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Nuevas tendencias de la industria –experiencia europea

VII TALLER INTERNACIONAL – TELEVISION EN AMBIENTE DE CONVERGENCIA: RETOS DE LA INDUSTRIA

3 septiembre 2012 • Lluís Borrell

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Agenda

Context – current situation in Colombia

Historic trends – some perspectives on key structural, cyclical and regulatory changes

Future challenges from connected TV – some perspectives on future changes, uncertainties and scenarios

2Agenda

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Colombia – some initial considerations3Context

Key regulatory issues Definition of new regulatory framework

Definition of markets requiring ex-ante regulation

Conditions for infrastructure use by public and private TV channels

Competition policy

DTT transition and DSO

Connected TV and convergent TV regulation

Overview Strong pay TV market with over 80%

penetration in 2011

mainly satellite (Direct TV, Telefonica) followed by cable

in 2008, pay TV revenues overtook TV advertising revenues

Five main FTA national TV channels

2 private (Caracol, RCN)

3 public (Uno, Institucional, SeñalColombia)

Significant regional (8) and local (46) TV channels

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Factors changing the European broadcasting 4Trends

STRUCTURALChanging consumer patterns and a more competitive landscape?

Digital (DTT/DSO) – multiplication of offerings (diversity) and fragmentation

Enhanced TV quality – move towards HD and 3D TV Explosion of connected TV & new devices – offering and

adoption Lower barriers to entry – a shift of power in the value chain

REGULATORY AND PUBLIC POLICYLighter-touch ‘competition law’ and new ‘targets’ of regulation?

Advertising bans on national PSBs: imposed on Spanish PSB (complete) and French PSB (partial)

Advertising limits: higher for commercial thematic channels (France) and debate on asymmetric rules (UK, Ireland, etc.)

Greater focus on competition law – general guidelines to focus on economic ex-post rather than ex-ante

Pay-TV competition rules – action on key bottlenecks like righs and retransmission consent (UK, France)

Public policy – ex-ante vs ex-post

CYCLICALWeaker underlying fundamentals?

Advertising – Advertising downturn PSB – Pressure on public financing for PSBs Pay TV – growing but weaker consumer spending

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Selected trends in the evolution from connected TV to coherent media Trends – providing some perspectiveExponential growth of connected TV … and resilience of linear

TVTerrestrial and DTT/DSO – varies by countryproliferation of TV channelsfragmentation of audiencesPressure on peformance of PSBs and commercial TV channelsContinuing growth of pay TV Increased competition among TV channelsTV channels adjusting to unfavourable market environmentPSB retains a major role in local and European production

5Trends

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6TV consumer changes – non-linear TV

The number of non-linear TV services is growing, as are the associated revenues …

Sources: comScore Media Matrix, EAO, Analysys Mason

Growth in number of VoD service providers (2006–9)

VoD and NVoD consumer revenuesin the EU (2005–9)

New VoD services grew by 15–167% from 2006–9; connected TV grew the fastest (>50% per annum), albeit from a very low base

20062009: Others2009: Internet content

2009: Broadcasters2009: Operators

0

5

10

15

20

25 15% 167%54%33% 60% 30%

-50%

0%

50%

100%

150%

200%

0200400600800

1,0001,2001,4001,6001,800

2005 2006 2007 2008 2009

Gro

wth

rate

EUR

milli

onConnected TVNVoD + PVRGrowth NVoD + PVRGrowth in connected TV

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… but consumption of traditional linear TV has also increased and remains strong

7TV consumer changes – linear TV

0

50

100

150

200

250

300

Austria Denmark France Germany Italy Poland Spain Sweden UK

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: European Audiovisual Observatory

Average television viewing per person in Europe (2001–10)

7% 31.8%

7.5% 16.2%18.8% 8%

12.5%

12.1%

11.3%

In most countries linear viewing rose by between7% and 32% over the last decade

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0%

1%

2%

3%

4%

5%

0

20

40

60

80

100

2005 2006 2007 2008 2009

VoD

vs

tradi

tiona

l TV

EU

R b

illion

VoD online + SVODPay TVBroadcasters’ net revenues (ads etc.)VoD vs traditional TV

8TV consumer changes – linear and non-linear TV

Despite rapid adoption of connected TV, this seems to have had only limited impact overall

