The previous post “Cord-Cutting Is Becoming A Reality” points out that cable and satellite companies face a big problem, they are losing subscribers and in a rapid pace. However, if TV operators lose ground, someone else needs to benefit for it. If consumers stop paying TV subscription, it does not mean they stop watch TV, they just don’t want to pay (too much) for it.
So, how do they watch TV?
DTT
At IBC, Abe Peled, Chairman and CEO at NDS, a provider of TV software solutions encompassing ‘traditional’ and broadband delivered services, said that for most Pay TV operators the biggest share of viewing time is consumed by free-to-air channels.
Most European countries provide impressive variety of DTT free-to-air channels (which is increasing every single quarter). In UK for example, there are dozens of free DTT channels, including HD ones. In 2008, 17.7M households with DTT receivers made impressive 66.7% penetration rate out of total households.
2008 DTT Overview in Europe
VOD
Couple of years ago, VOD content was available only via cable/sat operators. Nowadays, free premium content is available mainly via PC (e.g. Hulu) while PPV premium content is available in almost every single consumer electronics device. The best example for the latter case is Netflix. Netflix offers their services on a variety of consumer electronics devices such as game consoles (all three brands !), TVs (Sony, Samsung, LG, etc.) mobile phone and tablets, Blurays and more. Not surprisingly, consumers loved the idea of connected devices that offer VOD content on the top of their core purpose. Eventually, Netflix’s strategy paid off with $1.68B revenues (+22% YoY), $115.86M net income (+8% YoY) in end of year 2009.
Netflix's connected CE strategy
Those two trends did not miss Japanese and South Korean engineer’s attention. In the beginning they’ve manufactured TV sets with built in DTT tuners, and later on they have started to collaborate with content providers to provide VOD content. In France, LG teamed up with France Telecom. In the US, Samsung teemed up with Amazon. And in UK, leading content providers Canvas, FetchTV, Lovefilm, Miniweb, Sky and Virgin Media are planning to enable the delivery Connected TV.
Cable mess in the living room
Instead of buying extra hardware and deal with cable routing mess in my living room (e.g. Boxee box, Apple iTV), having connected TV with build in DTT and Catch-Up/VOD service is a wonderful idea. Especially due to the fact that consumers anyway periodically buy TV sets so there’s no extra cost or bother.
Consumer house rules are changing as TV manufacturers can practically offer à la carte TV services (what’s next? DVR built in?). Retail’s value chain role can rise (again) and threat the dominance operators had for years. No more plain simple hardware but converged platforms with variety of content. Samsung, LG, Sony will embrace Apple’s business model and provide converged hardware and content services, especially when forces such as Google TV are on their side.
Eddie Nudel is a Senior Product Marketing Manager in Orange Israel for the past 4 years, managing various online services – video, voice and cloud computing.
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