Growing multiscreen viewing trend opens up new opportunities for pay-TV providers

A new report from Pyramid Research has found that as the consumer demand for OTT services increases, pay-TV providers are being forced to adapt and evolve their business proposition to provide multiscreen models to better satisfy their growing customer base. Such huge changes present massive opportunities for the pay-TV industry to introduce multiscreen business models, increase customer loyalty and generate higher revenues.

We’ve already seen significant second screen growth. Last year’s sporting summer provided the perfect opportunity for consumers to get to grips with their new multiscreen TV options to keep up to date with the latest scores and results.

The UK also saw social media conversations rocket during popular programmes such as the X Factor, Britain’s Got Talent, and of course, the Olympics, as consumers shared their thoughts on what they were witnessing on TV with their peers. Demonstrating this, a staggering 150 million tweets were posted during London 2012, making last summer’s games the very first social Olympics. This growing trend has brought with it an influx of companion apps being introduced to the market, such as our very own ANT Galio Move. Apps like this extend the TV experience, allowing consumers to interact with their favourite TV shows, follow relevant hashtags on Twitter and discuss their views with friends online, all from a second screen.

Consumers are getting increasingly comfortable using multiple screens and interacting directly with the programmes that they’re watching, and the pay-TV industry is no different. Consumers now want to watch video services on multiple screens, and as a result, pay-TV providers must now evolve to meet their customer bases’ changing requirements. Launching OTT-like video services enables pay-TV providers to extend their reach to a new wave of customers. It’s an exciting time for the industry, with huge opportunities to create new, additional, revenue streams for those prepared to respond to changing consumer viewing behaviour.

Global Pay-TV will reach 907m in 2013

The global pay TV market saw strong growth in 2012, with nearly 47 million new subscribers taking the total size of the market to an estimated 864 million households. Over the same period, growth in digital terrestrial markets was relatively flat, indicating that even in tough economic conditions people are willing to pay to be entertained.

As always, content is king, and it’s likely that high-quality content and access to the most recent movie releases are what’s driving the growth of pay TV services.  However, as over-the-top service providers such as Netflix start to bid for this content as well, pay TV operators may need to revisit their strategy to look at how they can improve their offerings in order to remain competitive. While there’s no danger of pay TV services losing their dominant place in the industry just yet, the rapid growth of ITPV and over-the-top services is not something that pay TV operators can ignore.

Consumers are getting more demanding, and with increasing innovation from public service broadcasters and smart TV manufacturers, the pay TV operators will need to keep up with these trends.  Many pay TV operators are in a good place to do this, as we see in the UK with both Sky and Virgin launching major new features this year. Predictions that cable TV operators face growing pressure from IPTV mean that some operators may need to innovate more than others, though. Whether they are able to do that well enough remains to be seen.

The Sky’s the limit for brand new Now TV service

This week we have seen another contender enter the arena to battle it out for our on-demand attention. BskyB launched its own streaming service – Now TV – challenging the dominant players in the market, Netflix and LoveFilm. Now TV will be made available on PCs, Macs, smartphones, iPads and YouView. Consumers will be given the option to either watch unlimited films for £15 a month or pay up to £3.49 for individual films, with the "pay and play" option. With the launch of the new internet service, Sky is going beyond its pay-TV subscription roots. It’s a smart way of maximising its premium catalogue.

Having seen LoveFilm and Netflix make a huge splash this year, the launch of Now TV is a bold step for Sky to take. The move is a sign that Sky’s looking to get more from what it already has. More bang for essentially the same buck.

Whilst the launch is exciting news for consumers who don’t want to subscribe to Sky’s packages but do want access to Sky’s content, it’s also an interesting development for the digital TV industry overall. The launch is another sign that the market for on-demand services is rapidly growing.

Adobe abandons Flash for TV

Much has been made of Adobe’s recent announcement that it is halting development of the mobile and TV versions of Flash, but it’s worth looking a bit closer to see what this really means for the TV market.

