Back in September 2012 I published this report “TV Delivery Evolution: Hybrid TV, Over The Top (Internet) TV and TV Everywhere (Multi-Screen) TV. Status Report and Projections 2012-2017.”  A friend recently asked if they could buy the report, so I reread the material, and I was surprised at how far we have moved in the 6 months since its publish date.  The case studies, analysis, and projections remain correct.  But so much has happened since that I wasn’t comfortable asking my friend to pay for it as it needed a refresh, so I’ve made it free.  This is an increasing challenge for all reports, unless they’re tracking an area which moves relatively slowly like IMS (IP Multimedia Subsystem) or the Services Domain, the reports age so quickly.

The report is at the bottom of this article, and if you contact me at ‘info (at) alanquayle.com’ I’ll send you the PDF.

The TV industry is going through a period of change more significant than the conversion from analog to digital, as significant as the creation of the industry itself when on 2 November 1936 the BBC began transmitting the world’s first public regular broadcast TV service from the Victorian Alexandra Palace in north London.  In the conversion from analog to digital customers generally perceived little change in the core TV service or service providers, perhaps a few more channels and the availability of additional services like internet access, fixed voice, video on demand, and eventually High Definition TV and 3DTV.  It’s important to view the current change from the perspective of the decades long cycle analog to digital conversion is taking.

From a technology perspective the current change is stimulated by the convergence of the internet that can now support adequate quality video services lessening the barrier to entry of a national TV distribution infrastructure, and consumer electronics that has made video consumption pervasive and on the customers’ terms; it is impacting the whole of the TV ecosystem.

Viewers have new consumption options and new video service providers, e.g. a library of tens of thousands of movies and shows available over the internet for only $8 per month with no advertising.  Viewers can watch their payTV service and recorded shows anywhere they take their laptops, tablets and smartphones (they are all computing devices just of different sizes) as long as they have an internet connection.  Content owners have created their own internet-based catch-up TV / VoD (Video on Demand) services, e.g. Hulu, HBO Go and BBC iPlayer.  PayTV providers have rushed out partially formed TV Everywhere (multi-screen TV) offers.  And Hybrid TV has rapidly become pervasive since the last version of this report was written in 2009 / 2010, e.g. most satellite TV in developed markets have adopted Hybrid TV to support on-demand and interactive services.

The later changes of content providers support of new TV delivery models and proven consumer demand / acceptance of those new TV delivery models are critical to why the current changes are more significant than the move from analog to digital.  The whole of the TV ecosystem is changing, not one component of the ecosystem.  This will in time enable Google, Apple, Netflix, Amazon, Facebook to become payTV competitors, not directly at first, rather capping expansion of payTV revenues, but in time competing more directly as viewer habits evolve.

We are only at the start of the beginning of the change that the internet and consumer electronics convergence will have on the TV industry; it will be a multi-decade-long change, just like the conversion from analog to digital that is still ongoing.  Only in 2012 did the number of digital TV households exceed the analog TV households in the world.  This report takes a global view, analyzing what is happening outside North America as much as what is happening in North America.  As an independent consultant I have the fortune of not having a pay-master with an agenda to set; whether that is to sell a product, maintain a service provider’s stock price, or keep a group of major clients overpaying for projects.  I consult with payTV providers, internet companies, and technology suppliers around the world.  I live in the North American market and will share my direct objective experiences from being a consumer of bleeding-edge TV services as well as consulting around the world on TV projects.

This report is purposefully broad in scope to provide a reference text in the evolution of TV delivery.  OTT (Internet) TV cannot be viewed as a silo, it must be considered in the wider evolution of the industry, and today OTT TV is generally consumed as a complement to traditional payTV services, not as a substitute, this makes internet TV a latent threat.  I have included the feedback provided by the over 17,000 readers of the old report written in 2009/2010, and thank you all for the excellent feedback and guidance in creating this report.

