These methods include cable, satellite, Internet protocol TV (IPTV), Digital Terrestrial TV (DTT), online video aggregators and mobile broadcast TV.
The new report, “European and US digital TV, 2006 – 2012”, says innovation through digital service provision will be a crucial factor for survival. The likes of Apple TV, Joost and YouTube are shifting the competitive dynamics of the sector and providing consumers with multiple service offerings to create a unified entertainment and communications experience will prove a key differentiator.
“As the sector transforms, service operators and broadcasters are searching for multiple strategies to ensure that their offerings are kept attractive to consumers,” says Chris Khouri, media and broadcasting analyst at Datamonitor and author of the report.
“Primary strategies are found through bundling alternative communications services (including voice and data) to traditional TV services. Triple and quadruple play services, from operators like BSkyB, Canal Digital and Verizon, are becoming a must to survive in the market and are helping to promote an increasingly competitive sector. Further, these offerings are expected to aide in the significant growth of digital TV services over the next few years.”
According to Datamonitor estimates there are around 105 million households subscribing to satellite, cable and IPTV services in the US and Western Europe. By 2012, Datamonitor estimates there will be circa 77.7 million satellite households in both regions. Digital cable is expected to show significant growth particularly as analogue cable is switched to digital services. By 2012 there will be an estimated 69 million digital cable households, an average annual increase of 8.4% from 2006.
One of the most recent entrants into the pay-TV arena, IPTV, is expected to illustrate the largest growth. By 2012 it will be present in an estimated 19.3 million households – a compound annual growth rate of 41.8% from 2006.
High speed connectivity is the most important factor in the transformation of the television sector. Despite the fact that the issue has been at the forefront of the convergence discussion for quite some time, it is important to reiterate how rising broadband penetration is revolutionising this sector. As connection speeds increase, compounded with advancements in compression technologies, the quantity and quality of IP (Internet Protocol) based video services offered by TV service providers, Internet Service Providers (ISPs) and telecoms operators is set to escalate.
A primary issue, however, is whether the present network infrastructure will be able to handle the massive amounts of data traffic present in a predominantly IP ecosystem.
The proliferation of high speed connectivity is truly a double-edged sword for pay-TV service operators. The entrance of broadband into the home gives consumers the ability to access a vast array of entertainment options that may not necessarily fall within a service operators own content network. For instance, consumers are able to download pirated content via Peer-to-Peer (P2P) networks, stream it through an online aggregator, or access other alternative forms of entertainment in much greater quantities as connectivity speed increases.
Furthermore, content producers and most public service broadcasters (PSBs) are beginning to push content through proprietary or partnered online portals, such as the BBC's iPlayer and the recent strategic move to deliver content via YouTube. This puts rising pressure on traditional aggregators to boost the attractiveness of their service offerings in order to acquire and retain customers.
The Netherlands, Germany and the US have seen significant private investment into the national cable and broadcasting sector. Private ownership brings with it strong incentive to boost return on investment (ROI) through greater operational efficiencies and strong competitive advantage. In many cases, this involves driving revenue growth by creating additional synergies and value-add services such as triple play offerings.
Once private investment moves in, there is also strong interest in reducing operating margins by boosting internal efficiencies. These efficiencies will be found through overlapping infrastructure and value chain costs. Tackling these issues will enable a reduction of operational expenditure through system simplification and infrastructure rationalisation. As consolidation continues to occur in the sector, there will be significant opportunities for IT systems integrators to gain advantage from continuous strategy alignments.
