- Published: October 2005
- Region: Global
Europe Telecom Insider / Vol. 1, No 4, Edition 6 - Europe’s Five-Year IPTV Forecast: Mostly Cloudy, but Temperatures Slowly Rising
- Published: June 2009
- Region: Europe
- 21 Pages
- Pyramid Research, Inc
The EU economy, along with that of much of the rest of the world, is in a deep recession, and 2009 is expected to see the first full-year contraction in GDP since the early 1980s. Central & Eastern European (CEE) countries will generally face greater downside risk than most Western European (WE) countries, owing to weak currencies, capital flight, large external liabilities and much higher refinancing costs. WE countries will likely experience a GDP decline (in local currencies) of around 3-5% in 2009, while in CEE countries, GDP contraction will range from -1% in Poland to -15% in Latvia. Under the pressure of the economic crisis, some telecom and media services, such as mobile TV or VoD in some markets, are seeing lower adoption rates, and service revenues are shrinking. Still, not all markets and all services are seeing significant declines. For example, pay-TV subscribers are expected to grow by 8% in 2009 to reach 163.4m across the European region, despite the challenging economic environment.
IPTV, the youngest pay-TV technology, is under a lot of pressure to withstand severe competition from well-established cable and satellite TV. At year-end 2008, IPTV subscriptions accounted for only 8.2% of total pay-TV accounts in Europe, generating more than US$3bn (€2.1bn) or 8% of total regional pay-TV revenue. Although we project that by 2014 IPTV will double its share of the total pay-TV market both subscriptions-wise and revenue-wise, the question is, what will happen to IPTV service in the worsening economic situation in Europe? We believe that in the next 12 months, the economic crisis will have a negative impact on IPTV service adoption only in certain European countries, while its impact on IPTV service revenue growth will be uniformly adverse across the entire region in the same year.
- The ongoing economic downturn will affect IPTV adoption and service revenue growth differently across various European markets in the next 12 months. IPTV service adoption rates will decline in some markets, while becoming stagnant or even growing in other. Meanwhile, affected by the worsening economy, IPTV service revenue growth is likely to slow down across all European markets.
- In times of economic recession, when families and businesses are forced to cut costs considerably, service price plays a crucial role in the adoption of any service, including IPTV. In some European markets, IPTV adoption may plummet as customers, pressured by the worsening economy, opt for more affordable offerings from other pay-TV providers. This is the case with some Central & Eastern European markets, such as Poland or Russia.
- Creative and affordable bundled packages will be a way for telcos to mitigate the adverse effects of the economic recession on IPTV service adoption. Often the incumbent operators in their countries, major IPTV players are better positioned to offer bundled services that include telephony, broadband Internet access and IPTV than are local cable and DTH satellite service providers. Although offering cheap and convenient bundled packages may result in surging IPTV service adoption, this strategy will adversely affect IPTV revenue growth in the short term. We see such strategies in Italy and several other European markets.
This Insider will analyze the short- to medium-term future of European IPTV in the current economic climate. It will focus on the three factors affecting IPTV growth: The combination of the level of broadband penetration and operators' Capex, availability of affordable alternatives and telcos' strategies. It will then look in detail at two CEE ( Russia and the Czech Republic) and two WE (France and Germany) markets that best describe the scenarios we propose.
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Table of exhibits
Exhibit 1: Pay-TV subscriptions by technology in Europe, 2008 and 2014
Exhibit 2: Projected broadband penetration of households in Europe, 2009 (estimated)
Exhibit 3: Quarterly growth rates of IPTV customers for Telefónica Spain and France Telecom, Q2 2007-Q1 2009
Exhibit 4: Actual and projected subscriptions of TVN versus all IPTV operators in Poland, 2007-2014
Exhibit 5: Pay-TV subscriptions in Italy, 2007-2014
Exhibit 6: SKY, Wind and Telecom Italia offerings
Exhibit 7: Pay-TV service distribution by technology, 2007–2014
Exhibit 8: Availability of single and multiplay offers by technology and regional operator
Exhibit 9: Pay-TV service distribution by technology, 2007–2014
Exhibit 10: Availability of single and multiplay offers by technology and regional operator
Exhibit 11: Cable, DTH/satellite and IPTV subscriptions, 2007-2014
Exhibit 12: IPTV prices relative to digital cable and satellite by offer, May 2009
Exhibit 13: Share of pay-TV subscribers per transmission technology, 2007-2014
Exhibit 14: IPTV prices relative to digital cable and satellite by offer, May 2009
Exhibit 15: Summary of findings: IPTV revenue and adoption factors per country
The ongoing economic downturn will impact IPTV adoption and service revenue growth differently across Europe during the next year due to varied broadband penetration levels, the availability of cheaper alternatives, and telcos' response to competition, according to this latest report.
Europe's Five-Year IPTV Forecast: Mostly Cloudy, but Temperatures Slowly Rising examines the short- to medium-term future of European IPTV in the current economic climate. This 21-page report focuses on the three factors affecting IPTV growth: the combination of the level of broadband penetration and operators' capex, availability of affordable alternatives, and telcos' strategies. Case studies of four markets, two CEE (Russia and the Czech Republic) and two WE (France and Germany), are presented.
At year-end 2008, IPTV subscriptions accounted for only 8.2 percent of total pay-TV accounts in Europe, generating more than US$3 billion (€2.1 billion) or 8 percent of total regional pay-TV revenue, notes Stela Bokun, analyst at Pyramid Research and author of the report. "Although Pyramid projects that by 2014 IPTV will double its share of the total pay-TV market with both subscriptions and revenue, Pyramid predicts the economic crisis will have a negative impact on IPTV service adoption only in certain European countries, while it will reduce revenue growth across the region within the next 12 months," she says.
Telcos' capex cuts will affect IPTV only in countries with low broadband penetration. "If the country had low broadband penetration pre-crisis, its IPTV target market will stay at low levels during and immediately post-crisis; one such example is Spain, which is currently seeing a slowdown in IPTV adoption rates," say Bokun.
Although service quality and convenience play a significant role when the economy is doing well, price plays a crucial role in the adoption of any service. Customers are opting for more affordable offerings from other pay-TV providers. "In Poland, TVN attracted new customers with its affordable prepaid pay-TV service," says Bokun. "In fact, TVN is expected to achieve a 91 percent year-over-year growth for its IPTV subscriber pool in 2009, while total Polish IPTV subscriptions will grow by 34 percent in the same year," she adds.
"If other pay-TV operators in their market are offering very cheap and affordable plans, they should slash their own prices in times of crisis to prevent the erosion of your IPTV subscriber pool," recommends Bokun. "Creative and affordable bundled packages will be a way for telcos to mitigate the adverse effects of the economic recession on IPTV service adoption."
Europe's Five-Year IPTV Forecast: Mostly Cloudy, but Temperatures Slowly Rising is part of our Europe Telecom Insider report series. Telecom Insiders are packed with trend analysis, industry best practices, market sizing and forecasting, competitor analysis, and case studies, providing you information you can leverage to make better business decisions.
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- Deutsche Telekom
- France Telecom
- Kabel BW
- NTV Plus
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- Sky Italia
- Spain Telekom
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- Telecom Italia
- Telefónica O2
- Telekomunikacja Polska
- Telewizja na karte
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