media trends q1 2011

Media Trends Q1 2011 February 2011

The growth of innovative and alternative distribution methods continues to offer content producers avenues to not only reach new audiences across multiple devices, but also to interact with audiences; enhancing the viewing experience in new and exciting ways. We can see that media companies continue to diversify through product development, via mergers and acquisitions and by adapting product offerings to acknowledge current market conditions. The growing popularity of applications used for the distribution of and interaction with content is also extending the content producer/distributor/consumer relationship. In this report we examine not only current industry developments, but also the regulatory trends that ultimately influence the outcomes of the sector. What we can see is that the popularity of television continues to parallel the take-up of new products and services. At the same time Governments and regulators are grappling with issues associated with convergence, the protection of intellectual property in a digital environment, spectrum re-distribution issues and online distribution trends.

The media and communications industry continues to embrace technology and diversify through the delivery of content across multiple devices in a digital environment. Growth also remains tied to access to quality content and acknowledgement of economic influences.

UNITED KINGDOM

BSkyB surpasses the 10 million subscriber

milestone but still no decision on takeover BSkyB has reported strong growth in revenue, profit and cash flow for the half year to 31 December 2010. Revenue was up 15% to £3.2bn, operating profit was up 26% to £520m and the take-up of HD services increased by 68% year on year. Over the period BSkyB recorded 140,000 net additions surpassing the 10 million subscriber milestone.i

BSkyB is predicting increased subscriber uptake following the launch of Sky Atlantic which last year obtained exclusive UK rights to HBO’s entire archive, new HBO programming and co-production opportunities.

News Corporation is still awaiting approval of its bid to take full control of BSkyB. OFCOM

reported its findings into the deal in December 2010 and recommended that it be referred to the Competition Commission. The Culture Secretary, Jeremy Hunt has yet to take up this option. The European Commission approved the acquisition under the EU Merger Regulations in December 2010.

Virgin Media TV powered by TiVo

Virgin Media has teamed up with TiVo to launch a converged television and broadband interactive set top box with DVR functionality. Virgin reports that the new box will be available early in 2011.

UNITED STATES

On-going economic woes result in cuts to

entry level cable packages With the US economy still struggling and unemployment sitting at around 9%, a number of cable companies have recently taken steps to meet the needs of cash strapped consumers by cutting the price of their entry level packages. Comcast has cut the cost of its entry level package by 25% and Time Warner has rolled out a TV Essentials package that has been discounted from $49.95 to $29.99 across various states. ii


NBCUniversal, LLC – a vision of the future? The Comcast NBC-Universal merger that was approved by the FCC and the Justice Department on 18 January 2011 creates a $30BN media company that combines the largest cable operator and ISP in the US with NBC Universal, owner of some of some of the most valuable television and film content. While the deal comes with several undertakings, it sets the foundations for Comcast to fulfil its stated objective to reinvent how customers interact with their entertainment on TV, online and on mobile devices. An updated Comcast Xfinity iPad app allows on-demand viewing and access to live content with an android app planned for launch later in the year. Broadcasting safe from OTT services for the

next ten years

A new report from Moody’s Investors Services looking at US television competition has predicted that the main reasons that a new online model won’t be embraced by the networks or content producers this decade is because of the strength of the economics associated with mass market TV advertising and carriage-fee models. The 2020 Vision: U.S. Telecom, Media and Technology report predicts that lack of access to programming and costs associated with sports rights will be the main barriers to Google and Apple’s success in the OTT area as well as the fact that the distribution of content in a broadcast sense is out of their traditional area of expertise.iii AUSTRALIA

New supply deal for Optus and FOXTEL

Optus and FOXTEL announced a new supply deal that replaces the previous Content Supply Agreement. From February Optus customers will be able to get FOXTEL’s iQHD boxes and HD channels. Optus will be able to offer customers outside its cable area FOXTEL’s

HD services under a non-exclusive satellite agency agreement.iv

FOXTEL available on Telstra T-Box in May

2011

Telstra will offer 30 FOXTEL channels streamed to the T-Box from May 2011. The channels will be streamed unmetered via a BigPond ADSL or cable broadband service in metropolitan areas where FOXTEL subscription services are already available. Some of the channels on offer will include FOX8, Discovery, FOX SPORTS Play, Movie One and Showtime Premiere. Telstra reported that there are currently about 120,000 Australian households with a T-Box. As well as the 30 channels from FOXTEL,T-Box will soon include on-demand television and catch-up movies and TV programs.v STV continues to assist Digital TV

Switchover

The latest digital tracker survey reports that 75% of Australians were watching digital channels in Q3 2010. Free to Air (FTA) Channel 11 launched in January 2011. STV continues to assist with the digital take-up in metropolitan and regional areas throughout Australia by offering access to 200 digital channels in SD and HD.