Consumption of onlinevideo vs. TV (2010)

Sources: Analysys Mason, comScore, European Audiovisual Observatory

Traditional TV vs. connected TVrevenues in the EU (2005–9)

Despite exponential growth, online minutes of video viewing still make up less than 4% of linear TV minutes. In terms of revenues, non-linear

represents less than 1% of linear TV revenues

0%

1%

2%

3%

4%

5%

0

50

100

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200

250

300

Onl

ine

vs T

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onsu

mpt

ion

Min

utes

per

vie

wer

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TV consumptionOnline video consumptionOnline video vs TV consumption

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<30% terrestrial penetration30%–60% terrestrial penetration>60% terrestrial penetration

DTT/DSO has been a major driver of change in Europe, with marked variations

9DTT/DSO changes

Progress of digital switch-over(DSO) in Europe

Household terrestrial penetrationin selected European countries (2009)

Data not collected

Source: DigiTAG, Ofcom, Analysys Mason

Terrestrial remains the most important TV distribution platform in the EU (mainly due to the UK, France, Spain and Italy), but DTT/DSO has had a

significant effect on the structure of the TV market

Some DTT services launchedAnalogue switch off (ASO) underwayASO complete

DSO not formally launched

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The proliferation of linear TV channels has been significant across Europe

10Proliferation of linear TV channels

Growth of TV channels in selected European countries (2008–10)

Source: European Audiovisual Observatory (EAO)

13% 90% 45% 19% 386% 12% 23%4% 83%

The DTT/DSO, and digitalisation in general, has brought a proliferation of channels in most markets – Germany, Sweden and Austria seem an exception

0

200

400

600

800

1000

1200

2008 2009 2010

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The linear TV viewing share of PSBs has fallen, especially in countries with high DTT penetration

11PSBs – viewing and revenues

Source: EAO, Analysys Mason

Evolution of TV viewing share of PSBs in selected European countries (2001–10)

DTT/DSO has cut the share of major PSB channels by 6–14 percentage points, reducing their perceived impact – but will this affect their future

on connected TV?

0%

10%

20%

30%

40%

50%

60%

70%

80%

0%5%

10%15%20%25%30%35%40%45%50%

2001 May2011

2001 May2011

2001 2010 2001 May2011

2001 2010 2001 2010 2001 2010

RTVE BBC RAI FT SVT TV2 ZDF

DTT

pen

etra

tion

TV m

arke

t sha

re

Historical New channels DTT penetration

-13.6pp-10pp

-8.6pp-13.7pp -11.8pp

-6.4pp

-1pp

Low DTTpenetration

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0%

10%

20%

30%

40%

50%

60%

70%

80%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2001 2010 2001 May2011

2001 2010 2001 May2011

2001 2010 2001 2010

A3 ITV RetiTelevisive

Italiane

TF1 TV4 RTL

DTT

pen

etra

tion

TV m

arke

t sha

re

Historical New channels DTT penetration

Historical commercial channels have suffered similar erosion where DTT penetration is high …

12Commercial TV – viewing and revenues

Source: EAO

Evolution of TV viewing share of historical commercial channels (2001–10)

Low DTT penetration

-8.7pp

-11.6pp

-8.1pp

-9.1pp-8.3pp +0.6pp

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… which is putting pressure on their finances13Commercial TV – viewing and revenues

Evolution of operating revenues for Europe’s majorcommercial TV groups, at 2005 prices (2001–10)

Source: EAO, EIU, Analysys Mason. Excludes Mediaset, whose revenues include many other elements

-35% -45% -14% -21% -21%

Revenue growth,

2006–10

Cuts in operating revenue could affect the scale and timing ofinvestment in connected TV by commercial TV channels

0200400600800

1,0001,2001,4001,6001,8002,000

A3 ITV TF1 TV4 RTL

EU

R m

illio

n

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

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0%

2%

4%

6%

8%

10%

12%

0

5

10

15

20

25

30

35

2005 2006 2007 2008 2009

Pay

TV

gro

wth

Pay

-TV

reve

nues

(EU

R b

illion

)Cable SatelliteIPTV DTTPay TV growth

Pay TV has benefited from strong growth, but this has now slowed

14Pay TV

Source: EAO, Analysys Mason Research

Pay-TV channels and operators seem to be in a bettereconomic position to invest in connected TV

