From Cloud to Consumer, TV Everywhere Business Realities Guy Bisson, Research Director, Ampere Analysis ANGA Cable, June 2016 1
Ampere Analysis 2
Fundamental shifts in the TV economy over the last decade 300 250 200 2007 Online advertising passes public TV Two key inflection points Globally & another on the way? 2012 Pay TV becomes dominant force in TV economy $bn 150 100 >2020 OTT subscription to pass public TV 50 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Online Advertising OTT subscription Public TV Pay TV TV Advertising 3
Growth wise SVOD net additions now outstrip pay TV in EU 4000 3500 3000 Net additions (000s) 2500 2000 1500 1000 500 0 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Subscription OTT Pay TV 4
European SVoD homes consistently rank linear channel brands lower NPS for linear channel brands in all homes vs. homes with SVoD 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0 45,0 Warner Channels Viacom Channels 24,3 27,9 29,6 30,0 Sony Channels 21,3 24,1 NBC Universal Channels 18,7 30,6 Disney Channels 20,6 27,6 Fox Channels 15,2 14,9 Discovery Channels 22,9 22,3 HBO Channels 9,7 10,3 16,7 ZDF Channels (DE) 26,3 NPS All viewers (all ages) NPS All viewers (18 24) NPS SVoD homes (18 24) BBC Channels (UK) 5,2 11,0 ITV Channels (UK) Net promoter Score (NPS) is based on a scale of 0 10 where respondents are asked to say how likely they are to recommend a service or service provider to a friend/colleague. Promoters are those ranking 9 or 10. Detractors are those ranking 0 6. NPS = Promoters less Detractors. NPS is a measure of service satisfaction. Providers with a higher NPS generally perform better than competition with a lower NPS. Sample is 9,000 European homes of which 2,568 have SVoD. Survey March 2016. 13,4 18,7 5
As the app ascends among millennials, PSBs risk losing control of the access point In new Netflix markets incumbent s apps still rule In established Netflix markets, the picture is mixed 600% 80% 500% 60% 400% 40% 300% 20% 200% 0% 100% 20% 0% Atres Player (ES) RTVE (ES) TeleCinco (EX) Raitv (IT) Video Mediaset (IT) % more (less) likely to have than Netflix (18 34 yo) TIM Vision (IT) 40% 60% % more (less) likely to have than Netflix (18 34 yo) 6
Does SVoD influence pay TV churn? % deserting pay TV 35% 30% 25% 20% 15% 10% 5% Around one in five pay TV leavers deserts traditional pay TV for good 15% 15% 16% 19% 20% 20% 20% 23% 24% 28% 32% 25% 20% 15% 10% 5% Churn rate (%) % 350 300 250 200 150 100 50 Pay TV churners % more likely to have SVoD than average 0% % churners leaving pay TV Churn rate 0% 0 % more likely to have SVOD than average Chart shows the proportion of people who churned from pay TV in the last six months (June Dec 2015) who did not go to another pay TV platform (bars) and the base pay TV churn rate (line) 7
Is it an age thing? Age mix pay TV vs SVoD only 18 24 35% 30% YouTube 18 24 year olds Top video apps 25% 20% Netflix 55 64 15% 10% 25 34 Facebook 5% 0% Torrents Instagram Amazon Instant Video 45 54 SVoD only Pay TV only 35 44 Snapchat 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% Watched in past month 10,500 consumers. March 2016 8
Meet the Content Connoisseur Young, wealthy & highly engaged with both content and devices. A key target to future proof pay TV Nearly 50% of SVoD homes and 43% of all 18-24 year olds fall into this segment*. Love to have the latest technology and don t mind paying for it. Watch a little less TV than average, favour ondemand, online and catch-up TV. * Ampere Analysis has identified five key consumer segments that help qualify and quantify behaviours around TV consumption. Content Connoisseurs are one of these five segments. Big challenge is that this group truly believes they simply won t need broadcast TV within the next five years. 9
Content Connoisseur s watch TV differently Viewing in the Content Connoisseur home Video App Installations 02:24 02:09 01:55 01:40 They watch a little less TV TVoD Multiscreen And they use apps for a good part of their viewing 01:26 Hrsms 01:12 00:57 00:43 SVoD Catch up 00:28 00:14 00:00 CONTENT CONNOISSEURS And a lot less linear AVERAGE Linear Vod (from pay TV) Vod (other sources) DVR Catch up Free VoD 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Average Content Connoisseurs 10
Consumers are already building their own nextgeneration bundles 1.8x 1.5x Netflix 2.5x UK Netflix customers (255/1002 sample survey) 1.4x 11
The next generation bundle is not necessarily about ditching paid-for TV 9.99 9.99 6.99 5.99 38.95/month 5.99+ 12
Overall, a vicious/virtuous circle is ploughing the path to DTC Viewer/advertising spend shift to online Operators push back on channel carriage DTC launch to recoup margin Content owners margins squeezed 13
DTC shifts channel distribution costs from fixed to variable 400 350 300 Balancing the books: start up costs for OTT channel 250 200 150 100 50 0 SD satellite channel Fixed costs Variable costs SD OTT channel 14
UHD push from start & end of supply chain: Distribution battle in the middle? DVB S2 Satellite Transponder Throughput: ~55Mb/s Ready for UHD Ready for HD Connected Device SD (MPEG 4) Bitrate: 1.5Mb/s # of Channels: ~30 Channel Cost: $125k HD (MPEG 4) Bitrate: 3.5Mb/s # of Channels: ~15 Channel Cost: $250k UHD (HEVC) Bitrate: 15Mb/s # of Channels: ~3 Channel Cost: ~$1m Distribution OTT Stream Content Capture (Camera) Content Editing Content Processing SD (MPEG 4) Bitrate: 1Mb/s 10m Stream Cost: $180k HD (MPEG 4) Bitrate: 2.8Mb/s 10m Stream Cost: $504k UHD (HEVC) Bitrate: 10Mb/s 10m stream Cost: $1.8m 15
Thank you guy.bisson@ampereanalysis.com www.ampereanalysis.com @tvintelligence 16