Latest Analyses, blogs and news

Netflix is forcing the transformation of the broadcasting industry 30 Jun 2015

In our regular analyses over the last decade we have talked about the need for the traditional players in the broadcasting market to change their business models. But, apart from a few digital additions to their services, so far little has happened. The industry remains reluctant to change. What hasn’t helped either is the fact that broadcasting can continue to be a helpful cash cow during a relatively long period of decline, so there has been little appetite for transformative changes. The reason for the slow volume of change has been that when changes did start to take place – driven by broadband access and the internet – there was still a whole generation of people using traditional broadcasting as their only form of broadcast entertainment.

Now, a decade later, that part of the market has shrunk even further and, while we still might have another decade of broadcasting as we know it today, changes – coming in from the outside – are well and truly underway, driven by streaming video services such as Netflix – a stunning 32% of the global population is now using this service, within two months after it launch in Australia over one million people had registered with the service.

An important subset of the new video streaming services is TV catch-up, and although the content for these services is still provided by the broadcaster it is no longer delivered in the traditional broadcasting format; and, given the globalisation and commoditisation of content, the supply of content will increasingly be carried out by others.

While in the case of the popular Game of Thrones series Foxtel still had the lead in delivering the service during the exclusive 3-month period, the day after the final screening of series 5 the service became available through just about all the other video-streaming services. This shows that the forces outside the traditional industry are stepping up their activities, and this will fast-track further changes in the broadcasting model. These developments will also have a positive effect on addressing the piracy issue – the key reason that piracy exists is because the ageing business models are not well-fitted for the new ways people are using content, and, rightly or wrongly, users will try to bypass those archaic systems.

The BBC believes that, based on the current licensing system, broadcasting might have another ten years of life in it before the whole broadcasting system will have changed to a subscription-based service. In the case of the BBC they have the luxury of being funded through a broadcasting tax; but for commercial broadcasters the situation is much bleaker, as their model is still totally reliant on advertising revenues, and with viewer audience numbers dwindling they are facing problems attracting advertisers.

The fact that the commercial broadcaster TEN and pay TV operator Foxtel are forging closer relationships is a clear indication that the market is moving towards subscription-based services. However, this doesn’t take into account that the real action is moving away from national to international services and we still haven’t figured out how we are going to address this change. In this context it is also interesting to note that Foxtel’s revenue is already larger than the combined revenues of the three commercial free-to-air services – this despite the fact that pay TV in Australia has only about 30% penetration among TV households.

The globalisation of content mentioned above might work for movies and TV series and certain sports and major events, but what about local news, current affairs, local sport, etc? Surely we can’t have 5 broadcasters looking after this! What consequence would that have for diversity, competition and a well-informed society?

These are issues that need to be discussed well before the current system ceases to exist.

The ABC has already staked its claim here. Its aim is to be the leader in Australian content. The company is already the Australian leader in catch-up TV; their iView service now has something like 30 million views a month. The use of iView has seen an enormous increase after the launch of Netflix – this extremely well designed American service has really kicked off the video streaming market in Australia.

No doubt this is an interesting industry, with more massive changes coming up in the future, driven more and more by the customers of these services rather than by the rigid business models offered by the traditional players in the market.

Another issue that keeps coming back is that all of this depends on the availability of good quality high-speed broadband infrastructure, while other countries are building FttH networks, Australia has abandoned their FttH plans and have reverted back to a second class technology based on the old copper and coax cable networks. In the US Netflix already accounts for 54% of monthly broadband traffic and within weeks of the launch of the services in Australia iiNet reported that 25% of its traffic was based on this service. It clearly shows that proper broadband infrastructure is essential and Australia doesn’t have a plan for this.

Paul Budde

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Iran’s telecom sector presents opportunities and challenges in 2015 29 Jun 2015

The telecoms market is very important to the Iran economy and provides one the largest non-oil based revenue streams. Improving and expanding telecoms infrastructure has been the focus of investment in recent years, and Iran’s tech savvy, young population is eager to take up next generation services.

