Architecting the new TV Daniel Knapp, Director Advertising Research
Media trends have always sparked speculations and visions sometimes remarkably accurate How we will live in the year 2000 (German artist 1908) Apple iphone 4 (2010)
1. How we consume: the longevity of TV
The death of TV
Major channel owners launched 144 channels in 2013, FIC & Chello were most active in Europe* 35 30 25 20 15 10 5 0 2013 new-to-country channel launches
We expect overall television viewing to continue increasing over the years to 2020 350 All TV viewing time: Mins/person/day 300 250 200 150 100 50 UK France Germany Italy Spain Sweden 0
But broadcast television viewing to flatten and/or decline as non-linear mechanisms take over 350 Broadcast TV viewing time: Mins/person/day 300 250 200 150 100 50 UK France Germany Italy Spain Sweden 0 Source: IHS, national audience panels
Non-traditional viewing mechanisms driving much of the growth, but substantial country-variation 350 Non-traditional TV viewing time: Mins/person/day 300 250 200 150 100 50 UK France Germany Italy Spain Sweden 0 Source: IHS, national audience panels
Declines in TV viewing time are starting to become noticeable in younger demographic groups 7 Daily hours of broadcast TV viewing per age group (# hours/person/day) 6 5 4 3 2 1 New panel 65+ 55-65 45-54 35-44 25-34 16-24 Children 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 UK example, source: BARB
But use of online video in older age-groups is growing consistently 50 45 40 35 30 25 20 15 10 5 0 Source: BBC 2008 2009 2010 2011 2012 BBC iplayer users by age-bracket (% of users) 55+ 35-54 16-34
2. Where we consume: de-centering the big screen
Emerging device landscape threatens to disrupt traditional consumer behaviour European TV market key performance indicators 2,5 100% Devices per household 2,0 1,5 1,0 0,5 80% 60% 40% 20% Household penetration (%) 0,0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0% TV sets per HH Smartphones per HH Digital Pay TV Penetration Broadband penetration DVR penetration of pay TV
By 2020, we expect there to be 2bn connected devices across Europe 2 500 Europe: Installed connected devices (m) 2 000 1 500 1 000 500-2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
With growth driven by smartphones, tablets and smart TVs 2 500 2 000 1 500 1 000 Europe: Installed connected devices (m) Digital media adapters Pay TV set-top boxes FTA set-top boxes BD players Smart TVs PCs Game consoles Tablets Smartphones 500-2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Proliferation of video-capable devices makes monetising audiences difficult for publishers 1 200 Video-capable devices - Western Europe 1 000 800 600 400 200 0 2012 2017 Smartphones Tablets Game consoles PCs Smart TVs Other devices TV sets
So which devices are users currently relying on? PC still represents the most important platform ITV RTL M6 Pay TV, 37% Mobile/ tablet, 10% Pay TV, 43% PC, 45% Connect ed TV, 2% Mobile/ tablet, 15% PC, 46% PC, 90% Connect ed TV, 0% Mobile/ tablet, 12%
Despite proliferation of devices, focus on DVR consumption forecloses monetization opportunities Non-linear viewing as a percentage of Total TV Viewing Time 9%) 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2013: Non-linear TV Viewing Time Breakdown US UK France Germany Italy Spain In Germany, for instance we estimate that just 6% of TV viewing was non-linear in 2012 Roughly half of this was of OTT content DVR time-shifting of content represents the core of non-linear TV viewing in many markets VoD services have a far less significant effect on non-linear viewing time at the moment Pay-TV VoD OTT DVR time-shifting 18
3. Does revenue really follow eyeballs, just like that?
Funding and M&A activity trends are barometer for significance of video in digital media ecosystem Funding Amounts $250 $200 $150 $100 $50 Video Funding Activity Sum of Funding ($m) Deals 20 10 Number of Deals $0 0 6 Video M&A Deals 5 Number of Deals 4 3 2 1 0
The global digital video market is now worth almost $15bn and predicted to grow to $30bn by 2017 30 000 Global digital video revenues (consumer/nar) - $m 25 000 20 000 15 000 10 000 5 000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Digital Subscription (e.g. Netflix, Lovefilm, Hulu+) Digital Rental (e.g. itunes, Vudu) Digital Purchase (e.g. itunes, Microsoft) Broadcast (e.g. ABC, Hulu Classic, RTL) Other ad funded content (e.g. YouTube)
US-domestic and international markets are similar in size, but very different in business model composition 8 000 Consumer/NAR by bus model - 2012 ($m)* 7 000 6 000 5 000 4 000 3 000 2 000 Other ad funded content Broadcast Purchase Rental Subscription 1 000 0 US *includes TV and movies, and pay TV based platforms ROW
Mobile display advertising revenues are catching up with app spend 5 Western European app revenue & display advertising* per mobile subscription ( ) 4 3 2 1 0 2010 2011 2012 2013 2014 2015 2016 2017 Smartphone app revenue per mobile subscription Display advertising spend per mobile subscription *display includes banner, video both in-app and browser
Devices still beat content and advertising revenues 120000 iphone device revenues vs. mobile advertising ($m) 100000 80000 60000 40000 20000 0 2010 2011 2012 2013 2014 2015 2016 2017 iphone Mobile advertising
OTT revenues are growing, but account for less than 3 % of the traditional TV revenues in EU Big 5 in 2013 50 000 45 000 40 000 35 000 Big 5: OTT vs. Traditional TV revenues ( m) 2.8% of sector revenue 4.4% of sector revenue 30 000 25 000 20 000 15 000 10 000 5 000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Pay TV revenues TV advertising revenues OTT revenues
TV and movies are still behind the curve compared to other media sectors 50% % of UK sector turnover derived from OTT 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 3% 4% 4% 5% 6% 0% 1% 1% 2% 3% 2008 2009 2010 2011 2012 TV Movies Games Books Music
4. Re-thinking advertising: from averages to individuals
The data deluge: utopia & practice Technology: max computation power & algorithmic accuracy to gather, analyze, link, and compare large data sets Analysis: data informing patterns, predictions, discovering knowledge in data, correlation over causality Mythology: belief that data offers higher form of knowledge, provides insights that were previously impossible, data as magic bullet to all business problems, aura of truth, objectivity, and accuracy See also: boyd, danah and Kate Crawford. (2012). Critical Questions for Big Data: Provocations for a Cultural, Technological, and Scholarly Phenomenon. Information, Communication, & Society 15:5, p. 662-679.
