IPTV

• Global IPTV growth remains strong, reaching 29.6 million subscribers and with Europe leading the success story, according to Point Topic.
• The worldwide economic crisis is unlikely to stop IPTV’s strong performance, with subscribers forecast to grow more than three-fold by the end of 2012.
• While IPTV has gained critical mass in several global markets, the UK IPTV market has struggled to establish itself. UK’s European counterpart, France, remains worldwide leader.
• Global IPTV subscribers will approach 81 million in 2013, from 26.7 million in 2009, according to Multimedia Research Group.
Highlights
IPTV
Internet Protocol TV (IPTV)
IPTV involves TV delivered via broadband to a TV linked to a set-top box, such as the model used by Tiscali. IPTV provides another delivery platform, offering viewers an alternative route into the digital and pay-TV market and is considered by some to be the future direction of television.
IPTV provides pictures as good as television from digital, terrestrial, cable or satellite providers, but allows viewers to select what they want to watch from libraries of millions of movies and videos, making today’s multi-channel choice seem archaic.
IPTV is generally defined as video services delivered to the TV over a closed, managed IP network. This definition therefore excludes video services that are usually delivered to the PC, rather than the TV, over the public Internet, such as YouTube and iPlayer, which are refered to as online video.
Current Marketplace
New research from Point Topic reveals that global IPTV growth remained strong in the second quarter of 2009 at 11%, reaching 26.9 million subscribers. Europe continues to lead the IPTV success story, the research company claims, with 13.6 million subscribers, a 51% year on year increase.
The second quarter saw 6% growth in Western Europe – where France remains the “champion” IPTV country with more than seven million subscribers – and 12% in Eastern Europe, where new services in countries such as Poland, Czech Republic, Slovenia and Russia are in demand.
The Americas continue to show massive growth in IPTV, where over the last 12 months there has been an impressive increase of 86%, partly due to a major commitment by two of the region’s leading operators. The Americas now have reached a major milestone in IPTV, serving over five million IPTV subscribers (see Table 1) – which represent nearly 20% of IPTV penetration worldwide.
Asia continues to play its part in the encouraging global growth of IPTV, adding approximately 2.9 million customers over the last year, and 1.2 million in the last quarter alone.
Earlier this year, In-Stat reported that despite the worldwide economic crisis, IPTV would continue to perform strongly – a view which appears to be borne out by these latest Point Topic figures.
IPTV
According to In-Stat, not even a global financial meltdown can stop IPTV. Despite the worldwide economic crisis, subscribers to telco TV, which includes TV delivered by telecom operators via IP as well as other technologies, will grow more than three-fold by the end of 2012 . In several key markets, like Brazil, Korea, and India, recent regulatory changes have given telco TV a real boost, the high-tech market research firm says.
“A number of new countries, including places as varied as Montenegro, Jordan, and Ghana, saw the launch of their first commercial IPTV offerings in 2008,” says Michelle Abraham, In-Stat analyst. “Only a few markets, like Japan and Argentina, remain hamstrung by restrictions that hinder incumbent operators.”
UK IPTV Market
IPTV still accounts for a tiny proportion of all UK digital households. Although the UK was home to some of the first IPTV services in Europe, both of its pioneering services have struggled. Local incumbent Kingston Communications launched its service in 2000. The service reached 10,000 subscribers at its peak, but was shut down in April 2006, because the number of subscribers had dropped to 4000.
HomeChoice, which offered its services across a limited footprint in Greater London, had 45,000 subscribers when it was acquired by Tiscali in August 2006. Although the new owner extended coverage, the number of subscribers had dwindled to 36,000 by September 2007. Tiscali finished 2008 with around 100,000 IPTV customers in its UK market, although the carrier had been expecting 200,000.
Tiscali is winding up its IPTV operations in its domestic market of Italy, and it remains to be seen whether it will continue to offer IPTV services in the UK. Even Orange, one of the world’s most successful IPTV operators, seems to have quietly abandoned its plans for its delayed UK service at the end of last year.
