The New Paradigm Shift in TV Market Competition in Thailand

22 December 2015

Digital disruption and mobile data communication have totally changed the behavior

in TV consumption worldwide. Younger Thais consume video more on online platform.

– 2 –

Key Driving Forces in TV Consumption

- Digital disruption (digital content, video, clips, HD quality etc.)

- Mobile 3G/4G (higher speed and coverage) - Smartphone adoption (cheaper and more capability)

Lead to -> Changing in user behavior - Online consumption - Time shift watching - UGC (user generated content) -> Prosumer

-> need digital transformation in TV business to compete better

Source: TNS, 2015

Media Consumption

Mobile

Laptop

Television

Tablet

7.4 Hours

176 minutes

96 minutes

78 minutes

95 minutes

• Smartphone growth rate is increasing

continuously while feature phone is declining. • Smartphone penetration is currently at 31% of

the population (Approximately 20,908,917 Smartphone users)

• Mobile usage accounts for 40% of media consumption

http://www.positioningmag.com/content/61889

2.0 2.1

1.0

2.9

1.8 1.8

4.2

1.6

2.0

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Baby Boomer(46-65 years old)

Gen X(31-45 years old)

Millennials(16-30 years old)

Mobile usage Online TV and VoD consumption

Traditional TV consumption

hr/day

Thai Media Consumption Behavior across 3 Generations

• Cheaper smart phones makes them more affordable and leads to the increasing smartphone adoption rate

• Smartphone penetration is currently at 31% of the population (Approximately 20,908,917 Smartphone users)

Smartphone Adoption

• Digital content eg. Videos, clips in HD quality can be produced in a lower production cost

• Online platforms are ready for digital content. • User generated content makes number of

content online greatly increased.

Digital Disruption

• 3G/4G technology leads to possibility of smooth online TV and VoD streamimg

• Which would make traditional TV and online TV indifference in an aspect of smoothness

Mobile 3G/4G

• Thai media consumption behavior across 3 generation reflects trends in the consumption behavior • In the future, where millenials represent the future trend, online TV and VoD will gain more share in media consumption stake,

while traditional TV consumption will shrink. • need digital transformation in TV business to compete better

There are 6 major global trends in the TV industry. Many of them are already and

widely adopted but they will be much more prominent in the next 5 years.

– 3 –

Global Trend in TV Industry

• Personalization will go beyond content (on demand) to discovery process, user experience and advertising

Personalization 1

• Experience across all TV platforms i.e. linear and non-linear TV will be very much improved.

TV Anywhere 2

• There will be more and more channels with HD and UHD (4K and 8K) available in the future . Pay TV will lead this change due to ease of implementation.

4K Quality 3

• Non-linear TV e.g. OTT TV and Social TV will grow rapidly. Higher adoption will be explicit in the developing countries.

The Rise of Non-linear TV 4

• Content is still King but data is gaining more and more important

Data is the Game Changer 5

• TV Measurement will be extended to multi platform

Evolution of Measurement 6

There are two paradigm shifts in Thai TV market competition that are highly effected

from digital transformation i.e. advertising and distribution platform markets.

– 4 –

TV Media Ecosystem: Paradigm Shift in Market Competition

Product Owner Media

Agency Content

Production Service Delivery

Platform and Distribution

End User

Advertising market (Free TV) 1

Platform market (Pay TV) 2

• Advertising in traditional media has been challenged.

• Advertising market has to adapt to the

digital era in many aspects e.g. media

agency moves its focus to online

platform where viewers seems to spend

more time on it, emphasize more on

data analytics etc.

• OTT requires only internet access in

order to provide a pay TV platform

service unlike cable and satellite pay TV.

• Cheaper investment and readiness of

the infrastructure welcomes more OTT

players in platform and distribution

services market

TV is still the most important mean of product advertising. However, digital

advertising via different forms is growing its significance rapidly.