Over the top set top box devices are offering consumers new ways to receive content and the gaming consoles are also ramping up functionality. FOXTEL Available Via Broadband

FOXTEL on Xbox360 launched in November 2010. Australian consumers are now able to watch live TV, catch up TV and order individual movies and TV episodes to rent without the need for installation or a long term contract via their Xbox360. In addition,


FOXTEL movie and television content is now available to over 800,000 iQ boxes. Boxee Set Top Box

At the recent Consumer Electronics Show in the US, Boxee announced a partnership with CBS to sell TV episodes through its software platform. In the UK Boxee has commenced tests with VOD website SeeSaw to offer a range of ad-funded and premium content from the BBC, Chanel 4 and Five via the STB rather than over the web. Gaming consoles becoming

entertainment hubs

Nielsen research shows while US consumers still predominantly use their devices for playing games there is a trend that non-gaming TV and video activities are on the rise, meaning that devices are beginning to be considered as ‘entertainment hubs’. Figures indicate that 20% of Wii owners’ time is spent watching VOD and streaming services such as Netflix, MLB Network and ESPN 3, 10% of Xbox owners’ time is spent streaming subscription services with 9% downloading TV content and movies. 9% of PlayStation3 owners’ time is spent using the on-demand facility and 4% on downloading TV content.vi

From the online launch of the Apple app store in July 2008 to the announcement last month that Apple’s App store had achieved its 10 billionth download some two and a half years later, the popularity and advancement of the app continues at apace.

The Rise of Apps

Research firm Gartner has predicted that mobile store app downloads will increase 117% in 2011 and by more than 1000% from 2010 to 2014 with app store revenue for 2011 expected to exceed $15bn.

The report notes that alternatives to the Apple App Store are gaining popularity. These stores include: Android Market, Nokia's Ovi Store, Research In Motion's (RIM's) App World, Microsoft Marketplace and Samsung Apps.vii One of the first app stores made for TV is the Samsung Apps store which recently reported that it has reached its two millionth TV application download globally. Samsung has reported that the most popular SmartTV apps downloaded include YouTube, Hulu Plus, ESPN Next Level, AccuWeather, Google Maps and Texas Holdem. The Daily – the reinvention of newspapers?

News Corporation launched its first digital only newspaper The Daily, a news application designed for iPads. While The Daily is available through the Australian iTunes store, it is a US publication. In the US The Daily costs subscribers 99 cents a week and in Australia it costs just over a dollar a week. Aussie Channel Apps give viewers more

The Lifestyle FOOD Channel has launched a Summer Entertaining BlackBerry app that is filled with over 100 recipes and inspiring ideas from some of Australia’s top chefs. The app also includes video, a facility to save shopping list ingredients and ‘invite to dinner’ button.viii BBC Worldwide has recently released an updated BBC News app, a Top Gear app, a Teletubbies game app and a Doctor Who game app to cater for a diverse audience and to extend the viewing experience. National Geographic has recently launched the World Atlas app and the Ultimate Dinopedia app through the iTunes store. In January 2011 FOX SPORTS launched a new iPad app that streams FOX SPORTS News 24/7 live, offers on-demand FOX SPORTS news clips, episodes of FOX


SPORTS magazine shows, a ‘staff picks’ video catalogue and extended highlight packages. The app (available through iTunes) has full screen optimised video display and a ‘watch later’ function for bookmarking content.ix The BBC has launched an iPlayer app for iPad and Android devices that allows viewers to watch live TV, listen to radio and watch catch-up TV.x

Original production and exclusive content drives programming decisions on STV which will attract viewers to various channels across the 200 channel offering. Top 10 STV channels based on share of viewing are FOX8, TV1, The LifeStyle Channel, FOX SPORTS 2, FOX SPORTS 1, Disney Channel, UKTV, Arena, Crime & Investigation Network, and SKY NEWS. The Top 10 channels (combined with their plus2 channels if existing) receive approximately 20% share of viewing. FTA digital multi-channels on average individually receive a .4% share of viewing.xi Programming continues to develop and embrace social media to further enhance the viewer’s relationship with content. At the same time technology continues to offer unique experiences in programming. SpongeBob premieres on Facebook just

for fans

In the US, the new season of the perennial children’s favourite, SpongeBob SquarePants, premiered on Facebook in the US in January. SpongeBob’s 16 million Facebook fans were able to catch the first episode titled ‘Trenchbillies’ the day before it appeared on television on the Nickelodeon channel.

