ABI Research: Global Pay TV Service Revenue to Reach USD 245 Billion in 2013 with Telco TV Service Gaining Bigger Market Share
ABI research suggest that the global Pay TV market continues to grow in the first two quarters of 2013, adding 23 million new subscribers for a 3% increase. In particular, telco TV and satellite TV growth was robust while cable and terrestrial Pay TV services experienced virtually flat growth.Worldwide Pay TV subscribers will reach 895 million by the end of 2013, to generate service revenue of USD 245 billion.
Pay TV market growth is expected in all regions of the world in 2013, although Asia-Pacific will continue to be the main contributor of subscriber net additions. The North America Pay TV market is growing at its slowest rate because it’s already saturated with more than 80% penetration; furthermore, it is weathering headwinds from alternative web-based TV services. The growth in the North America Pay TV market will mainly be driven by the region’s increasing telco TV market.
North American telco TV operators, such as AT&T and Verizon, have demonstrated strong subscriber additions in the first half of 2013. ABI Research forecasts that more than 1.5 million telco TV subscribers will be added in North America in 2013 to reach 11.9 million subscribers. The region will generate service revenue of USD 10 billion from telco TV service in 2013
Globally, telco TV service revenue market share will increase more than one percentage point to capture 14% market share. However, cable TV service revenue market share will decrease to 47% in 2013 from 48% in 2013.
Rapid adoption of mobile devices such as the Tablets, Smart TVs, Connected Cars and Augmented Reality units are creating a huge impact on the way consumers interact with content, potentially putting billions of consumer dollars up for grabs: cable licensing agreements, advertising budgets, on-demand subscription fees, not to mention the future of the connected home. But despite all of the excitement — or perhaps because of it — there is still a lot of confusion about what the different types of multi screen apps are and how the technology is evolving to support this use case.
Multi screen scenarios imply the instances when the user is engaged across multiple screens – the most notable is that of a TV and a mobile device. Google recently shared that a stunning 77% of users are using a second device when they are watching TV. On the surface of it, a content owner could be upset about this dual activity being a distraction and yet – Dual screen apps present an opportunity to engage the user on more than one consumption platform. For example- watching the Superbowl on TV and tweeting about the event online. Thus, this allows creation of an interactive experience that enhances it with additional information, related advertising, or calls to action. These are the types of experiences that are poised to radically transform the way consumers engage with content.
Social Aggregators of multi screen content i.e Companies like GetGlue, Shazam, Zeebox, and Sidecastr have all created apps that detect what program a user is watching and present social or companion content on their device. Their hope is that they can assemble a large enough audience to become interesting to advertisers that want to target these users
Amongst the bigger players, Apple, Google, and Microsoft are each building enabling technology for dual screen apps into their platforms, as they view content-centric apps as a key battleground in their overall platform war. Also participating are consumer electronics giants like Samsung, Sony, and LG.
Prima Facie, the key here is when fundamental technology architectures are in play, platforms generally win in the long run. If one can successfully deliver the capabilities that enable armies of developers to build vertical or use case-specific applications, the network effects will generally overwhelm any individual competitor that is trying to do everything on its own.
Even while Apple TV is on the horizon and Android TV as a commercial product is half baked, the open ecosystem that Android engenders throws up exciting opportunities and devices based around the TV experience. Smart enough as these solutions are not driven by the large CE companies and is rather developed by small start-ups.
The innovation and the wow is the departure from the rectangular TV boxes into dongle sized entities. The pocket-sized dongle connects to the HDMI port of any regular TV and converts it into a Smart TV. It’s basically a fully functioning micro-computer the size of a thumb which runs Android 4.0 (Ice Cream Sandwich) much like today’s latest smartphones. Throw in a keyboard along with the remote and any HD television converts into an Android tablet and the accompanying remote (which includes a keyboard on the back) allows users to interact with their television as they would an Android tablet.
So then, we see the birth of a new ecosystem around the TV set, which is no longer controlled by old school parties such as the CE manufacturers, the broadcasters and the TV distribution platforms, and not even by relative newcomers such as Apple, but by a whole herd of out-of-left-fielders. The UI and the usability could be a spot of bother, but then it would eventually catch up in the next quarter or so.