BT Group’s IPTV service, BT Vision, was launched in December 2006. While initial reaction from the industry was positive there was some criticism that set up costs were expensive and it was noted that BT Group were entering a competitive market. The aim of the servcie was to attract “hundreds of thousands” of customers by the end of 2007 and 2-3 million in the medium term. However, according to Screen Digest, BT Vision now has just short of 500,000 subscribers – even taking into account the fact that the initial launch was a soft launch and that the service did not get strongly marketed until six months later, this represents a mere 8% penetration of its retail broadband subscriber base.
The take-up of BT Vision compares poorly with some of its peers. Across the channel, Belgacom had achieved 7% IPTV penetration of its broadband access channels within one year of launch, rising to 12.4% within a year and a half and 16.3% within two years. In spite of a slow start, even Telefónica’s IPTV subscriptions accounted for 7.6% of its retail broadband accesses in just under two years.
IPTV Barriers to Success
IPTV has been gaining critical mass in several markets across the world, and several deployments now exceed a million subscribers – so why has it been such a failure in the UK? One of the key reasons is the tough competition it faces from other platforms:
Digital satellite operator BSkyB dominates the UK pay-TV market, with more than 9.4 million subscribers by September 2009. Not only does it offer an extensive range of programmes, but, unlike most of its peers, it is also an ISP, having acquired local loop unbundler Easynet in January 2006, enabling it to offer its ‘see, speak, surf’ triple-play services.
Although its coverage only extends to around half of UK homes, cable operator Virgin Media is one of
IPTV
Europe’s most advanced cable operators. Not only are over 95% of its 3.7 million cable subscribers digital, the operator also offers fixed and mobile voice, and launched a DOCSIS3.0-based 50Mbit/s Internet access service, thus taking the lead in the domestic broadband speed wars.
Free-to-air digital terrestrial television (DTT) platform Freeview has had considerable success since its launch in 2002, surpassing BSkyB as the main provider of digital TV to UK households. The UK regulator Ofcom estimated that 9.7 million homes used Freeview for digital reception on their main TV set in September 2009.
Largely due to the above platforms, the digital penetration rate amongst UK TV households was estimated by Ofcom to be over 77% in December 2006 when BT Vision was launched, rising to 89.8% by September 2009, well above the European average. Therefore, BT entered the market too late to capitalise on digital switchover, and missed the opportunity that many of its peers still have in Europe.
Key to its strategy was the idea of targeting the small majority of UK households that have not opted for pay TV, offering them content beyond what is available via Freeview without having to commit to a regular subscription. The proposition consists of the 40-plus free-to-air digital TV channels delivered via DTT, while on-demand value-added content is carried over IP, with the additional benefit of a low-cost digital television recorder (DTR). This has so far failed to appeal to BT’s nearly 4.6 million broadband subscribers, because the range of content, although growing, remains limited. The UK’s rapidly growing online video market means that there are plenty of richer, PC-based alternatives to supplement Freeview.
Furthermore, BT Vision is even less likely to appeal to non-BT subscribers. Although there is no requirement for a regular pay-TV subscription, these benefits are pretty much outweighed by the commitment to a BT broadband subscription, at a minimum cost of £15.65 per month. In comparison, BSkyB’s entry-level pay-TV package costs £16.50 per month, and offers more than 150 TV channels, as well as a near-VoD service with a good range of premium movie content. This is complemented by various broadband packages, starting with basic 2Mbit/s access free of charge.
Operating in such a tough environment, IPTV operators in the UK will have to redouble their efforts if they are to have any real impact or presence in the market. Unless they can offer a user-friendly TV experience that is genuinely differentiated from competing platforms, they seem destined not to survive.
