Digital Media Strategies

We cover all of the major media sectors, including advertising, TV and video, music, games and social media.

March 12, 2008 17:03 dmercer
At the IPTV World Forum today, I chaired a panel during a session on IPTV ARPUs. The preceding presentations had demonstrated how difficult it is to stay focused on the topic of user revenues without drifting into the complexities of network architecture or exciting new service concepts (that users may or may not actually want to pay for). So I asked the panel contributors to focus on the revenue issue and I thought they did a good job. Joao Pedro Mendes represented Portugal’s Sonaecom, which has operated an IPTV service for the past year. In spite of my hopeful prompting he was unwilling to divulge precise details on the company’s ARPUs, but he did indicate strongly that on-demand content was one of the main tools Sonaecom has to get users to increase their spending, and the company considers its VOD service to be successful. Joao’s main point, however, was that introducing new services is as much as a way of differentiating the IPTV provider from competitors in the market, serving as a customer acquisition driver, as much as increasing revenues directly. Gudjon Mar Gudjonsson, CEO of the Icelandic solutions provider Industria, believes that one of main opportunities for IPTV providers to increase ARPUs is to offer users a much higher degree of flexibility in their ability to choose only the channels and programming that they want to pay for. This point was supported by a questionner from the audience, although he also admitted that he would also like to pay less to watch those channels. This is an long-standing debate in the pay TV industry: the battle between users wanting to pay for only the content they want to watch and the content providers who, it is claimed, have to subsidise the vast amount of content that would never get produced if it had to be profitable in its own right. Both ANT Software’s founder, Simon Woodward, and Jonathan Wilson of Red Bee Media recommended that IPTV providers should focus on changing the relatinoship with subscribers and viewers. For example, the provider needs to become a trusted partner in guiding each user towards content he or she will like. It is IPTV’s inherent interactive capabilities that should allow providers to improve the service and increase its value. Whether customers are willing to pay more for these capabilities still remains doubtful, however. My own conclusion of the panel was that IPTV service providers should be very cautious before assuming that ARPUs will increase with every additional new product or service. Client Reading: US IPTV Forecast and Outlook: $13.7 Billion by 2012 Add to Technorati Favorites

March 12, 2008 17:03 dmercer
IPTV World Forum’s main conference got off to a bad start today when it kicked off at 9am with hundreds of delegates still locked outside the venue. The chaotic arrangements for ticket collection meant that it took 30 to 45 minutes to get inside to hear the conference. This clearly affected the attendance at Dr Werner’s keynote, with a steady flow of people arriving as the presentation progressed. I mentioned last year that the organisers need to find a new venue. Olympia really doesn’t fit the bill any more and the conference facilities are just not up to modern standards. Now that Informa has taken over the event I would hope that there is enough funding to provide for a better conference and exhibition facility next year. Otherwise the sight of senior industry executives, delegates and press queuing half way down the street to pick up tickets will be repeated. Nicolas Bry, CMO Products and Services at Neuf Cegetel, was lucky to be chosen as the second speaker, when the auditorium was beginning to fill up. Mr Bry gave some interesting insights into the success of Neuf Cegetel’s IPTV service, particularly with regard to VOD. He claimed that 40% of triple play subscribers are aware that VOD is available, and that 8% have actually paid for a VOD event. In total he estimates IPTV VOD revenues in France at €30m in 2007. The key barrier to higher VOD revenues is still awareness and the habits of TV viewers, and it will take time to change these. Neuf Cegetel hopes that the new version of Microsoft’s Mediaroom middleware, which allows operators to present VOD movie titles as mini-DVD covers, will improve take-up. Client Reading: US IPTV Forecast and Outlook: $13.7 Billion by 2012 Add to Technorati Favorites