In recent years, foreign companies were reluctant to invest in Iran’s ICT market due to sanctions placed against it. However with the easing and possible lifting of these sanctions; it is expected that attention will again turn towards this potentially lucrative market.

Current penetration levels indicate room for continued revenue growth. Mobile data services are available but account for a small proportion of total revenue. This is expected to increase over time as mobile data services increasingly underpin future revenue growth, made possible by the launch of 3G/HSPA services. In November 2014 the first 4G LTE network was also launched by MTN Irancell.

Despite the relatively low penetration of fixed broadband in Iran; there are moves underway to improve broadband access in Iran with the FttX operator Iranian Net currently deploying a fibre network which aims to have 8 million customers by 2020.

It is impossible to discuss Iran’s telecom sector without considering the impact of censorship. Tensions over unresolved censorship issues continue to stifle Iran’s telecoms growth as the government attempts to restrict or block access to various online and mobile apps. Facebook, Twitter and Whatsapp are just some of the social apps which have faced banning in Iran.

However at the same time, the country is developing its own local versions of similar international services. Aparat is one example, which offers a YouTube-like service. Iran is also a large user of its own social media network called Crood and for blogging there is on offer. For photo-sharing Iran has established a site called Lenzor and another initiative is the development of its own search engine “Yooz”. In 2015 it was reported that Iranian’s may soon have access to their own mobile messaging service called Zoobi.

The e-commerce sector has experienced local organic development as well. Without access to eBay or Amazon, Iran’s own Esam became a replacement and instead of PayPal, Iran has established ZarinPal.

For detailed information, table of contents and pricing see: Iran - Telecoms, Mobile and Broadband

Multiple viewing platforms compete for consumer attention 24 Jun 2015

The global digital media entertainment market continues to go from strength to strength in 2015. This highly competitive industry sector is flourishing on the back of improved mobile and broadband infrastructure and consumers continue to embrace being entertained and connected via gaming, social media, video streaming and music. Advertising models are expanding in order to capture revenue from an industry where direct revenue-generating business models are not well received by the broader public.

The video media industries continue to evolve and consumer habits are shifting from broadcast TV to on-demand content – especially streaming. Traditional TV viewing is increasingly facing competition from other viewing platforms such as smart phones, tablets and Smart TVs.

Choice is the key. Broadcasters are no longer in charge of the global viewing habits of consumers, who have the choice of, and the ability to access, an enormous amount of movie and TV series content through internet broadband.

Pay TV across the various platforms – including cable TV, IPTV, and satellite TV – continue to rise in popularity and this trend is reflected in the market’s increasing service revenues. IPTV is the fastest-growing pay TV platform from a global perspective.

Video streaming already makes up the largest component of internet traffic and is set to continue growing faster than other digital formats. Video streaming over mobile networks is forecast to grow strongly, although not quite as dramatically as initially expected. Due to poor data allowance and steep prices, users tend to watch mobile video over WiFi more than over a cellular network.

With the rise of digital platforms, the media industry is rapidly changing. In newspaper and book publishing, TV and radio broadcasting, film, music, and other forms of media, we see that the national walls that protect local organisations within traditional models are crumbling. In other words, it is no longer an issue of local market share. It is now about international market share.

For detailed information, table of contents and pricing see: Global Digital Media - The Unstoppable Video Streaming, TV and Entertainment Industries

Telenet emerges as a key player in Belgium’s mobile market 23 Jun 2015

Though relatively small, Belgium’s telecom market has attracted investment from some of the region’s major players, including Liberty Global and Orange. There have been significant developments in the competitive landscape in recent years, fostered by regulatory measures which in April 2015 finalised requirements for cablecos to allow competitors access to their networks. This has enabled Movistar to become a viable force in the market for bundled services offerings, hitherto dominated by Proximus. In addition, Telenet in early 2015 acquired BASE from KPN. The deal propelled Telenet as the second largest mobile services provider in the country, a position bolstered overall by the company’s existing strong presence in the TV and broadband sectors.

