Vod Quarterly Apr 2009
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MAGNA On-Demand Quarterly
April 2009 Contact: Brian Wieser, CFA, Global Director of Forecasting Tel: 646-865-2260 Email: [email protected]
1
www.MagnaInsights.com
MAGNA On-Demand Quarterly: April 2009 • Overview • Advanced Video Platforms in Asia • DVR and VOD News • Appendix 1: DVR and VOD Forecast Data • Appendix 2: DVR Forecast Chart • Appendix 3: VOD Forecast Chart • Appendix 4: Internet Access Forecast Data
• Appendix 5: Internet Access Forecast Chart
2
www.MagnaInsights.com
Overview Updated DVR, VOD and Broadband forecasts through 2014 • Our year-end 2014 forecast for DVR subscriber households is 51.1 million (43% of TV households), up from 29.8 million (27% of TV households) as of the end of 2008. We note that the aggregated impact of DVRs will likely continue to be outpaced by rising population and increases in consumption of conventional TV. Over the 10 years between 2004 and 2014, we can estimate that DVRs will contribute to a 4% erosion in total viewing impressions across all dayparts.(a) However, rising DVR penetration will be more than offset by increases in TV consumption (which has been slightly less than1% per household in recent years) and increases in total households (which has been slightly more than 1%). These latter two figures would drive a 20% increase in total viewing impressions over this ten-year time-frame. Of course, while DVRs will continue to disproportionately impact younger target audiences and network prime time, the aging of our society and the gradually eroding importance of network prime time will likely render such targets incrementally less important in the years ahead. • By 2014, we expect that true Video-on-Demand (distinct from the simulated VOD offered by DBS providers DirecTV and EchoStar) will reach 67.2 million households (approximately 56% of television households). This compares with 41.7 million VOD households (37% of total TV households) at the end of 2008. • We estimate that 69.5 million households had broadband access as of the end of 2008, 59% of the country’s 118 million households. We expect that total broadband access will rise to cover 86.5 million households by the end of 2014.
3
(a) We make conservative simplifying assumptions that DVR homes consume 10% of total TV viewing via DVRs (historical figures are well below 10% across the entire population for all dayparts). This 10% DVR usage vs. a penetration rising from 4% to 44% equals 4% erosion, not accounting for commercials viewed while in playback mode
www.MagnaInsights.com
Advanced Video Platforms in Asia Growth in media platforms are key driver of an expanding market for multichannel video and fragmentation • New distribution technologies are giving greater numbers of consumers access to multichannel video across Asian markets. Video on Demand, DVRs, interactivity and advanced advertising all exist to one degree or another in most markets. But market change is primarily a function of the expanding availability of satellite TV and IPTV services (typically offered by incumbent telecom service providers). These services compete heavily for a share of consumers’ entertainment-related expenditures, and drive growth as a result. But importantly, although infrastructure is increasingly in place for potential advanced video services in the future, conventional broadcast programming continues to dominate in the present. • One of the best global examples of market expansion for multichannel video comes from Hong Kong, where one world’s leading providers of IPTV, PCCW’s Now Broadband has made major inroads into the Hong Kong market in recent years. Now’s subscriber base approaches 700,000, and has approximately doubled in size during the past three years. At the same time, incumbent cable operator iCable now has more than 917,000 household subscribers. Combined, the two account for almost two-thirds of Hong Kong households. Although advanced and interactive services are limited at present, both operators maintain potential for delivery of them. In a recent regulatory filing, iCable stated it would deploy interactive services “when the market is ripe”. • In fact, markets are not yet ripe in most countries for most types of advanced services for reasons familiar to observers in the United States. Where they are widely available technically, few advanced services are heavily utilized, often due to limitations on set-top box software (required to render graphics or interact with a content network), imperfect user interfaces and consumers’ general preferences to use their televisions in a passive manner. But they are increasingly available, especially among satellite services. As an example, India’s Dish TV (India’s leading satellite service with approximately 4 million subscribers) announced the launch of ICICIATIVE late last year. This is a service that allows a viewer to access information about their bank account and various banking products serviced by ICICI Bank (India’s largest).