– 5 –

Thai Advertising Market goes Digital

2.783

4.248

6.115

9.869

0

2

4

6

8

10

12

2012 2013 2014 2015F

Bill

ion

TH

B

Year

CAGR = 53%

Digital Advertising Spending from 2012-2015 Total Advertising Spending between Jan-Sep 2015

Digital Advertising Discipline in 2015 Total Advertising Spending by Brand in 2015

Source: Nielsen (2015), DAAT (2015)

Display 28.7%

Search 13%

YouTube Ad 16.5%

Facebook Ad 21.4%

Other platforms (20.4%): creative production, social media, instant messaging, mobile, programmatic ad and others.

Total: THB 92 b

Analog TV: 48% THB 44 b

Digital TV: 17% THB 16 b

Newspaper: 10% THB 44 b

Others (25%): cable/satellite TV, radio, cinema, moving target, magazine, outdoor, internet and mall

The top ad spending brand 1st: THB 965 m 3rd: THB 679 m for pick up truck ads

2nd THB 736 m

4th THB 663 m

5th THB 627 m

6th THB 519 m

1

With its advantages over traditional TV media, digital advertising on highly populated

video platform like YouTube is increasingly gaining popularity.

– 6 –

Example of Digital Advertising in Video Content

-12 spots of advertisement - 30 second each - User can skip but some

time cannot

2 years ago there would be not that much advertising on You Tube video Form of advertising - Adv insertion - Before watching the

content Advantages of Digital advertising - Measurable - Can be very targeted - Less cost than mass

media

http://www.positioningmag.com/content/61955

• 2 years ago there would be not that much advertising on You Tube video in

Thailand

• Advertising is in different forms e.g. video appears before other videos on

YouTube, beside playing videos and as a search results

• 12 spots of advertisement • 30 second each • Users can skip some of the ads

Advantages of digital advertising

• Measurable with build-in

analytics e.g. see where the ads

are viewed, how many views you

paid for, how many clicks you

have got.

• Can be very targeted e.g. age,

gender, interest, location

• Less cost than mass media and

complete control over budget

1

Media Agency and Channel have to adapt to new media planning and business model.

Currently Thailand still lacks of skill digital workers and tools but it’ll be getting better.

– 7 –

Implications to Media Agency and Channel

Current problems in Thai Ecosystem - Lack of skill workers e.g. digital marketers,

programmers - Existing Media Agency needs transformations

- New landscape of media planning - need people who have data analytic skill (more

scientific) - One stop service

-

- Multiscreen measurement

• Evidence from International shows that there will be many new but small Media Agency who are “digital specialist” emerged in the market

• Existing Media Agency needs transformations • New landscape of media planning • need people who have data analytic skill • One stop service

The Rise of Ad Agency Employment

Kanta will do multiplatform measurement http://www.kantarmedia.com/global/newsroom/press-releases/kantar-media-awarded-thailands-official-multi-platform-television-audience-measurement-contract http://www.mrweb.com/drno/news21951.htm Also incumbent like Nielson

Current problems in Thai Ecosystem

• Lack of skill workers e.g. digital marketers, programmers

• Only few reliable marketing research company in the broadcasting market

• Nielsen was a sole TV ratings in Thailand • Media Research Development Association or MRDA

(Thailand) with Kantar media will do a Multi-platform TV ratings in Thailand for 2016

• DAAT and TNS publish Thailand digital advertising spend 2014-2015

• Advertising revenues will be increasingly move to Digital. Hence TV Channel Operators need transformation in service offering and business model.

DAAT+TNS = Digital Ad spending 2015 MRDA+Kanta = multiscreen rating

http://www.positioningmag.com/content/62031

TV Ratings Ad spends

1

Pay TV platform business is highly competitive in Thailand. True Vision has captured

and lock-in most of the high value customers in the market.

