CAGR 2011/ RTL Group ITV Mediaset TF1 Antena Source: EAO, Analysys Mason

21 EUR million Evolution so far Linear TV though PSBs have also suffered, unless protected by licence fee and subsidies 21 Revenues of selected PSB groups, (EUR million) 6,000 5, /11 growth 7.3% -0.2% -3.0% -1.9% 1.6% 4, % -1.9% CAGR 2011/2007 3, % 2,000 1,000 % 0 ZDF France Télévisions BBC Group RAI Group Source: EAO, Analysys Mason

22 Millions of households Growth of pay-tv households EUR billion Growth of pay-tv revenue Evolution so far Linear TV In contrast, pay-tv players have enjoyed continued (though slower) subscriber and revenue growth 22 Pay-TV subscribers, (million) Pay-TV revenues, (EUR billion) % 40 12% 180 9% % 7% 30 9% 120 6% % 4% 20 6% 60 3% 40 2% 10 3% 20 1% 0 0% Cable IPTV DTT Satellite Pay TV Growth 0 0% Revenues in EUR Growth Pay-TV channels and operators seem to be in a better financial position than the PSBs Source: EAO, PWC GEM 2012, Analysys Mason

23 EUR million Evolution so far Linear TV 23 making them the most resilient to the crisis Revenues of selected private pay-tv groups, (EUR million) 2010/11 9,000 growth 5.4% 3.2% 5.0% 8.3% 5.9% 17.1% 8,000 7, % 6,000 5, % 4,000 3,000 2,000 1, % 7.8% CAGR 2011/ % 0 British Sky Broadcasting Ltd Vivendi (Canal Plus) Sky Italia Kabel Deutschland ONO Sky Deutchland Source: EAO, Analysys Mason

24 Contents 24 Setting the scene The evolution so far Linear TV Non-linear TV Putting things into perspective The policy and regulatory debate moving forward

25 Evolution so far Non-linear TV 25 Key trends in non-linear TV over the last 10 years Element Scheduling Device Transmission Consumption Type of service / content Business model Key trends over last 10 years Catch-up services (7 days), pre- and post-live broadcasting streaming of key shows, archives Proliferation and take-up of new devices DVR, connected TV, smart TV, Internet over TV Broadband is developing rapidly, enabling the mass-market launch of non- linear TV services increasing household penetration improving bandwidth (speed) Consumption of non-linear TV is growing exponentially number of users and viewing per user are increasing as a result, total non-linear TV viewership is rising Multiple standards Multi-screen services Wi-Fi to support smartphones/tablets in portable/nomadic usage Revenues from professional pay-tv and free online TV services are growing exponentially, but monetisation is still lagging behind issues with standards for measuring usage and advertising currency

26 Evolution so far Non-linear TV Broadband penetration rose rapidly in Europe between 2005 and Broadband penetration, December 2005 Broadband penetration, December 2012 HH broadband penetration below 40% HH broadband penetration between 40% and 60% HH broadband penetration between 60% and 80% HH broadband penetration above 80% With broadband penetration over 60% in most countries, the EU seems prepared for massmarket connected TV but the quality of the experience needs more detailed assessment Source: TeleGeography, Analysys Mason

27 Evolution so far Non-linear TV 27 but mass-market connected TV will require further improvement in the average speeds achieved Average downlink speed, 2011 Average downlink speed, 2013 < 6Mbit/s 6 12Mbit/s 12 18Mbit/s > 18Mbit/s Source: Speedtest.net Sweden, Netherlands and Switzerland seem prepared for mass-market connected TV. Other countries are just at the low end of the requirements, but the 30Mbit/s Digital Agenda target suggests there could be a mass market for connected TV by 2020

28 No. of simultaneous flows per HH Evolution so far Non-linear TV Speeds of 6 25Mbit/s might be sufficient for mass-market connected TV, including HDTV 28 Required connection speeds, based on multi-usage and quality of service (figures are illustrative) Speed per type of service format Service format Audio Music SD TV HD TV 3D TV / online game Ultra HD TV 1 Few kbit/s 320kbit/s 1 2 Mbit/s 6 8 Mbit/s Mbit/s 27 43* Mbit/s 2 Few kbit/s 640kbit/s 2 4 Mbit/s Mbit/s Mbit/s Mbit/s 3 Few kbit/s 960kbit/s 3 6 Mbit/s Mbit/s Mbit/s Mbit/s 4 Few kbit/s 1280kbit/s 4 8 Mbit/s Mbit/s Mbit/s Mbit/s 5 Few kbit/s 1600kbit/s 5 10 Mbit/s Mbit/s Mbit/s Mbit/s 6 Few kbit/s 1920kbit/s 6 12 Mbit/s Mbit/s Mbit/s Mbit/s ADSL sufficient ADSL sufficient for large proportion of HHs Fibre or DOCSIS 3.0 required * Speed required for 4K (UHDTV1) at 60 fps. For 30 fps, Mbit/s is sufficient

