IPTV Industry Potential and Limitations - Gerson Lehrman Group ...
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IPTV Industry Potential and Limitations
Thursday, May 3, 2007Penn Club, New York
James Meyers, Chief Executive Officer, Alpha Media
© 2007 Gerson Lehrman Group Inc., All Rights Reserved
Council Member Biography
James Meyers is the Chief Executive Officer at Alpha Media, an entertainment media company with international sales and distribution operations, US sales and distribution operations, cable television assets, plus international production operations. He is responsible for managing corporate strategy development, new alliances within the entertainment and investment communities, and overall operations. He has over 20 years of experience in the entertainment, media and telecommunication industries. Previously, he was the Chief Executive Officer at Cinema Entertainment, an interactive television channel producer; and the President and United States Resident Officer at DIRECTV International, where he was responsible for managing investment, development and operations.
© 2007 Gerson Lehrman Group Inc., All Rights Reserved
Table of Contents
► Everyone Bundles
► An Introduction To IPTV
► The Ever Expanding Bundle
► The Many Pieces Of A Successful Service…It’s Not Just The Bundle
► Broadband Video: Not To Be Confused With IPTV
► Japan / A Case Study
© 2007 Gerson Lehrman Group Inc., All Rights Reserved
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© 2007 Gerson Lehrman Group Inc., All Rights Reserved
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7
Big Dish Early 1980s
1920sPOTS
1993
Cable
1950s
DTV launched
1994
1984 1947
1920s 1930s 1940s 1980s 1990 1995 2000 2005 2010
Cable
Satellite
Mobile Cellular
Broadband
Broadband1997
Telephone1997
2006Television
POTS
History of the Bundle…
James J. Meyers CEO, Alpha Media
8
IPTV: A DefinitionInternet Protocol Television (IPTV):
• IPTV (Internet Protocol television): the delivery of programming by video stream encoded as a series of IP packets.
• IPTV can be free or fee-based and can deliver either live TV or stored video to the Television one addressed program at a time
• Traditional Pay-Television: all programming is broadcast simultaneously and is available by tuning to the channel.
James J. Meyers CEO, Alpha Media
Super Headend
Hub Office Serving OfficeSplitter
-Fiber
-Cable
-Twisted Pair
Leg
end
9
Verizon / AT&T: The BundleOfferings U-Verse
(AT &T)
FiOS (Verizon)
Basic + Premium Channels X X
International
Channels /Packages
X X
High Definition TV X X
Dual-Tuner DVR X X
VOD X X
Internet X X
Phone Service X X
Mobile X X
Bundled line churn is 50% lower than voice-only linesJames J. Meyers CEO, Alpha Media
Source: Company Reports
10
Verizon / Fios and AT&T / U-verse
0
5
10
15
20
25
Investment 23 4.6
FiOS - Verizon U-Verse -AT&T
35mbs/dwn5mbs/up
6mbs/dwn1mbs/up
James J. Meyers CEO, Alpha Media
AT&T / U-Verse• $4.6B investment• 6mbs/DOWN_1mbps/UP• Up To 6Mbps• Fiber-to-the-Node• MPEG-4• 18 Million homes by end of 2008
Verizon / FiOS• $23B investment• 35mbs/DOWN_6mbps/UP• Up to 100Mbps• Fiber-to-the-Home• MPEG-2• 18 million homes by end of 2010
US
D$
Bill
ions
Source: Company Press Releases
11
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
90,000,000
POTS 84,500,000 45,100,000 13,800,000 N/A
Mobile 61,000,000 59,100,000 801,000 53,100,000
Broadband 12,100,000 7,000,000 2,140,000 N/A
TV 635,000 747,000 366,000 N/A
AT&T* Verizon** Qwest*** Sprint
Telco Landscape
* AT&T TV via U-Verse (18,000), Bellsouth/ DIRECTV, SBC/Dish Network
** Verizon TV via FiOS (207,000), DIRECTV(540,000)
***Qwest TV via DIRECTV
James J. Meyers CEO, Alpha Media
Sub
scrib
ers
Source: Company Reports, Leichtman Research Group
12
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
Television 24,161,000 15,950,000 13,402,000 13,205,000 5,430,000 5,433,300 3,127,000
BroadBand 11,487,000 N/A 6,644,000 N/A 3,300,000 2,402,200 2,039,000
Telephone 1,900,000 N/A 1,900,000 N/A 2,000,000 445,800 1,200,000
Comcast DIRECTV Time Warner Dish Network
Cox Charter Cablevision
Satellite / Cable Landscape
James J. Meyers CEO, Alpha Media
Sub
scrib
ers Tel
evis
ion
Bro
adba
nd
Source: Company Reports, Leichtman Research Group
13
500
550
600
650
700
750
2004 721 725 633 656 617
2005 716 708 631 664 617
2006 675 651 598 632 586
DIRECTV Dish Network ComcastTime Warner
CableCharter
Customer Satisfaction Satellite / Cable
James J. Meyers CEO, Alpha Media
1,000 point scale based on seven categories: Overall Satisfaction, Performance and Reliability, Cost of Service, Billing, Image, Offerings and Promotions,and Customer Service.
