Finnish Broadcasting CompanyBusiness Environment Analysis

May 2013

To Reader

Media usage keeps growing and fragmenting. As content available for media consumers increases, media companies must work harder to be interesting and discoverable. As media consumption habits change, the use contexts of TV change too.

One million households in Finland have no access to broadband connection fast enough to enable diverse media consumption.

This is a summary of observations of Finnish Broadcasting Company’s environment produced by network of experts in various positions in Yle.

Tuija Aalto

Head of Stategy, Yle

Workgroup• Annika Ruoranen, Head of Audience Insight,

News and Current Affairs• Eija Moisala, Head of Audience and Media

Insight, Media Unit• Erja Ruohomaa, Head of Strategy Research• Jari Lahti, Chief Strategy Officer, Yle Media• Jarno Liski, Journalist• Janne Holopainen, Media Regulation Manager• Juha Haaramo, Audience researcher• Kaj Backman, Media producer• Leevi Kokko, Head of Audience Insight, Yle.fi• Maria Hausen, Producer• Marina Österlund-Karinkanta, Senior Media

Analyst• Marjo Ahonen, Head of Strategy and Planning,

News and Current Affairs• Olli Sipilä, Head of Technology and

Development & CTO • Outi Roivainen, Audience researcher• Pasi Ekman, Development Manager,

Technologies• Sami Kallinen, Head of Yle Internet

Development• Satu Keto-Kantele, Head of Content, Creative

Content • Susanna Snell, Head of Audience Insight,

Creative Content15.5.2013 2

Megatrends in media business

15.5.2013 3

Ubiquitous computing

Automation

Digitalisation

Globalisation

Media is transformed by the combined effects of automation, digitalisation, globalisation and ubiquitous computing.

The following affect media content and media user experience:

• Huge amount of content available• Free content & services• New business models• Development of devices • Cloud computing• Differences in regulation accross nations and regions

• Recommendation algorithms • User data based personalisation and deteoration of privacy as its result.

Yle’s competitors are global in all of the relevant business areas

15.5.2013 4

Mass media

Leisure activities

Interaction & participation

Online Video Services Social Media

News services

Commercial media suffer from the recession and global competition

15.5.2013 5

According to TNS Gallup media advertising fell 13,3% in a year (Q1 2013/2012) in Finland. This was the fourth consequtive quartal of advertising falling.

Some newspapers in Finland raise paywalls (Helsingin Sanomat, Keskisuomalainen, Aamulehti) while others count on online ad sales (Iltasanomat, Iltalehti).

Google launched it’s local version of YouTube for advertisers in Finland in February 2013 and will grow its already high 82M€ share of advertising. Facebook’s share of Finnish online ad revenue is rising fast, too.

TNS Media Intelligence 

On the rise: subscription based services and user data

15.5.2013 6

Assuming Netflix has 200 000 monthly paying subscribers in Finland, its turnover will be 15M€ in 2013. All of the VOD service providers combined (including Netflix, HBO, Viaplay etc.) can together reach a total turnover of 20-30M€. In comparison, the Finnish television companies’ pay-TV operations generated a combined turnover of 70-90M€ in 2012.

YouTube is launching pay TV channels in several countries – not yet in Finland.

Music streaming service Spotify already accounts for the lion’s share of digital music sales in Sweden according to Swedish Recording Industry Association (GLF).

The value of the data generated by using digital services is considered to be remarkable and global businesses have the economy of scale in using such data compared to smaller national media companies. User data powers targeted advertising and personalised recommendations. Several EU contries, concerned about their citizens’ privacy, have launched an inquiry attempting to stop Google from combining user data from the many online properties it offers.

Finns under 45 use slightly less radio and TV than five years ago

7

Radio listening of the over 45-year olds seems to have stabilised to four hours a day. Those under 45 listen to radio less and less.

Over 45 year old Finns seem to watch more TV every year. However, comparing TV viewing from year to year is increasingly difficult as the possibilities of TV viewing are changing.

Under 45 years old watch five minutes less TV today than in 2008. Will the trend contiunue, or will TV watching increase as more opportunities to watch online emerge and the content available keeps increasing?

Sources: KRT Online, Finnpanel/Yle Media. Tv Peoplemeter, Finnpanel/Yle Media.

Note: Radio and TV figures are measured differently and are not fully comparable.

