Navigating the ‘Great Content Shift’
by Elisabeth Tweedie, Associate Editor
Los Angeles, Calif., April 6, 2012-The theme of this year’s NAB to be held this month in Las Vegas is “the great content shift.” If you haven’t attended the NAB in the last five years, you’ll hardly recognize it now. The focus is still on traditional broadcasting, but it has since incorporated the many changes in how content is created, managed and distributed in the new multiplatform environment. The NAB now covers Over-the-Top (OTT), IPTV and other new and emerging technologies.
OTT, IPTV, cord cutting, cord shaving no matter which variant and what you call it, it is regarded as a threat to traditional TV, whether satellite, cable or OTA, but how imminent and how real is that threat?
The 2011 Video over Internet survey from Accenture which covers the US, Brazil, UK, Germany, Italy, Spain and Australia states that between 2009 and 2013 IPTV households will increase by 35%. In the same time period satellite TV households will increase by 11% and cable households by 2%, interestingly their projection for OTT was only 5%. To put these figures in perspective the 35% growth will result in 59 million IPTV households, the 2% cable growth will result in 473 million cable households and there will be 170 million satellite TV households and only 37 million OTT households. Put it another way – if IPTV continues a growth rate of 35% in eight years there will be more IPTV households than the combined cable and satellite households today.
So yes, the rapid growth rate cannot be ignored, but what is also relevant, and often overlooked in these discussions, is the amount of time spent watching video from the different sources. 85% of TV content in the US is still viewed live according to a report from Nielsen in February of this year. Time-shifted TV using a DVR accounts for another 8%. While that leaves 7% of TV being viewed by other means, the total amount of time each person spends viewing live or time-shifted TV has actually increased by 19 minutes from the same time period in the previous year. Overall in the US time spent watching linear and time-shifted TV is 146.8 and 10.9 hours per month respectively. This compares with 8.8 hours spent watching video on the internet or a mobile phone. The Accenture report similarly showed that across all age groups and geographies 92% of consumers watched TV via traditional sources (cable, satellite and Over-the Air (OTA). While this is not to the exclusion of other means, it does clearly indicate that TV as we know it is not about to disappear.
Similarly a global report from Ericsson shows that in 2011 84% of consumers watched live TV several times a week. What is definitely changing is what else people do when they’re watching TV, with over 50% talking on the phone, 45% using social media and over 60% browsing on the internet. Interestingly the use of social media – tweeting and commenting on Facebook etc means that the demand for “live content” (reality TV, Dancing with the Stars etc.) is actually increasing.
Much has been made of the fact that Netflix has more subscribers than each of the individual major cable networks. This however is comparing a national service with a regional one, hardly a fair comparison, so maybe the better way to look at it would be to compare Netflix subscribers against premium TV channel subscribers: Showtime, HBO and Starz. Netflix’s approximately 27 million subscribers are less than any of those individual channels and about 23% of the combined premium channel subscribers. Projections from IHS (formerly Screen Digest) indicate that while Netflix will grow to around 40 million subscribers by 2015 putting it about on par with HBO, it will still only be around 22% of the combined subscribers of the three premium channels.
All of these facts point very clearly to the fact that for most – but not all – consumers it will be a case of OTT and IPTV providing complementary video viewing and not substitution to the extent that satellite and cable TV are dropped completely.
Satellite service revenues have grown by 14% since 2005 to US$ 101.3 Billion of which $83.1 Billion is in the consumer sector – primarily Direct-to-Home (DTH) with 147M subscribers globally. Revenues have been driven by the growth in HD. Growth in this sector will continue coming both from Europe and Asia which currently lag the US in numbers of HD channels and also from higher quality bandwidth hungry formats. 4K is poised to follow 2K with 8K waiting in the wings. The demand is there as evidenced by the 57% of respondents in the Ericsson survey citing “excellent quality (HD or HD+)” as a key feature and something they are willing to pay for which bodes well for the satellite industry.
At the Broadcasters roundtable at Satellite 2012 in Washington, DC recently it was clearly evident that for Content Distribution Networks (CDN) satellite was here to stay. Several broadcasters citing the reliability and wide reach of satellite, neither of which fiber can compete with.
Of course, given the recent launches, one of the main topics of conversation at the Washington Conference was Ka-Band. It has previously been stated by both Avanti and Eutelsat, operators of the Hylas-1 and KA-SAT satellites respectively, that consumer and enterprise broadband is only one of several markets for Ka-Band: SNG, mobile backhaul, edge-casting, maritime, mobile, military and local TV being mentioned as other potential uses.
In March this year, Eutlesat announced that it would be broadcasting five TV channels and ten radio channels on KA-SAT to Ireland to provide service to the 1-2% of customers out of reach of RTÉ’s DTT service. However the real surprise came from Philip Goswitz SVP, Space & Communications/ Research & Development, of DIRECTV who pointed out that even though the management of the company may not have realized it yet, around 75% of their total revenue – which was $27 Billion in 2011 - was coming from Ka-band. DIRECTV currently has 12 satellites in orbit of which 5 are Ka-Band. The Ka-Band is used exclusively for HD content and that brings in around $20 Billion per annum. There are a further two Ka-Band satellites on order and Goswitz predicted that in five years time 100% of DIRECTV’s revenue would be from Ka-Band. Interestingly all of Echostar’s DTH satellites are Ku-Band.
In the near future the demand for traditional video – cable, satellite and OTA - will continue and if the projections are correct viewers will increase and it will remain the most significant method of viewing video for the vast majority of viewers.
But change is afoot and as an industry we would be foolish to ignore it. Romain Bausch, President and CEO of SES, summed it up very nicely at Satellite 2012 when he said that satellite needed to be an integral part of the mix coming into the home Set Top Box or Gateway. So that it can then be accessed wirelessly anywhere in the home alongside other content, the source being transparent to the viewer.
A European Initiative Hybrid Broadband Broadcast Television (HbbTV) supported by both SES and Eutelsat, is doing exactly that. The objective is to seamlessly integrate the delivery of linear and non-linear video through TVs and set-top boxes with an optional web connection. The technology is based on existing standards including Open IPTV Forum, CEA, DVB and W3C. The viewer gets one remote to control one screen as in linear TV so making the source, which could be cable, satellite, OTA and broadband “invisible” to the user.
At the end of last year Globecast and FRANCE 24 announced that they would hold trials of an HbbTV service with Western European viewers early this year. Viewers will use their connected television to interact with FRANCE 24’s linear TV services (delivered via satellite) and non-linear services delivered via broadband which will effectively be integrated. Orange will deliver the broadband content. And at the end of March Eutelsat announced an extension to their KabelKiosk service also utilizing the HbbTV standard. The service will provide bundling of satellite and terrestrial services to offer linear and on-demand services through the TV screen. Eutelsat are offering the service as a “white label” so that operators can provide the service through their own brand, but without having to make significant investments in their own infrastructure and service platform.
Industries that don’t innovate usually die, in this case there is plenty of innovation and although in the long run there is a very real threat there is time to continue innovating and experimenting with new technologies and delivery methods.
---------------------------------
Elisabeth Tweedie has over 20 years experience at the cutting edge of new communication and entertainment technologies. She is the founder and President of Definitive Direction a consultancy that focuses on researching and evaluating the long term potential for new ventures, initiating their development and identifying and developing appropriate alliances. During her 10 years at Hughes Electronics she worked on every acquisition and new business that the company considered during her time there. www.definitivedirection.com She can be reached at: etweedie@definitivedirection.com
