Posts tagged ‘Guy Bisson screen digest’

Guest Blog: Guy Bisson, Research Director, Television, IHS

Guy BissonBy Guy Bisson, Research Director, Television, IHS

As head of IHS Screen Digest’s television department Guy directs all TV-related research and statistical modelling activities. He has been researching and writing about the global television business for 15 years and was instrumental in building IHS Screen digest’s TV research department and the online statistical information service, Television Intelligence.

Guy will be speaking at the Cable Congress 2014 event taking place in Amsterdam on 12-14March 2014. For more information on how to register, please click here.

What were the most significant developments for the cable industry in 2013 and what are some of your predictions for the industry in 2014 and beyond?

If only I was a ‘glass half full’ type of person. If I was, I could claim to be 50 per cent right in foreseeing what I think were the two key developments for the cable industry in 2013. Trouble is, I’m not. Not only do I generally see every glass as half empty, but I believe that half a glass is already as good as gone. That means I have to admit to being half wrong last year in thinking that Vodafone would not push ahead with its acquisition of German cable operator KDG—one of the two key developments in 2013.

The other key development was the moves by Virgin Media and Sweden’s Com Hem to bring Netflix on board as a content partner within the TiVo platform. That one I did predict some years back, as any regular at the Cable Congress will know.

On the face of it, these two events seem unconnected. What links the acquisition of a German cable company by a telecoms operator eager to access a local fixed-line network, and the content and channel negotiations of two Northern European cable companies? Well, not only are these two events closely related, they set the scene for my five predictions for 2014 and beyond in terms of key industry developments.

1/ Mobile operators will increasingly seek alliances with cable infrastructure owners and other TV platform operators and content owners.

Here’s a true story: some years ago I got a call from a client in the telecoms business telling me my forecasts for European pay TV ARPU were “obviously wrong”. The reason, they argued, was that ARPU always goes down, not up as my forecasts showed. I politely explained that in the pay TV business, it was indeed possible for ARPU to increase over time, a concept that was completely alien to the client concerned.

In this anecdote lies an illustration of why the Vodafone/KDG deal may not be the only alliance we will see between mobile and cable. Mobile operators are sitting on increasingly fat distribution networks driving the industry more and more into the realm of video and entertainment distribution. For the mobile players, entertainment means an opportunity to get a bite of that mysterious upward ARPU flow.

At the same time, cable and pay TV operators not only see broadband as key to their offer, but are looking to provide entertainment services on the move to multiple devices. Suddenly, alliances that some years back looked like questionable partnerships to add quad-play to the cable service portfolio take on a whole new rationale. Mobile is one of the key planks in the future of multichannel entertainment, broadband provision and, of course, telephony: the cable Holy Trinity.

2/ The Content Distribution Network (CDN) will become the next area of focus for cable investment and acquisition.

Here’s another one that has been on my predictions list for some time, but I believe that another area not only of investment but of potential strategic merger activity will be cable operators and CDN infrastructure owners. Cable operators have always been in the business of investing in and owning infrastructure. Now the CDN is crucial to successfully scaling entertainment delivery in the OTT space. By investing in or acquiring CDN infrastructure, cable operators have the opportunity not only to maintain their central role as entertainment pipe providers, but also to establish a new business-to-business revenue segment offering channel and content partners CDN services. To me, a natural fit for the industry.

3/ ‘Quint-play’ by adding Wi-Fi and out-of-home access to entertainment content will be the norm.

By now you can hopefully see a pattern. If mobile alliances become common and CDN investment becomes the norm, then as cable operators look to move beyond triple and quad-play, the out-of-home entertainment network will become the fifth service in the cable arsenal. Wi-Fi access is already available from a number of cable providers, but this will evolve to embrace a full provision OTT service offering that reflects the best of the cable content offer and encompasses broadband and mobile services on the move. This will mean that…

4/ Super-fast broadband will no longer be enough to differentiate the cable proposition, and content will again be thrust to the fore: cable’s position as broadband pipe provider will make content investments and alliances important again.

All of this means that control of content, something the industry has backed away from in recent years with content division divestments, will again be pushed to the fore as a means of service differentiation. Fast broadband has been a major driver for growth in the cable industry over the last decade and an essential part of the triple-play proposition. To date, cable has been highly competitive, winning the price-to-speed battle hands down across Europe.

Now though, as broadband is seen as a way to access full-service entertainment content (indeed some of the first widely available 4K HD will be distributed over broadband rather than via traditional broadcast means), cable operators will differentiate their broadband offers on the content access and services that they bundle. That could mean that money that is no longer being spent on linear channel operations is diverted to OTT content propositions. But, of course, one source of content alliances and immediate differentiation are the existing OTT providers like Netflix, meaning….

5/ OTT providers will be seen as friend, not foe.

OK, so this can’t really be a prediction anymore as it’s already happening through the deals that Netflix is inking with the likes of Virgin Media and Com Hem, but it’s important to re-iterate because these deals unify all five of the predictions made here. Let’s summarise:

  • Cable is moving beyond triple-play…
  • Mobile operations that also embrace Wi-Fi are looking like attractive partners as data and entertainment on the go become core…
  • CDN investments will be needed to fully participate in both the future of entertainment delivery and the future of entertainment service provision…
  • To differentiate bundled services in the future, the content proposition will be key, and this content proposition will increasingly be about OTT…
  • Meaning, OTT content will be essential to the overall bundle. Of course, this doesn’t mean only third-party OTT providers like Netflix, but cable-curated services too. Today though, existing OTT propositions with a well-established name represent a quick win for cable operators.