The overall structure of the report is divided into 4 sections:

• Providing an understanding of the TV market’s current status and projections from 2008 to 2017;
• Learning from real-world case studies and surveys;
• Understanding what the viewer is thinking; and
• Then bringing it all together into a view on the future of TV delivery and specific recommendations.

The global TV market analysis examines the breakdown of households across platforms: Terrestrial, Cable, Satellite, IPTV (IP Television), and OTT (Over The Top); across analog and digital; and hybrid and non-hybrid TV.  The global analysis is then broken down into country specific analysis providing a summary of TV households’ primary viewing platform trends from 2008 to 2017 for interesting markets around the world.  The 17 markets reviewed in detail include: Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, Russia, Singapore, South Africa, Sweden, Turkey, United Kingdom and the USA.

16 Hybrid TV case studies including: AT&T HomeZone (discontinued service), Verizon FiOS, DirecTV, DISH Networks, BT Vision, Sky UK, Orange TV, Canal+ Le Cube, Deustche Telekom T-Entertain, Telecom Portugal Meo, Telefonica O2 Czech Republic O2TV, Hansenet Alice TV (now Telefonica O2), Telecom Italia CuboVision, JazzTel and Telefonica (Spain), Comhem, and Telecom New Zealand and TiVo.

25 TV everywhere case studies including: AT&T, Belgacom, Bell Canada, Bharti Airtel, Cablevision, Charter, China Telecom, Comcast, Cox Communications, DirecTV, DISH Networks, Mediaset, Orange, Rogers, Romtel, SFR, Shaw, SK Telecom, Sky Germany, Sky New Zealand, Sky UK, Swisscom, Telecom Italia, TerraTV, and Time Warner Cable.

44 companies reviewed in the OTT market analysis across: 4OD, Amazon Instant Video, Apple TV, BBC iPlayer, Blockbuster on Demand, Best Buy CinemaNow, Consoles (PS3 and xbox), Crackle, Demand Five, Google TV, Hulu Plus, ITV Player, Netflix, Wal-Mart Vudu, HBO Go, Acetrax (bought by Sky), Blinkbox, Film2home, Film4OD, Filmisnow, LOVEFiLM, Maxdome, Roku, Smart TVs (LG, Panasonic, Philips, Samsung, Sharp, Sony, Toshiba), Sky Go, Sony Video Store on PS3, SF Anytime, Tablets (iPad, Android, Kindle Fire, Nook) Video Futur (Glowria), Videoland, Voddler, Yahoo TV, and YouView.

Four new surveys across the TV Ecosystem:

• Hybrid TV survey: January to May 2012 a survey of 75 hybrid TV operators was undertaken across IPTV (DSL), Satellite, Cable / FTTH (Fiber To The Home) and Broadcast.  The results of this survey are compared to that of a 2009 survey shown in the previous version of this report.  The 2009 survey was conducted in September and October 2009 across 82 hybrid TV operators, generally IPTV (DSL) operators.
• TV Everywhere Survey: A survey was conducted between April and June 2012 of PayTV providers around the world on their TV Everywhere plans. Interviewees included 75 operators and 11 content providers / studios, with a total of 97 people interviewed (multiple representatives from some operators).  They were all responsible for TV Everywhere services, and generally VP level or above.  Most either know me, or were introduced through a friend so most conversations were frank and open.
• Future of TV Survey: Global survey across 81 members of the TV ecosystem during the summer of 2012, June-August.  This is also compared to a similar survey undertaken in 2009.
• Viewer Survey: 241 payTV viewers in North America and Western Europe, across a range of geo-demographic profiles.  Viewers were interviewed over the phone, or completed an online survey during May 2012, with follow-up questions in June 2012.

