Earlier this year we published some articles about the significant structural changes facing the audio-visual industry as consumers adopt on-demand TV, and the need for the industry to prepare for the future. Historically, broadcasters have enjoyed a strong position in the value chain, enabling them to drive mass-market TV consumption and to monetise it. However, many commentators consider the growth of on-demand TV services on open networks as a major disruptive change. A particular threat is perceived to come from new aggregators, in the form of global players like YouTube TV, Google TV and Amazon TV. However, are these new aggregators really competitors, or can they potentially become key strategic partners of traditional commercial broadcasters?
The threat to broadcasters can be illustrated by growth in the number of suppliers of TV and video on demand (VoD) services over the Internet as the entry barriers disappear, as shown in Figure 1. The chart highlights the significant growth of these players, particularly in the Netherlands, Sweden, France, the UK and Germany.
Figure 1: Number of VoD service providers in selected EU countries, 2006 versus 2009 [Source: Analysys Mason]
However, there are two factors that would appear to limit the threat, at least in the short term:
- Linear TV consumption seems to be holding up well, despite the growth of non-linear TV consumption. This is because the new on-demand TV could be considered as an extension of current consumption rather than a substitute, at least for TV series and programmes produced by the commercial broadcasters themselves.
- Despite new aggregators having achieved a significant share of new non-linear TV consumption or usage, this is not necessarily high-quality video consumption and so is difficult to monetise. What aggregators need in order to monetise their opportunity is suitable legal content, and this is something that commercial broadcasters with significant original production can provide.
For this reason, it appears that traditional broadcasters and new aggregators will in fact be better off partnering rather than competing with one another. A few broadcasters are clearly setting the pace on this issue, as evidenced by the successful agreements between YouTube TV and Channel 4 and Five in the UK, Arte in France, Antena 3 TV and La Sexta in Spain, and RAI in Italy. Under these agreements, on-demand TV content that is available on the broadcasters’ own site is also immediately available as a professional offering on the new aggregator’s site. These agreements involve a revenue-share deal, on the basis of ‘shared exclusivity’. This allows consumers to access their favourite TV content wherever and whenever they want, while broadcasters benefit from the reach and penetration of the new aggregator. We see several main arguments supporting this kind of deal:
- In most markets, traditional broadcasters are still the key players producing high-quality content and they have the upper hand in monetising online TV advertising, so it is advantageous for the new aggregators to reach an agreement with them.
- New aggregators have established themselves as a key destination for many consumers, and consumers expect them to provide lawful access to this high-quality content.
- New content management techniques enable copyright protection on those sites and so favour collaboration between broadcasters and new aggregators to offer a legal alternative for consumers who want to watch their favourite TV shows on those sites (rather than being tempted to look for unlawful alternatives).
- These agreements could allow broadcasters to continue selling their own advertising inventory whilst sharing the incremental revenues with the partner that helps to generate them – that is, the new aggregator.
In future, therefore, we believe there will be many more revenue-share agreements between traditional broadcasters and aggregators as the on-demand TV market continues to establish itself as a popular platform for TV consumption over the next five years. These agreements are likely to be most important in markets that are dominated by free-to-air terrestrial broadcasting and have strong commercial broadcasters (such as France, Italy, Spain and the UK in Europe), but will also be seen in many other countries worldwide (like Australia, Singapore, Chile, etc.).
We expect changes in audiovisual markets and the development of these partnerships to be more of an evolution than a revolution. In particular, the scale and speed of developments will be determined by the characteristics of each audiovisual market, such as its market structure and the dominance of particular platforms and broadcasters, as well as factors such as generational evolution among consumers (meaning take-up will be more rapid in a country with a high proportion of younger people) and the underlying broadband market.
Analysys Mason works for many broadcasters, regulators and broadband providers worldwide. Because we monitor global trends but also understand the local context within which our clients operate, we can provide relevant insights and advice.