the market for on-demand audiovisual services in the...

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


Netflix; 71,1%

Sky Now TV; 12,8%

Amazon Instant Prime Video; 16,1%

UK SVoD Volume market share in % of volume


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%


2320 92%


315 14% 2005 86%


274 12% 4 0% 1557 67% 448 19%

iTunes Poland catalogue


1176 92%


677 58% 499 42%


637 54% 108 9%

384 33% 115 10%

Kinoplex catalogue


950 100%


139 15% 811 85%


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

Dziękuję

-

Thank you

Contact: [email protected]

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