Australia’s First 3D Doco to premiere on

National Geographic Channel

Australia’s first 3D documentary to air on television: The Eye 3D will premiere on FOXTEL’s dedicated 3D channel on 22 February 2011. National Geographic’s award winning documentary will take viewers inside the world of the Very Large Telescope (VLT), the most powerful telescope in the world, which is situated on the summit of Cerro Paranal in Chile’s Atacama Desert.xii Super Bowl XLV most watched TV program

of all time in US

The Nielsen Company reported that this year’s Super Bowl broke US broadcasting history when over 100 million people tuned in to watch the Green Bay Packers triumph over the Pittsburgh Steelers xiii.

Governments continue to grapple with the regulatory issues associated with a converged media and communications environment. While reviews in the UK and Australia will address the issues associated with convergence the increasing importance of managing online distribution and spectrum shortages are being tackled in the US.

UNITED KINGDOM

UK to conduct Communications Act

review and publish Green Paper by end of

2011

The UK Culture Secretary, Jeremy Hunt recently announced the Government’s intention to conduct a full review of the media and communications environment, ultimately leading to a new Communications Act. The review will be conducted throughout the year and will result in the Government publishing a Green Paper at the end of 2011, setting out the full scope of a new Bill.xiv


Dedicated network channel for local news

and content

Hunt also launched a new Action Plan for Local Media that proposes a new dedicated network channel for the provision of local news and content to sit alongside existing public service broadcasters. OFCOM sets goals for 2011 that focus on

convergence

OFCOM Chief Ed Richards recently highlighted a number of areas of regulatory focus in 2011. Richards said that OFCOM had a number of short term goals related to three areas, which were copyright in a converged on line environment, net neutrality and the re-definition of content regulation in the IP video world.xv UNITED STATES

Controversial Net Neutrality rules

approved

In the US the FCC approved the controversial Net Neutrality rules in December 2010. The rules address the broad principles of transparency, where fixed and mobile broadband providers must disclose network management practises, not block lawful content, applications or services and not unreasonably discriminate in the transmission of lawful network traffic.xvi

Broadcasters encouraged to give up

spectrum for wireless services through

voluntary revenue sharing auctions

The rise in wireless application take-up in the US is putting pressure on the FCC to free up spectrum for those services. In January 2011, Senator John Rockefeller re-introduced a bill to give the FCC power to conduct voluntary spectrum auctions of broadcast spectrum. The bill proposes that broadcasters who voluntarily give up spectrum for auction will in turn share the revenue from the sale of that spectrum.xvii

AUSTRALIA

Convergence Review draft terms of

reference Submissions for the draft terms of reference for the DBCDE Convergence Review closed on January 28, 2011. The review will be undertaken by a committee of independent experts and the final terms of reference will be released in the first quarter of 2011. Classification Reviews

A Senate committee is currently conducting an inquiry into the Australian film and literature classification scheme with a report due 30 June 2011.xviii The Australian Law Reform Commission has been asked to conduct a review of classification taking into consideration changes in technology, media convergence and the global availability of media content. Proposed terms of reference have been released.xix

Connected TV’s offering new revenue

models for advertisers Connected TV’s are offering new streams for advertisers. In the US Adap.tv is working with TV applications company Flingo on a number of new advertising strategies. Flingo has developed an application with Warner Bros. offering consumers with connected TV’s access to TV series each with a pre-roll ad attached. Another app is a TV Guide that has videos that are supported by direct-response advertisements, where consumers can use the remote to contact the advertiser by email rather than remembering phone numbers.xx Australian advertisers tip 6% growth in 2011

The annual Starcom MediaVest Group Media Futures survey has revealed that national advertisers predict growth in main media advertising expenditure of 6% for 2011. The


report highlighted a second consecutive year of strong growth following the grim outlook of 2009. The report also shows national advertisers predicting that all digital TV advertising will increase by a total of 9.8%.xxi

• Since its launch in October 2010 BSkyB has announced that 3DTV take up has exceeded expectations with 70,000 3DTV subscribers now taking up the service.

• US ecommerce consulting firm Elastic Path Software has revealed that 75% of online video viewers are willing to pay for certain content with 40% having paid to access content online in the last year.

• Facebook has launched a new Sponsored Stories feature that will notify friends when people check into a store on Facebook Places.

