March 10, 2010 00:03 bpiper
"Life used to be easy,” says Duco Sickinghe, CEO of Belgian Cable operator TelenetOnce upon a time, the company had only to worry about keeping its television customers happy. Today it faces a new competitive reality; one where the triple play bundle of voice, video and data has become table stakes, and effective differentiation is paramount. Indeed, the entry of Telco companies into the television arena has been disruptive to the industry, putting satellite and cable companies on the defensive, while at the same time opening new points of entry into the subscriber’s household. In short, all bets are off. Increasingly complex  product offerings have catapulted many consumers into a state of perpetual confusion. While Cable as an industry has burnished its image in many Western European markets, in others it does not have the same history or credibility. And research suggests that it would be unwise for any operator to take its customer’s loyalty for granted. A survey fielded by Strategy Analytics in Q2’09 shows that stated satisfaction among Western European Digital Television customers is quite high, with 63% reporting to be either “somewhat” or “very satisfied” with their current service. However, when presented a competing offer, 20% cheaper, a full 45% said they would make the switch. Cable’s competitive positioning varies by country, though historically it has been portrayed as a “value offer,” competing largely on price. While there is much talk of evolving cable into a premium offering, Strategy Analytics’ research confirms that consumers are still relatively price-sensitive. The same survey showed that, irrespective of platform, Western European digital television consumers have a low perceived “value for money” from their provider, with only 21% saying it “exceeded” or “greatly exceeded” expectations. Even lower-rated was customer and technical support—with only 12% finding their provider to exceed expectations. The challenge facing operators, then, is to simultaneously and consistently demonstrate value for money and service excellence. Nobody said it was going to be easy.

March 5, 2010 20:03 dmercer
As promised, a quick preview of our games console forecast which will be published early next week. No surprise that Nintendo’s Wii stands in the lead at the moment, within the current generation of systems, in terms of global installed base. We estimate that there will be nearly 76 million Wiis in use worldwide by the end of 2010. But the signs are that the Wii has peaked in terms of console sales, and its installed base will begin to decline after 2011. Meanwhile, Sony’s PS3 and Microsoft’s Xbox 360 will continue to grow, so that the PS3 will become the largest platform globally by 2013. In terms of cumulative lifetime sales we expect the PS3 to hit 127 million units, compared to 103 million Wiis. These estimates are derived from our core forecast scenario, but we have developed various scenarios for each platform. Uncertainties clearly surround each of the major platforms, particularly relating to the new services and upgrades planned by Sony and Microsoft. Natal on the Xbox could be more beneficial to 360 sales than expected, and Sony’s own motion controller, together with its plans to upgrade all PS3s to 3D capabilitiy, also represent potential for upside to our core forecasts. This year’s global market for consoles is likely to fall again, after a 6% decline last year. For 2010 we are predicting global console sales of 47.5 million, a 9% decline.The Wii will account for most of that decline: sales of the PS3 and Xbox 360 are predicted to increase. David Mercer Client Reading: Global Video Game Market Forecast Add to Technorati Favorites

March 2, 2010 13:03 dmercer
As a long term Sky TV customer I’ve often been frustrated at the lack of attention the company gives to its loyal customers relative to its interest in winning new ones. While I understand the business goal – winning new customers is always much more expensive than retaining existing ones – as a customer it can leave a sour taste in the mouth. That taste was sweetened this morning by an unexpected call from Sky customer services offering me a new HD DVR, together with 12 months’ subscription to HD channels, all at no additional cost. No set-top box charge, no “set-up fee”, no installation charge, no further commitment. The normal fee for an existing Sky customer to upgrade to this package, as still described today on the company’s website, is £180 - £60 set-up cost plus 12 months of HD channels at £10/month. From £180 to zero – that’s what I call a discount. I couldn’t let the fact that I don’t yet have an HDTV, or my general rule to reject all cold calls, prevent me from accepting this offer. Sky’s latest HD DVR should represent a vast improvement over my 9-year-old Sky+ model, in speed and ease of use, interface and EPG, and storage capacity. I won’t get the benefit of the HD channels, but maybe, just maybe, those free channels will be enough of an incentive for me finally to replace my CRT TV. Sky’s initial financial loss on this, and presumably many other HD upgrades, results from their determination to remain competitive in the years to come. The resistance of many of their customers to subscription fees is high, as shown by our own user research. We found that, while Sky’s overall satisfaction ratings are high, more than a quarter of Sky’s customers would switch to another provider offering the same service for 10% lower monthly fees. We also found that more than a third of Sky’s customers do not rate the company as meeting expectations on value for money. With this new offer, although it is limited to selected existing customers, is aimed at the right spot: to make sure its subscribers are not lured away by competitors such as Freeview HD, Freesat HD, Virgin Media and BT Vision. While none of these alternative providers offer the exact same package as Sky, they are each, in their own way, becoming more competitive in certain aspects. Slowly but surely it seems as though the UK pay and multichannel TV sector is finally opening up to greater levels of competition. Whether Sky’s financials can withstand the impact of these customer retention strategies remains to be seen. David Mercer Client Reading: BSkyB Results Shine But Warning Signs Evident In Customer Value Ratings Add to Technorati Favorites

