Transcript Analysys Mason document

Information on Analysys Mason expertise
Understanding the impact of connected TV from a
global, 360-degree viewpoint
July 2012
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Confidentiality notice
 Copyright © 2012. The information contained herein is the property of Analysys Mason Limited and is
provided on condition that it will not be reproduced, copied, lent or disclosed, directly or indirectly, nor used
for any purpose other than that for which it was specifically furnished
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Contents
Background on Analysys Mason as a leading global advisor
Understanding the trends and complexities in connected TV
Analysys Mason has a unique combination of expertise
How we could we help you take action
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Background on Analysys Mason
Analysys Mason specialises in telecoms, media and technology (TMT)

We understand the complex workings of telecoms, media and
technology (TMT) industries

We deliver our key services via our Consulting and Research
divisions


We advise on regulatory matters, support multi-billion-dollar
investments, advise on network performance, and recommend
commercial partnering options and new business strategies
For over 25 years, our consultants have worked with clients
around the world to make the most of their opportunities
Regulation
Regulation
and
and policy
spectrum
Nextgeneration
Strategy
networks
and
planning
Transaction
support
Telecoms,
media and
technology
(TMT)
Strategy
and
planning
Operational
consulting
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Transaction
support
Procurement
and ICT
Procurement
Marketing
and
products
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Trends and complexities
Connected TV is evolving quickly, with rapidly changing trends in
consumption patterns, distribution methods and devices
Evolution of consumption
Today
Linear TV services by household
VOD and catch-up TV services by household and individual
Coherent media services by individual
Evolution of distribution method
Broadcast and physical media
Evolution of devices
PC with Internet connection
Online access to remotely stored media
PC with Internet connection
Connected TV sets and STBs
Games consoles
Any device with a screen
and broadband connection
Future devices (defined
mainly by screen size?)
Smart phones and tablets
TV services over Internet
Connected TV as a service
 Provides access to webbased video services
 User-generated content
(UGC), e.g. YouTube
 Web-based catch-up
 TV set still used primarily
for non-Internet content
 Increased non-linear, nonscheduled, on-demand
delivery
 Includes PC streaming, or
over-the-top TV or audiovisual
social TV (e.g. Skype)
 Professional, long-format
content (as well as UGC)
 PPV, VoD and subscriptionVoD business models
 Increased use of IP networks
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Connected TV is evolving
into coherent media
Future TV services could be
complex to define
 Seamless combination of
linear and non-linear TV –
e.g. programme guides
display both broadcast and
on-demand content
 Reliance on IP networks
 Consumption via any device
with a screen and a
broadband connection
 Continued disassociation from a
particular device such as TV set
 Multiple platforms, devices and
standards create issues of
coherence and compatibility
 Scheduled vs. unscheduled –
‘events’ vs. ‘catalogue’
 Complementary services with
potentially simultaneous
consumption
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Trends and complexities
The over-the-top (OTT) video market is challenging traditional players
Principal paths for video consumption
DVD
Examples of players
in the value chain
TF1
Mediaset
RTL
Panasonic
Sky
Universal
Traditional TV
Sony
Hulu
Vudu
Tivo
Roku
Over-the-top
Netflix
YouTube
VoD bypass
Orange
Google TV
OTT providers can
compete without capex …
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Apple
… but still create significant
traffic for ISPs …
Samsung
… while allowing device providers a
greater role in the value chain
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Trends and complexities
The services landscape for connected TV is a complicated place; short-term
technology choices must be made to deliver long-term economic returns
 Impact of bypass, integration and deals
 New competition from Internet players
Understand the
value chain
 Sufficient network capacity for an
acceptable quality of experience
 Use of video-specific delivery
technologies
Optimise the
network for
delivery
Select a
business
model
 Strategy for pricing and bundling
of services
Monitor
regulation and
policy
 Net neutrality, wholesale access
and PSB regulations
 Balance of advertising vs.
subscription
Services
landscape
 In-home device and customer
interface strategy
 Trends in new types of devices
and applications
 Development of new standards
Choose a
device strategy
Forecast
consumer
behaviour
 Government and EC policy to
deliver socio-economic benefit
 Forecasting the growth of the overall connected TV market
 Forecasting consumption patterns of different user types
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Analysys Mason expertise
Analysys Mason has deep expertise in all aspects of connected TV,
helping our clients to meet challenges and commercialise opportunities
Understand the value chain
Select a business model
 Assess how deals between companies and integration/
bypassing of different players will affect competition
 Cost-benefit analysis of different business models
(e.g. subscription vs. advertising vs. public funding)
 Assess the competitive impact of new Internet-based players
 Cost-benefit analysis of different applications in terms of
consumer attractiveness and network impact
 Consider the implications of copyright, share of value and
ownership of the customer
 Cost-benefit analysis of different CPE: cost recovery vs.