So there you have it. My top predictions for 2014, and beyond… at least near-term ‘beyond’. But in the fast-moving entertainment industry, predicting any further out quickly enters the realms of Science Fiction: cable operators offering neural implants for entertainment and communication? Ask me again in a few years.

The Expert View: Vodafone Interest Says Cable Got It Right

Technology is increasingly about mobility and choice, but there is a balance to be met

Guy BissonBy Guy Bisson, Research Director, Television at IHS Electronics & Media

Now there is a new word for people who break off from a social interaction to answer a mobile phone or browse social media: Phubber, meaning mobile snubber. Vodafone has built a £46bn a year business on the back of mobile telephony. With the rise of tablets, national Wi-Fi networks, Apps, 4G auctions and Cloud access, its services are at the cutting edge of the emerging media consumption trend. Why, then, is Vodafone bidding for a major cable operator in Germany where analogue TV still reigns and uptake of broadband and telephony among its customer base remains low? If the future is on-demand, on the go, what exactly does Vodafone see in this wired asset?

Much has been made of the cost savings Vodafone will make by using Kabel Deutschland’s fixed line infrastructure instead of leasing capacity from Deutsche Telekom, but do the touted savings of €200m a year justify on their own the €7.7bn deal, or is there something else to this transaction?

pie chart for guy bissons postOne thing is clear. Vodafone’s interest in cable is a vote of confidence in the cable business model. And more than that, it is a vote of confidence in the way that cable has positioned for the future of entertainment. A future at which television remains centre stage, but in which broadband (and increasingly mobile) take near equal billing.

Let’s take a step back. We all know people who seem to spend their lives glued to a mobile device. People who would rather walk into a lamp-post than lift their gaze from the mobile screen. But the average European spends nearly four hours of every day watching a much larger screen: the television. Video entertainment in the home is by far the biggest segment of consumer entertainment spend. IHS figures show that paid multichannel TV accounts for 64 per cent of Western Europe’s €52.5bn consumer-level spend on screen entertainment. Further, the average revenue generated by a TV customer in Europe has grown almost continually year-on-year, something that is astounding, indeed puzzling, to a pure-play telecoms company used to increasing commoditisation in fixed line.

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Serendipitous Investments Spell a Win, Win for Cable

By Guy Bisson

The majority of UK television channels could save money on their standard-definition broadcast costs by using Over-The-Top (OTT) Unicast to fulfil their actual viewing demand rather than the most cost effective broadcast technology. That was a key finding in a recent report we produced as a follow up to our earlier analysis that showed scaling OTT delivery to platform levels was not cost effective at current cost levels.

These two findings place the cable industry in an interesting position. On the one hand cable (and other multichannel broadcast platforms of scale), can remain confident that in the near-term, OTT-only competitors will face rapidly scaling costs when trying to replicate a full-service pay TV offer (and even more so when HD is considered). On the other hand, low-consumption channels may soon be considering whether a switch to OTT distribution as primary means of reaching the end consumer is starting to make sense.

As with many things in business, threat is opportunity and opportunity, threat. The threat: longer term, OTT distribution will begin to provide an alternative to closed network multichannel for individual channels wishing to reach a mass audience. But if the threat is clear, the opportunity is three fold. Opportunity lies in the positioning of cable as a platform for distributing OTT content, both to the end consumer, but also in the business-to-business segment of the TV distribution value chain, working with channels to distribute their signal as a CDN and last mile channel.

And what makes the situation so interesting today is through the miracle of happenstance, cable finds itself in an ideal position to fulfil these roles. Happenstance because the infrastructure investments made by cable operators in fibre and DOCSIS 3.0 where not done to facilitate OTT delivery but to diversify revenue streams when the core business of television was under increasing competitive and price pressure. And just how far cable has come from its days as a distributor of television only is evidenced in the fact that as of 2012, nine of the 27 markets in the European Union derive more cable revenue from telecoms services than from television.

For channels themselves, the reality of the business is that a switch today to only OTT Unicast delivery would be commercial suicide for all but the most niche of channels. Success in the TV channel business still requires reach. And the other factors that go into the reach equation, notably consumer behaviour and service availability, are still lacking.
OTT costs today are not substitutive and will remain incremental on broadcast for the near to medium term. The burden placed by the need to meet increasing OTT demand on larger-consumption channels, which must maintain fixed broadcast costs, is thus potentially onerous.

For business, that means there will be increasing demand for a solution to these costs as OTT consumption continues to scale. The larger the channel, the bigger the problem. The future of broadcast infrastructure provision will thus rely on finding a way to bundle flat-rate OTT delivery with some form of broadcast distribution for the scheduled feed.

For cable finding a way to capitalise on that long-term future will pay dividends. With a wired network, consumer-facing ISPs and an increasingly strong stake in the distribution of multiscreen content around the home, cable is a long, long way down that path already. The rationale for major take-overs that bolster pan-European footprints like the recent proposed take-over of Virgin Media by Liberty Global, start to take on a whole new perspective beyond the usual analysis of free cash flow and business synergies when this future is considered.

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