While some pay-TV operators have used Flash, they have been in the minority. HTML, Java and native solutions have been the most common approaches to UI development. Most Flash content on the web is not suited to TV displays or TV remote controls, and so Flash has often been a “tick list” feature in the TV market rather than a must-have. This becomes especially obvious when you start asking the question “what revenue stream will cover the costs of licensing Flash?”

Many people have asked what this means for YouView: the answer is probably “not much”. What Adobe have actually stopped supporting is Flash Player for web browsing: the focus has shifted to AIR and to applications. This is the category the YouView user interface falls into, so is likely to be unaffected by the announcement.

This is probably a wise move by Adobe: it enables them to concentrate on their key products (AIR and development tools) while minimising the pain of supporting companies with porting Flash to new platforms and integrating with new browsers. As HTML 5 and related standards have become almost ubiquitous, the demand for Flash has decreased in the Web world. This announcement lets Adobe strengthen their position in the world of app stores and in the changing mobile market. Flash-based technologies will still be a force in the TV world for some time to come.

By Steve Morris

The future of French terrestrial Pay-TV?

Frédéric Mitterrand, the French minister of culture and communication, said recently that allowing the information channel LCI to become free-to-air would send a “very bad signal” about the future of pay-TV on French terrestrial networks. The channel’s owners, TF1, had mooted moving the channel to a free-to-air model if an updated carriage deal with Canal Plus could not be reached. The news channel BFM also opposed LCI’s move to free-to-air, saying that “there is no place on the free DTT market” for three news channels.

While recent developments mean that LCI will remain a pay channel, it does raise questions about terrestrial pay-TV in France. The free-to-air market is changing in many countries due to reduced advertising spend and due to new opportunities offered by connected services. The recent entry of Canal Plus into the free-to-air market may also affect the relationship between the pay-TV and free-to-air sectors. Through its plans to launch the new Canal 20 channel and its proposed acquisition of Direct 8 and Direct Star, there are concerns that Canal Plus will have an unfair advantage in the French market.

With the CSA pushing for the adoption of DVB-T2 and the European Commission evaluating the plans for the attribution of “bonus channels” following analogue switch-off, the picture for digital terrestrial broadcasting in France gets especially complicated.

While the LCI situation may be resolved, there are still a number of issues that may affect the delicate balance between free-to-air and pay-TV services. All parties need to be aware of the unintended consequences of the changes currently taking place.

IPTV – ready for take-off?

As a company with its roots in IPTV, we’ve seen a lot of predictions in the past about how IPTV will grow rapidly in the future – and it’s often been “in the next couple of years”. However, Digital TV Research’s recent prediction that homes paying for IPTV will more than quadruple to 155 million by the end of 2016 is rather more likely to come true due to to changes in the market and in the growth of IP connectivity.

As expected, it’s the Asia-Pacific region, home of ubiquitous high-bandwidth Internet, that’s likely to drive this growth. But Asia-Pacific is no longer alone in deploying this kind of bandwidth; more and more operators are deploying gigabit networks to the home, with a large amount of this reserved for media services. This trend plays a large part in the growth of pay services, as the viewing experience improves to the point where more people will pay for it.

While we here in Europe are seeing over-the-top content as the most popular driver for connected TVs, in the USA pay-TV services dominate. A recent report by Sandvine indicated that, at its peak, Netflix accounted for almost 30% of internet traffic in the USA, with real-time entertainment as a whole making up almost 50% of the Internet traffic. Not all of this is paid for, of course, but as more and more companies offer their content online there will be more attempts to monetize this. We’re already seeing Apple offering streaming TV shows to Apple TV devices, and Google offering movie rental services to Android devices.

This isn’t “traditional” IPTV, but that’s not a bad thing. The growth in Connected TVs, broadcast digital TV services, and independent media services such as Netflix has meant a move away from the subscription-based IPTV service offered by telcos. IPTV is now less of a substitute for broadcast TV and more of an additional service alongside traditional TV services, pay-TV or otherwise. A recent DisplaySearch forecast indicated that half a billion connected TV sets would be shipped by 2015, indicating that this trend will only continue. People are having ever more choice in the content they consume, and where they get it from. We may finally have found a business model that enables IPTV to reach its true potential.