March 10, 2008 15:03 dmercer
Widespread rumours of Xbox console price cuts in Europe were confirmed today. The entry level SKU, Arcade, will fall to GBP159.99. The mid-range Pro will sell at GBP199.99 and the Elite at GBP259.99. Euro prices have fallen to equivalent levels. is already selling the consoles with additional discounts to the new recommended prices. Microsoft's Chris Lewis, who heads up Xbox in EMEA, told us that the Xbox was now entering the "mass market space" with these new price points, opening up a "much broader range of consumers". Clearly the fact that the Arcade is now the cheapest console of the current generation will help to bring it to the attention of a wave of customers that have previously dismissed the current range of products as too expensive. While the Wii remains difficult to find at its recommended GBP180, Nintendo will be watching carefully for any signs that potential Wii buyers opt for the Arcade because of its wider availability or lower price point. Yes, the buyer segments for Wii and Xbox have been very different so far, but for price-sensitive customers the new prices may make all the difference. The PS3 is now left once again as the most expensive console. Sony will be nervous that the PS3's recent sales surge may fizzle out now that the best Xbox 360 is £40 cheaper, and the cheapest one is nearly half the price of a PS3. Sony too will be scrutinising the daily sales reports, but will probably try to hold out until later in the year before making its next price move. We asked Lewis to address the question of the impact of the price cuts on Microsoft's profitability. He indicated that the company's Entertainment and Devices division has moved into "overall sustainable profitability" in the last few months, and claims that the new console price points will not significantly change this position as it continues to drive cost out of console manufacturing. Add to Technorati Favorites

March 10, 2008 12:03 dmercer
This week at London's Olympia we are attending the IPTV World Forum, which has become one of the world's largest events focused on the subject. Last year's event featured a number of emerging technology firms, such as Ruckus Wireless and Vividas, that made good progress in the following 12 months, so we are hopeful that the 2008 show will be as good at predicting future trends. Strategy Analytics is involved in a number of the conference streams this year, including Connected Home and TV-over-Net. I will be chairing my first panel at the main IPTV conference on IPTV ARPUs on Wednesday. I look forward to a lively debate with participants from Sonaecom, Industria, Red Bee, ANT and NDS. My main question is whether it is realistic to expect ARPUs to increase at all, at least in terms of direct subscriber payments, and should IPTV providers be looking instead to indirect subsidies from third parties such as advertisers. My second panel takes up this theme the following day when I will be debating advertising in the IPTV space with Alcatel-Lucent, Tandberg, Pilat Media, Red Bee (again), Talk Talk and Ruwido. I'm hoping these panelists will be able to shed some light on the potential for IPTV to revolutionise television advertising and when we are likely to see this happen. Clients wishing to arrange an analyst meeting during the event should use this form. Client Reading: US IPTV Forecast and Outlook: $13.7 Billion by 2012 Add to Technorati Favorites

March 5, 2008 12:03 dmercer
News reports today suggest that Pioneer is about to bite the bullet and exit manufacturing of plasma displays. It is in negotiations to have the panels made by Panasonic, but Pioneer would continue with its own R&D and assembly. Pioneer has fallen well short of its sales target and its investment in Kuro technology has failed to stem the decline. A company spokesman claimed that the only way to stay in the plasma business was to make a product that is "so much better than anyone else's", which is what Kuro was intended to be. It seems even that has not been enough. Pioneer's news is not unexpected: the company had already announced its entry into LCDs for sub-42" TVs, and is part-owned by Sharp. But as one of plasma long-term stalwart supporters Pioneer's decision to cease manufacturing is a significant moment. Whether Panasonic can continue to meet Pioneer's exacting standards remains to be seen. It is no small irony that Pioneer's execs have persuaded at least this observer, with detailed side-by-side demonstrations, of the superiority of their displays in comparison to those of their competitors, yes, including Panasonic... There are two messages from Pioneer's decision to pull the plasma plug: 1. Any remaining Plasma supporters need to watch the bottom line very carefully, even if they do have the scale of Panasonic 2. Japanese firms are increasingly willing to address financial realities by making tough decisions to drop support for commercially failing technologies The latter point will resonate with Toshiba, of course, after the HD-DVD saga. Competing technologies need ardent advocates but when the CFO points the finger it's time to say sayonara... Client Reading: Flat Panel TV Global Market Forecast Panasonic's AV Strategy: Plasma Success Will Not Prevent Revenue Shortfall Add to Technorati Favorites

February 20, 2008 11:02 dmercer
As if to demonstrate that it was not resting on its laurels after Blu-ray's defeat of HD-DVD, Sony yesterday also announced new investment in OLED technology. The company plans to spend 22 billion Yen ($200m), partly to buy out Toyota's share of the manufacturing joint venture, and partly to ramp up production of OLED panels so that it can begin to offer larger screen displays from 2010. Sony has been selling its 11" OLED TV in Japan and the US, although the premium price of $2500 makes it little more than a statement of intent at this stage, and the company is still thought to be losing money on each product. Nevertheless OLED's potential is exciting because it offers the most realistic long term competitor to LCD in the flat panel TV market. The theoretical benefits of OLED over LCD include lower power consumption, thinner displays, more realistic colour reproduction, wider viewing angle and faster response time. It is also hoped that they will eventually be cheaper to manufacture than LCDs. But the relative scale all of these benefits over LCD will only diminish over time as LCD technology continues to improve. Ultra thin OLEDs are undoubtedly impressive, but LCD TVs less than 1" thick will be dominating the market in a few years' time just when OLEDs are beginning to challenge them. This fast moving escalator of price-performance ratios is what makes OLED investment so risky. Sony's latest investment at least demonstrates its determination to lead the industry in the next generation of panel technologies, in contrast to its failure to predict the success of LCD a few years ago. But it is going to take a lot more than $200m to ensure Sony's OLED leadership, especially when Samsung has similar ambitions. Client Reading: CES 2008 and Beyond: Can the Wow Factor Make a Comeback? HD Discs: Blu-ray Wins Battle, Not War Add to Technorati Favorites