11% of the 25-44-year-olds’ TV viewing is time-shifted

The population’s (4+) TV viewing in Finland according to Finnpanel• 91% live• 7% time-shifted• 2% online viewing

15.5.2013 8Tv Peoplemeter, Finnpanel, comScore - Yle Media

All 10 years and

older

4-9 y 10-14 y 15-24 y 25-34 y 35-44 y 45-64 y 65+ 02468

101214161820

12

75 6

1517

14

9

7%

10%7% 7%

11%

11%

6%

3%

(min

ute

s / day)

Free time daily internet use frequency by devices

How often internet is accessed on different devices in one’s free time(n = does access internet on the device in question) Source: Taloustutkimus Web & Mobile Tracking 2012

TV viewing contexts are in a flux with second screens and social TV

15.5.2013 10

TV industry is developing second screen concepts in order to enhance TV viewing experience by interactivity and engagement.

Second screen also delivers new, measurable advertising opportunities to advertisers.

Social TV

29 % of all surveyed use internet simultaneously with TV. Being social online while watching is a regular habit for half of the under 44-year-olds.

12% of viewers want to comment and discuss TV online• 17% of men• 10% of women

37 % of 15-29-year –old –Finnsshare media content via social media.

Source: Monimediatutkimus 2012, Yle Media.

Television is becoming a background medium as personal devices command the viewers’ attention.

”TV is often on, even though I’m not actually watching any program”

50 percent of women 15-44 agree with the statement according to a multi media survey by Yle.

Internet ready TV sets but a fraction of online video devices at homes

15.5.2013 11

Internet ready TV sets (Smart TV, Connected TV) are only a small part of all the devices capable of online video consumption even if they become more common in households. Playing programmes from mobile devices on big screen increases. Tablet device sales and use are rising while PC’ and TV set sales fall. Game consoles are also used for media viewing.

TV-set ownership in homes in February 2013

TV-set: 93%

Flat screen 75%

Recording capable STB 50%

Full HD TV 38%

Sourcre: Statistics Finland

Current key players in Finnish audiovisual content market

Company Turnover

Linear TV-channels

Turnover 2012, Estimate 2012

A rough estimate 2013

Free-to-air Pay-tv FTA + Pay Weekly reach (*

Average weekly viewing minutes (*

Yle 423 4   4 87 604

MTV3, C More 268 3 19 22 88 406

Sanoma-Nelonen 110 3 5 8 83 212

Discovery-SBS 13 2 5 7 56 75

FOX ≈ 5-10 1 2 3 50 44

Viasat-Viaplay 20 (** 0 20 20 7 5

Netflix ≈ 10-20        ?  ?

HBO Nordic VOD ≈ 5        ?  ?

You Tube.fi ?       ?  ?Makuuni, largest DVD-rental chain 16       ?  ?

15.5.2013 12*) Weeks 1-15/2013, Source http://www.finnpanel.fi/en/tulokset/tv.php **) Viaplay VOD and linear pay-tv-operations, excl. tv-ad revenues

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Comparison of some VOD services available in Finland May 2013

Netflix has best user experience in the heuristic assessment conducted by Yle Media in May 2013. The user interface is simple and the recommendation algorithm is unrivalled.

None of the compared services had very broad content or the newest titles. Viaplay had more titles than Netflix.

The broad device support of the international VOD services leaves national broadcasters’ VOD services such as Yle Areena, Ruutu and Katsomo behind. Not many of the services have Smart TV or game console support. In smartphones, the weakest support was for Windows Phone.

In addition to monthly subscription price, several of the VOD services offered pay-per-view-prized content as well (series season, hockey game, movie).

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Netflix

ViaplaySVT Play

Yle AreenaYouTubeBoox TVBBC iPlayer

KatsomoRuutuHBO NordicTv-kaistaElisa ViihdeSonera Viihde

Availability of news services onlineSeveral Finnish newspaper have announced paywalls in 2013: Helsingin sanomat and Keskisuomalainen (HS 9,90e/month, 5 free articles / week.)

Example price: Keskisuomalainen online :

Tablet newspaper: iOS, Android, Windows 8.PDF paper, Archives, unlimited access to online news KSML.fi, mobile service, subscribers’ benefits - 18,90€ /month.

Aamulehti is expected to implement paywall during 2013. Both advertisers’ expectations and paywall logic are driving publishers towards more local news content.