market share and competitiveness benefit
Optimise the network for delivery
Monitor regulation and policy
 Analyse requirements for quality of experience, including
technical due diligence and trade-off between technologies
 Independent review of regulations with assessment of fitness
for purpose
 Scenario analysis of traffic loads over short/medium/long term,
with resultant network requirements and associated costs
 Review of current trends/precedents in key issues, such as net
neutrality, copyright, minor protection and asymmetric
regulation of broadcast advertising
 Benchmark new technology approaches such as cacheing,
side-loading and WiFi offload (for mobile networks)
 Consider incremental cost to meet DAE bandwidth targets
Choose a device strategy
Forecast consumer behaviour
 Impact of application prevalence on device requirements,
including scenarios for disruptive events, e.g. HD Skype
 Forecast consumer take-up based on current trends, network
roll-outs and scenarios to model disruptive technologies
 Summarise expected developments in standards, including
impact on device and application and traffic trends
 Benchmark IPTV bundling and pricing; scenario based
analysis with forecasts using elasticities
 Consider specific requirements of the device strategy, e.g.
STB hardware and EPG structure
 Forecast bandwidth and demand, considering innovative
applications and different user types
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Case studies are included at the end of this document
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Taking action
Analysys Mason can help you to take action by providing support in
four key areas
Implement your
strategy
Consider all the aspects
beyond traditional linear
TV – evolution and scale
of connected TV and
timing of its impact
Understand
connected TV
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Analyse the value chain
to determine most
advantageous position
and uncertainties
Understand
roles in the
value chain
Formulate the
key elements of
your strategy
Identify and assess the
complete range of
opportunities and threats
to formulate a strategy
Implement the strategy to
drive revenue growth and
reduce costs
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Case studies
In the following slides we present details of a sample of our media work
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Case study
Supported the successful acquisition of an integrated media group
(TV, publishing and national distribution chain)
Business challenge
 A large media group with interests in TV, radio, publishing (including printing and distribution) and advertising was privatised by tender
 We were contracted by the successful bidder to develop a ten-year business plan in order to raise debt to finance the acquisition
Approach
 We conducted an extensive interview programme with the media
company's management, ranging from printing, publishing, radio
broadcasting and TV broadcasting
 We reviewed all available financial documentation on the group,
including IPO prospectus, valuation reports, management
accounts, P&L statements
Assessment of operating units
TV station
Value generators
Primarily
operating
costs
Publishing
 In addition, we studied the macro-economic factors of the local
market and built a comprehensive market model to determine the
size of the advertising market and the share of each media
 Using this information, we developed a ten-year business plan
which took into account the impact of various technological
challenges that the local market would face within the time
horizon of the plan (e.g. digital TV distribution, convergence of
media, online media and advertising)
Printing
Necessary base
Primarily
capital
costs
Distribution
Primarily
fixed costs
Primarily
variable costs
Benefits and results
 Our findings were presented to leading international investment banks, sovereign wealth funds and other financing institutions to
secure the raising of debt in order to close the transaction
 We also assisted the buyer during the closing phase, by participating in investor presentations and conference calls,
as well as a roadshow
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Case study
Advised a large European telecoms operator on its potential
acquisition of domestic football league rights
Business challenge
 A large European telecoms operator was considering the acquisition of the audiovisual rights for its top domestic football league, and
was analysing the best approach to monetising those rights
 Analysys Mason provided research and analysis to inform the review of the key drivers of the business plan(s) and the identification of
the most important assumptions, in terms of operational, commercial and technology risks
Approach
 We reviewed and provided tactical inputs and insights to negotiate
the draft tender documents prepared by the football league
 We researched and developed case studies to understand the
existing and emerging business models to exploit audiovisual
football rights including the way the leagues sell their rights and the
way operators sell or resell (wholesale) the acquired rights
 We collected benchmarks about acquisition and exploitation of
football rights, including some key ratios, such as the size of the
football premium rights versus that of the underlying broadcasting
and telecoms markets, to help assess and validate the key business
plan drivers (revenues, opex, capex)
 We also provided some ad-hoc input to support the operator in its
negotiations with the incumbent pay-TV operator for the acquisition
of Internet-only rights
Only a handful football web TV services are offered
and/or priced separately from other platform services
Canal+/Canalsat
BSkyB
Eredivisie
Deutsche Telekom
Foot+ channel
Sky Sports channel
Eredivisie Live
“LIGAtotal!” package
Web TV is free for
Canal+ and CanalSat
subscribers
Web TV is free for
Sky TV customers or
GBP24.50 on
SkyPlayer
Web TV is free for
Eredivisie Live
customers
Orange France
SingTel
Orange Sport channel
Football Frenzy
Web TV is free for
Orange Sport IPTV
customers
Web TV and mobile
TV are free for
Football Frenzy TV
subscribers
Direct TV/ NFL
NFL live games and
play-offs
NFL Web TV weekly
pass is USD24.99
Operator
MediaPro
Gol TV
Not available on
WebTV
Benefits and results
 The operator used the insights we provided to develop its bidding strategy and to agree it internally
 It did not acquire the rights but used the information to get a wholesale agreement with the incumbent pay-TV retailer
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Live games on
MobileTV for
EUR4.95 or 24-hour
access to LIGA total!