February 18, 2008 12:02 dmercer
As Toshiba considers giving the last rites to the HD-DVD format, the last major objector is likely to be Microsoft. As Strategy Analytics has noted in its research many times, Microsoft's strategic objection to Blu-ray Disc stems from its use of Sun's Java technology as the basis for its interactive applications. There is nothing inherent in the disc format itself that would prevent Microsoft offering a BD drive, for example, as an add-on to the Xbox 360. Likewise, BD drives are available for Windows XP and Vista PCs, although support for the BD format is not native to either OS: users must install a third-party application such as Cyberlink's PowerDVD Ultra in order to watch BD movies. Significantly perhaps, Microsoft also never included native support for HD-DVD in its Media Center platforms. Toshiba would be unlikely to withdraw from HD-DVD completely without Microsoft's approval unless it wants to risk upsetting a key strategic partner. Microsoft's decision will hinge on three key questions: - Does it need to support a high definition disc format at all? - Could HD-DVD still survive purely as a PC format? - Could Microsoft realistically support BD without supporting Java? There are doubtless many Microsofters who believe the disc content business model is dying anyway, given the success of its Xbox Live HD video download service and the explosion in web-based HD content. Realistically, however, it will be a few years yet before broadband and the internet infrastructure can support HD streaming and downloading on an equivalent global scale to a disc platform. We have previously argued that there is no reason HD-DVD could not continue as a PC format, even as it was always bound to fail in set-tops. The dynamics of the PC industry mean that dual-format drives could become cost-effective relatively quickly if there was sufficient support from manufacturers. But it seems inevitable now, given the tidal wave of support for BD, that HD-DVD will lose support from any remaining hangers-on, so there seems little need even for dual formats in PCs. So can Microsoft ever live with Java? Our conversations with the company suggest a resounding No. So if BD drives are going to appear for the Xbox 360, as some rumours suggest, they will either not include Java, or will be developed by third parties. Either that, or a remarkable declaration of peace is about to break out between two old IT enemies. One way or another, Microsoft is HD-DVD's last hope for survival. Client Reading: High Definition TV and Video Devices: Global Market Forecast Add to Technorati Favorites

February 15, 2008 15:02 dmercer
Just an advance warning of a release we will be issuing next week on our latest set-top box research. Here is the gist of it: Worldwide sales of digital TV set-top boxes broke through the 100m barrier for the first time in 2007, according to the latest research from Strategy Analytics’ Connected Home Devices service. The report, « Digital TV Set-Top Boxes: Global Market Forecast », found that sales reached 102.4 million units last year, an annual increase of 12%. IPTV’s market share rose to 5.9%, compared to 3.6% in 2006. Cable’s share also rose, to 36.2%, while satellite and terrestrial shares declined. For 2008 the report predicts a surge in demand for digital terrestrial set-top boxes, driven by the impending switch-off of analogue broadcasting in the US. By 2012 annual global sales of all digital TV set-top boxes will reach nearly 200 million units. “We expect the Asia-Pacific region to overtake North America and Europe in 2008, accounting for a third of this year’s 129 million sales,” says Peter King, Director, Connected Home Devices. “Sales of digital terrestrial TV boxes in Europe have now plateaued as consumers begin to transition to integrated digital TV sets, but this pattern is unlikely to prevent overall market growth across all platforms.” “The set-top box remains the key gateway to advanced digital television services around the world,” says David Mercer, Principal Analyst. “Added value services such as high definition TV, digital video recording and Internet video are all set to drive further growth in this strategically important sector.” The report provides Strategy Analytics' latest global market forecast for digital TV set-top boxes, based on analysis of more than 200 digital television platforms and operators around the world. It including 5-year demand forecasts for 22 countries across the principal geographies, and segmentation by the major access platforms DTTV, IPTV, satellite and cable. Client Reading: Digital TV Set-Top Boxes: Global Market Forecast Add to Technorati Favorites

