the market for on-demand audiovisual services in the eu · - increased competition on online...
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The market for on-demand
audiovisual services in the EU
Overview & Trends Christian Grece
Analyst – On-Demand Audiovisual Markets
European Audiovisual Observatory
New ways of distribution – Creative Europe Desk Polska/KIPA
Warsaw - 29th October 2015
Overview
I. Digital transformation of the media sector
II. Digital media landscape in the EU
Main figures & Trends
III. Challenges in the digital audiovisual ecosystem
Section I
Impact of digitalisation and distribution of audiovisual content over the Internet
-
How did the media ecosystem change on the Supply and Demand side?
4
I. Digitalisation and «over-the-top» distribution of content
Intensification of competition Advertising & Paid content
New services
« OTT » = Open Internet
New entrants
5
I. Increased fight for consumer attention …
Theatrical films TV films
TV shows
Video films
Live broadcasts
Music
Pay TV content
News
Animations
Audio-TV
Abundance of
audiovisual media
content
6
I. Changing audiences & Mult-screen viewing
0,0
50,0
100,0
150,0
200,0
250,0
300,0
350,0
2009 2010 2011 2012 2013
EU 14 – Smartphones and Tablets installed base in millions
I. Audience fragmentation by media … Source: eMarketer
+92% Digital - Desktop / Latop - Tablets - Smartphones
-4% TV
-9% Radio
-13% Print
4:39
2:25
3:19 3:12
00:00
01:12
02:24
03:36
04:48
06:00
2011 2012 2013 2014 2015
UK - Avg Time Spent per Day 2011 - 2015
+371% Mobile - Tablets - Smartphones
+16% Desktop / Laptop
2:26
0:31
1:55
2:13
00:00
00:28
00:57
01:26
01:55
02:24
02:52
2011 2012 2013 2014 2015
UK Avg Time Spent On Mobile Devices per Day
I. Increased importance of mobile devices…
Source: Ofcom , eMarketer
Digital video viewers by device in EU Big 5 Oct 2014
In % of respondents (18+ who own all devices)
Between 50% and 60% of Europeans already
use mobile devices to watch videos
64%
58%
51%
35%
Laptop / desktop
Tablet
Smartphone
Fixed game console
And a trend towards mobile video consumption …
10
Audience fragmentation
Scarce resource = Attention of audiences
Shift in paradigm
Consequences of changes on Demand and Supply side
« ATAWAD » content consumption
Abundance of content & New entrants/services
Impact on Advertising & Paid Entertainement markets in the EU
11
II. EU digital media landscape in 2014 – Main figures and trends
12
II. EU digital media landscape – Main figures 2014
- Over 2 900 on-demand audiovisual services available in EU 28 (MAVISE 2014)
- Increased competition on online advertising market and VoD market
Many services and players but only a few dominate Online Oligopolies
Rapid growth but EU markets are heterogenous when it comes to digital services
(UK, Germany and France 66,7% of online advertising revenues / EU-5 70% of VoD revenues in 2014)
EUR 27,2 billion
EUR 2,5 billion
0
5
10
15
20
25
30
EU Online Advertising revenues EU VoD revenues
+10%
+38,5%
Section II Part 1
Online Advertising in the EU
-
Main figures and Trends
Where is the market going?
