Online video overtakes film revenue in ’08

We will mark 2008 as the year when global revenues from digital media exceeded revenue generated by cinema and homevideo combined. Online (& mobile) accounted for $90 billion in worldwide revenues whilst the global filmed entertainment market generated $83.1 billion.

This analysis comes from Strategy Analytics: “We’re starting to see now that digital media is becoming a significant part of revenue for a lot of companies,” says director of digital media research Martin Olausson. “A few years back, everyone was still discussing whether movies would be distributed online. That’s not a discussion anymore.”

>>  Based on my own experience of working in/advising on the evolution of online retailing and the eventual (& still incomplete) development of multi-channel retailing, I’d say there are several years to go before this tipping point converts into a mature market.

 Broadband downloading and streaming, terrestrial and video-on-demand (VOD), and mobile platforms are now all ways to watch entertainment content, from feature films and TV shows to made-for-Internet/mobile programming.

 Read more here

The future of TV, via Broadband

A recent article in the NY Times, In the Age of TiVo and Web Video, What is Prime Time? does a nice job of highlighting the changing landscape of broadcast network TV.

This and another recently in The Independent Online Television: Channel Surfing raise the question many in the industry are starting to ask with little in the way of clear-cut answers:

How will broadband video impact TV broadcasters?

The many developments in broadband video distribution (Kangaroo, iPlayer, 4OD, ITV Catch Up, Joost etc) and the impact of timeshifting (Sky+, Tivo etc), and soon placeshifting (Sling) are raising questions about how the billions spent on TV advertising will be impacted now and in the near future.

A few thoughts on the impacts:

Watching via broadband the video viewers become on-demand consumers and are more empowered than ever, the key is to take advantage not to resist. Broadband is a great way to catch up on episodes missed, conveniently sample programs, build interactivity, involve viewers as viral promoters, etc. More exposure will translate into more broadcast consumption. Of course as broadband viewing audience size builds ad revenues will follow. Broadcast programming is and always will be the most watched, best valued of video entertainment but with broadband opening up all kinds of new revenue opportunities, there are reasons to be cheerful.

However, the glass is really only half full for broadcasters. Broadband will erode the traditional broadcast advertising revenues and it’s unrealistic to think that broadband revenues will ever catch up. Since only a limited amount of ads can be included in online broadcasts, even the higher CPMs received per ad seem unlikeley to deliver the revenue per episode per viewer as the on-air model does. All the interactivity and engagement in the world will never offset this shortfall. As more programs move online and viewers can eventually watch these right on their TVs, the shift from on-air to online consumption will only accelerate, causing permanent erosion to the traditional broadcast business model.

Timeshift TV is so easy now, when will Placeshift TV be easy?

I’ve been working on digital strategy from a number of different perspectives over the last few years – I’ve worked with Telco’s and Media co’s trying to move us closer to a vision of the Digital Home – and at various stages it’s felt like big pieces of the digital strategy puzzle are falling into place.

First it was reaching mass adoption of Broadband, taken for granted now but it felt like a long jouney.

Then the war of Music Downloading, a series of tough battles leaving few standing and most not where they wanted to be, that established a download/on-demand expectation for entertainment consumers.

Along the way much posturing and occasional stuttering progress in the transition from DVD to download, and that feels like another journey that will,be long and painful.

But at the same time the way we watch TV programmes is going through perhaps the most exciting changes. We now take for granted multi-channel TV with a choice of services – the choice of which will extend even further in the UK with Sky introducing services via the ariel and Freeview being joined or superceded by Freesat. Not to mention the fact that BT are making progress with their Vision service, and unfortunately Virgin Media seem to be taking three steps back for every step the others take forward.

In addition to all that we have Timeshifting and Placeshifting – two concepts that sound like they belong in a dodgy Sci-Fi movie but actually are happening in more and more households right now. Timeshifting is easy enough now with the introduction of PVRs like Sky+ mean that we are increasingly making our own decisions about when we want to watch our favourite programmes rather than being dictated to by the programmers schedule (also of course many of us fast forwarding through the ads) which is causing much disruption in the industry. The next step is Placeshifting, and I’ve decided I need to rise to this particular challenge in my TV viewing this year. We have multi-channel TV at home (no need to go into whose service it is because that’s not the point here) and we are lucky enough to spend a few weekends and some of the summer in an apartment we own in Southern France – I want to Placeshift my TV choices from the UK to my place in France. It’s early days but already I know it’s technically possible (I can install a Slingbox at home aand recieve the programming via Broadband on my PC in France) but how and when is it going to become easy and convenient? I want to watch it on a decent sized TV screen and that means I will need Fast Broadband (something I can’t rely on currently) and I will need to port what i recieve from Slingbox across to the TV (not exactly a convenient and easy user experience). So my challenge for 2008 is, will this become possible with a decent user experience and without a technical training course for the average punter?