Finally, after two years of delays, could Orange’s near-dead UK IPTV ambitions be jump-started again? Orange first announced the UK roll-out in June 2006, then promised it would launch in 2007. Last year, Orange told us it would launch in 2008, but UK CEO Tom Alexander canned the idea in November, admitting it’s too similar to BT Vision, which itself has struggled on adoption. but he didn’t close the door on the scheme completely, hinting there could be more investment in mobile TV instead.
Orange’s ADSL TV service is popular across its European markets and has more than 2.1 million subscribers in France alone. But the French market is leaving the UK behind: Orange has an advanced three screen strategy, allowing its customers to watch its channels seamlessly across PC, TV and mobile.
IPTV has simply failed take off in the UK like elsewhere – 20% of French households had IPTV in Q4 2008. BT, Virgin Media and Italian ISP Tiscali have all struggled to win digital TV market share from BSkyB and its dominance must surely put off anyone considering joining the fray.
However, on a more positive note, the BBC’s Canvas initiative could very quickly make the UK Europe’s leading IPTV nation by providing a cheap, free-to-air option combining BBC and other PSB content, as well as commercial programming.
In spite of the demise of Project Kangaroo, Project Canvas – the new IPTV service which aims to bring ‘catch-up from the PC to the TV’ via a broadband connection – is going from strength to strength. Broadcaster Five has recently been confirmed as joining Project Canvas alongside the BBC, ITV and BT.
IPTV
IPTV Forecasts
The number of subscribers worldwide to IPTV services will approach 40 million by the end of this year, according to international research firm Parks Associates. The strong growth in IPTV services is due partly to aggressive provider deployments, according to the firm’s new white paper IPTV and the Digital Home, but the most successful rollouts will incorporate multiple services, such as home networking, convergence in entertainment and communications features, and unique interactive services such as quality on-demand programming.
“IPTV services are a core part of successful digital home strategies, but the appeal of these services is strongest when they are part of a complete service package,” said Kurt Scherf, vice president, principal analyst, Parks Associates. “To edge out incumbent pay-TV providers, telecom operators must move beyond the ‘killer app’ mentality and be holistic in their approach.”
Parks Associates reports the number of IPTV households worldwide grew by nearly 80% in 2008 to exceed 20 million and the growth rate is expected to exceed 50% for 2009.
“Beyond multichannel lineups, telecom operators can differentiate, generate new revenue opportunities, and pull subscribers away from competitors through service offerings that include interactive services, unique search and discovery elements, home networking, and enhancements to customer support,” Scherf said.
Multimedia Research Group is forecasting that the number of global IPTV subscribers will grow from 26.7 million in 2009 to 81 million in 2013, a compound annual growth rate of 32%.
In terms of service revenue, the global IPTV market is estimated to be $6.7 billion in 2009 and growing to $19.9 billion in 2013, a compound annual growth rate of 31%. By 2013, Europe and North America will generate a larger share of global revenue, due to very low ARPUs in China and India, the fastest growing (and ultimately, the biggest markets) in Asia.
The US IPTV market will grow from over 5 million subscribers in 2009 to 15.5 million by 2013, according to a report published by analyst firm Strategy Analytics. While IPTV holds less than a 5% share of total television households in 2009, the percentage will approach 13% in 2013.
The entrance of the Telcos into the television game has created new and significant competition for the traditional pay television platforms, according to the report. Strategy Analytics believes that, despite recently announced deployment deceleration by companies such as AT&T, IPTV will nonetheless become an important platform in the pay television landscape.
Informa Telecoms & Media forecasts that the number of global IPTV subscriptions will continue to rise, to 57 million by 2013. However, the research group suggests that not all these subscribers will pay for their IPTV services – Informa believes telco operators are using IPTV as a customer retention tool.
France remains the worldwide leader in IPTV, largely because the French cable market is weak there – IPTV works well when there is little or no competition. Asia, meanwhile, has become an interesting IPTV market according to Informa – China is predicted to be the largest IPTV market globally, with 13 million subscribers by 2013.