EU28: Online challenging TV advertising – in EUR million
Source: Warc
Poland - TV advertising still dominant in 2014
Concentration: Scale & Reach is important – Advantage to global players on the online ad market
Source: IHS
Online advertising surpassed TV ad spend in 7 EU countries 2014
In EUR million Source: Warc
But online video advertising is still a small fraction of TV advertising in 2014…
1%
1%
2% 2%
3% 3% 4%
4% 5% 5% 5% 5% 5% 5%
5%
9%
10%
12%
6%
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
14,0%
Source: OBS on Warc, IAB and IHS data
Online video as a percentage of TV advertising in 2014
Google and Facebook dominant players for online video advertising in EU, broadcasters take a smaller share
Source: IHS
Display advertising – Objectives
• Increase in connected mobile devices = localisation, geo-fencing/mkt
• Increase in screens & devices = Increase in addressable market (« Eyeballs »)
• Increase in online video consumption & broadband coverage = Audience’s
shift in consumption habits, Digital natives (« Follow the money »)
• Real-Time Bidding • Real-Time Marketing
• « Big data » • Tracking (Cookies
/ Advertising ID
• Social Networks • Retargeting
Right message (ad) at the Right Time in front of the Right Person
• « Big Data » (Targeting/Behavioural)
• Online Video ads
Online Display advertising – Drivers of growth
- Online advertising-financed video websites and Social Networks - Acquisitions of YouTube MCNs by major traditional media companies
- Investments in premium & original content
- Social networks on video offensive (monetize audiences)
• Capture new audiences & ad budgets, valorise existing & new content
• Data driven advertising = targeting and personalisation of ads
• Programmatic advertising and real-time bidding
• Social & Mobile advertising is further changing the rules of the game
Shift of mass advertising to individualized, personalized advertising
Social & Mobile advertising – For winners, huge growth drivers
Section II Part 2
On-demand and Paid Entertainment revenues in the EU
-
Main figures and Trends
Traditional versus Digital?
Consumer revenues for VoD services: fast growth but EU-5 & Nordics generated 82% of total revenues in 2014
Source: IHS
919 1 038
1 406
1 821
2 501
13%
35%
30%
37%
0
0,05
0,1
0,15
0,2
0,25
0,3
0,35
0,4
0
500
1 000
1 500
2 000
2 500
3 000
2010 2011 2012 2013 2014
ISP
« OTT » players by-pass « managed networks » by Internet Service Providers (ISP)
Managed networks
« OTT » Open Internet
OTT is becoming dominant in the EU in absolute figures
238
1582
681
919
0
200
400
600
800
1000
1200
1400
1600
1800
2010 2011 2012 2013 2014
OTT VoD EU 28 TV VoD (Managed networks) EU24
OTT VoD and Managed networks 2010-2014 Consumer revenues (in EUR million) EU28
OTT VoD EU28
CAGR +61%
TV VoD EU28
CAGR +8%
Source: IHS
II. VoD services: Main trends
1. Over-the-top on-demand revenues are growth drivers, surpassing consumer spend on TV VoD (managed networks by national players)
Tendency towards OTT audiovisual on-demand consumption
Global players are dominating the OTT on-demand market in most EU countries
2. Explosive growth of subscription video-on-demand services (SVoD) since 2012
Competition or Complement to pay TV?
3. Physical media (DVD & Blu-Ray rental/retail) revenues versus on-demand revenues
Overall physical media market is shrinking - Does VoD compensate for loss?
4. Cinema: Evolution of admissions in the EU
OTT VoD « Over-the-Top » distribution
versus
VoD Distribution on managed networks
– OTT VoD distribution by-passes traditional players and, in some
cases, national audiovisual regulation • Players established in specific countries or abroad to target EU countries
– In Poland, VoD on managed networks still dominant in 2014
NL: 14
LU: 29
UK: 68
SE: 27 CZ:
23
Source: European Audiovisual Observatory elaboration, MAVISE
A multi-country approach
FR: 18
CY: 11
US: 105
Growth rates: consumers are going « over-the-top » and towards subscription-based VoD services
11%
59%
38%
4%
23%
72%
249%
11%
36% 33%
123%
4%
32% 30%
93%
12%
0%
50%
100%
150%
200%
250%
300%
OTT TV OTT Film OTT SVoD Managed networks
2011 2012 2013 2014
Source: IHS
The picture in Poland: VoD Distribution on managed networks still dominant but growth lies in OTT
0,1 0,5
3,9
8,3
13,3
17,0
24,8
38,1
35,5
40,9
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
45,0
2010 2011 2012 2013 2014
Total OTT Poland TV VoD (Managed Networks) Poland
OTT VoD CAGR +248%
TV VoD CAGR +25%
Subscription Video-on-demand services in the EU
– SVoD fastest growing business model in the EU
– Netflix effect?