February 14, 2008 16:02 dmercer
ProSiebenSat1, one of Germany's leading commercial television broadcasters, will close its two free-to-air HDTV channels (ProSieben and Sat1) from tomorrow morning, 15th February. Instead the company will focus on increasing the availability of its 16:9 SD broadcasts. This shows, if nothing else, that the German market has some way to go to catch up with other countries, where 16:9 has been established for some years, and that HD may be a step too far, too soon. ProSiebenSat1 was one of the first broadcasters in Europe to take the plunge with free-to-air HDTV. Germany's TV market is characterised by the continued dominance of free-to-air broadcasting and the weakness of pay TV, relative to other European countries at least, and is often seen as being fundamentally different to other markets. So FTA HDTV may have seemed a natural development in Germany while other countries concentrate on pay HDTV services. But ProSiebenSat1's decision suggests that the laws of economics apply in German broadcasting as much as anywhere else. The fact is that in the early days of any new platform the audience is going to be tiny. HDTV requires users to buy or rent new set-top boxes, so a significant audience will only begin to emerge after some time. Any broadcaster believing that an HD channel can survive on advertising revenues alone in the early days is relying on wishful thinking rather than a sound business plan. Strategy Analytics' European HDTV scenario has always called for initial market leadership from the pay TV providers to establish the technology platform in the first few years, as indeed Sky is doing in the UK, using subscription payments as the primary business model. Public broadcasters will also find it difficult to participate initially because of lack of funding, although the BBC and others do have limited initiatives already in place. Wider availability of FTA channels will have to wait until the audience capable of receiving HD signals has expanded significantly from today's 1% of European homes. Client Reading: Europe's High Definition Homes: High Definition TV and Video Devices Forecast Add to Technorati Favorites

February 12, 2008 12:02 dmercer
The uncertainties of digital terrestrial broadcasting technologies have been highlighted on both sides of the Atlantic in the last couple of days. Survey house Centris, as reported in the Boston Globe, suggests that millions of US homes will get fewer or no off-air TV signals once digital switchover is complete next February. The study (I can't cite it directly as it appears to be unpublished and even unidentified on the company's website) claims to have investigated signal characteristics in many US cities and estimated reception probabilities accordingly. The BG article claims that at least 50% of viewers using set-top aerials will fail to get a digital signal. Others will have problems with trees and walls. There is nothing new in any of this. The problems with the ATSC system have been well rehearsed over many years. It's not that it doesn't work. It is just that it is impossible to know when it will or won't work. And that is a killer when it comes to selling digital TVs, converter boxes and new digital channels. Is a similar issue now spelling the end for DAB, the digital radio standard used in the UK and some other countries? Yesterday GCap, one of the UK's leading commercial radio broadcasters, announced that it will close two of its leading DAB stations, TheJazz and Planet Rock (the latter ironically described as "award-winning" in the CEO's website introduction), and sell its 63% stake in Digital One, the DAB promotional group, to Arqiva, the broadcast infrastructure provider. According to GCap DAB "cannot be an economically viable platform" with its current cost structure. As I noted previously, DAB has had some success in the UK: it now accounts for 10% of all radio listening. But the network rollout has been frustratingly slow and patchy, and while "coverage" is claimed at 85% of the population, residents outside major towns and cities still struggle to get a usable service. The problem is similar to that in the US DTV market, in that users in marginal areas are encouraged to install a roof-top antenna to enable reception. And a professional installation multiplies the £40 invested in the DAB receiver several times over. I'm sure DAB is a wonderful thing if you can get it (although there have been complaints about reduced audio quality). My neighbour 10 yards across the road is pleased with her set. But I had to return mine to the retailer because it wouldn't receive a signal. That's how uncertain the system is, and it's not good enough for a service that aims eventually to replace analogue broadcasting through a retail, open standards model. The many millions of investment needed to correct those problems are one of the factors GCap will have looked at, and why they have the passed the buck back to the owners of the broadcast infrastructure. Likewise in the US, as the DTV convertors leave the retailers' shelves and reach customers' homes, the real test will be when they start getting returned as unusable, or simply gather dust. Some users will be lucky: many others will simply give up and switch to cable or satellite, or indeed stream or download from the Internet. Client Reading: Broadcast Under Threat: Over-The-Top Video Distribution Add to Technorati Favorites