Presentation at Ibec The battle for power in the converging worlds of telecoms and television 28 March 2014 Matt Yardley
Analysys Mason: we are specialists in telecoms, media and technology (TMT) 2 Major topics for clients at present include: Next generation access network strategy Content distribution economics Competition issues Spectrum strategy Long-term infrastructure investment strategy Wholesale access regulation National broadband plans
BBC iplayer: Over 50% CAGR* since launch 3 Source: BBC iplayer monthly performance pack Nov 2013; * CAGR is for TV requests Jan 09-Jan 13
International brands are growing fast too 4 End 2013: 44m customers 4Q13 revenues = $1.2 bn 4Q13 net income = $48m Jan 2011: 200m acquisition 1.6m customers Source: Netflix, Amazon
Yet linear TV viewing seems robust 5 Time-shifted here includes: PVR and catch-up TV services such as BBC iplayer, ITV Player, 4OD etc. within a 7-day window, viewed on a TV set Source: Ofcom CMR 2013
However, that misses the tablet effect which is growing fast (24% pen. of UK homes*) 6 Video clips TV progs. ~3m homes using tablets for viewing TV-like content in some form, 60% say tablets replace secondary TVs in the bedroom Source: Ofcom CMR 2013; * as of end 2013
This could accelerate non-linear trends 7 Source: Google
The Ofcom data also suggests that more live TV is being accessed on tablets & phones 8 Source: Ofcom CMR 2013
Chromecast* could be even more disruptive if the main linear TV channels go online 9 Today Clunky TV web interface EPG Smart TV Remote control Disruptive impact Bypassed by mobile/tablet apps as familiarity and ease of use win out Devalued or even totally bypassed, as users effectively define their own preferences Dumb display Just a power-on button! Everything online and at the users control has major ramifications for advertising * And other similar initiatives
Linear TV over broadband is not new 10
11 BT is catching up with its ~EUR1bn sports investment, leveraging its broadband network + FTTC / VDSL up to 76 Mbit/s + Multicast Source: BT
12 The UK highlights one potentially interesting long-term scenario DTT coverage today High-speed broadband coverage by end 2018* 98.5% >99% * UK Government s stated ambition; broadband specification for final 5% not yet determined
13 but there are other factors that will dictate how quickly TV distribution evolves Incentives for channels Coverage & capability Demand-side factors Reliability (end-to-end) Cost of distribution
One small step in this direction*? 14 Source: BBC; * subject to approval by the BBC Trust
Unintended consequences of the EC s Digital Agenda for Europe targets? 15 30Mbit/s to every single EU household by 2020 sufficient for multi-room HDTV though it will depend on how Member States interpret the loose definition of 30Mbit/s Nevertheless, such an outcome could influence: Future spectrum policy and use (DTT vs mobile) Future regulation, e.g. how to deal with truly converged markets?
Internet TV Consumers Traditional TV 16 There are many different TV partnerships and strategies emerging Extended TV value chain new global competition, some examples 1 2 3 Producers go direct (All3Media) Broadcasters go for OTT and smart TV (BBC, Canal+) Pay-TV platforms embrace OTT players (Virgin Media, Comcast, Liberty and Netflix) Production Programming Platforms 3 2 2 1 4 Consumer devices Operatormanaged STBs Retail electronics 4 Manufacturers develop platforms with smart TV (Samsung, Sony) Business models subscriptions, downloads, advertising, metadata are not settled, and the value chain is not stable vertical vs horizontal open platforms
What does this mean for the long term? 17 Broadband challenges traditional platforms, and could drive a wedge between content and distribution Quality content will always be valuable, linear or non-linear Smaller channels may behave very differently to larger channels Expect more flexing of muscles in non-regulated markets as players test their scope of influence in the end-to-end distribution chain (e.g. Netflix/Comcast) Viewing habits (demand) and costs of distribution (supply) will ultimately dictate the future Others players like towers companies may need to re-appraise their roles
18 Thank you Dr Matt Yardley Partner matt.yardley@analysysmason.com +44 7766 058 242