for EUR1.95
Product
Web TV
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Case study
Review and forecast of future demand for home devices, for a
leading private equity firm
Business challenge
 A leading European private equity firm was considering entering into the home devices market, and wished to review and analyse the market across
a selection of key countries worldwide
 It was particularly interested in likely future demand for devices, anddevelopments in the home device industry
Approach
 For key developed countries (USA, France, Germany and UK) and
developing markets (Brazil, Mexico and India), we identified the major
pay-TV platforms and developed a detailed model of future demand for
home devices in these countries
Country A is expected to remain the key STB market, combining
both high volumes and high unit prices
 In order to provide a more in-depth perspective, the team profiled major
manufacturers, their key clients and other players in the value chain
 We also carried out over 20 interviews with industry stakeholders to draw
out the trends which they expected to shape the market in the short and
medium term
 Our report also highlighted expected future evolution of traditional STB
and home gateway markets
 We identified opportunities and threats to manufacturers of home devices
Benefits and results
 Our report provided our client with an in-depth understanding of expected developments within the home devices market in several key countries
 Our views and report were a key element in the client’s decision about the investment opportunity
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Case study
Analysed and segmented drivers of cost-to-serve for a pay-TV
operator in South-East Asia
Business challenge
 A DTH pay-TV operator in South-East Asia was experiencing an increase in its cost-to-serve, despite rapid subscriber growth and
increases in economies of scale
 Analysys Mason was commissioned to re-scope the operator’s definition of cost-to-serve, analyse its drivers identify potential costreduction measures, and develop a cost-based segmentation for monitoring and acting on cost-to-serve
Approach
 We used a bottom-up, activity-based approach to build up a new
definition of cost-to-serve, taking into account major activities in the
value chain such as network and technology, marketing, customer
service, customer retention, billing and revenue assurance
 For each activity, we assessed and identified potential cost drivers,
such as segment drivers based on ARPU, ethnicity or geographical
characteristics, and other drivers such as process or business
inefficiencies
 Based on this assessment, we developed a short-list of ‘quick win’
recommendations for cost-reduction measures in the short term
 We then defined five segments based on cost behaviour for our client
to focus on in developing segment-based action plans to address
costs and to monitor cost trends
Differences in cost-to-serve (CTS) across segments
CTS (ex broadcast)
686
405
Broadcast
683
462
455
449
232
244
122
Content
407
207
100
124
102
96
158
110
110
129
104
High ARPU
Urban ethnic 1
Ethnic 2
All others urban
All others rural
Benefits and results
 Our client was able to identify cost inefficiencies in its call centre operations, after-sales policies, and billing channel approach
 The segmentation findings also provided our client with a better understanding of the cost implications of its changing customer base
and where it should focus its cost-management efforts
 The operator incorporated a cost-to-serve reviewing exercise into its internal reporting cycle, based on our methodology
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Case study
Formulated an audiovisual business plan and identified growth
options for a Western European media group
Business challenge
 A large Western European media company wanted assistance in forming a strategic growth plan for its audiovisual assets (production,
TV channels, Internet)
 It wanted to explore potential areas of growth to offset cyclical revenue pressures suffered in the traditional audiovisual sector
Approach
 We supported these hypotheses with preliminary market research
and our previous experience in the sector. We then carried out
extensive research and international benchmarking to validate
and modify these hypotheses, identifying the most interesting and
those that fitted the client’s profile and growth strategy
 We identified the main business, regulatory and economic
variables of the strategic options, defined a series of scenarios
and modelled the economic impact of the different outcomes of
the scenarios for the client’s different business areas (e.g.
