What once might have been considered a region stuck a pace or two behind neighboring Western Europe is quickly catching up and, in some areas, leapfrogging Western markets and jumping head-first into these new market opportunities and dynamics. The past year, in particular, has seen an explosion of activity in the Central and Eastern European (CEE) online-video sector, with a flurry of new services coming to market.
Online video accounted for only about 12% of all Internet traffic in the region in 2010, but Informa Telecoms & Media forecasts that the figure will jump to about 27% by 2015. Additionally, the number of connected devices – including connected TVs and hybrid set-top boxes – is set to dramatically increase over the next five years. In 2011 the installed base of all in-home connected devices was about 6.1 million, but Informa forecasts that by end-2016 the number will have risen to just shy of 100 million. The growing penetration of such devices will continue to fuel additional over-the-top (OTT) service launches.
Poland and Russia, in particular, are setting a formidable pace for their CEE peers when it comes to online-video services. Homegrown online video on demand (VoD) services, such as Omlet.ru and TVigle in Russia and Onet.pl and Ipla in Poland, are all experiencing ever-increasing subscriber numbers and usage and demonstrate the tenacity of local player in this OTT landscape. All these players have been quick to launch on connected-TV devices, and it is notable that in this respect these services are on par with their Western peers. The speed with which these services are launching on connected-TV devices is impressive to say the least.
However, the operators are increasingly demonstrating a canny sense of adaptability when faced with the encroachment of OTT services. Several players, including the leading direct to home service in Poland Canal+ Cyfrowy, and Slovenian incumbent Telekom Slovenije, are investing in the development of full multiscreen services, taking content offerings out of the living room and onto portable connected platforms for subscribers to access anytime, anywhere. These launches are both a pre-emptive response to the threat of OTT players that have not yet seriously emerged and driven by the understanding of the additional value a truly multiscreen service offers subscribers.
Others are teaming up directly with OTT offerings, such as cable operator Tarr in Hungary, which last year became the first operator in the country to offer a multiscreen service but also integrated the online VOD service HBO Go.
In Western Europe, examples of traditional telecoms operators having launched their pay-TV services on connected-TV devices are rare. But in Russia, Beeline launched its service on the Xbox 360 in April 2011. Only a few months later, mobile broadband operator Yota launched its VOD service, Yota Play, on Samsung’s connected TVs. But Yota is not the only big player to have a VOD service on Samsung’s TVs. It is joined by the VOD services of fellow operator MTS’ Omlet.ru and startup TVigle. So, unlike in the major Western Europe markets, connected TVs are already turning into a battlefield between operators and online services in Eastern Europe.
The outcome of the impending tussle for supremacy is still far from over, but where Western peers are being disrupted, many of the big CEE pay-TV providers are launching services to preemptively stamp out potential OTT threats and further spread market dominance. Informa believes OTT will prove to be much less of a disruptive force in Central and Eastern Europe than in Western markets. Conversely, OTT will be an important tool for further entrenching the market dominance of established larger players – including pay-TV providers and Internet services, such as Yandex – in the media landscapes of their respective countries and perhaps beyond.
Michael Dean is a research analyst with Informa Telecoms & Media