– Complement or Competitor to pay TV?
Impressive SVoD growth since 2012 in the EU: Netflix effect?
40,7 56,2
196,3
437,5
844,1
38%
249%
123%
93%
0%
50%
100%
150%
200%
250%
0
200
400
600
800
1 000
1 200
2010 2011 2012 2013 2014
Launch GB/IE and Nordics
EU SVoD consumer revenues and yearly growth rate in EUR million and %
Source: IHS
« Netflix effect »: Raising awareness among EU consumers for SVoD services and launch by national players of SVoD services
Source: OBS on IHS
And Netflix’ growth relies more and more on international markets as expansion continues
But SVoD consumer revenues still a small fraction of pay TV spend…
0,1% 0,2%
0,6%
1,2%
2,3%
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
2010 2011 2012 2013 2014
SVoD consumer revenues in % of consumer spending on pay TV - EU
- SVoD services rather a complement to traditional pay TV than a competitor in the EU (in 2014) - « Cord-cutting » yet marginal in the EU
- SVoD consumer revenues in Poland (EUR 2,9 million) only 0,16% of pay TV consumer spend (EUR 1 843 million)
Source: IHS
Physical video market and VoD
Paid content: Evolution physical media (DVD/Blu-ray) and on-demand revenues EU 18 in EUR million VoD not compensating physical decline
8 032 7 422
6 810 6 054
5 343
915 1032
1391 1798
2453
0,0
1000,0
2000,0
3000,0
4000,0
5000,0
6000,0
7000,0
8000,0
9000,0
10000,0
2010 2011 2012 2013 2014
EU 18 DVD& Blu-ray turnover EU 18 On-demand revenues
8 947
7 796
- 13%
Source: IHS
Paid content: Evolution physical media and on-demand revenues Poland – VoD is compensating
63,1 54,9 52,9
47,4 40,0
17,1 25,3
42,0 43,8
54,2
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
90,0
100,0
2010 2011 2012 2013 2014
Poland DVD& Blu-ray turnover Poland On-demand revenues
94,2 +17,5%
80,2
Source: IHS
Cinema admissions
Admissions stabilize - slightly below pre-3D levels … Source: European Audiovisual Observatory
840
860
880
900
920
940
960
980
1 000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
899
932 920 925
982
964 968
949
905 911
Cinema attendance in the EU 2005 - 2014
PROVISIONAL & ESTIMATED
in mio.
… thanks to strong performances in France, Spain & Poland Source: European Audiovisual Observatory
Ch
ange
in a
dm
issi
on
s 2
01
4 v
s 2
01
3 (i
n m
io)
-8.0
-6.5
0.5 0.7 0.9 1.1
4.1
10.5
15.2
GB DE IT AT DK PT SI HR SE IE GR LU LV NL LT
CY EE BG SK CZ BE HU RO PL ES FR -1.1
-0.7 -0.5 -0.5
FI
-8.0
Growth 11 27
Decline 16 27
But Cinema audiences are getting older Source: CNC
Audiences getting older
0%
10%
20%
30%
40%
50%
60%
Under 25 50 plus
37%
30%
Summary – Impact on traditional markets
Section III
Challenges in the digital audiovisual ecosystem
Challenges for EU players and the audiovisual sector
• High number of VoD services BUT Concentration and Market domination by small number of players on VoD and digital markets
– Future for smaller EU players?
• Access and Exposition of EU films and TV shows on main VoD services
– « Gatekeepers »
• Lower monetization of content than physical (DVD/Blu-ray)
• Access to premium content increasingly more expensive need of orginal
and exclusive content in order to secure competitive advantages as digital players conquer the value chain
– Netflix, Amazon, Vimeo, YouTube Red and others investing in original content – Competition to secure premium content increases licence prices for all players
• Financing of EU works: traditional broadcasters under increased pression from online players for advertising budgets, viewers and subscribers Future of financing?