Belgium enjoys effective competition between the DSL and cable platforms, and benefits from comprehensive coverage. Network investments from Telenet and Proximus using a combination of DOCSIS 3.0, hybrid fibre/VDSL and FttP technologies have greatly improved the availability of faster services in recent years. Related to this development is the growing popularity of bundled services offerings among consumers, and the efforts among telcos to offer the full range of services.

Belgium’s mobile market is dominated by Movistar, Proximus and a newly formed BASE/Telenet following KPN’s sale of its local division. All three have invested in network upgrades, and mid-2015 LTE was available to over 90% of the population.

A new BuddeComm report profiles Belgian’s mobile market, providing the latest statistics on the main players, as well as the most recent developments on HSPA and LTE rollouts, emerging data markets and data services such as SMS, i-mode and mobile TV.

The report also provides data and analyses on key aspects of the Belgian telecom market. It assesses the latest statistics on fixed-network services and also reviews the principal regulatory issues, noting the status of interconnection, local loop unbundling, number portability and carrier preselection. The national telecom infrastructure and major fixed-network operators are also profiled, including operational and financial data and an assessment of company strategies in a highly competitive environment. The report also reviews developments bundled services, and assesses the country’s digital media landscape, supported by statistics on the major service providers. It also profiles Belgium’s fixed and wireless broadband markets, including forecasts for selective years to 2020, as well as the mobile market, covering the main players as well as recent developments with HSPA and LTE rollouts, and emerging data services.

For detailed information, table of contents and pricing see: Belgium - Telecoms, IP Networks and Digital Media

Brazil - Telefónica merge fixed-line and mobile operations while Oi divests Portugal Telecom interest 22 Jun 2015

The Brazilian telecom sector has seen considerable changes in recent quarters, with the key players consolidating their holdings under a single brand. The market has seen sustained though slow revenue growth despite a difficult economic climate. Although the number of fixed lines in Brazil continues to increase slowly, partly attributed to VoIP connections, teledensity remains low. International infrastructure is set to improve considerably during the next two years as new cables are laid connecting to the US and Angola, while the government has also commissioned a review of an Amazon basin network connecting key areas of the country. The state-owned Telebrás will from 2017 also make use of a new satellite (under construction) to improve broadband connectivity) in rural areas.

The 2014 FIFA World Cup held in Brazil provided a stimulus to operators providing new technologies and networks such as LTE and FttP. The 2016 Olympic Games will similarly provide further encouragement from all stakeholders to improve infrastructure, though most benefits are likely to be limited to cities where events are being held.

Four companies (Telefónica’s Vivo, América Móvil’s Claro, Telecom Italia’s TIM Brasil, and the domestic player Oi) still dominate Brazil’s mobile market, though an emerging MVNO sector should begin to provide real price competition from 2016.

Operators are rolling out LTE networks at a fast pace in an effort to gain subscribers and secure revenue from mobile data services. Three of the four major mobile companies – Vivo, Claro, TIM Brasil and Oi – have secured spectrum in the 700MHz band for LTE services, though this spectrum is unlikely to be made available before late 2016 or early 2017. Mobile broadband is being supported by the declining cost of smartphones. M-commerce remains low in terms of transactions, but the country is an m-commerce pioneer in the region, and a number of initiatives between mobile network operators, banks and credit card companies have targeted the large number of people without bank accounts.

Brazil has one of the largest broadband markets in Latin America, though broadband penetration is only slightly above the regional average. The pay TV market is the largest in Latin America, with considerable room for further growth which has encouraged investors such as AT&T to gain a foothold in the market.