– 8 –

Thai Pay TV Market Landscape

Source: CASBAA, Informa, Company Data, TIME Analysis 2015, TRUE at a Glance (Sep 2015), TRUE Annual Report 2014

Premium (Platinum, Gold, Super Family): 0.3 m (11%)

Standard (Smart Family, Sport Family, Happy Family): 0.8 m (30%)

Free-view: 0.5 m (20%)

Free-to-air: 1.06 m (39%)

Key contents

• Satellite/cable operator

• Local cable operator: LCOs (300+)

• IPTV providers

Subscription TV Satellite Free TV

“Set-Top-Box based business model”

Free/Pay

“Subscription based business model”

• Thailand’s No.1 nationwide pay TV provider and the first HDTV provider

• There are 195 channels with high-quality local and international content

• Offering 6 packages to capture each target segment and strengthen its mass-market strategy:

• Platinum HD (195 channels) • Gold HD (170 channels) • Super Family HD (166 channels) • Smart Family HD (155 channels) • Sport Family HD (133 channels) • Happy Family HD (125 channels)

1H 2015 Subscriber Breakdown

• Satellite operator • Satellite operator

King of Movies and Series

King of Sport

King of Entertainment

King of Knowledge

Total 2.7 m

GMM Z is still operating ka P’Dome http://www.gmmz.tv/home.php

2

The market will be even more competitive with the invasion of OTT TV service

provision. Utilizing their strengths, Channel & Telcos can become significant players.

– 9 –

OTT TV Landscape in Thailand

- Low investment in the service

- Large addressable demand and market

- As a result, new players will continue entering the OTT market and expand

consumer choices

sVoD On-line Video Platform Telco (incl. IPTV)

Key Advantage of OTT TV

2

Friend or Foe?

HOOQ, a JV between Singtel, Sony Picture TV and Warner Bros, is a regional OTT

service provider, offering sVoD on Hollywood and regional movies and TV series.

– 10 –

Case Study on HOOQ

A subscription video on demand (sVoD), using website and online streaming video application to provide unlimited access to variety of movies and TV series on any device, anytime and anywhere.

Key Solution Vendors:

Source: HOOQ (2015)

Supply the CLEAR Operations Cloud: a hybrid Cloud-enabled media ERP suite which manages workflows of content processing and packaging, together with tackling the content delivery speed issue

Partnering with HOOQ to supply a managed multiscreen video platform which powers premium video to any device.

An OTT service created by a joint venture between Singtel, Sony Pictures Television and Warner Bros. Entertainment

Partnership with Telecom Operator for Distribution

Regional Footprint:

Launched in February, 2015

Launched in June, 2015

Launched in May, 2015

Partnership with Local Content Creation Houses

Product and Service:

A monthly subscription with up to 5 registered devices per account e.g.

PC iOS devices Android devices

Unlimited access to 10,000+ movies and TV series in HOOQ’s library

Hollywood movies Popular American TV series Regional content specific to

Filipino/ Thai/ Indian customers

Able to download up to 5 movies and TV shows across all registered devices

“Regional content specific to Filipino/ Thai/ Indian customers” Ping: Do I use the right sentence? -> just wanna explain in the slide that there are regional movies and TV series specific to each region (The Philippines, Thailand and India) i.e. Filipino, Thai and Indian users is able to access Hollywood movies and popular American series from Sony Pictures and Warner Bros. However, Thai movies and TV series will be available to only users registered for the service in Thailand

2

OTT TV is expected to grow the Pay TV industry as evidenced in UK and USA where OTT providers like Netflix extents the market size and hits critical mass.

– 11 –

Source: Ofcom (August, 2014), Television and audio-visual, Ofcom The Communication Market Report., Ooyala & Vindicia (2015)

2009 2010 2011 2012 2013

Re

ve

nu

e (

mil

lio

ns

£) UK Online TV Revenue

2009 2010 2011 2012 2013

Reve

nu

e (

Mil

lio

ns £

)

Total UK TV Industry Revenue

Pay-TV Subscription

Other revenue (e.g. TV license, advertising, and etc.)

£11,000 £11,800 £12,300 £12,400 £12,900

FTV Ad Revenue Subscription

Other (PPV, Pay-Per-View & DTO Download-To-Own)

Growing in online TV £

5,8

79

£4

,38

4

£4

,65

5

£5

,02

7

£5

,42

8

The Future of Pay TV Platform goes OTT

NBC, ABC FOX, Telemundo, and Univision will all be launching distinct subscription OTT services by 2016.

The SVOD market has been primarily dominated until recently by Netflix, Hulu and Amazon – but 2015/16 will see the launch of a wide range of new services, including Dish Network’s Sling TV, Sony PlayStation Vue, HBO Now, CBS All Access and more.