29 Evolution so far Non-linear TV New devices have proliferated and are being taken up e.g. DVRs, connected TVs, smart TVs, Internet over TV 29 Take-up of new connected devices in larger EU countries, 2012 (% of households) 45% 40% 35% 30% 25% 20% 15% 10% Claimed DVR TV over the Internet Connected TV or Smart TV 5% 0% France Italy Germany UK Spain These devices enable both timeshifting of traditional TV broadcasts (DVRs) and new models with delivery over the Internet Source: Ofcom, Market report 2012

30 Millions Evolution so far Non-linear TV The number of online viewers, and the amount of videos they watch, have increased over the years Number of unique online TV viewers, (million) Average number of online videos watched per viewer per month, /11 growth % 3.4% -1.0% 4.3% -6.4% 2010/ growth 6.8% -0.9% 8.1% 13.1% 9.6% % 17% CAGR 2011/ % 22% 150 CAGR 2011/ % 17% Germany Italy France Spain UK Germany Italy France Spain UK Source: EAO, Analysys Mason

31 Evolution so far Non-linear TV resulting in substantial increases in minutes of consumption per day Minutes of online TV consumed per head per day, /11 50 growth 45 25% 17% 23% 33% 21% 40 CAGR 2011/ % 42% 44% France Italy Germany UK Spain Source: Screen Digest, EAO, Analysys Mason

32 Evolution so far Non-linear TV 32 and even greater increases in revenues from non-linear TV Revenues from online TV, (EUR million) /11 growth 35% 49% 106% 102% 363% CAGR 2010/ % % 128% 117% 251% Germany Spain France UK Italy Source: Screen Digest, EAO, Analysys Mason

33 % of total non-linear TV revenues Evolution so far Non-linear TV In response, business models have evolved with variations between countries 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Proportion of revenues from non-liner TV realised by pay-tv and FTA business models, Germany Spain France UK Italy Pay-TV FTA 33 Source: Screen Digest, EAO, Analysys Mason

34 Contents 34 Setting the scene The evolution so far Linear TV Non-linear TV Putting things into perspective The policy and regulatory debate moving forward

35 Evolution so far Putting things into perspective Summary of relative impact and degree of complementarity of linear and non-linear TV at least so far 35 Element Scheduling / type of service Device / service Transmission Consumption Business model Key trends over last 10 years Complementarity of non-linear and linear TV for popular TV series and programmes potentially having a significant impact Importance of new players offering Internet-based non-linear TV Simultaneous growth of HDTV and non-linear TV Simultaneous growth of traditional and non-traditional non-linear TV Simultaneous growth of traditional transmission TV services (DTT, cable, satellite, IPTV) and broadband/internet-based networks High growth in non-linear TV viewership needs to be put in line with the current evolution of the overall TV market Although growing fast, non-linear TV revenues still make up a very small part of the whole TV market We expect non-linear TV to continue to grow but it could grow: along with linear TV, i.e. as a complement at the expense of linear TV, i.e. as a substitute

36 TV over Internet Evolution so far Putting things into perspective 36 HDTV and Internet TV are developing along similar paths, but as yet Internet TV is only a small proportion of non-linear TV Take-up of HDTV vs. non-linear TV in larger EU countries 60% 9% Non-linear TV as % of total TV viewing by category in the USA, % 7% Video on mobile 40% 20% 6% 5% 4% 3% 2% Video on Internet Video game console Video DVD 0% 0% 20% 40% 60% 1% 0% Q3 11 Q2 12 Q3 12 Timeshifted TV (DVR) HDTV France Italy Germany UK Spain Source: Ofcom, Nielsen

37 Evolution so far Putting things into perspective Despite the rapid adoption of connected TV, this seems to have had only a limited impact on overall consumption 37 Non-linear TV as % of daily TV consumption, Incremental YOY % of total consumption going to non-linear TV, % 5% 18% 5% 16% 4% 14% 12% 10% 8% 6% 4% 2% 0% France Italy Germany UK Spain % 3% 3% 2% 2% 1% 1% 0% France Italy Germany UK Spain 2009/ / /10 Source: EAO, Analysys Mason

38 Millions Thousands Evolution so far Putting things into perspective For popular series and programmes, the complementarity of non-linear and linear TV can be significant 38 Example 1: Africa in the UK Leading TV series from the BBC with average 20% share in the UK Non-linear viewing could represent 25% of total viewing Example 2: Polseres Vermelles in Catalonia Leading TV programme from TV3 with average 20% share in Catalonia Young target audience Format is being exported to other countries incl. USA Non-linear viewing could be 34% of total viewing Metrics for linear vs non-linear viewing of Africa Metrics for linear vs non-linear viewing of Polseres Vermelles Linear TV viewers non Linear TV BBCiplayer requests 0 Linear TV viewers Unique web users Postview video streams Previews videostream Source: The Guardian, BBC, TV3, Analysys Mason