Profiling a few of the leading efforts on the Smart TV Sticks
Infinitec Pocket TV- Dubai based start-up dealing which show-cased Smart TV solution
Liquid TV – Italy based start-up’s USB dongle solution for coverting TVs into smart TV(Android TV)
Its economics stupid!
As of 2010, India has over 515 channels of which 150 are pay channels. According to Pioneer Investcorp, the Indian cable industry is worth 270 billion (US$5.39 billion) and is the third largest in the world after China and US. The number of TV homes in India grew from 120 million in 2007 to 148 million in 2011. Cable reaches 94 million homes with 88 million analog connections and 6 million digital ones, while DTH has commanded 41 million subscribers.
Every year, 100 million Indian homes pay for a bundle of cable channels. Like any bundle, it’s hard to see exactly what they are paying for. That in effect is somewhat the point of bundling — to disguise the true cost of the constituent items. Most of the users end up paying more money than the total worth of TV time they are watching. Imagine the working couples in Mumbai or Delhi who watch 4/5 (at max 10 channels) for an hour or two in the evening after they get back home from work. They pay the same money to the cable provider/DTH provider even for value packs just because their total cost of entertainment consumed is less. They are effectively cross subsidizing entertainment value consumed by a large family where the TV runs through the day for the people at home.
With advent of 4G and higher broadband access, content providers and TV providers have a unique opportunity to break down on the economics of TV viewership, make it more meaningful and interactive, focus on the right target segment of consumers (more band for the buck) and make users pay less (or pay more meaningfully) for the content they consumer. After all why should I pay for a Bollywood movie pack if all I am interested is in sports. In effect they can cut out content not required and cure the content consumed for much higher levels of viewership through many other personal devices such as Tablets or smartphones etc. Video streaming will eat away into TRPs as people would want to watch only their kind of programmes at their kind of times with mobility featured in.
The Internet is ruthlessly efficient at stripping cross-subsidies and allowing content to shine on its own. The Internet gutted the music industry. Print journalism has been forced to innovate or die — or, sometimes, both simultaneously — in response to the Web. The question isn’t really if the 4G data and the economic of unbundling will visit the television industry but when.
It does look like a fertile ground for TV service providers and Content providers. A melting pot for mergers and acquisitions.
A research report by Ericsson endeavours to put some numbers to global data traffic projections: Mobile broadband subscriptions are expected to reach almost 5 billion in 2016, up from the expected 900 million by the end of 2011.That would represent 60% CAGR. Total smartphone traffic is expected to triple during 2011 and increase 12 fold by 2016 (roughly equal to PC generated traffic). Growth in mobile data traffic between 2011 and 2016 is mainly expected to be driven by video. By 2016 more than 30 percent of the world’s population will live in metropolitan and urban areas with a density of more than 1,000 people per square kilometer. These areas represent less than 1 percent of the Earth’s total land area, yet they are set to generate around 60 percent of total mobile traffic. Overall, an increase in mobile broadband, new smartphones, and higher app consumption will all drive the push for more data and Smartphones alone will account for a huge part of that.
Compare this to the growth in Global consumer Internet traffic which is expected to grow 5X during 2009-14 (CISCO report). Though the time intervals for both these data points are not concurrent, it highlights the growth perspective in data/internet led networks. The same report puts the growth in Mobility based data at 39X between 2009 and 2014. Increasing Video traffic driven by live video and TV are expected to drive global consumer internet video consumption by a factor of 10X between 2009-14 (and to me that is massively understated). The growth in Internet video consumption will be prevalent across all categories of Video: Internet to PC (Long, Short and Live), Internet to TV and Ambient Video/Internet PVR.
Driven by Lifestyle requirements, Living situation and Employment status, consumption of Internet video content is accelerating at a smart pace even as Content and its discovery itself is becoming smarter. What could this mean for consumers and the service providers ?
For the consumer: They would seek for capabilities that enable them to easily and securely access content, applications and infrastructure they seek from any location or device.
For the service provider: It would mean infrastructure capabilities that are re-usable, expandable, scalable for quick time to market and better insight and control over consumer’s end to end experience. Smart content delivery networks constitute a $6bn-$15bn market for service providers by 2015. Massive internet video growth drives puts forth huge operating challenges but also very unique revenue and monetization opportunities. Content management will perhaps not be enough unless the service providers are clear on their consumer segmentation, segment focus and positioning strategies and how much money could be made on these services. Again since this sector is fairly nascent at this point of time, regulatory and anti-trust considerations could also be key influencers.