Prospects for Premium OTT in the US OTT Content is geared to dominate the market.

2

Movistar and HBO have signed an agreement that will allow Movistar to

broadcast HBO’s flagship TV series such as Game of Thrones, Boardwalk

Empire and Girls distributed via Telefonica’s online VoD service. (Jan, 2015)

Telecom operators, pay TV operators, cable and IPTV providers are increasingly

looking to open up their platforms to OTT providers via partnerships.

– 12 –

OTT Partnership Model Worldwide

SFR's 4G LTE customers will be able to access online music from Napster

after the operator signed an exclusive partnership with the US-based company.

As a result of the deal, subscribers to the French company’s next gen network

with Apple and Android devices will have access to over 20 million songs,

both on and offline. (Sep, 2013)

Bouygues Telecom has reached an agreement with Spotify to include the

latter's music streaming service in its higher-end mobile plans. Bouygues

customers will benefit from the popular music service and Spotify will be

able to potentially access the 10 million subscribers on the Bouygues

network. (Dec, 2014)

Netflix has partnered with SoftBank to launch its video-streaming service in

Japan. SoftBank customers will be able to sign up for Netflix through

SoftBank's channels without having to fill out any payment information.

The Netflix fee will be added to users' monthly bill that they receive from

SoftBank. (Aug, 2015)

Source: CNBC (2015), Advanced Television (2015), Telecompaper (2014), European Communication (2013)

2

As the internet video streaming service like Netflix becomes popular, which increases

the data usage. Comcast reacts by putting the limit on home internet data usage.

– 13 –

Some React from Telco

Source: Cinemablend (2015), Comcast (2015), Netflix (3Q 2015)

American mass media company, operating in such area as:

Cable provider TV and radio broadcasting Cable TV/ Pay TV service Home internet service Home Telephone service

American internet video streaming provider with 69 m subscribers worldwide

Offering sVoD to users in The Americas and 25 countries around the world, with 8 countries scheduled to launch the service in 2016

The Americas: 35 countries in North and South America Due to the change in the consumers’ behavior in watching TV and other media contents, there is an increase use of internet video streaming like Netflix. On the other hand, cable TV provider see the declining trend in the number of subscriber.

Accessing Netflix’s service requires data usage to download content. Once the number of the internet video streaming users increases, it causes the data traffic congestion problem to the internet service providers and the needs to expand the data usage capacity in their system.

Therefore, Comcast is bound to lose revenue from its cable TV/ pay TV business and to invest in the expansion of data capacity in the near future.

300 GB 50 GB

300 GB

Comcast reacts to this consumer behavior shift by announcing a 300GB metaphorical limit on data usage through the home internet service, starting from October, 2015

300 GB Each home internet

user has 300 GB limit on their monthly plan

For every 50 GB used after the cap, the user will be charged $10

User can also choose to pay $30 to get the unlimited home data usage

$10

Unlimited

$30

2

The issue on competition regulation in the light of new OTT TV has been debating

worldwide. It’s recommended clear regulatory objectives have to be set for Thailand.

– 14 –

Un-level Competition Playing Field

Regulation Licensed Network

Operators

OTT Players

Licensing Subject to license and

license fee

No license required

Quality of Service SLAs included in the license No quality requirements

Interconnection Interconnection mandated No interconnect requirements

Consumer

Protection

Subject to (enforceable)

consumer protection policy

No or little enforcement

power

Universal Service Usually subject to universal

service obligation

Not subject to universal

service regime

Legal Interception Usually license condition Country dependent

Taxation Subject to national tax

regime

Service dependent

Comparison of market

conditions

• Network operator’s

business model is

determined by regulatory

requirements

• OTT Players are usually

free of such limitations

• Current market setups

have not yet adapted to

the new competitive

situation

• Competition is

dysfunctional

• Regulators punish

network operators that

invest in local

infrastructure, are an

important source for local

employment and are local

tax payers

It’s recommended clear regulatory objectives have to be set for Thailand. Source: Detecon (2015)

2

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– 15 –

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