A new BuddeComm report profiles the major and some minor fixed-line operators, and provides an overview of the broadband market, accompanied by updated statistics, market analyses, and forecasts to 2020. It also reviews the mobile voice and data markets, profiles the mobile operators and assesses their strategies as they endeavour to exploit opportunities offered by the fast developing mobile broadband sector.

For detailed information, table of contents and pricing see: Brazil - Telecoms, IP Networks and Digital Media

Australia's geo-blocking legislation is a regressive step for consumers 19 Jun 2015

In recent months the power of the broadcasters and content providers over Australian policy makers has led to legislative changes which protect the interest of mainly US-based providers at the expense of Australian consumers. One only has to go back to June 2013 to see how far things have come. Then, the parliamentary Standing Committee on Infrastructure and Communications recommended that Australian consumers (lawfully) evade geo-blocking techniques used by IT and software retailers to over-charge local consumers for identical products available in other markets. Software in Australia was up to two-thirds more expensive than in the US, a trend repeated with a range of hardware including computer peripherals, music, games and e-books. The practice of geo-blocking was considered to isolate markets artificially, and prevent consumers from searching for cheaper alternatives to those fostered on them by the international corporates. The Committee’s report recommended a range of reforms to remove barriers to competition, and to reduce the implementation of artificial pricing. Step forward to June 2015. The government did recently push legislation through the House of Representatives, aimed at ending geo-blocking. Yet this was to safe-guard the interests of the powerful content providers rather than of the exploited consumer. The Copyright Amendment (Online Infringement) Bill provides for content providers to request that local ISPs block certain websites. The Bill represents a regressive and wholly unrealistic interpretation of a market in which the internet has allowed the consumer to be the principal driver. As such, content providers should adapt their business models to what the consumer wants, rather than lobby politicians to compel consumers to take what is offered to them. The Bill still has to undergo a review process, but it is unlikely at this stage that cross-bench politicians are mindful to listen to anyone but the lobbyists.

For more analysis on these developments see Australia - Digital Media - Video Streaming - Trends, Developments and Statistics

Digital media now the largest entertainment market 19 Jun 2015

The explosion of digital media has been nothing less than spectacular. It is revolutionising the way people stay in contact with each other and the way they consume and enjoy their digital entertainment.  The traditional landscape is trembling under these changes.

Similar to the digital economy developments, the digital media are also transforming many aspects of the economy and the society, in general increasing efficiencies, democratising access and putting the people in charge rather than the suppliers of the services.

The changes are proving very difficult for the traditional industry to cope with and as a result digital media leadership is coming from new companies who don’t have the burden of legacy systems and legacy services.

A new BuddeComm report will follow the major digital media market segments, with analysis and overviews of the major trends and developments.

Video streaming

Driven by the successful US-based Netflix video streaming service from America, several Australian companies have launched new video streaming services, or have updated their existing services.

The traditional IPTV model is making something of a comeback, with new video streaming services launched over higher-speed broadband networks and the introduction of competitively priced triple-play models. But digital rights constraints are making it impossible for the services to take a larger share of the entertainment content market, and the current developments are therefore being driven by free catch-up TV series rather than movies and sport. Movie content available (under the basic IPTV subscription) is mostly B- or C-rated; A-rated material and new releases are only available at extra charge.

BuddeComm remains pessimistic about the current commercial video streaming business models of most of the players. We predict that consolidation will have to take place.

Until now services offered by ISPs have failed to attract large paying-user bases – in early 2015 there were only around 128 million subscribers globally, and some 800,000 in Australia.

By far the largest growth in video entertainment comes from user-generated content services such as YouTube, Facebook and a whole new range of services of short, and even super-short, videos. Catch-up TV would be the second largest category.

All of the above will significantly influence video streaming developments and future models will therefore have to be substantially different from those of today. The best way to envisage this is to look at the smart devices which provide ‘app-like’ interfaces to new content services that supply instant streaming.

BuddeComm estimates that downloading and streaming of video now constitutes well over 50% of all regular online video usage, and that this will only increase over time.