www.MagnaInsights.com
Advanced Video Platforms in Asia Growth in media platforms are key driver of an expanding market for multichannel video and fragmentation • Singapore and Japan provide typical examples of robust VOD services in the region. In Singapore, the upstart mioTV (an IPTV service provided by incumbent telco SingTel) offers movies, local content and more than 50 popular US programs as early as 24 hours after the programs’ US premieres. Content is supplied on a subscription basis, and the company attributes much of its growth in the fourth quarter in part to this product. mioTV’s primary competitor, cable operator Starhub, offers its 504,000 digital subscribers a VOD service which prominently features English language content from CBS on a similar basis In Japan, both Hikari TV (a new IPTV service launched by telco NTT) and J-Com (the country’s dominant cable operator) provide thousands of hours of VOD content from broadcaster NHK. These assets are available as part of broader subscription packages as well as on a per program basis. • Digital Video Recorders with integrated program guides are a recent phenomenon in Asia compared to the United States and the UK. But data from J-Com and Australian satellite operator FoxTel indicate that where they are deployed, Asian MSOs may benefit from an industry-wide experience curve in marketing DVRs. JCom’s 16% DVR penetration rate took three years to accomplish, vs. the four years Time Warner Cable needed to achieve a similar level. At FoxTel, 34% of subscribers had DVRs at the end of 2008, almost four years after launch. By contrast, the UK’s Sky took almost six years to achieve similar DVR penetration levels. DVR Penetration Comparison
www.MagnaInsights.com
Advanced Video Platforms in Asia Basic cable subscriptions continue to rise in most Asian markets
• •
6
Across Asia, basic cable services contribute to growing television industries. Advanced services such as satellite and telco-based IPTV (or better yet, fiber-to-the-home data services paired with TV) tend to launch in a market and the ensuing competition results in more multichannel video access. Data below reflects the primary MSOs in each of Japan, Hong Kong, Australia, Singapore and India. None of the major video distribution businesses in these countries reported subscriber losses, despite economic weakness across the region (especially pronounced in Japan).
Source: MAGNA, Company Reports
www.MagnaInsights.com
DVR and VOD News – United States During 4Q08, DVRs were added to 1.3 million homes while 1.3 million new homes gained access to VOD • We estimate that DirecTV added 300,000 DVR subscribers during the fourth quarter. By our estimates, the company now has 6.5 million households with DVRs (37% of total subscribers). • Despite a smaller overall subscriber base, similar dynamics are driving EchoStar’s DVR subscriber levels, which we estimate now total 6.6 million households (48% of total subs). • Meanwhile, Comcast added 275,000 advanced service customers during the quarter, and now has approximately 4.6 million DVR subscribers by our estimates – 19% of the company’s total. Advanced service penetration now stands at 45.4% of the company’s digital customer base. At a recent investor conference, the company reported serving 325 million VOD streams during the month of February 2009. This equates to approximately 19 VOD streams per VOD subscriber per month, up from approximately 18 a year earlier. • Time Warner Cable’s DVR growth continued to moderate somewhat with DVR subs increasing by 87,000 in the quarter, vs. 253,000 in last year’s third quarter and 150,000 in the third quarter of this year. Total DVR subscribers totaled 4.4 million at quarter’s end, 34% of the company’s subscriber base.
Company management noted at a recent investor conference that its remote DVR service Start Over, which was rolled out widely during 2008, now has 3.2 million customers using that service. Start Over enables any digital cable subscriber to start certain programs (those for which Time Warner negotiates appropriate rights) from the beginning of its airing if a special button is selected prior to that show ending. Commercials are aired in their entirety with this service. • Mediacom stated during its quarterly earnings call that 32% of its 624,000 digital customers take either HD or DVR services, up marginally from recent quarters.
