The market for on-demand audiovisual services in the EU Overview & Trends Christian Grece Analyst On-Demand Audiovisual Markets European Audiovisual Observatory New ways of distribution Creative Europe Desk Polska/KIPA Warsaw - 29 th October 2015
Overview I. Digital transformation of the media sector II. Digital media landscape in the EU Main figures & Trends III. Challenges in the digital audiovisual ecosystem
Section I Impact of digitalisation and distribution of audiovisual content over the Internet - How did the media ecosystem change on the Supply and Demand side?
I. Digitalisation and «over-the-top» distribution of content «OTT» = Open Internet New services New entrants Intensification of competition Advertising & Paid content 4
I. Increased fight for consumer attention Abundance of audiovisual media content TV shows News Audio-TV Animations Music Theatrical films TV films Live broadcasts Video films Pay TV content 5
I. Changing audiences & Mult-screen viewing 350,0 EU 14 Smartphones and Tablets installed base in millions 300,0 250,0 200,0 150,0 100,0 50,0 0,0 2009 2010 2011 2012 2013 6
I. Audience fragmentation by media Source: emarketer 06:00 UK - Avg Time Spent per Day 2011-2015 04:48 03:36 02:24 01:12 2:25 4:39 3:19 3:12 +92% -4% TV -9% Radio Digital - Desktop / Latop - Tablets - Smartphones 00:00 2011 2012 2013 2014 2015-13% Print
I. Increased importance of mobile devices 02:52 02:24 01:55 UK Avg Time Spent On Mobile Devices per Day 1:55 2:26 2:13 +371% Mobile - Tablets - Smartphones +16% Desktop / Laptop 01:26 00:57 00:28 0:31 00:00 2011 2012 2013 2014 2015
And a trend towards mobile video consumption Digital video viewers by device in EU Big 5 Oct 2014 In % of respondents (18+ who own all devices) Laptop / desktop 64% Tablet Smartphone 51% 58% Between 50% and 60% of Europeans already use mobile devices to watch videos Fixed game console 35% Source: Ofcom, emarketer
Consequences of changes on Demand and Supply side «ATAWAD» content consumption Abundance of content & New entrants/services Audience fragmentation Scarce resource = Attention of audiences Shift in paradigm Impact on Advertising & Paid Entertainement markets in the EU 10
II. EU digital media landscape in 2014 Main figures and trends 11
II. EU digital media landscape Main figures 2014 - Over 2 900 on-demand audiovisual services available in EU 28 (MAVISE 2014) - Increased competition on online advertising market and VoD market Many services and players but only a few dominate Online Oligopolies Rapid growth but EU markets are heterogenous when it comes to digital services (UK, Germany and France 66,7% of online advertising revenues / EU-5 70% of VoD revenues in 2014) 30 +10% 25 20 EUR 27,2 billion 15 10 5 +38,5% EUR 2,5 billion 0 EU Online Advertising revenues EU VoD revenues 12
Section II Part 1 Online Advertising in the EU - Main figures and Trends Where is the market going?
EU28: Online challenging TV advertising in EUR million Source: Warc
Poland - TV advertising still dominant in 2014
Concentration: Scale & Reach is important Advantage to global players on the online ad market Source: IHS
Online advertising surpassed TV ad spend in 7 EU countries 2014 In EUR million Source: Warc
But online video advertising is still a small fraction of TV advertising in 2014 14,0% 12,0% 12% 10,0% Online video as a percentage of TV advertising in 2014 9% 10% 8,0% 6,0% 4,0% 3% 3% 4% 4% 5% 5% 5% 5% 5% 5% 5% 6% 2,0% 1% 2% 2% 1% 0,0% Source: OBS on Warc, IAB and IHS data
Google and Facebook dominant players for online video advertising in EU, broadcasters take a smaller share Source: IHS
Display advertising Objectives Right message (ad) at the Right Time in front of the Right Person «Big Data» (Targeting/Behavioural) Online Video ads Real-Time Bidding Real-Time Marketing «Big data» Tracking (Cookies / Advertising ID Social Networks Retargeting Increase in connected mobile devices = localisation, geo-fencing/mkt Increase in screens & devices = Increase in addressable market («Eyeballs») Increase in online video consumption & broadband coverage = Audience s shift in consumption habits, Digital natives («Follow the money»)
Online Display advertising Drivers of growth - Online advertising-financed video websites and Social Networks - Acquisitions of YouTube MCNs by major traditional media companies - Investments in premium & original content - Social networks on video offensive (monetize audiences) Capture new audiences & ad budgets, valorise existing & new content Data driven advertising = targeting and personalisation of ads Programmatic advertising and real-time bidding Social & Mobile advertising is further changing the rules of the game Shift of mass advertising to individualized, personalized advertising
Social & Mobile advertising For winners, huge growth drivers
Section II Part 2 On-demand and Paid Entertainment revenues in the EU - Main figures and Trends Traditional versus Digital?
