Hybrid TV Prospects: Implications of Connected TV

• Publication date: January 2012

Hybrid TV is now a reality, and gaining momentum. The appetite for OTT video content, reinforced by the development of connected TV solutions further exacerbates this phenomenon. This study aims to position the hybrid solutions in this new context and to measure their impact on the "big" TV markets. Key questions • How does the development of connected TV affect the balance between the various segments of the TV broadcastin...

Hybrid TV is now a reality, and gaining momentum. The appetite for OTT video content, reinforced by the development of connected TV solutions further exacerbates this phenomenon. This study aims to position the hybrid solutions in this new context and to measure their impact on the "big" TV markets.

Key questions

• How does the development of connected TV affect the balance between the various segments of the TV broadcasting market?
• What are the impacts on the video supply chain, and what space is there for the Internet players?
Is the cord cutting a real threat or rather an emerging opportunity?
• What hybrid positioning for cable and IPTV operators?
• Will connected devices mean a comeback for satellite and DTT
operators?
• What is the current state of play in the standardisation of hybrid solutions, and what are the results to date?
• How do the settings, networks and players of "big" TV markets influence the potential of market-specific hybrid TV?
What are the prospects for 2015?
> This report is an add-on to our technological survey service on
Connected TV Markets, featuring:
- A unique database (revenues of OTT services, volume of connected devices & player profiles)
- Ten Market Insights providing key market analyses
- Special access to our lead media analysts (hotline, briefings, online presentation, etc.)

Television Broadcasting Industry in Europe

Contents

This report is part of a study that also includes a PowerPoint presentation.

1 Executive Summary . 7
1.1 IDATE estimates the market for OTT video services on the TV at EUR 3.4 billion in
2015 8
1.2 Connected TV, a driver for hybrid distribution . 8
1.3 The distribution chain: Is this war? ... 9
1.4 The “hybridization” of TV distribution will have major impacts, and broadcast players
must seize this opportunity ... 10
1.5 Trends in hybrid’s development and positioning of hybrid solutions 10
2 Méthodology . 11
3 The Market for Video Services on Connected TVs .... 13
3.1 Offerings and positioning of connected TV players and proponents .... 13
3.1.1 Types of connected TV services .. 13
3.1.2 Video services 15
3.1.3 User interface models ... 16
3.1.4 Positioning of players in the connected TV market .... 18
3.2 Market forecasts .... 19
3.2.1 Installed base of connected devices and active connected households .. 19
3.2.2 The market for VOD on the television .... 22
4 Market Structure & Key Issues . 24
4.1 Why hybrid distribution? .. 24
4.1.1 OTT video: giving the people what they want .. 24
4.1.2 A new balance between linear and on-demand TV consumption .. 25
4.1.3 The TV set’s comeback 26
4.1.4 An underserved market . 28
4.1.5 An addressable market for hybrid TV 30
4.2 TV/video distribution networks: broadcast vs. two-way 30
4.2.1 Broadcast networks . 31
4.2.2 Two-way TV networks ... 32
4.2.3 The open Internet, the vehicle for connected TV services ... 33
4.3 Hybrid distribution .. 36
4.3.1 Theoretical framework .. 36
4.3.2 Three models for hybrid video distribution emerge: ... 37
5 Impact of Hybrid TV on the Dynamics of the OTT Video Industry .... 38
5.1 Industry structure ... 38
5.1.1 Content producers ... 39
5.1.2 Content programmers and packagers .... 41
5.1.3 Distribution networks 43
5.1.4 Software platforms ... 44
5.1.5 Connectable STBs ... 47
5.1.6 Connected TV sets .. 52
5.2 Case studies 54

6 Issues at Stake .. 61
6.1 Cord cutting and the strategy of pay TV operators . 61
6.1.1 The cord-cutting phenomenon needs to be put into perspective ... 61
6.1.2 Cord shaving seems to be the major trend…but it still means the threat of subscribers
jumping ship is real .. 62
6.1.3 Possible responses for pay TV operators ... 63
6.2 Bandwidth and service trade-offs made by wireline operators ... 64
6.2.1 Expected increase in online video traffic 64
6.2.2 Are high-speed Internet services the future for cable and IPTV? ... 65
6.3 Connected devices, a return path for satellite and DTT operators? 66
6.3.1 Major opportunities for TV industry players . 67
6.3.2 This scenario does pose threats to development of the OTT offering . 68
6.4 Standardization: TV versus the Internet? . 69
6.4.1 A complex issue .. 69
6.4.2 First steps forward ... 69
7 Positioning of Hybrid TV Solutions on the Video Distribution Market .. 73
7.1 Market-per-market positioning of hybrid solutions .. 74
7.1.1 Key positioning criteria .. 74
7.1.2 Positioning descriptions 74
7.2 Hybrid TV outlook by market: Germany, Spain, France, Italy, UK, USA ... 76
7.2.1 United States: Wireline network operators dictate the direction of the market ... 76
7.2.2 Germany: Future of hybrid TV uncertain 77
7.2.3 France: Broadcast/IP coopetition . 78
7.2.4 UK: Strengthening broadcast/OTT synergy 79
7.2.5 Spain: A central role for hybrid DTT .. 79
7.2.6 Italy: The absence of wired networks creates huge opportunities for hybrid TV 80