There is a correlation between the availability of high-speed broadband and video streaming usage and it is envisaged that further increases in high-speed broadband penetration will drive new video streaming developments. The rapid growth of smartphones and tablets is also giving this market a boost, as well as new business models such as pay-per-view. New video streaming services are already being streamed over these devices, as well as over gaming devices.

Social Networks

Social media developments are fascinating and exciting. They show the great potential of the new communication and information tools that are becoming available thanks to the internet, Web 2.0, email, broadband infrastructure and mobile phones and tablets. But for these new social media tools to succeed they need to be fully and totally integrated into our daily communication.

Popular social media sites have come and gone over the last five or so years as users trend to new features that allow them to experiment and connect. Services include Facebook, Twitter, YouTube, Wikipedia, Foursquare and LinkedIn Instagram, Pinterest and many others. The battle however is still far from over, with companies trying to build viable business models around their ever increasing customer data bases.

In 2015 there are more than 13.8 million Facebook users, 2.7 million Twitter users and 3.3 million LinkedIn users; and some of them access these sites several times a day. This rise in users continues the trend from 2009, when Australians interacting with brands via social networks jumped by more than 60%. Increased use of mobile broadband through mobile devices is driving consumer uptake, with many businesses now also investing in social media and also expecting a return.

Gaming and Gambling

As broadband speed and capacity increases a completely new range of gaming applications will enter the market over the next decade. Not needing a console has increased access and created distinctions between console and casual gamers. Games are now integrated with other online services such as music and movies. The video and computer games industry in Australia had a bumper year in 2014, with sales hitting $2.46 billion (iGEA).

Online gaming and gambling can take players from outside the boundaries of their home countries, where these online activities may or may not be sanctioned by the authorities. The global market is an expanding one where virtual online gaming and virtual online gambling is a growth market. There is a decline in the number of Australians who are gambling, but an explosion in sports betting, especially via online.

Music Industry

Music was one of the early key drivers behind the developments in digital media but, with faster speeds, both mobile broadband-based and fixed broadband video streaming has overtaken music downloading. Nevertheless music streaming, podcasting and downloading MP3s is a growing activity, particularly among the younger demographic. Inflexible digital rights arrangements are still leading to illegal downloading.

With the 20% or so of Australians who actually pay for downloaded music, many others are using the online music apps like YouTube and other cloud-based sites to obtain their music. Cloud-based music has been the major growth area in recent years. It is expected that the other 80% of users who are using digital media online will try it and then some will continue to use these services – with some service providers giving cheap or free complimentary access for a couple of months and access to over 20 million tracks, some interspersed occasionally with ads. The online industry has also created several new services, especially around interaction with artist, festivals and concerts.

Newspaper and Book Publishing

The newspaper publishers are among those hardest hit by the massive changes that are taking place as a consequence of rapidly changing digital technologies.

Many of the printed media have resorted to ‘dumbing down’ their newspapers in order to survive. This has led to excesses – illegal practices in order to obtain news, and politicisation of the media to create an environment of fear, uncertainty and doubt in relation to some of the critical issues that are now being faced around the world.

New e-business models will need to be developed whereby the printed media could use their broad appeal to attract customers and then, once these customers are inside their applications and services, they could explore new business models that would enable them to monetise these visits.

By way of contrast the book industry has a golden future. More books are read than ever before and new (international) book markets open up every year. Writers have existed – and have been in demand – for 5,000 years and they are not going to die out any time soon. Nor will there be any decrease in demand for more book content.

However, new technologies are delivering the same product in a different format and/or different ways, for a fraction of the cost. Traditional cost structures are dictated by analogue business models. Digital technologies don’t have those high costs and they therefore can deliver the product significantly cheaper. As the traditional industry has been slow to adapt to this situation, we have seen others entering the market. These are enormously destructive developments for the traditional industry, and linear solutions are not the answer.

For detailed information, table of contents and pricing see: Australia - Digital Media - Apps and Services

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