As we reported today, the global IPTV subscriber base reached more than 30 million households last year. It's difficult to imagine that major vendors such as Alcatel were predicting 100 million by this stage a few years ago. That sort of over-optimism is hardly new, but in this case reflected a failure to appreciate the strategic challenges facing telcos as they entered the TV market. My colleague Ben Piper suggests that the IPTV market globally may be hitting a speedbump: perhaps it just never built up much speed in the first place. IPTV was supposed to be different. The built-in ability to integrate communications services with content delivery, together with one-to-one targeted delivery, would enable powerful and compelling new features and experiences which would help telcos leapfrog their established competitors in the cable and satellite industry. But instead of changing the game most telcos which offer IPTV today still play to the rules originally fixed by the incumbents. Most could not avoid getting dragged into content rights battles and disputes, and few if any have deployed the sort of exciting advanced capabilities which have been on show at countless exhibitions over the past decade or so. Which brings us to this year's IPTV World Forum, opening tomorrow at London's Olympia. Ericsson gave us a preview of its announcements this evening, which are encompassed by the new tag-line “End-to-Endless Television”, or “E2E TV” for short. Sure enough they include subjects such as on-demand advertising, new connected IP devices and hybrid solutions. Without doubt what I am most looking forward to seeing is Ericsson's IPTV Remote. Someone will explain to me one day why a home device with no obvious cellar network implications was launched at Mobile World Congress; in any case now that the mobile phone industry has seen it we await reaction from its core target customer base. Ericsson describes the IPTV Remote as the best thing they have done in a long while. The challenge for Ericsson, like its competitors, is that it does not sell these products to consumers, who are the end users, but to service providers and operators, who decide what they think their customers will want and will make them money, before making them available to the likes of you and me. Ericsson carries out a lot of its own consumer research to identify future customer needs, but it still has to persuade its operator customers of the validity of these predictions. Many of these scenarios sound good in a Powerpoint; Ericsson’s own presentation sees the future of TV as “blended services”, “converged interactive communication”, and “your media anywhere, anytime”. I hate to sound like a weary old cynic, but we have heard these promises more than a few times over the years. But I do look forward to seeing the IPTV Remote in action, and maybe, just maybe, this 10” touchscreen “tablet” (definitely not an iAnything) will persuade operators that their customers might value their service over their competitors for the privilege of using a particular device, rather than receiving targeted ads or first run movies. Our own research showed TV viewers are waiting for touch screen controllers, so Ericsson may be on to a good thing. David Mercer Client Reading: Orange's IPTV Challenge: Create a Non-Content Differentiator

Niklas Rönnblom, analyst at Ericsson’s ConsumerLab, recently blogged about the company’s white paper called “What Consumers Want from TV/Video Solutions”. This document discusses how television and video consumption is changing and the challenges this brings for service providers. The background assumption in the paper is, not surprisingly for Ericsson, the concern that the “managed” TV/video industry will suffer because of changes in consumption habits. A key conclusion is that this industry will not be able to respond effectively until regulations are changed to create a “level playing field” so that traditional providers can compete fairly with emerging content and service providers. Finally, the report’s recommendation is that “The goal should be to offer user-centered high-quality services that motivate consumers to stay legal; not a system or service that “forces” them to stay legal”. The paper offers a series of logical arguments to support the notion that managed video/TV services should play an important role in keeping illegal content distribution to a minimum. It even attempts to quantify the relative value of countermeasures such as “fear of getting caught” as factors in consumer decisions over which content to consume. Thus far the paper does a good job of analysing the impact of illegal content distribution on the traditional, ie legal, industry. One or two observations should be challenged, however – first, the assumption that “traditional TV distributors, as well as telecom service and content providers, are failing to satisfy consumer demand for TV/video services”. This statement will come as a surprise to successful “traditional TV distributors” such as BSkyB, which continues to report customer and revenue growth quarter on quarter during the toughest economic environment in living memory. There certainly are some traditional TV distributors which are not performing as well as others, but there are different reasons in every case, and it is certainly not always because they are not offering their customers clips from Youtube or movie sharing services. Secondly, the paper’s motivation analysis is surely flawed: the main reason people watch TV/video is to be entertained, above and beyond every other reason. Instead, Ericsson positions this as a secondary factor behind the social role of content; people discuss TV shows, and feel socially excluded if they haven’t watched them; or they make copies of these shows and give them to their friends. While these social functions clearly have some relevance for many people, they are surely secondary, even for so-called “digital natives”. Would anyone really watch a boring TV show just because they thought everyone else was watching it? Ratings data would suggest otherwise. There is no doubt that managed service providers need to continue to roll out new services such as on-demand, personal content storage (DVR), integrated communications, HDTV and 3D. But it is a mistake to think that successful providers are not already doing this. The paper’s real contention is that these firms will not be able to compete when the same content is available illegally (and free of charge) from non-managed services. The paper does not have the space to go into wider issues such as the disaggregation of access and content, and the impact of emerging advertising business models (see my recent entries from the Future of Broadcasting content for further discussion). These questions will ultimately have a greater impact on the success or failure of managed TV service providers than unauthorised distribution of content. Twitter: twitter.com/DavidMercer_SA Client Reading: Global Digital Media Growth Slows to 2.7% in Q4 2008