February 25, 2010 02:02 bpiper

An FCC report released February 23 announced the findings of its National Broadband Plan Consumer Survey, “Broadband Adoption and Use in America.” The findings reaffirm what Strategy Analytics has been saying for years about the state of Broadband in the United States. Namely, that in the "metrics that matter," including speed, availability, penetration and price, the US falls woefully behind. The FCC study finds that 67% of US households “contain a broadband user who accesses the service at home,” in line with the Strategy Analytics estimate of 63.4% household broadband penetration in 2009. According to the study, 93 million Americans (representing roughly 43 million households) are so-called ‘non-adopters.’ The reasons cited for “non adoption” of broadband include affordability, digital literacy, and relevance. These barriers to adoption will be—and must be—overcome in the near future.

Affordability Remains an Issue in US

Thirty-six percent of the “non adopter” respondents in the FCC study cited affordability as a key barrier to broadband adoption. Indeed, Americans do pay more on per Mbps than most of our peers. When it comes to faster speeds (i.e., above 50Mbps offerings), the “rip off factor” is even more evident. We estimate that, on average, Americans pay almost $16 per Megabit received to the home. In Korea, the amount is $2.00. Central to the relatively high cost of broadband in the US is the lack of meaningful competition. With essentially zero intra-platform competition, service providers have little incentive to innovate offerings beyond par. PRICE_PER_Mbps

Digital Comfort Factor and Relevance

Another notable finding from the study was the importance of digital literacy and ‘relevance’ as barriers to adoption. Twenty-two percent of non-adopters indicated a lack of comfort with the technology, while 19% saw little if any personal relevance. Of the one-third of American households falling under the “non-adopter” category, the largest sub-group doesn’t use the Internet at all. This particular category was older, lower-income, and less educated than occasional non-home users and/or dialup users.

Growth Opportunities Remain

Despite the 93 million unconnected Americans estimated in the report, Strategy Analytics continues to be bullish on the future of broadband in the US. We expect household penetration to breach the 80% mark by 2013.  Why?
It’s Generational
It’s not surprising that older Americans are more intimidated by (and see less need for) broadband. This group, however, is being replaced by a generation who will have known no world without broadband. They won’t be able to imagine a world without ubiquitous connectivity.
People Come Around
As was the case with non-adopters of microwave ovens, VCRs, cable tv and cell phones, people eventually do come around. Interestingly, 78% of the “Digitally Distant” (non-Internet using) respondents had cable or satellite tv at home, and over half had a cell phone.
It’s Inevitable
Broadband is so tightly woven into the fabric of our culture and society that it is almost impossible to imagine a future devoid of the technology. We truly do live our daily lives online, and the pipe dreams of five years ago are fast becoming reality. Telepresence, a technology until recently dismissed as a niche enterprise application, will be launched to consumer households this year. Telemedicine and distance learning are inching their way into the mainstream of American life. US_HOUSEHOLD_BROADBAND_PEN