Evolution of pay-TV revenuesin Europe (2005–9)

Evolution of pay-TV subscribersin Europe (2008–11)

0%

1%

2%

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6%

7%

0 20 40 60 80

100 120 140 160 180

2008 2009 2010 2011

Gro

wth

in h

ouse

hold

s

Mill

ions

of h

ouse

hold

s

Cable IPTVDTT SatellitePay TV growth

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Selected challenges in the evolution from connected TV to coherent media

15Challenges

Challenges – short or long term?Mass-market connected TV may up to 30Mbit/s broadbandNetworks need developing (current connectivity and the Digital

Agenda) Uncertainty about monetising connected TV – small for

incumbents but significant for new entrantsThe new battle of the value chain – broadcasters/pay-TV

platforms adapting to a new ecosystemFinal direction of public policy debate – advertising, premium

TV rights and exclusivities, support for production Looking into the ‘crystal ball’ – there are many views about the

scale and speed of connected TV

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6–25Mbit/s broadband might be sufficient for mass-market connected TV, including HDTV

16Broadband requirement for Connected TV

Speed per type of service format

No.

of s

imul

tane

ous

flow

spe

r HH

Audio Music SD TV HD TV 3D TV / online game

Few kbit/s 320kbit/s 1–2Mbit/s

6–8Mbit/s

12–16Mbit/s1

Few kbit/s 640kbit/s 2–4Mbit/s

12–16Mbit/s

24–32Mbit/s2

Few kbit/s 960kbit/s 3–6Mbit/s

18–24Mbit/s

36–48Mbit/s3

Few kbit/s 1280kbit/s 4–8Mbit/s

24–32Mbit/s

48–64Mbit/s4

Few kbit/s 1600kbit/s 5–10Mbit/s

30–40Mbit/s

60–80Mbit/s5

Few kbit/s 1920kbit/s 6–12Mbit/s

36–48Mbit/s

72–96Mbit/s6

ADSL sufficient

Fibre or DOCSIS 3.0 required

ADSL sufficient for a large proportion of HHs

Example of service format

Required broadband connection speeds, based on multi-usage and quality of service

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HH broadband penetration below 40%HH broadband penetration between 40% and 60%

HH broadband penetration between 60% and 80%HH broadband penetration above 80%

Broadband penetration in Europe (June 2011)Broadband penetration in Europe (Dec. 2005)

Broadband penetration has risen rapidly in Europe between 2005 and 2011 …

Broadband situation

With broadband penetration of >60% of HHs in most countries, the EU seems prepared for mass-market connected TV – but the quality of the

experience needs more detailed assessment Source: TeleGeography, Analysys Mason

17

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… but mass-market connected TV will require an improvement in the average speeds achieved

18

Digital Europe plans are essential to ensure the mass-market take-up of connected TV

The EC’s Digital Agenda for Europe aims to achieve the following objectives:

100% broadband penetration in 2013 network speed above 30Mbit/s in 2020 50% of households to have access to

superfast broadband (100Mbit/s) in 2020

These targets would allow for most connected TV applications

However, many analysts view the 2020 targets as ambitious and complex to achieve

Broadband evolution

Source: Speedtest.net

Average speed between 6Mbit/s and 12Mbit/sAverage speed between 12Mbit/s and 18Mbit/sAverage speed above 18Mbit/s

Average speed below 6Mbit/s

Average downlink speed in Europe (2011)

Sweden, Netherlands and Switzerland seem prepared for mass-market connected TV. Other countries are just at the low end of the requirements, but the 30Mbit/s Digital Agenda target suggests there

could be a mass market for connected TV by 2020

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0

1000

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3000

4000

5000

6000

7000

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9000

10000

2010 2011 2012 2013 2014 2015

PB

per

mon

th

Central and EasternEuropeWestern Europe

Vendors forecast an explosion of video traffic, suggesting significant consumer adoption …

19TV consumer changes – linear and non-linear TV

Source: Cisco VNI Forecasts 2011

Internet video traffic in Europe (2010–15)

With a 58% CAGR over five years, this forecast would support more-aggressive and disruptive developments in connected TV

Internet video-to-TV traffic will increase14-fold in Western Europe and 24-fold in Eastern Europe between 2010 and 2015