I will be keeping my eyes on it!

2008 to be the year of online TV

In 2007 there has been a dramatic increase in usage of internet for television, at the same time viewing has declined for the terrestrial TV channels - figures from Nielsen Online suggest that almost 21 million people in Britain visited a television, video or movie-related web site in September 2007, a 28% increase on the previous year.

In the UK the TV broadcasters have seen their share of television viewing slide – Channel 4 has seen its share of viewing fall by almost 12% over the year, while Five has fallen by nearly 10%, BBC One and Two are also down by 3%, while ITV dropped nearly 2%. This is no more than a percentage point in the share of each channel, but collectively the trend is clear. Viewing of other channels has increased correspondingly by nearly 9%, partly as result of more people having access to multichannel digital television.

John Chambers, CEO of Cisco, speaking at their global forum in San Jose, suggested that by 2011, between 15 to 20% of internet traffic will be video delivered to the television. He dismissed plans by broadcasters to offer their programmes online, saying he could record any show he wants and watch it on his personal vide recorder.

Valerio Zingarelli, the recently appointed CEO of new entrant, Babelgum says, “the intense competition can only lead to greater innovation and a substantial increase in service quality for viewers, and we’re certainly expecting more new entrants to arrive in 2008. Whilst traditional television platforms such as cable and broadcast TV still serve a large audience, those viewers unwilling to wear the straight-jacket linear TV offerings put them in are seeking new ways of accessing content tailored to their specific taste, whether it be sport, news or entertainment. Broadcasters worried about web television should realise internet TV is not trying to replace traditional TV, but is merely giving increasingly savvy viewers greater control and choice. It is this greater control, and choice, which will see internet TV take its place as a conventional platform alongside broadcast TV in 2008 and beyond.”

Meanwhile research from Nokia predicts that in five years up to a quarter of the entertainment enjoyed by people will have been created, edited and shared within their social circle rather than being produced by traditional media companies. Their study, entitled A Glimpse of the Next Episode, carried out by The Future Laboratory, surveyed over 9,000 consumers aged between 16-35.

Mark Selby, vice president of multimedia at Nokia said, “from our research we predict that up to a quarter of the entertainment being consumed in five years will be what we call ‘Circular’. The trends we are seeing show us that people will have a genuine desire not only to create and share their own content, but also to remix it, mash it up and pass it on within their peer groups — a form of collaborative social media.”

All these indicators point to a continued shift away from TV, and this could be accelerated by another trend – place shifting is remotely accessing personal media from another location over the internet, and is destined to become a standard feature of personal computers and set-top boxes.

A new report on this emerging market is called – Bending the rules of time and space: Trends and analysis for place shifted media, and will be published by The Diffusion Group in the first week of 2008 to coincide with the CES in Las Vegas.

Colin Dixon, senior consultant at The Diffusion Group, suggests that even if place shifting proves to be a compelling application, it will not be capable of acting as a stand-alone revenue driver or support an independent hardware platform, but with place shifting embedded in devices from set-top boxes to digital media adaptors and games consoles, it will have a significant impact on how people interact with digital media.

So all in all it seems like 2008 will be a big year for TV via the internet – but one thing hasn’t changed – we are still at the mercy of our internet connection and the bandwidth available incoming to our PC. We all know what an awful viewing experience that can create, so for me in the foreseeable future it will be downloads only! Whilst downloading video content requires a little planning ahead, at least it ensures better viewing quality than streaming.

I just realised I’ve been pushing similar views about digital entertainment for about 4 years now, here is an interview from 2005 when I was working with BT on a proposition for movie downloads to exploit the emergence of broadband access as a mass market – that work was later subsumed into BT Vision led by Dan Marks.

iPTV, the numbers game

The UK IPTV customer numbers just don’t add up at the moment, but everyone is being very optimistic for the UK, European and Global take-up. Loads of people have jumped on the BT-bashing bandwagon to say that they are behind target with numbers of customers recruited onto their broadband TV service BT Vision. BT is claiming it is ahead of schedule in acquisitions, many observers are keen to interpret the numbers differently. Nonetheless some ambitious forecasts are being touted by BT and others for the next three to five years.

 BT Vision says that its public target is still 100,000 customers by the end of 2007 and it is actually ahead of schedule. In fact they say they have already signed up 100,000 customers, although according to the most recent figures it has only 70,000 installations. So it would seem there is quite a lag between signing them up and setting up the service for them. they also say they are adding over 5,000 customers a week, so 100,000 by the end of the year looks possible. In previous statements BT said it would have be “initially connecting thousands of customers then hundreds of thousands by the end of 2007″.