February 15, 2010 18:02 dmercer
The rapid re-emergence of 3D in the television and video industries is beginning to reach “real” consumers. I was tempted into the Sony Style store in Boston’s Copley Mall recently by a window poster offering the chance to “see 3D in action”. After circling the store with no sign of said “3D in action”, a sales consultant pointed me, with slight embarrassment, to a PS3 connected to an LCD TV. “This should be showing 3D, but we were sent the wrong box.” Further inquiry revealed that “Singapore”, whatever might be there, had shipped a faulty hard disk drive for installation in the PS3, and the store was awaiting a new module, presumably along with the sort of firmware upgrade to be offered to all PS3 owners later this year to enable 3D Blu-ray playback. Personally I have seen enough 3D demos to last a lifetime, so this disappointment represented no great loss. But Sony will clearly have to avoid such problems for US-based customers interested in 3D Blu-ray players and TVs once they are offered for sale. Effective in-store technology demonstrations have always been one of the major obstacles to commercial success, and 3D will be no different. Minor issues such as these will be overcome as the technology matures, but they will be replaced by other practical questions such as how 3D glasses are stored, demonstrated and secured. Retailers will have other headaches too, as an excellent article in specialist trade publication, CE Daily, revealed last week. The incompatibility of passive (side-by-side) and active (eg Blu-ray) 3D systems is one of the major faultlines in the realm of 3D standards. The Blu-ray 3D standard specifies only the active approach, which is generally accepted to offer the best quality available today, and will be compatible with TVs with active displays and the transmitter necessary to communicate with active shutter 3D glasses. Panasonic recently became one of the first major companies to announce sales of new, active 3D TVs. It will sell 50” and 54” plasma sets in Japan, starting at around $4800. One pair of glasses will be included in the bundle; additional pairs will retail at around $112 each. But, as CE Daily’s Barry Fox reports, it seems, as long suspected, that some TVs will be launched which will only support passive 3D technologies, from vendors such as Hyundai and JVC. These TVs, which are likely to cost considerably less than the first active 3D sets, will be suitable for broadcast 3D services from Sky, which are only using the passive approach. But they will apparently not be compatible with 3D Blu-ray players (including the PS3), at least not without some modification or add-on transmitter device. They will also apparently not incorporate the latest HDMI 1.4 ports required for 3D Blu-ray and other potential active 3D systems. We wrote nearly a year ago that BSkyB, which had just announced its intention to launch a 3D service, was unconcerned by 3D standards issues. But that narrow perspective ignored the dilemma which now apparently faces retailers anxious to push sales of new 3D devices and software. Sky’s 3D customers will need new TV sets; but will retailers tell them (will they even know) that some of those TVs may not play 3D from Blu-ray discs? Buyer, as always, beware. Client Reading: Consumer Imperatives for Digital TV Media Browsers Add to Technorati Favorites

February 10, 2010 14:02 bpiper
A report we just published  analyzes the findings from a nationwide survey of 856 US Digital Pay Television consumers.  In it, we look at satisfaction for key performance  metrics, analyze customer willingness to churn, and look at the role of the bundle in mitigating churn.  This is presented at both an overall and platform-level (including Cable, Satellite and TelcoTV / IPTV). A few key findings from the report:

Digital Television Satisfaction is High Overall, but Cable is Still Vulnerable

Seventy-one percent of respondents in the survey reported to be "somewhat" or "very" satisfied with their current service. While this may seem like positive news for the digital television industry, the story changes somewhat when viewed at the individual platform level. The differences among Cable, Satellite, and IPTV were impressive, with  Telco/IPTV customers reporting 95% overall satisfaction, compared to 67% for Cable. Cable underperformed in virtually every satisfaction metric.

Low Perceived "Value for Money" among all Digital Pay TV customers

Virtually across the board—and irrespective of platform—respondents reported low satisfaction in the metric of `Value for Money.' There was very little measurable difference by platform among respondents, and in all cases, fewer than 22% of respondents felt the service "exceeded" or "greatly exceeded" expectations of value for money. This is among the most important findings of study, as it underlines the vulnerability of pay television in its current state. Indeed, in a report published in 2008, we found that over 50% of US digital pay television customers would be willing to scale back or completely drop their television service if household budgetary circumstances dictated.

Cable Customers Most Willing to Jump Ship

Despite a high stated satisfaction rate, digital television respondents displayed relatively high price elasticity. A somewhat surprisingly high percentage of respondents indicated a willingness to switch providers when offered a competitive deal 10% or 20% cheaper than their current spend. Cable customers displayed the highest propensity to churn, with 47% saying they would switch for a 10% price discount. When the price discount was raised to twenty percent, over two-thirds (68%) said they were willing to jump ship.