Cord cutting? Not yet…

A recent CEA survey has shown that despite the hype surrounding “cord cutting”, most consumers in the US are not looking to give up their pay-TV services any time soon. While terrestrial TV services are becoming much less popular (only 8% of US households relying on them), the pay-TV companies are still in a dominant position when it comes to delivering people’s entertainment.

It’s the younger consumers who are more likely to move to completely online viewing, but this research shows that pay TV is still strong. Good news if you’re a pay-TV company, but it also reinforces the fact that content is still king. Pay TV providers invest a huge amount of money in content, and while some of this is available online, if you want to watch a major series like the recently launched ‘Game Of Thrones’ then a pay-TV subscription is the only way to do it (legally).

Most people won’t pay just for technology, no matter how much it’s hyped. But they are prepared to pay for the ‘must have’ content, and at the moment the companies best placed to deliver this are the traditional TV providers. TV is also a social experience, with people discussing last night’s shows over a coffee or around the water cooler, and traditional linear TV, helps maintain this experience. We are increasingly seeing this social aspect online as well, the #apprentice is a popular hashtag on Twitter each week.

On-demand is great for catching up on shows you missed (or forgot to record), and for watching extras about your favourite shows, but linear TV makes it easy to watch good programmes without much effort. At the end of the day, this is what most consumers – me included – are really looking for.

Pay-TV market share movement

The number of IPTV subscribers in Europe is set to rise by 92% in next five years, according to a report from Analysys Mason. This will more than double the current number of subscribers from 15.4 million to 29.6 million.

These results show that IPTV is set to grow at a fast rate and is shaping up to take a 19% share in the pay-TV market by 2015. Analysys Mason is also expecting to see strong growth with pay-DTT (digital terrestrial television) subscriptions owning up to 11% of the pay-TV market in the next five years.

As these platforms display strong growth, there will of course be platforms that decline in market share, as the report states there will "inevitably be losers as well as winners during the next five years". Cable platforms will continue to dominate, although this is expected to decline to 41% and Satellite TV services are expected to lose out on their share by a 1% decline.

HD TV on the rise

According to data released this week by satellite operator SES Astra, we are set to see the number of HD channels triple by the end of 2013. They expect to see this reflected in the number of pay-TV subscribers as well. Thomas Wrede, VP product management media, SES Astra, notes that there is a well known relationship between the number of subscribers and the number of channels, which they find with each pay-TV operator.

There have also been advances in technology hardware, with the report stating that there has been an increase in the number of 1920 x 1080 flat screens purchased. SES Astra note however, that initial HD forecasts have already been proven to be far lower than the actual volumes being deployed. This once again demonstrates the need for more HD content, which is yet to become mainstream.

Keep content in mind

ABI Research predicts that 846 million people will have subscribed to paid for TV services by the end of 2014. The majority of subscribers are expected to come from cable TV platforms, will satellite TV coming in second, followed by telco TV.

The 2014 prediction is 25% more than the 2009 number, representing impressive growth for paid TV services. This jump is reportedly down to the increasing demand for premium content, the emergence of new operators and the offers that they’re bringing to market combined with a growing list of interactive features.

Interactive applications are proving to be a key differentiating factor for operators, especially in more mature markets. But it’s important to keep content in mind as it is the ‘must have’ content that drives subscriptions, increases ARPU and reduces churn.

Blinkbox gets content approval from BBC World service

Viewers of VOD service Blinkbox could soon catch up with popular programmes commissioned by BBC, according to numerous reports this week. BBC Worldwide has licensed the rights to offer shows, including Planet Earth, Top Gear and Spooks, in what seems like a revenue sharing deal.

The VOD service boasts 1.5m video streams to 750,000 unique visitors last month, and already has 5,000 hours of programming available, but much of the content is from US networks.

Blinkbox has an interesting proposition for the UK VOD market. Although the service has a competitive edge over BBC’s own iPlayer with its mixed catalogue of content, it remains to be seen whether its pay-tv model will work in the UK. The VOD market is fast evolving and companies such as Blinkbox are working to find a business model that works.

VOD viewers can be fickle so content could be the differentiator, but not without a good price structure, accessibility and usability features.