7
www.MagnaInsights.com
Appendix 1: DVR and VOD Forecast Data
8
Source: MAGNA, Company Reports
www.MagnaInsights.com
Appendix 2: DVR Forecast Chart
9
Source: MAGNA, Company Reports
www.MagnaInsights.com
Appendix 3: VOD Forecast Chart
10
Source: MAGNA, Company Reports
www.MagnaInsights.com
Appendix 4: Internet Access Forecast Data
(a) Represents implied number of subscribers to dial-up services who do not also have broadband services
11
Source: MAGNA, US Census, FCC, Company Reports
www.MagnaInsights.com
Appendix 5: Internet Access Forecast Chart
12
Source: MAGNA, US Census, FCC, Company Reports
www.MagnaInsights.com
MAGNA On-Demand Quarterly Contact: Brian Wieser, CFA, Global Director of Forecasting Tel: 646-865-2260 Email: [email protected]
13
www.MagnaInsights.com
April 2009 Contact: Brian Wieser, CFA, Global Director of Forecasting Tel: 646-865-2260 Email: [email protected]
1
www.MagnaInsights.com
MAGNA On-Demand Quarterly: April 2009 • Overview • Advanced Video Platforms in Asia • DVR and VOD News • Appendix 1: DVR and VOD Forecast Data • Appendix 2: DVR Forecast Chart • Appendix 3: VOD Forecast Chart • Appendix 4: Internet Access Forecast Data
• Appendix 5: Internet Access Forecast Chart
2
www.MagnaInsights.com
Overview Updated DVR, VOD and Broadband forecasts through 2014 • Our year-end 2014 forecast for DVR subscriber households is 51.1 million (43% of TV households), up from 29.8 million (27% of TV households) as of the end of 2008. We note that the aggregated impact of DVRs will likely continue to be outpaced by rising population and increases in consumption of conventional TV. Over the 10 years between 2004 and 2014, we can estimate that DVRs will contribute to a 4% erosion in total viewing impressions across all dayparts.(a) However, rising DVR penetration will be more than offset by increases in TV consumption (which has been slightly less than1% per household in recent years) and increases in total households (which has been slightly more than 1%). These latter two figures would drive a 20% increase in total viewing impressions over this ten-year time-frame. Of course, while DVRs will continue to disproportionately impact younger target audiences and network prime time, the aging of our society and the gradually eroding importance of network prime time will likely render such targets incrementally less important in the years ahead. • By 2014, we expect that true Video-on-Demand (distinct from the simulated VOD offered by DBS providers DirecTV and EchoStar) will reach 67.2 million households (approximately 56% of television households). This compares with 41.7 million VOD households (37% of total TV households) at the end of 2008. • We estimate that 69.5 million households had broadband access as of the end of 2008, 59% of the country’s 118 million households. We expect that total broadband access will rise to cover 86.5 million households by the end of 2014.
3
(a) We make conservative simplifying assumptions that DVR homes consume 10% of total TV viewing via DVRs (historical figures are well below 10% across the entire population for all dayparts). This 10% DVR usage vs. a penetration rising from 4% to 44% equals 4% erosion, not accounting for commercials viewed while in playback mode
www.MagnaInsights.com
Advanced Video Platforms in Asia Growth in media platforms are key driver of an expanding market for multichannel video and fragmentation • New distribution technologies are giving greater numbers of consumers access to multichannel video across Asian markets. Video on Demand, DVRs, interactivity and advanced advertising all exist to one degree or another in most markets. But market change is primarily a function of the expanding availability of satellite TV and IPTV services (typically offered by incumbent telecom service providers). These services compete heavily for a share of consumers’ entertainment-related expenditures, and drive growth as a result. But importantly, although infrastructure is increasingly in place for potential advanced video services in the future, conventional broadcast programming continues to dominate in the present. • One of the best global examples of market expansion for multichannel video comes from Hong Kong, where one world’s leading providers of IPTV, PCCW’s Now Broadband has made major inroads into the Hong Kong market in recent years. Now’s subscriber base approaches 700,000, and has approximately doubled in size during the past three years. At the same time, incumbent cable operator iCable now has more than 917,000 household subscribers. Combined, the two account for almost two-thirds of Hong Kong households. Although advanced and interactive services are limited at present, both operators maintain potential for delivery of them. In a recent regulatory filing, iCable stated it would deploy interactive services “when the market is ripe”. • In fact, markets are not yet ripe in most countries for most types of advanced services for reasons familiar to observers in the United States. Where they are widely available technically, few advanced services are heavily utilized, often due to limitations on set-top box software (required to render graphics or interact with a content network), imperfect user interfaces and consumers’ general preferences to use their televisions in a passive manner. But they are increasingly available, especially among satellite services. As an example, India’s Dish TV (India’s leading satellite service with approximately 4 million subscribers) announced the launch of ICICIATIVE late last year. This is a service that allows a viewer to access information about their bank account and various banking products serviced by ICICI Bank (India’s largest).