Market concentration – United Kingdom 2014
Source: British Video Federation Yearbook 2015
Sky; 54,5%
iTunes; 9,4%
Blinkbox; 8,6%
Virgin Media; 7,0%
BT; 6,5%
Amazon; 5,3%
Google ; 2,6% Other; 6,1%
UK Digital rental market shares in % of value
Market value: £ 264 million
iTunes; 57%
Blinkbox; 8%
Google Play; 7%
Sky ; 4%
Amazon ; 19%
Other ; 5%
UK Digital retail market shares in % of value
Market value: £ 168 million
Netflix; 71,1%
Sky Now TV; 12,8%
Amazon Instant Prime Video; 16,1%
UK SVoD Volume market share in % of volume
Market value: £ 381 million
Oligopolies? «Winner-takes-all » logic? What place for national players in light of
strong international competition? Economies of scale essential
Access and exposition of national and EU films on VoD services Difficulties to access platforms: Poland: % of Polish films on selected VoD services
Breakdown by Region of Origin (films where variable was identified)
1065 82%
European Non-European
518 49% 547 51%
EU 28 National US Others
498 47% 70 7%
456 43% 91 9%
Breakdown by Region of Origin (films where variable was identified)
2320 92%
European Non-European
315 14% 2005 86%
EU 28 National US Others
274 12% 4 0% 1557 67% 448 19%
iTunes Poland catalogue
Breakdown by Region of Origin (films where variable was identified)
1176 92%
European Non-European
677 58% 499 42%
EU 28 National US Others
637 54% 108 9%
384 33% 115 10%
Kinoplex catalogue
Breakdown by Region of Origin (films where variable was identified)
950 100%
European Non-European
139 15% 811 85%
EU 28 National US Others
139 15% 25 3% 791 83% 20 2%
Chili.tv Poland catalogue
Source: OBS Study on VoD catalogues 2015 (forthcoming)
IPLA catalogue Low matching rate
Monetization: VOD is harder to monetize than DVD/Blu-ray…
TVOD/EST
Transactional VOD
Consumer pays a fee to
buy or rent a film
SVOD AVOD
Subscription VOD Ad supported VOD
Rental : USD 4 Monthly fee: USD 3-10
Purchase : USD 3-8
Free
Revenue split:
US consumer expenses:
Business model:
Highest potential Depends on title Low / Need of scale
“All you can watch” for
monthly subscription fee
Free for consumer,
advertising income
Key players
% share of ad revenue
Monetisation potential:
20%
20%
30%
30% VOD provider
Distributor
Sales Agency
Producer
Source: DocumentaryTelevision.com (27 April 2015)
USD 50’
10’–20’
5’
Avg High Common
NETFLIX: Non-exclusive
2-year US license
…and Digital players conquer the value chain
Source: TNO White Paper “Regulation in the converged media-Internet-Telecom value web”
Access networks still under control of traditional players
With deep pockets, acquiring and investing in (original) content
Source: IHS
Conclusions
- Shift in paradigm for the audiovisual sector - Attention is the scarce resource, content is abundant
- Competition becomes international with OTT distribution - National players compete with international players profiting from economies of
scale (investment in technology, content, exclusive licences) and larger reach
- Digital markets: Tendency towards Oligopolies & « Winner-takes-all » logic - Online advertising, SVoD and Transactional VoD all dominated by 1 or 2 players
- Traditional financing sources for EU productions under increased pressure
- Commercial TV competes with online players for advertising budgets
- Monetization of Film and TV shows lower than in traditional ecosystem
- Question of Access to and Exposition on main VoD plateforms for EU works
- Transparency of figures (revenues, subscribers, growth, viewing) necessary in order to evaluate trends and market directions