As communications companies venture into new arenas (like cable into voice, and telcos into video), customer satisfaction can become more difficult to achieve because they are peddling products in which they have had no prior experience selling.
Source: J.D. Power and Associates
14
0%
5%
10%
15%
20%
25%
Customer Service 25%
Performance and Relability 19%
Image 16%
Billing 15%
Cost of Service 14%
Offerings and Promos 11%
Importance to Customer
Customer Satisfaction Satellite / Cable
James J. Meyers CEO, Alpha MediaSource: J.D. Power and Associates
15
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2004 3.5 1.59 3.2 1.64 N/A N/A 2.7 1.9
2005 3.2 1.7 3 1.65 N/A N/A 2.65 1.8
2006 3 1.57 3.2 1.62 1.5 4 2.55 1.8
Comcast DIRECTV Time WarnerDish
NetworkVerizon* AT&T** Cox CableVision
%
James J. Meyers CEO, Alpha Media
Average Monthly Churn
Sources: Company Annual report, SEC filing, MultiChannel News
*Churn represents Verizon FiOS television service**Churn represents AT&T U-verse television service, U-Verse Churn over 4%
+
16
5,000
15,000
25,000
35,000
45,000
55,000
65,000
75,000
DBS Subs 19,359 21,638 24,845 27,173 29,055 30,343 31,487 32,511 33,433 Cable Subs 69,390 69,477 69,139 68,839 69,145 69,928 70,820 71,727 72,635
2002 2003 2004 2005 2006 2007* 2008* 2009* 2010*
DBS / Satellite - Past, Present, Future
James J. Meyers CEO, Alpha MediaThe biggest year-end surprise within the multiplatform business was satellite TV with
better-than-expected subscriber gains achieved by the two big DBS companies.
Sub
scrib
ers
(100
0s)
Sources: Banc of America Securities
(10
00
s)(10
00
s)
17James J. Meyers CEO, Alpha Media
DVR / HD BundleHD-DVR Multi-room
DVRProgramming DVR via Web
Programming DVR via
cellphones
Comcast X O O O
Time Warner
X X O O
Cox X O O O
AT&T X O X X
Verizon X X O O
EchoStar X X O TBA
DirecTV X O O O
Tivo X X X X
X = Implemented
O = Planned to Implement
Legend
DVR and HD services are becoming two additional weapons wielded by Satellite, Cable, and Telephone companies whom are vying for customers and increasing
ARPU
Source: The companies
18
30
40
50
60
70
80
90
100
110
120
2004 77 66.95 72 55 77.1 70.5 88.332005 83 69.61 81 58.04 51.67 48.86 87.2 76.27 100.462006 95 73.74 90 62.47 53.6 49.29 86.32 115.3
Comcast DirectTVTime
WarnerDish
NetworkVerizon* AT&T* Cox Charter CableVision
James J. Meyers CEO, Alpha Media
Average Revenue Per User (ARPU)
*POTS only
US
D$
Source: Company Annual Reports
19James J. Meyers CEO, Alpha Media
Pay-TV Subscription Distribution
Cable69% DBS
30%
Other1%
Cable 61% DBS
29%
Telco 9%
Other .5%
Source: Kagan Research
2006 2015
20
010,000,00020,000,00030,000,00040,000,00050,000,00060,000,00070,000,00080,000,000
Other 1,090,000 1,464,000 1,808,000 2,233,000
Cable 25,457,000 30,293,000 34,447,000 37,732,000
DSL 17,164,000 22,397,000 26,695,000 30,045,000
2005 2006 2007 2008
James J. Meyers CEO, Alpha Media
Broadband Subscriber GrowthS
ubsc
riber
s
Source: Banc of America Securities
21
Not to be Confused with Broadband Media
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Offers Major Studio content
on pay-per-view basis
Download-to-own service for feature films.
