IPTV in Europe: no silver bullet for success

There is no silver bullet for IPTV's success in Europe. T-Homes view of IPTV in Europe succinctly sums up the picture painted by our benchmark of six European IPTV markets. This sector shows more variance across Europe than broadband or mobile markets and is at a much earlier stage of development. Overall, IPTV in Ovum's benchmark countries  Belgium, France, Germany, Italy, Spain and Sweden has made good progress, but operators still face significant challenges.

The market impact of IPTV varies widely in the countries we looked at, from a low of around 1% penetration in Germany to a high of 17% in France.

All operators face a large number of challenges, some are common to all, while some are unique to their market. Key variables include broadband and pay-TV penetration, market dynamics, local loop unbundling conditions and competition.

From a challenging pay-TV market in Germany to recent sluggish broadband growth in Italy, IPTV operators have had to shape and adapt their strategies to accommodate market conditions. Hence Germany's 1% penetration is not necessarily a reflection of failed IPTV strategies, rather IPTV operators there face fierce competition in a market where consumers are used to low-cost TV.

The next phase of IPTV development will make or break many operators. To justify the high sunk costs involved in IPTV roll-out and substantial operating costs, operators need to achieve much greater scale and grow ARPU so they can start showing either greater profitability (a few operators claim to be turning a profit on IPTV services, but this is the exception rather than the rule) or a profit from IPTV at all.

The increasingly vocal presence of consumer electronics vendors and over-the-set-top players in the TV space will only intensify competition.

Pricing is critical for achieving growth and strategies vary widely. In France, operators have aggressively pushed a 30 triple-play package, but also managed to squeeze up ARPU via incremental growth in sales of video on-demand and additional pay-TV packages. In Belgium, incumbent Belgacom launched with pricing that undercut its cable-TV rivals, which helped boost growth. In some cases, IPTV operators have even started offering basic TV services free of charge to gain scale.

In Italy, the launch of stand-alone IPTV was both a reaction to sluggish broadband growth and to reach a different audience - one less interested in the internet and much less willing to pay for a monthly subscription, unlike Fastweb's early adopter customers. In Germany, T-Home has reduced prices considerably to compete on a more level footing with other pay-TV platforms. The one strategy that all markets have in common is aggressive promotions.

Many services that have long been touted by the industry as the key differentiating features for IPTV are, surprisingly, not widely available today. Catch-up TV, remote programming and user-generated content channels are not available in many markets. In some, they are present but not actively promoted.

While the temptation may be to roll out new services quickly, many markets are not ready for mass uptake of them. Operators are, sensibly in our view, taking a pragmatic approach to rolling out new services to avoid confusing and alienating their user base, particularly those who are targeting the more traditional TV watchers.

For this base, services need to be positioned carefully, shown to provide clear, tangible benefits for the end-user and easy to use.


Alternatively, operators need to have a clear target audience in mind (younger, early adopters for example) for more advanced services and adopt appropriate marketing.

Boring it may be, but best prices, aggressive marketing and strong content line-ups have been by far the most effective drivers of growth.

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