Index of Tables

Table 1: Types of connected TV service .... 14
Table 2: Distribution of the main pay VOD services and YouTube on the primary connected TV
platforms in the US ... 16
Table 3: Detailed breakdown of installed base of connectable devices in the major European
countries and the US, 2010-2015 . 20
Table 4: Top online video destinations in the US by average time per viewer, in May 2011 . 24
Table 5: Characteristics of video distribution networks ... 30
Table 6: Video distribution billing models in Europe for a 2.5 Mbps SDTV channel (or equivalent) 44
Table 7: Microsoft partnership agreements in hybrid TV worldwide ... 57
Table 8: Change in online video consumption, 2010–2015 . 64
Table 9: Positioning of hybrid TV solutions . 74

Index of Figures

Figure 1: Estimated potential of hybrid TV market by country 8
Figure 2: Positioning of the key players in hybrid TV .... 9
Figure 3: Connected TV access technologies and players ... 15
Figure 4: Panasonic Viera Cast home screen .. 17
Figure 5: Philips Net TV home screen .... 17
Figure 6: Facebook widget on Verizon FiOS TV .... 17
Figure 7: Widgets on VUDU Apps 17
Figure 8: New Google TV interface .... 18
Figure 9: Search on Google TV .... 18
Figure 10: Positioning of the offerings of connected TV players .. 19
Figure 11: Connected TV access technologies in Europe, 2010-2015 .. 20
Figure 13: Connected TV access technologies in the US, 2010-2015 ... 21
Figure 14: Penetration rates of connected TV access technologies in the major European countries
and the US, 2015 . 21
Figure 15: Change in value of global market for OTT video on the TV, forecast, 2010-2015 ... 22
Figure 16: Breakdown of market for video services on the TV by value, Europe, 2015 .. 23
Figure 17: Breakdown of market for video services on the TV by value, US, 2015 ... 23
Figure 19: TV viewing vs. video streaming in the US .... 25
Figure 20: Time spent watching video by service type, US, 2007-2010 26
Figure 21: Modes of consumption by Netflix and Hulu users .. 26
Figure 22: Platforms and programs consumed on the Internet .... 27
Figure 23: Types of program viewed, by format . 27
Figure 24: TV access methods compatible with OTT video services 28
Figure 25: Change in CAPEX of US cable operators .... 29
Figure 26: Change in CAPEX of wireline telecom operators .. 29
Figure 27: Estimated potential of hybrid TV per country, % of TVHH .... 30
Figure 29: Satellite video applications . 31
Figure 30: Terrestrial video distribution 32
Figure 31: Typical HFC cable architecture 32
Figure 32: How multicast works for IPTV .. 33
Figure 33: How download, progressive download and streaming work . 35
Figure 34: Consumer Internet traffic .... 35
Figure 35: Network trade-offs .... 36
Figure 36: Access to video content: a potential alternative to triple play combining a broadcast
network and the open Internet . 37
Figure 37: Positioning of key hybrid TV players along the distribution chain ... 39
Figure 38: Content release windows .... 40
Figure 39: Change in cumulative audience of top five TV channels per country .. 41
Figure 40: Overview of the OTT offerings from Amazon, Blockbuster, Hulu and Netflix . 42
Figure 42: Description of the solution offered by Espial 45
Figure 43: Technical principle behind the HbbTV hybrid television standard ... 46
Figure 44: Fetch TV’s hybrid television service model .. 48
Figure 45: Most common hybrid TV model with an Internet STB . 49
Figure 46: Installed base of Blu-ray players in the US and Europe, 2010-2015 ... 50
Figure 47: DTT hybrid television on an OTT video/managed network via video game console 51
Figure 48: Modified game console used as an STB on a second TV set for AT&T subscribers in the US 52
Figure 49: Expansion of the installed base of connected TVs in the major European countries and the
US, 2010-2015 .... 53
Figure 50: Positioning of the key players in hybrid TV .. 53
Figure 51: TiVo interface .... .. 54
Figure 52: Change in the base of TiVo subscribers worldwide .... 55
Figure 53: The new Apple TV box .. 56
Figure 55: Orange portal home screen 59
Figure 56: Orange sports info header on the Orange portal ... 59
Figure 57: HbbTV interactive services from France Télévisions during the French Open tournament59
Figure 58: Application for voting live during the France 2 TV news program ... 60
Figure 59: Change in TV subscribers in the US, by platform (Q1 2009-Q1 2011) 62
Figure 60: How viewers usually watch TV series in the US .... 62
Figure 62: Example of an RF frequency spectrum usage in HFC networks in Europe ... 65
Figure 63: Is Docsis 3 a potential technical solution for absorbing traffic overload? .. 65
Figure 64: Illustration of initiatives toward ITU-T and IPTV interoperability 70
Figure 65: Example of IPTV (ITU-T H.721) standardization for connected TVs in Japan .... 70
Figure 66: Illustration of hybrid MHP .... 71
Figure 67: HbbTV specifications 71
Figure 68: Modes of TV/video distribution in the US 76
Figure 69: Modes of TV/video distribution in Germany . 77
Figure 70: Modes of TV/video distribution in France 78
Figure 71: Modes of TV/video distribution in the UK 79
Figure 72: Modes of TV/video distribution in Spain 79
Figure 73: Modes of TV/video distribution in Italy .... 80