Consumer revenues for VoD services: fast growth but EU-5 & Nordics generated 82% of total revenues in 2014 3 000 2 500 35% 30% 37% 2 501 0,4 0,35 0,3 2 000 1 821 0,25 1 500 13% 1 406 0,2 1 000 919 1 038 0,15 0,1 500 0,05 0 2010 2011 2012 2013 2014 0 Source: IHS
«OTT» players by-pass «managed networks» by Internet Service Providers (ISP) «OTT» Open Internet ISP Managed networks
OTT is becoming dominant in the EU in absolute figures 1800 1600 1400 1200 1000 OTT VoD and Managed networks 2010-2014 Consumer revenues (in EUR million) EU28 OTT VoD EU28 CAGR +61% 919 1582 800 600 400 681 TV VoD EU28 CAGR +8% 200 238 0 2010 2011 2012 2013 2014 OTT VoD EU 28 TV VoD (Managed networks) EU24 Source: IHS
II. VoD services: Main trends 1. Over-the-top on-demand revenues are growth drivers, surpassing consumer spend on TV VoD (managed networks by national players) Tendency towards OTT audiovisual on-demand consumption Global players are dominating the OTT on-demand market in most EU countries 2. Explosive growth of subscription video-on-demand services (SVoD) since 2012 Competition or Complement to pay TV? 3. Physical media (DVD & Blu-Ray rental/retail) revenues versus on-demand revenues Overall physical media market is shrinking - Does VoD compensate for loss? 4. Cinema: Evolution of admissions in the EU
OTT VoD «Over-the-Top» distribution versus VoD Distribution on managed networks OTT VoD distribution by-passes traditional players and, in some cases, national audiovisual regulation Players established in specific countries or abroad to target EU countries In Poland, VoD on managed networks still dominant in 2014
A multi-country approach SE: 27 CZ: 23 UK: 68 NL: 14 US: 105 LU: 29 FR: 18 CY: 11 Source: European Audiovisual Observatory elaboration, MAVISE
Growth rates: consumers are going «over-the-top» and towards subscription-based VoD services 300% 250% 249% 200% 150% 123% 100% 50% 0% 11% 93% 72% 59% 36% 38% 32% 33% 30% 23% 11% 12% 4% 4% OTT TV OTT Film OTT SVoD Managed networks 2011 2012 2013 2014 Source: IHS
The picture in Poland: VoD Distribution on managed networks still dominant but growth lies in OTT 45,0 40,0 35,0 30,0 38,1 35,5 40,9 TV VoD CAGR +25% 25,0 20,0 15,0 17,0 24,8 OTT VoD CAGR +248% 13,3 10,0 8,3 5,0 0,0 3,9 0,5 0,1 2010 2011 2012 2013 2014 Total OTT Poland TV VoD (Managed Networks) Poland
Subscription Video-on-demand services in the EU SVoD fastest growing business model in the EU Netflix effect? Complement or Competitor to pay TV?
Impressive SVoD growth since 2012 in the EU: Netflix effect? 1 200 EU SVoD consumer revenues and yearly growth rate in EUR million and % 250% 1 000 249% 200% 800 600 400 123% 437,5 93% 844,1 150% 100% 200 38% 196,3 50% 0 40,7 56,2 2010 2011 2012 2013 2014 0% Launch GB/IE and Nordics Source: IHS
«Netflix effect»: Raising awareness among EU consumers for SVoD services and launch by national players of SVoD services Source: OBS on IHS
And Netflix growth relies more and more on international markets as expansion continues
But SVoD consumer revenues still a small fraction of pay TV spend - SVoD services rather a complement to traditional pay TV than a competitor in the EU (in 2014) - «Cord-cutting» yet marginal in the EU - SVoD consumer revenues in Poland (EUR 2,9 million) only 0,16% of pay TV consumer spend (EUR 1 843 million) 2,5% 2,0% SVoD consumer revenues in % of consumer spending on pay TV - EU 2,3% 1,5% 1,2% 1,0% 0,6% 0,5% 0,0% 0,1% 0,2% 2010 2011 2012 2013 2014 Source: IHS
Physical video market and VoD
Paid content: Evolution physical media (DVD/Blu-ray) and ondemand revenues EU 18 in EUR million 10000,0 8 947 VoD not compensating physical decline - 13% 9000,0 8000,0 7000,0 915 1032 1391 1798 7 796 2453 6000,0 5000,0 4000,0 3000,0 8 032 7 422 6 810 6 054 5 343 2000,0 1000,0 0,0 2010 2011 2012 2013 2014 EU 18 DVD& Blu-ray turnover EU 18 On-demand revenues Source: IHS
Paid content: Evolution physical media and on-demand revenues Poland VoD is compensating 100,0 +17,5% 94,2 90,0 80,0 80,2 70,0 17,1 25,3 42,0 43,8 54,2 60,0 50,0 40,0 30,0 20,0 63,1 54,9 52,9 47,4 40,0 10,0 0,0 2010 2011 2012 2013 2014 Poland DVD& Blu-ray turnover Poland On-demand revenues Source: IHS
Cinema admissions
Admissions stabilize - slightly below pre-3d levels Source: European Audiovisual Observatory Cinema attendance in the EU 2005-2014 in mio. 1 000 980 960 940 920 900 899 932 920 925 982 964 968 949 905 911 880 860 840 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 PROVISIONAL & ESTIMATED
thanks to strong performances in France, Spain & Poland Source: European Audiovisual Observatory Change in admissions 2014 vs 2013 (in mio) Decline 16 27 GB DE IT AT DK FI PT SI HR SE IE GR LU LV NL LT -1.1-0.7-0.5-0.5-6.5-8.0-8.0 Growth 11 27 15.2 10.5 4.1 0.5 0.7 0.9 1.1 CY EE BG SK CZ BE HU RO PL ES FR