 Despite all this confusion BT Vision has re-iterated its target of 2-3 million customers in the medium term, which it defines as “3-5 years from December 2006″. So that is at least 2 million customers by the end of 2011, a big challenge at over nine thousand net new customers a week for four years. To achieve three million customers in the next two years would require over 27,000 new customers a week. That does not take into account customer churn, which is likely to see at least 10% of these customers leaving every year.

Meanwhile, Tiscali TV who acquired the Video Networks Homechoice service in August 2006 for £100 million reported having only 36,000 customers at the end of October 2007, despite extending its network to be able to reach over five million homes in the UK. Tiscali has been migrating customers onto its own local loop unbundled network. The company says it is registering 250 new activations per day. The number of television customers still remains a small fraction of its broadband customer base, which now stands at over two million. The baffling thing is that Homechoice reported 45,000 customers before the change of ownership.

 But to keep the theme of optimism, research company MRG has substantially uplifted their global forecast of IPTV subscribers, up from 63.6 million to 72.6 million in 2011. Apparently, this reflects their view of big opportunities for America, China, India and Korea to catch up with Europe. Len Feldman, director of IPTV analysis at MRG says “Europe will remain the number one IPTV market in terms of subscriber count through 2011, but Asia is catching up quickly and will most likely surpass Europe in 2012-2013,” he added. “In North America, Verizon and AT&T are growing considerably faster than we previously forecasted, and we expect Verizon to be the world’s largest IPTV service provider in 2011.”

iPTV heading for mass market status

I spotted this interesting release that pumps up the growth of IPTV, it is overstating the progress but what is clear is that there really is progress. Take a look at what they say at www.iptv-forum.com/.

IPTV is moving rapidly towards mass-market adoption. The involvement of incumbent telecoms operators in most major markets by 2007 (France, Spain, Italy, UK, Germany, Austria and the Netherlands, for example) will provide the marketing, word-of-mouth and – for the many conservative-minded television viewers yet to switch to digital TV – the credibility that could boost the market for all IPTV providers.

Several early IPTV deployments are now reaching subscriber figures where they must be taken seriously, including Telefonica in Spain, which has over 200,000 subscribers for its Imagenio television service (launched commercially November 2004). The Spanish company is predicting one million customers by 2008. France Telecom (launched December 2003) doubled its customer count during 2005, ending the year with 200,000 subscribers for its MaLigne TV service too. The pace of deployment is accelerating: Telekom Austria launched its aonDigitalTV video-over-DSL service in Vienna in March 2006 and KPN in the Netherlands is preparing for a second quarter (2006) commercial launch. Deutsche Telekom is hoping to roll out its 100 channel broadcast TV (including HDTV) and VOD service late summer 2006 and BT has scheduled late summer/autumn for its hybrid DSL/DTT offering.

Competition is also increasing. Utility companies continue to launch television services but the main rivals to the big telcos are alternative broadband providers using Local Loop Unbundling (LLU). The second half of 2006 and 2007 will also see the expansion of incumbent telcos into territories outside their domestic markets, where necessary using LLU to compete with their peers on ‘leased’ networks. France Telecom has already announced that it will launch IPTV in Spain, the UK and Poland this year, followed by the Netherlands (not to mention Mauritius, Senegal and the Ivory Coast). Meanwhile Telecom Italia – through its subsidiary HanseNet – is adding television to its existing telephone and DSL services in Germany, starting in Hamburg. Telecom Italia also launched television services in France (via Telecom Italia France’s AliceBox triple-play service) in January. Meanwhile, Deutsche Telekom subsidiary T-Online is taking IPTV to Hungary, with a planned commercial roll-out of TV-over-DSL in Budapest and other major cities later this year. And to add further spice to this market, existing Pay TV operators from the satellite and cable world are buying into DSL. BSkyB bought UK DSL network provider Easynet in January (2006) to give itself a two-way network and exploit the “exciting opportunities that now exist to combine quality entertainment with significant high-speed connections.” Europe’s largest satellite TV provider has told investors that it intends to introduce IPTV some time after 2007. Meanwhile, UPC Austria (part of the pan-European UPC group owned by Liberty Global) has agreed to acquire the Austrian xDSL provider Inode – so establishing a national footprint, initially for high-speed data and voice. All this activity is underpinned by network upgrades across the continent, with BT in the UK now committed to delivering ADSL speeds up 8Mbps from 5,300 telephone exchanges in the UK – putting broadband in reach of 99.6 per cent of the country. France Telecom and Telefonica, among others, are using ADSL2+ and Deutsche Telekom will deploy television services exclusively on VDSL, using the 50Mbps fibre/copper network being built by its fixed network infrastructure division, T-Com. T-Com expects VDSL in 40 cities by the end of 2007, putting 11 million homes within reach of the planned IPTV service.