VOD-HD
Offers Burn-to-DVD
Download-to-own service
MAJOR studio films
Netflix
Cinema Now
Apple - itunes (Music)
Movie Link
Vongo
Joost
“Watch Now” Streaming
movies and DVD
Apple - itunes (Music / VIDEO)March: Apple TV released
Apr. 11, 07 Sold : 2.5b music tracks, 50m TV shows, 2.5m movies
P2P, by founders of Skype and
Kazaa
Pay-per-view / VOD
22James J. Meyers CEO, Alpha Media
Film and Video Distribution
Theatrical23.1%
IVOD0.1%
Free TV3.0%
Video Rental12.3%
Video Sell-Thru46.9%
Pay TV11.7%
PPV/NVOD0.9%VOD
1.9%
Theatrical Video Rental Video Sell-Thru Pay TV Free TV PPV/NVOD VOD IVOD
Internet Video Represents .1% of the $35 Billion generated Studio revenue in 2006
Source: Adams Media Research
23
Audio
0
200
400
600
800
1,000
1,200
Subscription 45.5 118.4 247.7
Downloads 29.6 204.5 782.7
2003 2004 2005
James J. Meyers CEO, Alpha Media
Internet Audio and Video SpendingU
SD
$ M
illio
ns
US
D$
Mill
ions
Source: Adams Media Research
Video
0
5
10
15
20
25
30
35
Subs 1.4 1.8 3.5
Rental 2 3.8 6.2
Purchase 1 1.4 22.4
2004 2005 2006
24
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Purchase Spending Rental Spending Subscription Spending
Purchase Spending 0.0014 0.0224 0.1329 0.5 1.2 2.1
Rental Spending 0.0038 0.0062 0.0215 0.1 0.2 0.5
Subscription Spending 0.0018 0.0035 0.0115 0 0.1 0.2
2005 2006 2007 2008 2009 2010
James J. Meyers CEO, Alpha Media
Consumer Spending on Internet VideoU
SD
$ B
illio
ns
Source: Adams Media Research
25
1.2 1.52
3.24.2
0.20.5
1.1
1.8
3.5
0
1
2
3
4
5
6
7
8
9
2006 2007 2008 2009 2010
UserPaid Services AD Supported Services
Expect shift toward greater parity between revenue sources. User Paid Services are expected to be 45% of total revenues by 2010
Online Video’s Future
James J. Meyers CEO, Alpha Media
US
D$
Bill
ions
Source: Parks Associates
26
0
10
20
30
40
50
60
70
80
TV-Connected 0.0 0.2 0.7 1.6 3.8 6.3
PC-Only 10.4 16.7 23.6 31.7 40.1 49 56.2 61.9 65.3 67.1
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10
James J. Meyers CEO, Alpha Media
High-Speed HouseholdsU
nits
(M
illio
ns)
Source: Video-On-Demand: The Future of Media Networks, 2nd Ed.
Cable - 55% of market, DSL - 45% of market (2006)
27
7.2
3.3
1.3
0
2
4
6
8
Country 7.2 3.3 1.3
Japan Korea US
Subscribers as of March 2007
Japan• 100 MBPS/ $23• Digital Living Room, Mathushita, Sony, Toshiba, Sharp, Hitachi
• Integrating w/ All New TVs
Korea• 51 MBPS/ $40 • Digital Living Room Samsung• Integrated Home Networking
USA• 30 MBPS / $39• Digital Living Room MICROSOFT
Japan and Korea Policy: Fiber to Every HH by 2010
FTTHSubscribers
(Millions)
15% of all HHs
23% of all HHs
1.3% of all HHs
M M M
Source: Asahi Shimbun, Chosun Ilbo, Company Data
28James J. Meyers CEO, Alpha Media
Thoughts
Bundling is becoming essential for long-term survival
Consumer-focused industry innovations are key to success
Being first mover is important. Execution is crucial
Video capabilities of Telco, Cable and Satellite providers are mirroring the increase in HDTV households
Options for broadband video are growing at a rapid pace. Apple TV, Joost, and other services present the future of video/media content via
broadband
Asian providers should be followed closely as they are pushing the envelope of speed and applications over broadband and fiber