Better late than never, I should summarise the main discussion points from last week’s IPTV World Forum in London. In general “IPTV” in the context of this event means “managed TV services over broadband”, and indeed, “managed by broadband service providers”, as opposed to “managed by over-the-top providers”. It’s easy to spot this because the interest of the major sponsors – Ericsson, Alcatel-Lucent, Cisco etc – has historically been to support BSPs rather than their competition. But in spite of this natural bias, much of the debate in the conference and on the show floor revolved around how BSPs could counter the impact of emerging OTT competitors such as Hulu and the BBC’s iPlayer. While anecdotes are always a dangerous foundation for analysis, it is not unprecedented to hear of people in the US claiming to have cancelled their cable subscription (ie TV) because they can now “get all their shows” on Hulu and other internet-based services. However much they pretend to dismiss these claims as isolated or atypical, such stories strike fear into the hearts of operators, and their technology vendor partners, around the world. The general impression from IPTV World Forum debates is that the BSP response will be to “embrace” OTT content, encouraging providers to join their managed services and packages so that customers are guaranteed quality of experience for their Youtube videos. Before accepting these overtures, OTT providers themselves should consider whether this embrace will resemble a loving couple gazing at the sunset, or a grizzly bear hugging its newly captured prey. Broadband providers have little choice but to offer content in some form or other, and that’s really what IPTV is about. As we are seeing in France, bundling content (TV) with broadband access can be a highly successful, if controversial, strategy. And the regulators have barely begun with this issue, let alone completed their assessment. As Christophe Forax, a Member of EU Media Commissioner Viviane Reding’s Office, informed the conference on day one, all broadband service providers would be expected to embrace “platform neutrality”. Quite what this means to the bundling of access and content, however, is a topic for further very heated and lengthy debate. The key question, as Juniper’s EMEA Director Paul Gainham put it, is “what is the role of service providers in a few years’ time?” For now, a number of them are placing their bets on content, either as partners and distributors or as fully fledged owners and developers. The other main strategic option in a mature market is often described disparagingly as becoming “bit pipe providers”, and incumbent telcos in particular are reluctant to admit to this possibility: it would inevitably mean considerable downsizing, and that’s something that’s tough to sell to any investor. Twitter: twitter.com/DavidMercer_SA Client Reading: Global Media & Entertainment Market Forecast, 2004-2012

Strategy Analytics' latest quarterly mobile phone handset data is released today. In spite of fears of a global recession unit sales were up 14% in Q108 v. the same period last year. Even in a market as large as this (282 million units shipped in 3 months) the rate at which market shares can change is a warning to current leaders not to lose their focus. Motorola's problems are well documented, but to lose nearly 9 percentage points within 12 months is an indication of the malaise within the company. Its share is now 9.7%, having been nearly 22% as recently as 2006, and both LG and Sony Ericsson are within striking distance of Motorola's third position. Samsung has also been a major beneficiary of Motorola's decline, and is now a clear no. 2 behind Nokia. The Finnish giant maintained its 40% share attained in Q407, although its US performance remains an area of concern. Client Reading: Motorola, Sony Ericsson and Apple Lose Global Handset Marketshare in Q1 2008