revenues, EBITDA, investments)
EBITDA of the client for the different scenarios considered
Scenario 1
Scenario 2
EBITDA
 We defined the client’s competitive position and helped identify
hypotheses on areas of potential growth, both organic and
inorganic, providing an initial estimate of the potential size of
these opportunities
Scenario 3
Scenario 4
Scenario 5
Scenario 6
2010
2011
2012
2013
Benefits and results
 We helped our client by identifying the main options for business growth, and in understanding the potential impact on its business plan
 The project also gave a better understanding of selected market areas to validate/modify previously identified strategic options
 The media group integrated the outputs of this project into its business plan for 2010–2013
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Case study
Assisted a major audiovisual player in its negotiations with ISPs and
with net neutrality issues
Business challenge
 The consumption of video content over a broadband connection is booming, and this represented both a significant opportunity and a
challenge for our client
 The company faced two specific issues:

increasing pressure from ISPs to raise the fees charged for the quality of the transmission service required

potential discriminatory behaviour from ISPs (e.g. trying to prioritise other types of traffic, such as their own content)
Approach
 We analysed the possible discriminatory practices that ISPs may
employ and reviewed the network neutrality debate in a set of
relevant countries
 We then analysed the value chain for video distribution via fixed
networks, including players and likely evolution
 Using this information, we conducted both technical and
economic analyses (including the implementation of a detailed
bottom-up cost model to calculate the incremental cost of
delivering non-linear TV – see right)
Benefits and results
 Our presentation and conclusion were approved by board members, and our recommendations were implemented
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Case study
Assessed the impact of the BBC’s catch-up TV service, iPlayer, on
the UK broadband market
Business challenge
 Following a successful trial, the BBC wanted to launch iPlayer across the UK
 As part of its public-value test (PVT), the BBC needed to conduct a market impact assessment to determine what kind of effect iPlayer
might have on the market, and in particular on ISPs’ costs
 It needed to satisfy both Ofcom and the BBC Trust that iPlayer would not have a detrimental impact on the UK broadband market
Approach
 We assessed a range of scenarios for how the Internet market may develop over a period of five years, taking into account plausible
growths in other (non-BBC) rich media services
 We considered how ISPs could use different broadband products to deliver rich media content, and what these meant for distribution
costs
 We considered four main iPlayer services: catch-up TV over the Internet; simulcast TV over the Internet; non-DRM audio downloads;
and catch-up TV over cable
 We estimated both the volume and cost impact of iPlayer on the various types of ISPs that may distribute such content, under a range
of scenarios for underlying Internet growth and household consumption of content
Benefits and results
 We quantified the impact that iPlayer may have on the UK broadband market, and presented our results to Ofcom and the BBC Trust
 Our impact analysis played a significant role in the PVT, and the BBC’s proposals were approved by the BBC Trust
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Case study
Reviewed the market, revenue and capex projections of a Western
European cable TV operator
Business challenge
 In the context of the negotiations on the covenants of a multi-billion euro debt of a cable operator in a Western European country,
Analysys Mason was asked to conduct:
- a quantitative residential market assessment i.e. triple-play cable (broadband access, telephony, TV), and triple-play DSL, as well
as VoD and MVNO
- a review of the revenues and capex elements of the business plan of the client’s operations
Approach
 We interviewed the management of the company and built
detailed market models of all the services under study
2015
2014
2013
2012
2011
 We prepared a report detailing our conclusions
Management case Share of GA
2010
 We assessed the potential risks and upsides that may be
encountered by the company
AM revised case
MS on addressable
market
2009
 We then evaluated the main elements of the business plan
against a series of drivers, and benchmarked them against
comparable companies
Management case
MS on addressable
market
2008
 We assessed the revenue side of the business plan by assessing
the market share and the relative ARPU of our client, and
analysed historical capex data
Addressable MS and share of GA (%)
 We conducted a detailed qualitative analysis of our client’s
offerings and compared these with its competitor
Share of gross adds and share of the addressable
market for cable TV services
AM revised case Share of GA
Benefits and results
 Our client successfully renegotiated the covenants related to its debt following our presentation of our report to the lenders
 The operator took our comments into account in a revised version of the business plan
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Case study
Advised a major European incumbent on enhancing its IPTV product
strategy and business model
Business challenge
 Our client, a fixed incumbent operator in a major Western European country, registered poor take-up of its IPTV product a year and a
half after launch
 The major competing broadband operator was also offering IPTV services and had just revised its positioning in the value chain by
partnering with broadcasters and content providers. Additional players in the market were about to launch their own IPTV propositions
