Digital TV business models

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1 Digital TV business models Peter MacAvock Caracas, Venezuela 10 th August 2005 Copyright Digital Video Broadcasting Project DVB

2 Digital TV business models Background Digital TV markets in Italy, Germany, Taiwan, UK Examples of new services HDTV Handheld broadcasting Interactive Television Lessons to be learnt A little warning... Conclusions

3 What I would like to achieve... Examples of different country business models. Countries adopt a common standard, but this doesn t restrict them to the same digital service combinations. Each business model is specific to each country s environment competition with other service, political/economic considerations, viewer demographics, etc. These can include: SDTV services (pay-tv and Free-to-Air) HDTV Interactive services (idtv) and data services Fixed, portable and mobile reception scenarios BTH (Broadcast to Handheld) services Can your chosen standard facilitate all this? yes... (but pick the right one!!)

4 digital TV in Europe overview

5 Europe very different TV markets The primary source of TV signals in 1998 was: Cable Satellite Terrestrial UK 9% 18% 73% Italy <500K ~5M Dominant Germany 57% 33% 10% Analogue terrestrial was free-to-air in all 3 cases Analogue cable and satellite were mostly free-to-air in Germany, but almost purely pay TV in the UK Italy has a chaotic analogue environment

6 ... the most successful digital TV

7 UK TV Market DVB-T commenced 11/98 with multichannel SDTV services with mixed FTA and Pay services Rapid initial growth with free STB for Pay subscribers Heavy competition with Cable and Satellite (SKY) both DVB as well OnDigital (Pay TV) closed. Successful re-launch with Freeview 11/02 Changed to FTA Business Plan Improved coverage changing parameters reduce payload (24 -> 18MBit/s) all receivers follow automatically Terrestrial Approx 7M STB s & growing Sales now exceed 150k/month DVB-T penetration will shortly exceed that of DVB-S satellite

8 UK DTT success Receiver prices as low as UK 30 (US$60) Interactive services very popular & growing using MHEG-5 Great interest in HD when spectrum becomes available after analogue shutdown Sky BSkyB provides launching multichannel HDTV using H264 in 2006 Total digital homes now exceed 85% of UK TV homes important for analogue shutdown!!

9 ... the island principle

10 German TV Market 36.2 million TV households 11% digital About 1% interactive cable dominates, followed by free-to-air satellite Terrestrial reception is 10% of viewers Germany s 13 independent media authorities agreed launch DVB-T and switch-off analogue 12 months later cross industry support to promote DVB-T launch in the richest regions first, then move progressively to the poorest. Result: DVB-T has more viewers than analogue PAL had!

11 Plans for DVB-T in Germany DVB-T on air DVB-T DVB-T starting May 2005 DVB-T in the future

12 Germany

13 Germany 01 November 02

14 Germany 29 February 03

15 Germany 4 August 03

16 German Business Model Focus is on portable/mobile services don t compete with DVB-S and DVB-C DVB-T receivers now approx. US$70 Now more than 700 receivers models on sale in Germany (DVB-S, DVB-C and DVB-T) German car manufacturers now all offering DVB- T receivers in their cars Berlin has no analogue PAL-TV Northern Germany will follow next month!

17 What can be learnt from Berlin? Accelerated switch-off is possible At least once less than 10% of population rely on analogue terrestrial Public outcry in Berlin (predicted by some) never materialised Clear public communication was a key success factor Common approach from government, broadcasters and industry Adhered to a well publicised switch-off schedule No STB = no picture adverts Low cost boxes are essential for the analogue to digital transition (usually means simple zappers) Second step is to enhance with interactive services, but legacy will remain Cheapest MHP DVB-T box is 129

18 ... the interactive country

19 Italian Digital TV the twist Business model is based on free-to-air Terrestrial television with heavy emphasis on Interactive services The Italian government is helping pay for digital TV rollout in order to accelerate adoption it has given a 150 subsidy on the sale of the first 720,000 set-top boxes; 2005 subsidy is 75 Nearly 3 million STBs deployed amazing for Italy! Analogue switch off targeted for end million TV sets to convert. Key in Italy is to ensure that all have access to enhanced interactive services it s working!

20 Italy DTT is enjoying a considerable success in the market: nearly 1,5 M DTT STBs have been sold in less than one year MHP STBs sold (values at end of month) ,500,000 (1) Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan ' (1) It is estimated that by Jan-05, a total of ca. 200,000 STBs were sold without government subsidy Note: November and December values are estimates Source: Italian Ministry of Communication, DGTVi

21 ... everything has to be different!

22 France is splitting FTA and Pay-TV France late in announcing plans for DVB-T 6 multiplexes all reserved for SDTV Heaving competition from pay-tv satellite (TPS, Canal+) and Cable (France Telecom, etc) All free-to-air services will be: DVB-T with MPEG-2 All pay-tv services will be: DVB-T with H.264 No HDTV at present, but some flexibility for future especially with adoption of H.264

23 Taiwan Taiwan is dominated by cable (90% FTA cable). DTT used to try and stop fall in terrestrial television ATSC chosen in 1998 Reviewed decision ATSC didn t work and no flexibility Adopted DVB-T in 2001 World s first 6Mhz Launch of DVB T 2 multiplexes Taipei 1 elsewhere now 7 coverage areas, up to 5 services in each when rollout complete in 2007 Business plan is to focus on Mobile and to expand into fixed services later

24 P.R. China China has adopted DVB-S and DVB-C, but seems intent on developing its own DTT solution concentration on deploying DVB-C at present DTT decision expected end 2005 driving by IPR concerns DVB-T a popular industry choice about 20 cities have DVB-T services on air business models centre around mobile services DVB very active in China most of DVB-T, DVB-S and DVB-C receivers come from China anyway.

25 Latin America Mexico has logically chosen ATSC Argentina chose ATSC in 1998 decision since suspended Brazil has yet of make a decision Broadcasters will only support a COFDM based system Must do portable, mobile and HDTV ATSC simply can t perform Other countries waiting for Brazil, but for how long? internal markets facing competition from cable and satellite move to digital is being forced by economic considerations not political...

26 Australia Launched DVB-T in 2001 Large country, small population and it has 7MHz channels Model based on HDTV... Unique configuration But: > 770,000 digital DVB-T receivers sold to March 05. Sales now around 40K/month Projected penetration after 5.5 yrs > 1.17M (15.8%) (greater penetration than in UK) More than 3.6 million DVD replay machines sold. >10,000 plasma screens sold in 04/04 - more than 6 times the sales recorded in 04/03. average price of plasma screens has fallen by over 40% during the same 12 month period. Sales growth of digital receivers now at record levels mainly on the back of strong sales of widescreen TV, DVD and home theatre systems.

27 Coverage Source ABA

28 Digital Terrestrial Receiver Penetration No TV homes = 7.4 Million Penetration > 770,000 (3.05) Penetration after 4.5 years = 11% (3.5 years = 5.7%) Projected penetration after 5.5 years >15.4% (based on current growth rate 40k/month)

29 Conclusions Choosing the right business model depends on: political, commercial through to social and financial factors. vital that all industry players be involve making the choice. Whichever model you choose you need a system which is flexible to meet the short term demands and be adaptable enough to ensure relevance going forward Receiver prices are the single most important factor in determining whether people will watch new attractive services. Free to air seems a common parameter to all profiles Interactivity is a position which needs to be seriously considered particularly as a future option Trial services and exploration of alternative business models is generally a good strategy. The UK is a good example Handheld broadcasting a serious option in the medium term

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