Price squeeze looms as telcos compete for pay-TV customers

Jim O'Neill — Tue, 10 Jun 2008 06:21:02 -0400

London 9th June 2008--IPTV is increasingly being offered free by telcos across Europe to encourage people to choose their broadband services. According to the latest research from media analysts Screen Digest, IPTV is rapidly becoming a commodity - bundled for no extra cost with a broadband and/or telephony package. The result is that nearly half (40%) of today’s European IPTV households are currently enjoying the service for free.

Free IPTV is often cited as an antidote to the heavy churn affecting the broadband sector; Screen Digest believes that this is only half the picture. In many cases, the sheer size of the investment needed to deliver IPTV far outweighs the cost savings resulting from even a substantial drop in broadband churn, particularly as IPTV is currently generating so little revenue. Rather, as Screen Digest Analyst Richard Broughton comments, “The primary intent behind most of the major IPTV services is to add new broadband subscribers – not to drive profits or even to act as a churn reducer.”

This is confirmed by the number of IPTV operators reselling third party content packages rather than offering content of their own to attract viewers. Almost every major satellite operator in Western Europe has a deal in place – Viasat’s deal with Telia in Sweden being the most recent – to offer their content to the IPTV channels. With the players abandoning their own packages in favour of third party ones, it would appear that they not overly concerned about making a direct profit from IPTV – rather broadband is their key focus.

From Pay-TV to Free-TV – what it means for the consumer

So while some of the developments in the broadband and TV markets are potentially disadvantageous for the companies involved, for the consumer, IPTV presents a great opportunity.

France now enjoys some of the cheapest pay-TV in the world, with much content available free simply with a broadband subscription. For this reason, nearly a fifth of French households will be using IPTV as their main method of TV viewing by 2012. Furthermore, the enhanced competition generated by the IPTV space will begin to put pressure on the cable and satellite sector. CanalSat, which bought rival operator TPS in 2007 has recently been lacking any true pay-TV competition, but with France Telecom (arguably in a better market position than TPS was) stepping up to the challenge, Vivendi’s dominance of the pay-TV market may no longer be so absolute. For the consumer, the increased options and the potential for cut-price TV offers brought about by an increase in competition can only be a boon.

In the UK, the situation is similar. Customers of BT Vision or Tiscali TV can use features (like PVR functions) that will generally require a subscription, or hefty purchase cost, on Virgin Media cable or Sky’s satellite TV, at no cost beyond installation and broadband subscription. Following the trend begun by BT Vision’s subscriber pick-up in late 2007/early 2008, roughly 6 per cent of households will be watching IPTV within five years. With Virgin Media also offering a TV option available free with broadband, a fifth of UK households will be on a ‘pay’ TV platform which can offer them free content/features beyond those available on Freeview or analogue terrestrial.

Europe in five years’ time

Looking forwards to 2012 reveals a disparate picture for IPTV in Europe, with certain markets benefiting more than others from the technology. While the UK, France, Germany, Italy and Spain will contribute the majority of IPTV subscribers, there are other important markets emerging.

The Baltic countries will enjoy significant IPTV growth in the next half decade. Estonia’s DigiTV already occupies a significant proportion of the digital pay-TV market, and by 2012 is aiming to reach 20 per cent of Estonia’s households. An in Scandinavia over 10 per cent of households will be watching IPTV in Sweden, Norway and Iceland, with Denmark only a short way behind.

In the south, Slovenia and Croatia companies including Slovenije Telekom and Croatia’s T-Com have achieved significant growth in recent years. Other markets that Screen Digest believe are worth watching include the Czech Republic and Slovakia.

Broughton concludes “In all of these markets, the wide availability of triple-play and relatively low-cost TV options will ensure that consumers begin to enjoy a better deal for their TV. Both in terms of price and functionality, households across Europe will see their pay-TV options increasing substantially over the next few years.”

IPTV Operators Searching for Competitive Differentiation

Jim O'Neill — Tue, 13 May 2008 12:42:20 -0400

LONDON - May 12, 2008

In the past five years, IPTV has grown from a handful of deployments by a few pioneering telcos and ISPs to an established part of the pay-TV landscape with services spanning the globe from Australia to the Ukraine. But now, according to ABI Research, this “adolescent” industry must find ways to create a distinct identity so it can continue to grow and prosper, with IPTV operators creating unique service offerings that are differentiated from the traditional video services of their key competitors.

Some services have recently crossed the symbolically important 1-million-subscriber threshold. But, says senior analyst Cesar Bachelet, “IPTV operators must now leverage the characteristics of the new platform to produce a differentiated offering, redefining the experience of television.”

How are they to do this? Bachelet offers several suggestions.

Operators should focus on integration of Web content (text or video) with traditional broadcast content. New technologies offer the ability to pull real-time feeds from the Web and combine them with broadcast video content.
Offering subscribers the ability to access the EPG (electronic program guide) and DVR functionality through any Internet-connected device, e.g. a PC, mobile handset, or portable device.
Targeted advertising. IPTV’s interactivity and personalization allow much more effective ad strategies than conventional broadcast.

“From a technology perspective,” Bachelet concludes, “all the tools are there, enabling IPTV operators to move to the next level and bring greater choice, convenience, and control to consumers. However, operators must tread carefully in order not to overwhelm subscribers with too many new features at once, and business models still need to be defined for some of the new value-added services in order to monetize them without alienating subscribers.”

ABI Research’s recent study, “Global IPTV Markets” discusses IPTV’s current and future development in detail, covering key IPTV operators and vendors on a global basis. It focuses on strategies, propositions and the competitive environment in key markets, as well as critical business and technology issues.

It forms part of the Multi-Channel Video Research Service, which also includes other Research Reports, Research Briefs, Market Data, Online Databases, ABI Insights, ABI Vendor Matrices, and analyst inquiry support.

ABI Research is a leading market research firm focused on the impact of emerging technologies on global consumer and business markets. Utilizing a unique blend of market intelligence, primary research, and expert assessment from its worldwide team of industry analysts, ABI Research assists hundreds of clients each year with their strategic growth initiatives. For information, visit www.abiresearch.com, or call +1.516.624.2500.

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Price squeeze looms as telcos compete for pay-TV customers

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