In the UK, consumption of video delivered through the Internet to a video screen will rise from 8% of total Internet video traffic in 2010 to 14% in 2015

In Germany, Internet video will account for more than half of all Internet consumption by 2013

In France, 67% of broadband connections will exceed 10Mbit/s in 2015, up from 36% today

The average broadband speed in Central and Eastern Europe in 2015 will be 20Mbit/s

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20TV consumer changes – linear and non-linear TV

… but some analysts suggest more moderate advertising revenues from non-linear TV …

Source: PwC, Analysys Mason

Similarly, advertising connected TV revenues might be only between 2% and 6% of total TV advertising by 2014. However, online and mobile TV advertising are forecast to account for approximately 30% of incremental revenues from TV advertising in Europe over 2009–2014

0%1%2%3%4%5%6%7%

20092014

Revenues from online TV advertising and mobile TV as share of total TV advertising revenues in selected EU countries (2009 and 2014)

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0%10%20%30%40%50%60%70%

Europe2011

Europe2016

WE2011

WE2016

CEE2011

CEE2016

Over-the-top servicesSatellitePay DTTIPTVDigital cableAnalogue cable

Source: Analysys Mason Research

… and even more moderate forecasts forpaid-for OTT

21Connected TV and pay TV

Household penetration of primary services by platform, Europe (2011 and 2016)

Pay-TV service revenues in Europe (2011–16)

Paid connected TV (OTT) revenues are forecast to be marginal or less than 3% of pay-TV revenues by 2016 – but they might be sizeable for new entrants

0%

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10

20

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2011 2012 2013 2014 2015 2016 Con

nect

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V v

s pa

y TV

EU

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illion

Over-the-top servicesPay analogue terrestrialSatellitePay DTTIPTVCableConnected TV vs traditional pay TV

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Connected TV and OTT video market is challenging traditional market players

22OTT and connected TV services

Principal paths for video consumptionDVD

Over the top

OTT providers can compete without

capex…

… while allowing device providers a greater role in

the value chain

… but create significant traffic for

ISPs…

Traditional TV

VoD bypass

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There are significant changes across the value chain by both incumbents and new players

OTT and connected TV services 23

Source: Analysys Mason

Retail platform provider

s

Content aggregators

Rights owners / Content

originators

Vendors andmanufacturers

Network operators

Integration Deal Bypass

User generated content

Incumbents

New entrants and internet players

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Coherent TV consumption – will connected TV and linear TV be complementary or substitution?

24Looking at the “Crystal ball” - Connected TV to Coherent TV

Scenario 1 - Online video is complementary to traditional TV

Scenario 2 - Online video as a substitute of traditional TV

Illustrative – for discussion only

0

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TV Online Video

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TV Online Video

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In terms of revenues, will connected TV develop into a mainstream TV model comparable to FTA or payTV?

25Looking at the “Crystal ball” - Connected TV to Coherent TV

Scenarios in 2020

Connected TV

PSB + Commercial TV

Pay TV

Scenario 1 Lower growth(CAGR 30%)

Historical trend

Historical trend

Scenario 2 Medium growth(CAGR 40%)

Connected TV mainly FTALower growth

Historical trend

Scenario 3 Higher growth(CAGR 50%)

Connected TV mainly FTALowest growth

Historical trendErosion from connected TV

Scenario 4 Higher growth(CAGR 50%)

Connected TV strong FTALower growth

Connected TV strong payLowest Pay TV revenues

0

20

40

60

80

100

120

140

EU

R b

illion

s

VoD online + SVODPay TVBroadcasters net revenues (ads…)

Scenarios of TV revenue growth in Europe (2020)

Illustrative – for discussion only

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Colombia – lessons/some questions?26Questions?

For debate FTA vs pay TV market definitions – asymmetries of regulation

Linear vs non-linear market definitions

The role pay TV on DTT /DSO

Debate on terrestrial infrastructure

Competition across the pay TV value chain

Any rights issues

Any retransmission consent issues

Limited regulatory action on OTT/connected TV?

Minor protection

Rights?

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Contact details27

Lluís BorrellPartner lluis.borrell@analysysmason.comAnalysys MasonJosé Abascal 44 4°28003 Madrid, SpainTel: +34 91 399 5016Fax: +34 91 451 8071www.analysysmason.com