Malaise?  Angst?  Ennui?

Whatever it is,  it doesn’t feel good. Despite a rather high stated satisfaction level, pay television customers in our survey indicated a substantial willingness to churn, and a general feeling that they were not getting high value for money from their television service provider.  Both of these factors further underline the threat that Over-the-Top (OTT) distribution poses to traditional service providers. Among platforms, IPTV appears to being doing best in terms of satisfaction and anticipated growth.  Its success, however, is not a foregone conclusion. DTV_CHURN_2

February 4, 2010 18:02 dmercer
We met with Sony Playstation's senior European executives today for a performance update and to hear plans for 2010 and beyond. After what the company described as a challenging 2009 the PS3 nevertheless appears to be in a strong position as we enter 2010. I can't release any detailed European market data yet, but we will be publishing our own estimates and forecast for console sales very shortly. But the general global outlook for the current generation of home consoles appears to be clear. In terms of annual sales volumes Nintendo's Wii is entering a period of decline, although its global performance in 2009 held up well. The Xbox 360 has peaked in terms of annual sales, while sales of the PS3 are still on an upward trajectory. So while the PS3 still ranks third globally in terms of installed base, this situation may not last much longer. Much depends on assumptions about the longevity of these platforms. As we have always argued, the PS3 was designed with longest term vision in mind, and that is now being demonstrated by global sales patterns. However the uncertainty surrounds the impact of system upgrades such as Natal and Sony's motion controller. These are likely to give renewed impetus to both platforms. We'll release our conclusions together with market data projections in the next week or so. Client Reading: Consumer Imperatives for Digital TV Media Browsers Add to Technorati Favorites

January 28, 2010 02:01 dmercer
Apple cynics seem to have taken the initiative following the announcement of Apple’s iPad internet tablet. I tend to shy away from anything as hyped as this product has been. Surely the most hyped Apple device ever... And for that reason alone I am feeling underwhelmed. Is the iPad really what this was all building up to? Let's think about the applications: Books - ok, I get this. if you want e-books this seems like a reasonable way to carry and read them. A nice way to read newspapers as well – I’m not sure the publishers will make money from it though. Web browsing and applications - I suppose the brower must work well. This is definitely the primary set of apps in my view. Consumers need an easy and fast way to get to websites quickly when they’re at home and don’t want to boot up the laptop. Music - ok, but who would rather listen to their music through a 1.5 pound portable device with (presumably) tinny speakers rather than either a) a small iPhone/Pod plus headphones, or b) plus docking device? Photos - yes of course – iPad could be a very nice digital photo frame. Games - could eventually become a killer app but control and input functions will need to be adapted to a larger screen device and iPhone app developers need to get to work to match the screen's HD resolution. Productivity applications - I'm struggling here. is this really how the iPad is going to get used? The virtual keyboard may be good, although early reports are not promising. But think about how are people going to hold or rest this device: sitting down in a chair - it would have to rest on the flat table, so you are leaning over it to use it properly. Sitting in an armchair - so it's on your lap, but again you have trouble positioning the screen at the right angle; or standing, so you hold it resting in one arm and only have one arm free to touch the screen. Or you use a stand and add-on keyboard, and it becomes... a laptop! OK, maybe the iPad could be used occasionally for productivity applications, but I just don't see this device as a breakthrough for work-based devices. and finally... Video. Video playback is reported as stunning - I can believe this. But where are the extra video content applications or TV deals? The specialised video apps like TV-transfer? No HDMI for TV connection? Apple seems to be struggling more than ever to break into the home video market in a big way. And no multi-tasking… this is crazy. I can't play music while I surf?! Form factor: maybe I was expecting too much from Apple, but really the iPad is hardly a revelation. Have they done what we expected? ie take all previous tablet-type implementations, improved on them and added innovative style and usability and content integration to create a unique package? I don't see this from what I've read and seen. And it's too heavy to be held in one hand, much heavier than some e-readers. Wireless: So the key question - how often would this device be used in truly mobile situations, and of those situations, how often would a user need to have cellular data service? The cellular service can be bought ad hoc - and I think it will be primarily. Not much new recurring revenue for carriers there then... The iPad is surely primarily a “free data” wifi device. It doesn’t need always-on connectivity for messages and voice - I'm always going to carry a phone for those. I can get online for websites and apps via hotspots when needed, and primarily use my home broadband to load it up with content. Having said all this, of course the lower than expected price points mean they will sell millions to Apple fans who won't blink at spending another $500 on the latest Jobs gizmo. (And did anyone at Apple really not investigate the unfortunate connotations of the device name for the female market? - one wonders if Jobs has really lost his touch.) Client Reading: Consumer Imperatives for Digital TV Media Browsers Add to Technorati Favorites

