Abstract
This report draws a portrait of the future of TV in Europe, taking as its
point of departure an in-depth examination of the industry in 2005. From
there, it provides several long-term growth options for the European TV
industry. For each of these options, a set of figures and key indicators is
supplied to track how the sector will be financed in the coming years. These
long-term projections in turn make it possible to gain a perspective on some
of the challenges that lie ahead, and to offer several possible lines of
action for the sector's players.
TV, Europe's favourite medium
Whether in the United States or the larger European countries, the time spent
exposed to the various media is now nearing 10 hours a day! Despite the
emergence new digital media, and competition from the other mass media (radio,
newspapers, magazines, film), TV is still the medium which Europeans are
exposed the most. European households watch TV virtually ever day, and still
spend more time in front of the telly than surfing the web. At the end of
2004, Europeans devoted 33% of their media time to TV, compared to 20% for the
internet.
TV under threat?
Although still enjoying a privileged status with most individuals, television
does appear to be facing a threat. The TV sector will have to contend with
disruptive factors that could well overthrow the current balance. IDATE has
pinpointed four key factors that will drive the European TV industry's
transformation:
- Through most of its components, internet is clearly a key variable in how
TV sector will evolve over time: it is virtually certain that 60% of European
households will soon be equipped with broadband access. Furthermore, the
emergence of "universal alternative TV" on the web, through the proliferation
of vlogs, video podcasts, personalised TV platforms, video search engines and
web reality shows appears a foregone conclusion.
- Because their systems of preference and value systems will, in theory,
remain largely the same over time, the young people of today are in a position
to dictate the trends of tomorrow. Amongst Europeans in the 15 to 24 crowd, TV
no longer has the power it once did: not only are they tending to watch less
TV overall, but their prime time viewership is dropping as well.
- Of course, this is not good news for advertisers who are already having
doubts about TV's efficiency as an advertising medium. Becoming aware of the
internet's increasingly strong performances in the area, advertisers appear
tempted by the option of gradually cutting back their TV advertising
investments.
- The final disruptive factor concerns the strategic choices that will be
made by new entrants (telcos, as well as the leading computing companies and
internet heavyweights), particularly with respect to their propensity to
integrate the higher end of the value chain in the long term.
Not only threats, but deep-seated changes ...
In future, TV viewing will no doubt be a less linear affair, in addition to
being more personal, more interactive and more mobile. The early days of
mobile TV are upon us, with the recent launch of 3G cellular offers. Over the
next two years, we are likely to witness a growing number of mobile TV offers,
initially using the DVB-H standard. In the medium term mobile TV via satellite
offers too are likely to appear. And, finally, the iPod phenomenon could well
move into the audiovisual sector (and TV in particular) in the near future,
with the development of TV channels dedicated to portable digital multimedia
players. In the same vein, even if Europe is lagging behind the US in the area
of VoD, offers based on ADSL, cable and the internet are beginning to appear
and will be increasingly numerous in the medium term, while the installed base
of personal video recorders (PVR, or DVR: digital video recorders) is expected
to grow substantially between now and 2015. Over the next 10 years, Europe is
therefore likely to enter into the personal TV era.
European TV is also likely to become relatively cheaper for viewers, since
some operators have made the choice of "returning"to the Free to air model,
with the development of ADSL TV and the launch of DTT. The competition between
cable, satellite, ADSL and DTT will also fuel a price war to a certain degree,
particularly as triple play strategies become an increasingly common part of
cablecos' and ISPs' strategies.
The sector's financing structure bound to change
The TV sector's financing structure has changed over the past five years, with
the rise of specialty channels, but particularly in a way that has benefited
digital pay-TV operators whose subscriber bases having been growing steadily.
This is likely to change in the medium term, due to two fundamental factors:
- The pay-TV market which reach its limits,
- The TV offer will be enhanced by the introduction of new platforms and new
service concepts.
The next 10 years are very likely to be marked by:
- The advent of new forms of TV advertising, taking advantage not only of
interactivity, but also PVR's storage capabilities and ability to target the
viewers that make up its growing base;
- The rising prominence of interactive transactional entertainment services
on TV (games, polls, betting...);
- Increasing T-commerce and Teleshopping services;
- The transition from a linear TV viewing model to an on-demand viewing
model, with a growing number of pay-per-view services (VoD, services
associated withthe deployment of the PVR base...);
- Growth of the mobile TV market, which could bring with it new forms of
revenue for the TV sector, such as Pay-Per-Use (billing per minute of viewing
time), or traffic-based billing.