News UI. Helsingin Sanomat and Maaseudun tulevaisuus have touchscreen apps. Most of the newspapers have digital editions (a print paper facsimile), resulting in less than optional user experience in mobile devices. Other news publishers have specific mobile optimised news sites as well as apps, according to observations on the most important news media in Finland by Yle in May 2013

App stores. Vertical ecosystems such as Apple’s App Store and Google Play Store offer distribution platforms for news apps and charge a roayalty of the price. To reach smartphone users publishers have to make their paid for content available, although they end up taking a loss on revenue because of that.

Yle news is the only news medium in Finland without an iOS app. Yle has a news application for Windows 8 .

Yle News is also the only to have responsive news site, which functions on all devices. The page layout adapts to screen size and offers the same functionalities on all devices. Aamulehti has responsive beta helppo.aamulehti.fi.

Volume. Yle and Ilta-Sanomat published most news online during the observation period in May, nearly 200 per day.

All news publishers have RSS feeds. 15.5.2013 14

Cost structure of linear broadcasting over IP and broadcast

Broadcasting cost is lower than IP unicast distribution in a situation where every Finn 10 years or older watches a channel more than 45 minutes per day.

The distribution costs are lower on broadband networks than via broadcasting network in Finland until the average daily viewing of TV channel reaches 45 minutes.

Sources: Akamai estimate and Digita C-mux list price.

15.5.2013 15

Cost, euros

Viewing, minutes

Availability of TV-over-broadband

Approx. one million households are living in single family houses, outside or close to densely populated areas. Most of those households can have only copper wire based DSL-FBB, in addition to wireless BB.

FBB population coverage will be reduced from current 92% to approx. 80% by 2020.

Sources: Ficora, MITC, Markab Oy.15.5.2013 16

In Finland there are 2,5 million households.59 % of households have subscribed fixed broadband.

Approx. one million households are living on densely populated areas, where high speed broadband is a commodity.

several HD-channels

one HD-channel or two SD-channels

one SD-channel with good quality

one SD-channel with uncertain quality

VOD only

Fixed BB allows ….

25MB

4 MB

10 MB

2 MB

< 2MB

25 Mbits FBB available for 60% of households

84% 10MB

88% 4MB

91% 2MB

8% of house-holds have no FBB available

92% <2MB

Fixed broadband (FBB) population coverage

Broadcast radio might be digitized through cellular networks

15.5.2013 17

Several European countries are preparing or building digital broadcasting networks for radio (DAB etc). DAB uses in most cases VHF III frequency band.

Finnish public and commercial radio companies seem not to be willing to invest in digital audio broadcasting networks. In Fínland the VHF III band is used for digital tv-brodcasting.

The potential of 4G cellular networks for radio channel distribution will be studied in Finland.

Audio content from radio channels is already available over internet. All domestic radio channels are streamed over internet and several companies are offering also audio on demand services.

11% of population 9+ years are listening to radio channels over internet on weekly basis, according to Finnpanel .

Ubiquitous media in cars

15.5.2013 18

Media content is brought to cars using personal devices: smartphones, tablets and wearable computing devices such as Google glasses.

Service information such as realtime traffic information and weather servcices are delivered to in car computers as part of intelligent traffic. Open traffic, weather and similar data allows for combinations of new kinds of services.

YLE STRENGTHENS FINNISH SOCIETY AND CULTURE BY PROVIDINGEVERYONE WITH INFORMATION, EDUCATION, INSIGHTS AND EXPERIENCES.

STRATEGIC GOALSYLE SERVES ALL FINNSYLE PROVIDES VALUE TO SOCIETYYLE HAS THE MEDIA SECTOR'S BEST COMPETENCE

Yle Strategy

20

VISION

We provide a world-class public service.

.VALUES

Reliability, independence, and respect for everyone.

MISSION, VISION, VALUES

MISSION

Yle strengthens Finnish society and culture by providing

everyone with information, education, insights and experiences.

21

STRATEGIC GOALSYle serves all Finns

Yle provides value to societyYle has the media sector's best competence

STRATEGIC GOALS

1.Yle serves all Finns 1. Our content is relevant to all Finns regardless of age, gender, place of

residence, background or situation of life.2. We create diverse culture in an open way, through interaction with

Finns. 3. Our content is easy to find in a multi-channel world.

2.Yle provides value to society1. Finns appreciate Yle and deem it important to society.2. We create an opportunity for everyone to participate in communication

and interaction in a digital age.3. We promote the vitality of the creative sector and our goal is that it is

easy for partners to cooperate with us.

3.Yle has the media sector's best competence1. We have the best people and partners.2. We boldly renew our operations.3. We operate in a transparent, effective way.