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Viewing report
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Navigating OTT - Over The Top Video Markets in Europe 2011-2015
Rethink Research, Jan 2012, Pages: 114
A description of all over the top video activity in europe from broadcasters and pay TV operators and a forecast for five years
What we have tried to do in this report is put some skin on the bones of three key ingredients of Over The Top video strategies:
- Taking catch up TV full circle back to the Television set.
- Seeing the way in which pay TV will embrace OTT delivery using
- TV Everywhere style connections.
- Looking at specialist devices which Pay TV will introduce to revoutionize their TV offering and bring down churn.
In each case there is scant evidence of the rate of take up but there is some. For instance you can buy reports today which show how many people are watching free to air Catch up TV on general purpose devices, and you can also buy reports which show the rate at which connected or smart TVs are being acquired – but to fully understand take up of catch up services on specialist devices you have to understand the percentage of smart TVs which are actually being used for OTT on a day to day basis, and how that is likely to change over time.
So for instance for Germany we have looked at the uptake rate of HbbTV devices and then taken some evidence from spokesmen and executives that they believe only 30% so far are being used to connected to HbbTV services. We assume that this will rise gradually to 70% of devices which are sold. The uptake rate of smart TV devices is already established in Europe at around 27% during 2011, and is projected to rise to 34% in 2012. TVs are replenished in the market in a seven year cycle, so one seventh of the installed base are acquired each year.
We have simply assumed that 27% of homes who bought a new device, bought one that CAN receive a catch up service and of these 30% put it to use immediately.We have then discounted or accelerated this in each country based on how widely the catch up service is already used in that country on PCs etc.., and how easy it is technically to install.
For the OTT hybrid “super set tops” such as the UPC Horizon, the TiVo at Virgin in the UK and at Ono, the Freebox Revolution and the Neuf Evolution, we have taken the average rates at which pay TV operators have introduced top end services such as HD set tops in the past their respective marketplaces, and brought this down to a progression of 3% in year one, rising to 11% of the installed base taking such innovations by five years after introduction. Again where the strategy has taken time to come to market, where it is being offering to a small region, or where numbers are available, such as the amazing uptake of Virgin?s TiVo box in its last quarter, we have educated the projection with reality.
In the final category, Pay TV travelling to general purpose devices, such as PCs, tablets and smart TVs – copying the route which free to air TV catch up services have already travelled, the route where we think most OTT TV will travel in Europe, we have taken evidence of TV Everywhere uptake, such as the log ins experienced by Sky TV on its multiple Sky Go services. In many other cases we have guessed, based on past experience, which operators will launch such services and when, because very few have them widely available as of now.
In this way we have carefully built a progression from where we are today, with few smart TVs, with only broadcast catch up travelling in any great number over the internet, to 2015 when pay TV once more dominates, at least to the point where it has overtaken broadcaster connectivity on tablets, PCs, Smart TVs and handsets, even if its own category of ultra-smart hybrid set tops will fare less well.
We have made no attempt to quantify in-roads made by Netflix, Amazon, Apple and Google to provide general purpose pay per view, purchase or subscription services. We believe these can be projected and we may try to do this at a later date, but they will both be less widely used (a large number of people but for very few viewing hours per home) and, initially at least, they will not undermine these other OTT services, but instead augment them and become yet another way of viewing high value content. Uptake at the percentage levels of the US (i.e. 20% of European homes) is unlikely in the forecast timescale, but a significant percentage will emerge. However all such services will have a tough time acquiring current content which will enable competition with pay TV and broadcast services, since existing content relationships with US and other studios, are already in place and controlled by pay TV operators and Broadcasters across Europe.
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