The challenge the payTV industry faces is its strength is also its greatest weakness, a profitable well-established ecosystem that is resistance to change and hence innovation; the Innovators Dilemma.  The threat from the web-based service providers is latent; over the study period of this report OTT TV will become the dominant secondary viewing platform in many markets; 67% of payTV households in the US, and likely 50% of Western European households by 2017.  It will only become a primary viewing platform for a niche of viewers, with subscription revenues dominating; the situation will financially appear OK.  The main threat for the period of study is capping of interactive TV revenues, new advertising revenues and losing control of the emergent TV applications business; which will remain relatively small, perhaps reaching 8-14% of existing subscription and advertising revenues by 2017.

But by 2017 payTV providers in North America and Western Europe will find themselves in a precarious situation.  OTT TV will be capturing the hearts and minds not only of viewers, but of advertisers, and in time content owners.  So that without adequate response from the payTV industry, the constant well-funded innovation from the OTT TV providers could finally find the right recipe to attract the bulk of the ecosystem so that core subscription revenues could be halved within a little as 5 years of that recipe being found.  But this tipping point is difficult to predict, and may not happen if payTV operators take adequate action.

There is much to learn from the struggles both the mobile and fixed telecom industries have faced over the past two decades in competing with web-based service providers.  They tried and failed to create application ecosystems, proving unable to open their networks and business models on terms that make sense for all ecosystem members, they were too self-focused.  They have let the user experience become dominated by over the top providers that are substituting revenues, e.g. Apple’s iMessage is substituting highly profitable SMS revenues.  Android phones make is as easy to use OTT services as operators’ services for voice and messaging.

PayTV providers and their suppliers must:

• Innovate with other ecosystems.  TVE must be more than simply delivering TV to other screens.  TVE must explore other business models in co-operation with the content providers, advertisers and other ecosystems.  Getting smarter with the packaging and bundles to squeeze additional cash out of those customer segments prepared to pay; offering innovative interactive services to win additional advertising and sponsorship dollars; and an eBay model in TV content, i.e. bringing content buyers and sellers together and taking a cut of the transaction.
• Focus on customer experience.  That’s so much more than the TV interface; it’s across every touch-point with the customer.  Do not repeat the mistakes of partial service launches that plagued TV Everywhere, it makes payTV operators appear out of touch and incapable of matching the performance of Netflix, Amazon, Apple, Google, etc.  Dish Network is doing some great service innovation, but its basic customer service is letting it down, it’s across the whole customer experience.  Segmentation is critical, different customers have difference needs, and operators must understand their customers to survive in the long term.
• Find a way of acting together with agility.  There needs to be some down-side to selfish service provider behavior that invariably kills industry initiatives such as Canoe Ventures and WAC (Wholesale Application Community).  Put simply, financial markets need to penalize operators for failing to act together in competing with the latent threat from OTT TV.
• Consolidate both nationally (cable franchises) and multinationally (across all payTV operators) as the OTT TV will bring its global scale to achieve advantages in content rights, cost of operations, vendor negotiations, and marketing power.  The current fragmented mess of payTV operators must in the long term either consolidate else wither and die.

From the timings discussed in this report it would appear we have time; however, 5 years is but a blink of an eye for payTV providers and their suppliers to fundamentally change their business to focusing on the diversity of customers rather than operating their single network.

Title: TV Delivery Evolution: Hybrid TV, Over The Top (Internet) TV and TV Everywhere (Multi-Screen) TV. Status Report and Projections 2012-2017.
A reference text in the evolution of TV delivery.  OTT (Internet) TV cannot be viewed as a silo, it must be considered in the wider evolution of the industry, across payTV, Free to Air, hybrid TV, TV everywhere, broadband, regulation, consumer trends and the interplay of actors across the TV ecosystem.
Published: September, 2012
Pages: 307
Figures: 165
Interviews: Over 900 operator, regulator, viewer and supplier interviews and online questionnaires across 6 global / international surveys.
Case Studies: 17 detailed country analysis, 16 Hybrid TV case studies, 25 TV Everywhere case studies, reviews of 44 internet TV companies.