January 15, 2010 19:01 bpiper

In a report to be published in the few days, my colleague Martin Olausson and I talk about the new challenges facing France Telecom (Orange), in light of a recent ruling by the French Competition Authority. According to a commission appointed by France's Competition Council, Orange’s exclusive carriage of channels on its “Orange TV” IPTV platform “has drawbacks in the short, medium, and long-term,” rendering it “undesirable to maintain.” This decision could potentially have repercussions on the entire industry, and Orange will need to fundamentally alter its marketing strategy to stay in the game. A few thoughts…

If not content, then what?

Strategy Analytics has long held that content—particularly exclusive content—would be a key differentiator and driver of IPTV uptake. Recent developments in the hyper-competitive French market threaten to change that model.  Orange, which was unable to differentiate itself on the basic services level, has pursued an aggressive content strategy in recent years, spending over €200 million to acquire exclusive rights to sports and other content, packaged under its Orange Sport and Orange Cinéma Séries brands. The strategy has worked quite well for the operator, and utilizing exclusive content to market its pay TV services has led to rapid growth of its pay TV segments. Now all of that is in limbo, and the operator will need to find other ways to stand out.

Pricing matters…but differs by region

One of the takeaways of a report we published back in September was that platforms don’t matter to customers—features do.   Well, features and price. Further customer survey work we have just completed confirms that price as a churn motivator depends largely on the individual market. Our research shows French consumers to be the least motivated by price, and those in the UK most influenced. DTV_CHURN2 Much of this has to do with consumer perception. In France, all the major triple play service providers offer very similar packages at essentially the same price. Our interpretation is that the typical French consumer might not feel it worth the time to make a switch—even for a 20% discount. The perceived disparity is much greater in markets such as the UK, where pricing and bundling disparities are much more pronounced.

Challenge is in finding ‘non-content differentiators’

The recent ruling by France's Competition Council suggests that the “traditional” differentiation through content may not be viable for much longer. As such, operators will be forced to find other ways to differentiate and “own” the customer. The easiest way to do this, in our opinion, is to control the gateway into the home and offer a better QoE, and more value for money (i.e. better bundles) for the consumers than the competition.

January 11, 2010 09:01 dmercer
Sony has introduced what it calls a new device category at CES 2010: the “Personal Internet Viewer”. This takes the form of Dash, a small, 7” touch screen internet access device with WiFi access to the home network. It will launch in April 2010 and retail at $199. Dash is based on Flash technology, so, “for Flash, get Dash”. Dash is based on Chumby’s internet service. It currently features more than 1000 internet services and applications across social networking, news, music and video, and can access video from Sony’s Bravia internet video platform. It can run multiple applications simultaneously. One drawback is that it is only mains-powered, so in-home portability is out of the question. Nevertheless we felt this was a very nice implementation of a simple to use, and relatively inexpensive internet access device. At $199 it could well become a favourite for kitchens and bedrooms. We were also impressed with the progress made by Plastic Logic, a company originating from the well-known hub for advanced display technologies – Cambridge in the UK. PL was showing off its QUE ProReader e-reader. At $649 the product is aimed very much at the professional needing to access multiple documents on the move, such as newspapers, books, newsletters and reports. Barnes and Noble is behind the QUE bookstore, and connectivity is via WiFi and AT&T’s 3G network. The device is extremely thin, light and easy to read, and battery life is supposedly several days in normal use. If volume sales lead to cost efficiencies and price declines this technology could find its way into the mass market. In the meantime the company is looking towards adding colour and eventually video capabilities. Client Reading: Consumer Imperatives for Digital TV Media Browsers Add to Technorati Favorites