• DVD rental and video streaming service Netflix passed 20 million US subscribers in 2010.

• Ericsson has predicted that mobile broadband subscriptions globally are on track to surpass 1 billion in 2011.

• Research firm companiesandmarkets.com reported that the US and South Korea accounted for 66% of total worldwide 3DTV sales in 2010.

ENDNOTES i BskyB, http://corporate.sky.com/documents/pdf/latest_results/Interim_Press_Release_1011

ii Comcast cuts cost of entry level package by 25 per cent, http://articles.philly.com/2011-01-09/business/27018560_1_cable-industry-comcast-customers-

cable-subscribers, 18 November 2010 iii

Moody's sees broadcast TV safe for the next decade, http://www.rbr.com/media-news/research/moody-s-sees-broadcast-tv-safe-for-the-next-decade.html,

3 January 2011 iviv

Optus and FOXTEL sign new subscription agreements, http://www.foxtel.com.au/about-foxtel/communications/optus-and-foxtel-sign-new-subsciption-

agreements-107192.htm, 21 December, 2010 v Telstra to Offer Foxtel on T-Box in May 2011, http://www.foxtel.com.au/about-foxtel/communications/telstra-to-offer-foxtel-on-t-box-in-may-2011-

114397.htm, 8 February 2011 vi Gaming Consoles edge closer to serving as entertainment hubs, Nielsenwire, http://blog.nielsen.com/nielsenwire/online_mobile/game-consoles-edge-

closer-to-serving-as-entertainment-hubs/ 15 Dec, 2011 vii

Gartner says worldwide mobile application store revenue forecast to surpass $15bn by 2011, http://www.gartner.com/it/page.jsp?id=1529214, 26 January

2011 viii

Our Summer Entertaining App is here, http://www.lifestylefood.com.au/quickbites/lifestyle-food-launches-summer-entertaining-mobile-app-for-

blackberry, 22 December 2010 ix Fox Sports View, a game-changing application for iPad, available at the iTunes store from January 6, http://www.foxsports.com.au/other-sports/fox-sports-

view-a-game-changing-application-for-ipad-available-at-the-itunes-store/story-e6frf56c-1225982514551, 5 January 2011 xBBC iPlayer app for iPad - review, http://www.guardian.co.uk/media/pda/2011/feb/10/bbc-iplayer-app-ipad-review, 10 February 2011

xi OzTAM National, Surveys 1-10 2010 (ex Easter), Total People, STV Channels and FTA DTT channels (Includes Plus2 Channels)

xii National Geographic Channel Puts Universe in Focus with Australia’s First 3D Documentary Premiere, http://www.foxtel.com.au/whats-on/foxtel-

insider/national-geographic-channel-with-australias-first-3d-documen-114278.htm, 4 Feb 2011 xiii

Super Bowl XLV Most viewed telecast in US broadcast history, http://blog.nielsen.com/nielsenwire/media_entertainment/super-bowl-xlv-most-viewed-

telecast-in-broadcast-history/, 7 February 2011 xiv

Jeremy Hunt, Oxford Media Convention, http://www.culture.gov.uk/news/ministers_speeches/7726.aspx, 19 January 2011 xv

Oxford Media Convention, Speech by Ed Richards OFCOM, http://media.ofcom.org.uk/2011/01/24/oxford-media-convention-speech-by-ed-richards/, 24

January 2011 xvi

FCC Net Neutrality http://www.fcc.gov/Daily_Releases/Daily_Business/2010/db1223/FCC-10-201A1.pdf xvii

Sen Rockefeller introduces bill on spectrum auctions public safety network, http://technology.greenpromote.biz/sen-rockefeller-introduces-bill-on-

spectrum-auctions-public-safety-network/ xviii

Parliament of Australia, Review into the Australian Film and Literature Classification Scheme,

http://www.aph.gov.au/senate/committee/legcon_ctte/classification_board/info.htm xix

Australian Law Reform Commission, National Classification Review, http://www.alrc.gov.au/inquiries/national-classification-review, 11 January 2011 xx

Media Post, Adap.TV Strikes Flingo Deal to Better Monetize TV,

http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=143423&nid=122929, 24 January 2011 xxi

Advertisers predict main media expenditure to grow by 6 per cent in 2011,

http://accesspr.com.au/index.php/news/673/56/Advertisers-predict-main-media-expenditure-to-grow-by-6-per-cent-in-2011, 7 February

2011

Media Trends Q1 2011 is created by Infodec www.infodec.com.au for ASTRA www.astra.org.au