www.MagnaInsights.com
Advanced Video Platforms in Asia Growth in media platforms are key driver of an expanding market for multichannel video and fragmentation • Singapore and Japan provide typical examples of robust VOD services in the region. In Singapore, the upstart mioTV (an IPTV service provided by incumbent telco SingTel) offers movies, local content and more than 50 popular US programs as early as 24 hours after the programs’ US premieres. Content is supplied on a subscription basis, and the company attributes much of its growth in the fourth quarter in part to this product. mioTV’s primary competitor, cable operator Starhub, offers its 504,000 digital subscribers a VOD service which prominently features English language content from CBS on a similar basis In Japan, both Hikari TV (a new IPTV service launched by telco NTT) and J-Com (the country’s dominant cable operator) provide thousands of hours of VOD content from broadcaster NHK. These assets are available as part of broader subscription packages as well as on a per program basis. • Digital Video Recorders with integrated program guides are a recent phenomenon in Asia compared to the United States and the UK. But data from J-Com and Australian satellite operator FoxTel indicate that where they are deployed, Asian MSOs may benefit from an industry-wide experience curve in marketing DVRs. JCom’s 16% DVR penetration rate took three years to accomplish, vs. the four years Time Warner Cable needed to achieve a similar level. At FoxTel, 34% of subscribers had DVRs at the end of 2008, almost four years after launch. By contrast, the UK’s Sky took almost six years to achieve similar DVR penetration levels. DVR Penetration Comparison
www.MagnaInsights.com
Advanced Video Platforms in Asia Basic cable subscriptions continue to rise in most Asian markets
• •
6
Across Asia, basic cable services contribute to growing television industries. Advanced services such as satellite and telco-based IPTV (or better yet, fiber-to-the-home data services paired with TV) tend to launch in a market and the ensuing competition results in more multichannel video access. Data below reflects the primary MSOs in each of Japan, Hong Kong, Australia, Singapore and India. None of the major video distribution businesses in these countries reported subscriber losses, despite economic weakness across the region (especially pronounced in Japan).
Source: MAGNA, Company Reports
www.MagnaInsights.com
DVR and VOD News – United States During 4Q08, DVRs were added to 1.3 million homes while 1.3 million new homes gained access to VOD • We estimate that DirecTV added 300,000 DVR subscribers during the fourth quarter. By our estimates, the company now has 6.5 million households with DVRs (37% of total subscribers). • Despite a smaller overall subscriber base, similar dynamics are driving EchoStar’s DVR subscriber levels, which we estimate now total 6.6 million households (48% of total subs). • Meanwhile, Comcast added 275,000 advanced service customers during the quarter, and now has approximately 4.6 million DVR subscribers by our estimates – 19% of the company’s total. Advanced service penetration now stands at 45.4% of the company’s digital customer base. At a recent investor conference, the company reported serving 325 million VOD streams during the month of February 2009. This equates to approximately 19 VOD streams per VOD subscriber per month, up from approximately 18 a year earlier. • Time Warner Cable’s DVR growth continued to moderate somewhat with DVR subs increasing by 87,000 in the quarter, vs. 253,000 in last year’s third quarter and 150,000 in the third quarter of this year. Total DVR subscribers totaled 4.4 million at quarter’s end, 34% of the company’s subscriber base.
Company management noted at a recent investor conference that its remote DVR service Start Over, which was rolled out widely during 2008, now has 3.2 million customers using that service. Start Over enables any digital cable subscriber to start certain programs (those for which Time Warner negotiates appropriate rights) from the beginning of its airing if a special button is selected prior to that show ending. Commercials are aired in their entirety with this service. • Mediacom stated during its quarterly earnings call that 32% of its 624,000 digital customers take either HD or DVR services, up marginally from recent quarters.
7
www.MagnaInsights.com
Appendix 1: DVR and VOD Forecast Data
8
Source: MAGNA, Company Reports
www.MagnaInsights.com
Appendix 2: DVR Forecast Chart
9
Source: MAGNA, Company Reports
www.MagnaInsights.com
Appendix 3: VOD Forecast Chart
10
Source: MAGNA, Company Reports
www.MagnaInsights.com
Appendix 4: Internet Access Forecast Data
(a) Represents implied number of subscribers to dial-up services who do not also have broadband services
11
Source: MAGNA, US Census, FCC, Company Reports
www.MagnaInsights.com
Appendix 5: Internet Access Forecast Chart
12
Source: MAGNA, US Census, FCC, Company Reports
www.MagnaInsights.com
MAGNA On-Demand Quarterly Contact: Brian Wieser, CFA, Global Director of Forecasting Tel: 646-865-2260 Email: [email protected]
13
www.MagnaInsights.com
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