These changes will all contribute to making the TV sector's financing
structure more complex, and more fuzzy (access/content dividing line).
Three scenarios
During this time of considerable technological, regulatory and socio-economic
change, the TV sector's players appear tobe facing a particularly significant
number of challenges.
To take stock of these challenges, and to gain a better understanding of the
way that the sector's financing structure is likely to evolve over the long
term, IDATE has defined three scenarios, or three views of the future, each of
which is characterised by a distinct dominant consumption mode (see table
below).
- Scenario 1, "TV anywhere, all the time;"supposes a swift rise of mobile TV
on 3G, DVB-H and S-DMB networks.
- Scenario 2, "Welcome to the age of Egocasting," supposes the emergence of
universal alternative TV, thanks to the internet and a nomadic TV model based
on widespread use of portable digital multimedia players.
- Scenario 3, "The reign of the top media brands," derives from the rise of
non-linear TV viewing, but which nevertheless remains concentrated around the
leading media brands' TV portals.
Although presented as separate, these scenarios could very well co-mingle and
combine in the future.
What conclusions to draw, then, from this probable outlook?
TV is evolving towards a new paradigm and a more diversified model of TV
operations financing.
The changes sketched out will naturally have an impact on TV as a whole and on
its various protagonists.
More specifically, as VoD becomes increasingly prominent, along with
programmes financed directly by advertisers, the business of broadcaster is
likely to gradually disappear, to be replaced by the business of TV programme
distributor or aggregator, or that of non-linear content publisher.
At the same time, in an environment of growing competition and one where the
price of popular programmes will continue to rise, TV channels will be faced
with a pressing need to alter their cost structures and diversify their
revenue streams.
Inside this "bubbling" environment and in view of the way that the TV sector
is expected to evolve, players from the world of television will need to begin
defining their stance in the very near future.
With respect to their strategic moves for the short term, and in light of the
figures drawn from the scenarios described earlier, it is IDATE's view that TV
industry players should:
Bank (too) on the internet
There are a great many paths to explore in this area. Because of the existence
of vlogs, video podcasts, community TV, niche video programmes and video
portals, the internet offers a tremendous opportunity to "rethink" the TV
offer. TV channel operators may find here a chance to expand their viewing
audience... Added to this, TV distribution systems based on streaming and P2P,
like those that use RSS streams, open up the possibility of developing more
personal, more innovative and less costly TV services.
Given the growing ubiquity of broadband access in homes, opting for the
eventual transition to one-to-one "broadcasting," possibly in P2P mode over
the net, emerges as a valid strategic option (particularly for new entrants).
Accept the spread of multimedia home networks
Since, for TV platform operators - and ISPs and cablecos in particular - home
networks constitute a powerful element of distinction, and one which is likely
to steer new subscriptions, increase ARPU or, at the very least, cement
customer loyalty.
By providing an added ease of use, home networks too will contribute to the
creation of new forms of TV viewing, notably the universal alternative TV
model, fuelled by the internet, based on IP and exchange. With this in mind,
channel operators would undoubtedly do well to already begin preparing for the
rise of potential competition from this new type of TV offer.
No longer "overlook" interactivity
Because interactivity helps increase viewer loyalty, and is one of the primary
weapons in the "battle" against the internet, particularly in the bid to
secure advertising monies.
The channels and the public authorities should therefore work to enable the
emergence of a market structure that encourages the development of a highly
interactive TV market.
Don't be afraid of the PVR
Because advertising pressure is lesser in Europe than in the United States,
and because the PVR constitutes a major source of innovation in the TV market
(audiovisual portals, interactive and targeted advertising...), and it helps
increase viewer and/or subscriber loyalty.
It also helps maintain a certain control over access to viewers (via portals),
and heightens the power of the TV brand.
Pay-TV platform and channel operators should therefore do what they can to
convince advertisers of the opportunity that the deployment of a large PVR
base can represent. At the same time, they should work (together?) to create
the (technical and commercial) infrastructures needed to foster the
development of an interactive and targeted TV advertising market.
Strive for the swift development of a mobile TV market
The threat that the internet poses in its ability to gain a growing share of
viewers' attention, means that new ways need to be found to increase TV
viewing time: mobile TV makes it possible to reach viewers when they are away
from home.
DVB-H is not the only solution. S-DMB allows TV channels to devise a strategy
that could eventually work in their favour. Because of the iPod's massive
popularity, video podcasting too must be viewed as an option, plus the day
will come when portable multimedia players will enable access to a range of
mobile broadband services.
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