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The television sector is facing a profound restructuring, as players from formerly disparate sectors, such as TV, Internet and equipment vendors converge on the market. IDATE has decided to monitor the market trends affecting the market through a three level approach providing end user devices & video services market data, highlighting innovation pulses and key players’ moves. The following analyses are excerpted from of one of their monthly World Connected TV Market Insights written by Jacques Bajon, head of the video distribution practice:
“The most influential element comes from the popularity of OTT products in the US, whether Netflix with its 22 million streaming customers in Q1 2012 (up 9% from Q4 2011 and generating revenue of $500 million during the quarter) or Hulu which regularly reports more than 1.5 billion ad views a month for its streamed videos, while its Hulu Plus paid offer had a base of two million subscribers in Q1 2012, which is 33% more than in Q4 2011,” says Jacques Bajon, Head of IDATE’s Video Distribution Division.
He goes on to say:
“There is nothing comparable as yet in Europe. The early days of CanalPlay Infinity, for instance, appear quite tepid in France, attracting only 25,000 paid customers in Q1 2012, while American players’ weight in the global OTT market is increasing and, by extension, in the TV connected market as well”.
More from the research:
Global market for video services on connected TV
We believe that the global market of services on connected TVs will reach EUR 2.5 billion in 2016. This market will represent 16.8% of the OTT video market and about 1% of the global fixed video services market. These figures correspond to our overall analysis of the deployment of connected TV services, which concluded that the right conditions for rolling out new services were not yet entirely there in early 2012, so we do not expect to see the market really take off until 2015.
Breakdown by service
We anticipate that paid services will play a leading role in the development of connected TV services. We are indeed currently nearing the end of a double phenomenon known as cordcutting (in which consumers will combine free access to linear television via digital terrestrial and satellite with a fee-consumption via OTT services) and cord-shaving (in which consumers will scrap their paid cable and IPTV plans for low cost OTT offers or a limited consumption of VOD services). Globally, we believe that the paid services will represent 59% of the market for video services on connected TV.
With respect to advertising revenue, we believe that they will be primarily derived from the operation of premium programs. Consumption of short programs and of UGC contents is likely to remain largely limited to PCs, smartphones and tablets.
Given the pioneer position of the United States with respect to attractive OTT service offerings, we believe that they will remain the largest market for connected TV services, harbouring up to 61% of the total market.
The impact on the global broadcasting market
We believe that the overall development of OTT offerings, in particular on connected TV, will significantly affect the linear TV market, and in different proportions depending on the region.
In the US, we anticipate a decrease of this market, due in particular to the reduced rates of pay television in the wake of competition from OTT services. However, over the period, we expect a growth of the global market (both linear television and new services) at current currency values, but probably a decrease in real terms. We believe in particular that the market could shrink towards the end of the period.
We anticipate a more favorable development in Europe. On the one hand, in developed European markets, we believe there is still some growth potential for pay TV and that the level of prices will limit the impact of competition on linear TV offers. On the other hand, Central and Eastern European countries offer a high growth potential.
Outside these areas and Japan, the development of OTT offers, which will come later, will not weigh on the growth of the traditional broadcasting market over that period.
To learn more about the Connected TV Watch Service : www.idate.org