We’re only scratching the surface with the current lot of Smart TVs (Hint: The possibilities are Limitless)
In an earlier post i had blogged about Smart TVs with features such as search and social networking, web browsers, apps, media sharing capabilities, video calling, streaming rich internet media, WiFi and others. However, the argument here was that for everything that the Smart TV does, an iPad does better except perhaps a large screen 3D experience.
Paul Otellini, CEO Intel in an interview some time back stated that we are only scratching the surface in as far as Smart TV is concerned. I second that and i firmly believe that possibilities are limitless. A Skype, Facebook or Twitter integration is really the low hanging fruit here. I am attempting to list out possibilities of internet based Smart TV experience here:
1. The TV could become a Library of media titles which could mean that BBC, Universal, Sony pictures and other such content owners could put thier whole content catalogue up for discovery and purchase by the user.
2. A Smart TV with a 25GB space in the cloud where the user could store all his media and entertainment stuff is another possibilities. Imagine not having to purchase DVDs and Blu-rays of favorite movies and shows. The whole content bit goes digital with the user purchasing media online and putting it in his personal cloud based hard drive. He would also have the option of taking CD back ups mailed to his home. Neat!
3. Related content: A quick index of all web based related content available to the user for detailed and comprehensive updates. An example here: If i am keen to know more on a particular news snippet which BBC is televising, i could immediately check with CNN, ABC, Fox and more on more information on that piece.
4. Media would be consumed across all devices such as smartphones, tablets, computers. It would be interesting if all such media snippets which is being “Favorited” could be sent to my TV cloud for leisure viewing. Remember the You Tube video which you are crazy about, but every time have to search for before viewing. Now one could organize the content into the Smart TV cloud drive for ever.
5. Talking to the source. This one is my favourite part. The idea behind is that if the “smartness” could profile my media patterns and return results more tailored to my tastes. For example, if my media profile shows that i have seen 80% of Man U soccer games, my TV would then provide me information about the next Man U game and better, record it even if i am travelling, so that next time i switch my set on, it would provide me the option of watching the match.
6. Talking to source has other huge IP and privacy related possibilities such as profiled targeted advertisements on user opt-ins.
That would be my higher order list of feature empowerments from the Smart TV. Currently Smart TVs are talking highest features in TV and some integration with Internet. In times to come it would be more about personalized media wraps around users and usages with relevant and customized content: Smart Media?
With Microsoft announcing the extension of Media centre into Windows Set Top box (Windows TV), it joins its traditional rivals Apple and Google in the Digital Home space domain. The flipside is $200 cost: Unless Microsoft is able to convince its consumers with its software ability to fuse TV, Internet and other domains, it will be a difficult price to justify especially when Apple retails at $99.
Apple already has an established advantage having crossed the 1 million sales mark for Apple TV last Christmas. Apparently, people really want to buy a new box to watch Internet video on their TV sets. Now that Apple has established its 1 million base, the next best thing that Apple would offer would be an Apps Store for its Apple TV. That is vintage Apple stuff, innovating and going to the market the fastest, establishing a lead, innovating on the product and extending base even further. Did we not see it happen in Smartphones. The $99 price and Apple’s proven capability to integrate experience across a range of connected devices along with its first mover advantage will be big gains for Big Apple! The addition of an Apple TV App Store would be a major catalyst for Apple’s progress into the living room. Apple is reported working on a HDTV with 3D capabilities within the next 2 year horizon.
Google TV on the other hand has been a flop so far. The digital living room is far from figured out — even Apple failed on its first attempt — and Google has a big incentive to try and make something work. Google could take lessons from its smartphone success: make the Google TV, the default operating system for plethora of digital TV devices. Google TV already has tie ups from Sony and Logitech and it would need to take the technology to Samsung, Toshiba, LG, Vizio and more. Perhaps the TV divisions of LG and Samsung have learned from their colleagues in the mobile phone divisions that there’s no need to rely on their crappy, proprietary software platforms, when good, open-source alternatives like Android are available.
So that’s the opportunity for Google TV: It could either become the de facto operating system for consumer electronics and succeed as the Android for TVs and set-top boxes, or it could crash and burn. However, Google will need to look at the $250 pricing for its Gen 1 TVs which don’t quite stand a chance versus Apple!.