Growth rates vary by market maturity, pace of adoption, structure of market players Video programmatic revenue CAGR 2012-2017 Sweden 99,3% France 95,6% Germany 95,0% Spain 91,1% Italy 84,0% Europe 77,1% UK 61,4% 0,0% 20,0% 40,0% 60,0% 80,0% 100,0% 120,0% Source: IHS 2013 IHS
Types of media owners/platforms show different adoption curves of programmatic video Big 5: programmatic share of online video ad revenue (%) 60% 50% 40% 30% 25,8% 30,3% 33,2% 20% 12,2% 18,7% 10% 4,6% 0% Source: IHS Broadcasters YouTube Other Total 2013 IHS
5. Publishers as audience architects
Most publishers are still in nascent stages of developing a data strategy Publishers in Europe in H1 2013* 20% 80% No data strategy Data strategy * source: IHS biannual publisher survey
Most publishers are still in nascent stages of developing a data strategy Publishers in Europe in H1 2013* Publishers in the US 2013** 20% 28% 80% 72% No data strategy Data strategy No data strategy Data strategy * source: IHS biannual publisher survey ** source: IAB/Winterberry Group Whitepaper
Why a data strategy? A. Demand-side innovations B. Competition from online giants C. Adding transparency to existing data regime D. Connecting audiences across screens
GRP-like metrics by Nielsen, comscore improve measurability, but put publishers under pressure Trading desks DSPs Ad Exchanges/ SSPs Ad networks
Publishers are already marginalised in display 20 000 USA: Online display NAR by company ($m) 18 000 16 000 14 000 12 000 10 000 8 000 6 000 AOL Microsoft Yahoo! Facebook Google Others 4 000 2 000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
and YouTube commands a dominating position in the ad-funded online video sector Global ad-funded video revenue - 2012 ($9.1bn) Others, 59% YouTube, 41%
Publishers need to proactively create transparency Ad tech companies suck in data and define prices on that basis. But I never had a fair answer from ad tech companies who is auditing their data. (Publisher)
Personally identifiable log-in data becomes crucial as 3 rd party cookies face pressure New service providers Growing proprietary ecosystems 1 400 1 200 1 000 m 800 600 400 200 0 Millions of users by service Apple ID with credit card icloud users Game center users Mac installed base Active buyers Activated Android devices Active Chrome users Google+ active users G+ users active in G+ Windows 7 PCs Monthly active users Mobile MAUs Mobile-only MAUs
Data strategy: adoption varies among publishers Predisposition Online portals & print Open to experimentation duet o either 1) understanding the experimental nature of online or 2) originating for a declining print business Broadcasters Reluctant to adopt new unproven techniques as they comes from a longtested TV background Aware of the urgency to use data Video ad networks Accustomed to selling audiences Most advanced in understanding the value of data Challenges State of adoption of data strategy Advanced in their thinking about data strategy Combining 1 st and 3 rd party data effectively Leveraging data with context to enhance their offering Various states of adoption from early to advanced: tend to be more advanced than broadcasters Fear of alienating users by asking for registration data Connecting data available across devices Early: the process of understanding their 1 st party data Cannot offer premium context in the way the other two can Combining 1 st and 3 rd party data effectively Advanced: already use 3 rd party data extensively and working on integration of 1 st party data
Data strategies what are publishers currently doing? Data is key to their long-term selling strategy 10% of ad revenues come from programmatic Programmatic is part of their media planning strategy, but not creative Own trading desk (Response+) to implement demand-side capabilities 1 st party data is still underdeveloped Display is traded programmatically, but not video Cautious of middlemen Work solely with 1 st party data 3 rd party data is too expensive and frankly not very good Direct sales remains the primary and preferred channel Cooperate with other publishers in data strategy
Thank You! daniel.knapp@ihs.com @_dknapp