39 Evolution so far Putting things into perspective Although revenue from online TV is increasing exponentially, it still represents less than 2% of total TV revenues 39 Total non-linear revenues by source in larger EU countries, (EUR million) % 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Non-linear revenues as % of total TV revenues in larger EU countries, Germany Spain France UK Italy Pay-TV FTA Free models seems to be gaining momentum in most countries, but pay-tv models are also growing in relative terms in Germany Source: EAO, Analysys Mason

40 Consumption of online video vs TV (min) Consumption of online video vs TV (min) Evolution so far Putting things into perspective 40 Future TV consumption will connected TV be a complement for linear TV, or a substitute? Figures illustrative for discussion only Connected TV as a complement traditional TV follows historical trend 250 Connected TV as a substitute erosion or decline in traditional TV TV Online Video TV Online Video

41 Evolution so far Putting things into perspective In terms of revenues, will non-linear TV develop into a mainstream TV model comparable to FTA or pay-tv? 41 Figures illustrative for discussion only Scenarios for growth of TV revenues in Europe (period to 2020) Scenario Non-linear TV Linear TV (FTA) Linear TV (Pay TV) Scenario 1 Evolutionary Lower growth (CAGR 40%) Evolutionary trend (CAGR 2%) Evolutionary trend (CAGR 5%) Scenario 2 At the expense of FTA Medium growth (CAGR 50%) No growth (CAGR 0%) Slower growth (CAGR 2%) Scenario 3 At the expense of pay TV Higher growth (CAGR 60%) Long-term substitution and decline (CAGR -3%) Long-term substitution and decline cord cutting (CAGR -1%)

42 Evolution so far Putting things into perspective We expect the revenues from online TV to grow at different rates all at the expense of traditional TV 42 Figures illustrative for discussion only Scenarios for TV revenues, linear vs nonlinear, (EUR billion) Scenarios for TV revenues by source, (EUR billion) Linear S1 S2 S3 Non-linear S1 S2 S3 Non-linear as % of total TV 10% 21% 41% TV revenue growth (10 years) 49% 35% 33% Source: Analysys Mason

43 Contents 43 Setting the scene The evolution so far The policy and regulatory debate moving forward

44 The policy and regulatory debate Several countries have formally kicked off the debate around connected TV and future regulation of broadcast 44 The specificities of broadcast media will need to be reassessed to reflect the new environment and to safeguard growth, innovation and competition Consultations will be launched to properly assess the potential need to adapt and/or consolidate discrete policy and regulatory frameworks EC is producing a green paper on connected TV this spring UK will publish a white paper France has set up a commission to study the connected TV market Germany s regulatory bodies have published an opinion paper outlining their priorities in future regulation of connected TV Other countries, such as the Netherlands, are also starting the debate

45 The policy and regulatory debate Key elements and issues likely to be at the core of the debates 45 TV advertising Access and prominence IP rights / Premium rights Terrestrial spectrum Reference markets Net neutrality European works Protection of minors Each leading country within the EU assigns a different level of importance to each of these issues and the potential need and timing for convergence.

46 The policy and regulatory debate Key elements and issues likely to be at the core of the debates 46 Element Key issue Policy and regulatory reference TV advertising Asymmetries in TV advertising regulations AVMS directives Access and prominence IP rights / Premium rights Spectrum Reference markets Net neutrality EU works Must-carry, linear and non-linear TV services access to platforms and due prominence in EPG, searches, apps, etc. Evolution of retransmission rights, territoriality, broadcast and VOD windows, events of major importance and premium rights and distribution exclusivities Spectrum and, eventually, administrative incentive pricing (AIP) Changing definition of TV reference markets Non-discrimination regarding third-party content Level of support for EU audiovisual production and model Universal access directive Access directive Cable and satellite directive AVMS directive Competition cases Framework directive, national frequency plans and policies, EC spectrum inventory work and associated decisions Market reviews, ex-post regulation Framework directive AVMS directive Protection of minors Protection of minors AVMS directive

47 The policy and regulatory debate Access and prominence issues have already gained momentum in the UK 47 Significance in trad. pay-tv market Significance in non-linear TV market Commercial relevance Possible regulatory tools Access and carriage TV channels are included in operators EPGs It might vary and evolve rapidly. Will content providers apps be available in pay-tv platforms? Will content providers be included in search engine results? Must-have content may determine a platform s viability Inclusion in key platforms may be crucial for ensuring high viewing figures. Open access rules to all? Review and/or extension of mustcarry rules? Review and/or extension of mustoffer rules? Prominence TV channels are given prominent numbering It might vary and evolve rapidly Are apps being preinstalled or displayed on the start screen? Order in results from search engines? High prominence may be crucial for ensuring high viewing numbers and revenue. This will have implications for investments in content production (e.g. European works) Review and/or extension of appropriate prominence rules?

48 Concluding remarks 48 Concluding remarks Complexity and uncertainty in short, medium and long term tactical approach for short term strategic planning for medium to long term Established and new players have different perspectives a land of opportunity for new players limited losses for established players, but a threat in medium and long term prepare tactically! You are not observer but KEY PLAYERs Your actions can change current forecasts!

49 49 Contact details Lluís Borrell Partner