So with high-speed networks available and expanding their reach, multiple service launches and growing subscriber figures, the big questions are how much market share IPTV providers can take from satellite and cable, and whether they can make money – if indeed, video revenues are their real motive rather than simply reducing churn on voice/data customers. Are there digital TV newcomers who will choose IPTV ahead of digital terrestrial – and are these the customers IPTV providers want? And can companies differentiate their services sufficiently from cable and satellite to tempt existing Pay TV subscribers away from them?

I think it is fair to say Broadband-Delivered Video & IPTV will ramp up in 2007, thanks to products like Brightcove and whatever Google does with YouTube/Google Video. Also we’ll see more of Interactive TV (iTV etc). On this theme, the Venice Project (from the founders of Skype) promises free TV all around the world. Rising adoption of IPTV technology in 2007 and Bittorrent will be an important part of the online video landscape too.

Digital pirates to pilots

The broadband internet has created tremendous opportunities for new digital media services to develop in music, video, games and gambling. At the same time pirated distribution and downloading has taken first mover advantage and many new brands have appeared. As more consumers look for interesting and exciting digital downloads so the popular consumer brands will take their place and supplement the ‘cool’ service with the ‘trust’ factor– as Shelley Taylor says “converting pirates to pilots”.

As we move more and more of our personal music collection to the hard-drive and the network we will want to control our own entertainment experience rather than feeling that everything is locked up and inaccessible. So aside from the technology development that’s moving quickly enough for most of us there’s also a demand for a simple, intuitive customer experience built around us rather than focused on the service providers product. Some of these experience issues are not new and fortunately there is a lot we can learn from how the most successful e-commerce companies have persuaded customers to buy products online through intuitive web page design, simple transaction processes, effective merchandising and attractive pricing and promotions.

The battle is on to ‘own’ the consumer relationship in the digital home. Consumer electronics and computer companies are converging on the digital living room, major computer companies like HP and Dell, and household names like Philips and Sony aren’t planning on leaving without a fight. At the same time the Telcos and Broadband Service Providers like BT, SBC, Yahoo! and AOL all expect to deliver the services that bring this digital home to life via a fat broadband pipe and a wireless network. The combined value of the consumer electronics industry and the online entertainment market runs to hundreds of billions – whether you report it in dollars, pounds or euros.

Consumers have taken to large LCD displays, high-powered multimedia PCs, and portable devices, but connecting them all is still a work in progress. But the UK now has over 6million broadband connections and the rate of adoption is accelerating fast – once homes are sufficiently wired, there is the question of where the digital living room begins and ends. With mobile phones, PDAs, and portable game players becoming more powerful, the four walls that once housed all of our movies, music, and photos are breaking down. The time we spend on entertainment now blends into the workday, helping us stay closely connected to business associates and family. The broad use of the Internet, which spawned the previous tech boom, and the increasing number of high-speed connections will inspire new generations of technology and a huge wave of digital entertainment services.

Broadband video – the gang of five

Interestingly on the theme of my last blog post I now find that research company Broadband Directions talks about the “Group of Five” as a way of grouping the “online behemoths” BD thinks are best-positioned to become next-generation, broadband-centric video distributors.

Google, Yahoo, MSN, AOL and Apple

Recent announcements have included: Google launched video ads for its AdSense network and a special promotion in Google Video Store for “The Break Up”, Jennifer Aniston’s new movie. Yahoo announced a deal with “60 Minutes” and launched a preview using Ed Bradley’s interview with Tiger Woods. MSN announced its “MSN Originals” initiative and a deal with Reveille’s Ben Silverman, producer of “The Office”. AOL announced that it acquired Lightningcast to better monetize its broadband video streams. And of course Apple continued building its roster of programming partners, announcing deals with Fox Entertainment, Discovery Networks, MTV Networks, Showtime and CBS for March Madness highlights.

Broadband video, what is that?

It’s a confusing world at the moment if you’re trying to keep track of what’s happening with digital entertainment with much talk about IPTV and other variations that often aren’t used clearly or defined properly for market observers. Here is an attempt to simplify it and a push to use the generic description, Broadband Delivered Video.

Broadband-delivered video can be defined as; video delivered from a remote server to a user’s computer. Its delivery requires a high speed or broadband Internet protocol (IP)-based connection, as opposed to a dial up connection.

As an early-stage technology or business model the definitions and language used can be confusing. Such services are sometimes referred to as; “Internet TV”, broadband TV”, “web video” or “online video”.

IPTV can be defined separately; as video which is delivered over a closed IP network to an IP-based set top box (STB) connected to the user’s television. This type of application leverages some of the underlying technology of broadband video, but the business model is closely related to existing multi-channel TV services.

This differs from broadband-delivered video; where the user experience is likely to be closer to (and will evolve from) today’s Internet-based consumer experience. The business models will be closer to those seen on today’s Internet, and we should ensure we adopt the lessons learned by successful e-commerce services.

This definition may evolve further depending on whether the video is actually viewed on the computer or on other devices, and other factors such as what underlying technologies might be used.