Transforming comms sector challenging broadcasters
LONDON: The coming 12 months will see the broadcast sector addressing new business models for distribution and advertising in a bid to retain and attract new audiences. This is one of the key conclusions to be drawn in a new report by independent market analyst Datamonitor.
The report, “2008 Trends to Watch: Media and broadcasting technology”, says the transforming communications and entertainment sector is creating a challenging new environment for traditional broadcasters. In order to remain competitive, digital TV players will need to use effective technological solutions to aide in multi-platform distribution and value-add services.
Unprecedented number
Consumers are faced with an unprecedented number of methods to watch and obtain video content.
“From personal media players (PMPs), to TV sets, to mobile phones, people will access media content on a variety of different devices over a multitude of communications networks,” says Chris Khouri, media and broadcasting analyst at Datamonitor and author of the report.
“As such, broadcasters are faced with strong pressure to adapt to multi-platform entertainment provision. With only so many hours in a day, retaining and attracting consumers requires a thorough understanding of evolving consumption habits.”
As a whole, Datamonitor expects the global broadcast market to experience significant revenue growth from US$284.1 billion in 2007 to US$326.2 billion by 2010. However, it is expected that growth will only be secured through revenue diversification from value-add and bundled services including Internet service provision, HD content, on-demand solutions, interactive applications and multi-platform distribution.
There were around 149.5 million households subscribing to a digital television service in Western Europe and the US in 2007. Of the total digital TV households, digital cable services accounted for a 32% share, satellite 43%, digital terrestrial television (DTT) 22% and IPTV at around 3%. By 2010 Datamonitor estimates 193.5 million households in the US and Western Europe to be connected to a digital television service. In terms of absolute growth, the two largest gainers will be DTT and digital cable growing by an estimated 13.3 million and 14.5 million households, respectively.
Market share
In terms of market share, Datamonitor expects IPTV and DTT to show the strongest percentage growth with a 2.7% and a 3.7% increase, respectively. Considering this, digital TV players will face a challenging year as they look to attract new customers and reduce churn.
In order to tackle continued threats of piracy, declining advertising effectiveness, the entrance of non-traditional competitors and audience fragmentation, broadcasters are diversifying their revenue streams. The UK provides a prime example of diversification models, with broadcasters obtaining significant revenue from non-traditional broadcast sources including TV shopping, interactive services, pay-per-view and programme sales.
Furthermore, multi-service operators (MSOs*) are using bundled services (primarily telephony and Internet service provision) to bolster both their product portfolios and secure additional revenue. In the long run, broadcasters who employ diversified revenue models are able to hedge against some of the risk inherent in securing funding from just one or two sources.
“Advertising has been a steadfast revenue generator for the broadcast sector, says Khouri. “However, as consumption habits transform and consumers utilise multi-platform channels as well as on-demand and time-shifted viewing, traditional revenue generation models are losing their effectiveness to bring returns. Broadcasters therefore will need to look to a variety of diversified revenue streams to bolster income.”
Digital programme insertion
One key development that is expected to transform the broadcast sector is digital programme insertion (DPI). Regional and targeted advertising insertion has long been considered a strong revenue generator for broadcasters, particularly in larger broadcast countries and regions such as the US. Ad insertion allows broadcasters to push relevant advertising to specific demographics effectively heightening their potential effectiveness.
Traditionally, ad insertion technology has been based on MPEG-2 codecs that is a tried and tested technology, widely available in the market. As compression technologies mature, particularly with the introduction of MPEG-4 (H.264) codecs, ad insertion solutions can take advantage from the substantially lower bit-rates involved in transmission. Technology vendors assisting in the transition towards enhanced advertising solutions, such as analytics and on-demand server vendors, are expected be in a strong position over the coming 12 months.