But Cinema audiences are getting older Source: CNC Audiences getting older 60% 50% 40% 37% 30% 20% 30% 10% 0% Under 25 50 plus
Summary Impact on traditional markets
Section III Challenges in the digital audiovisual ecosystem
Challenges for EU players and the audiovisual sector High number of VoD services BUT Concentration and Market domination by small number of players on VoD and digital markets Future for smaller EU players? Access and Exposition of EU films and TV shows on main VoD services «Gatekeepers» Lower monetization of content than physical (DVD/Blu-ray) Access to premium content increasingly more expensive need of orginal and exclusive content in order to secure competitive advantages as digital players conquer the value chain Netflix, Amazon, Vimeo, YouTube Red and others investing in original content Competition to secure premium content increases licence prices for all players Financing of EU works: traditional broadcasters under increased pression from online players for advertising budgets, viewers and subscribers Future of financing?
Market concentration United Kingdom 2014 Amazon Instant Prime Video; 16,1% UK SVoD Volume market share in % of volume UK Digital retail market shares in % of value Amazon ; 19% Other ; 5% Sky Now TV; 12,8% Netflix; 71,1% Sky ; 4% Google Play; 7% itunes; 57% Market value: 381 million Amazon; 5,3% BT; 6,5% Virgin Media; 7,0% UK Digital rental market shares in % of value Blinkbox; 8,6% Google ; 2,6% Other; 6,1% Sky; 54,5% Blinkbox; 8% Market value: 168 million Oligopolies? «Winner-takes-all» logic? What place for national players in light of strong international competition? Economies of scale essential itunes; 9,4% Market value: 264 million Source: British Video Federation Yearbook 2015
Access and exposition of national and EU films on VoD services Difficulties to access platforms: Poland: % of Polish films on selected VoD services IPLA catalogue Breakdown by Region of Origin (films where variable was identified) 1065 82% European Non-European 518 49% 547 51% EU 28 National US Others 498 47% 70 7% 456 43% 91 9% Low matching rate European Kinoplex catalogue Breakdown by Region of Origin (films where variable was identified) 1176 92% Non-European 677 58% 499 42% EU 28 National US Others 637 54% 108 9% 384 33% 115 10% itunes Poland catalogue Chili.tv Poland catalogue Breakdown by Region of Origin (films where variable was identified) 2320 92% European Non-European 315 14% 2005 86% EU 28 National US Others 274 12% 4 0% 1557 67% 448 19% Breakdown by Region of Origin (films where variable was identified) 950 European Non-European 139 15% 811 85% EU 28 National US Others 139 15% 25 3% 791 83% 20 2% 100 % Source: OBS Study on VoD catalogues 2015 (forthcoming)
Monetization: VOD is harder to monetize than DVD/Blu-ray TVOD/EST SVOD AVOD Transactional VOD Subscription VOD Ad supported VOD Business model: Consumer pays a fee to buy or rent a film All you can watch for monthly subscription fee Free for consumer, advertising income Key players US consumer expenses: Rental : USD 4 Monthly fee: USD 3-10 Purchase : USD 3-8 Free Revenue split: 30% VOD provider 30% Distributor USD 50 10 20 NETFLIX: Non-exclusive 2-year US license % share of ad revenue 20% 20% Sales Agency Producer 5 High Avg Common Source: DocumentaryTelevision.com (27 April 2015) Monetisation potential: Highest potential Depends on title Low / Need of scale
and Digital players conquer the value chain Access networks still under control of traditional players Source: TNO White Paper Regulation in the converged media-internet-telecom value web
With deep pockets, acquiring and investing in (original) content Source: IHS
Conclusions - Shift in paradigm for the audiovisual sector - Attention is the scarce resource, content is abundant - Competition becomes international with OTT distribution - National players compete with international players profiting from economies of scale (investment in technology, content, exclusive licences) and larger reach - Digital markets: Tendency towards Oligopolies & «Winner-takes-all» logic - Online advertising, SVoD and Transactional VoD all dominated by 1 or 2 players - Traditional financing sources for EU productions under increased pressure - Commercial TV competes with online players for advertising budgets - Monetization of Film and TV shows lower than in traditional ecosystem - Question of Access to and Exposition on main VoD plateforms for EU works - Transparency of figures (revenues, subscribers, growth, viewing) necessary in order to evaluate trends and market directions
Dziękuję - Thank you Contact: Christian.Grece@coe.int