 Analysys Mason was commissioned to advise the incumbent on how it could enhance its IPTV product strategy and business model
Approach
 Our approach encompassed the following steps
 an assessment of the structure of the current analogue and
digital TV market in five major European countries
IPTV value chains for the carrier and re-seller business models
Carrier business model
Content
origination
 a review of the content packaging and product positioning of
the offerings of all major players in those markets
 an analysis of pricing and distribution strategies
 assessment of commercial terms under which players secure
rights to distribute content
Content/
rights owner
Content
aggregation
Production company
Receives
one-off rights
payment
Content
marketing
Payment
management
IPTV
player
Broadcaster
Receives a 100% share of user
revenues, and pays out the carrier
fee (~15% of revenues)
Receives
carrier fee*
E
N
D
U
S
E
R
Reseller business model
Content
origination
 recommendations to our client on suitable modifications to its
IPTV product strategy in the local market
Content/
rights owner
Production company
Receives
one-off rights
payment
Content
aggregation
Broadcaster
Receives a 60%
share of user
revenues
Content
marketing
Payment
management
 We recommended modifications to our client's product strategy and business model that would help it achieve its goals
 As a result of our work, our client changed its product strategy for IPTV and implemented most of our recommendations
 Consequently, our client’s IPTV take-up figures almost tripled within a year
Provision of
access
E
N
D
IPTV player
Receives a 40%
share of user
revenues
Benefits and results
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Provision of
access
U
S
E
R
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Case study
Assisted a major broadcaster in developing its content distribution
network (CDN) strategy
Business challenge
 Our client, a major broadcaster, was looking at how it should develop its online distribution strategy. It was particularly concerned with
how the changing nature of content (including the move to high definition) would impact distribution costs
 It therefore wanted to understand how traffic-related network costs would evolve in the future, and what technological options were
available to ensure efficient delivery of content in the future
Approach
 We projected how the nature of content consumption would
evolve over time, for traditional broadcast TV, and the shift to nonlinear viewing
 We estimated the total bandwidth required to support the
expected demand for online content, and the costs associated
with this delivery, paying particular attention to how these costs
varied by network. We also made estimates for growth in total
Internet traffic
 We made recommendations on the optimal way to deliver our
client’s content, taking into account specific issues such as
availability of networks, the role of quality of service and nextgeneration access and core networks (NGA and NGN), as well as
geographical issues around broadband access
Traffic volume
 We included the introduction of HD content and technological
advances in compression technology
Traffic volume by content type
2008 2009
2010
2011
2012 2013
Niche linear new content
Non-linear new content
Internet volume excluding new content
Benefits and results
 Our client gained an in-depth understanding of the costs of content distribution, and associated broadband issues
 Our work is helping inform our client’s future content distribution strategy and technology choices
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Case study
Built a new tool to enable a major European broadcaster to maximise
the value of its advertising inventory
Business challenge
 A major European broadcaster was looking for fresh ideas on the value of its advertising inventory
 The company was seeking to deliver more efficiently the campaigns of its advertising partners through fewer advertising slots
 It wanted to gain a better understanding of the value of these slots to assist in wider design of its future programming portfolio
Approach
Audience viewings required to achieve target coverage
under alternative scenarios
 We worked with the client to specify the campaign objectives of
the hypothetical advertisers
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
 We devised a metric which was related directly to the probability
that the viewers had contributed usefully to the campaign:
 too much viewing of the campaign generates little value
 too little viewing of the campaign generates little value
 This metric was then correlated with the likely number of viewings
needed to meet the campaign objectives
% target coverage
 We used existing statistical summaries of audience measurement
data to gain an understanding of relevant viewing profiles
0
Baseline
100
200
300
400
500
600
700
800
900
Total viewings (millions)
2.0–2.5 million 1.5–2.0 million 1.0–1.5 million 0.5–1.0 million
Benefits and results
 The client gained a new method to understand the value generated by particular programming that is simple to understand and
implement, and helps to understand some of the behaviour of media buyers
 This method is used to examine the relative value of different advertising slots in the crucial peak hours and to schedule adverts more
efficiently
 When fully implemented, this method should significantly increase capacity of the inventory to fulfil market needs, and support
optimal programme scheduling
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Contact
For more information, please don’t hesitate to contact us
Lluís Borrell
Partner (Media)
[email protected]
Matt Yardley
Partner (Broadband)
[email protected]
Michael Kende
Partner (New internet players)
[email protected]
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