IPTV@IBC2010 special report


distressed times. There is no reason to believe it will be any different this time around. Technology advances, regulatory changes, demographic shifts, and a revolution in both digital and work/home lifestyles are likely to reshape significantly the broadcast industry over the coming decade. Yet despite the optimism that currently exists - especially over the prospects for 3D for which there is, to date, no objectively determined consumer demand - there are a number of considerable challenges that the industry faces, including the need to develop the strategies to enable companies to turn promise into profits.


But just how worried is the industry in its brave new world? Well, not very, according to ‘Poised for digital growth: Preserving profitability in today’s digital world’ - Ernst & Young’s 2010 global media and entertainment chief financial officer (CFO) study, released in June.


In the study of CFOs from 75 of the world’s largest media and entertainment companies, the head bean counters are optimistic about revenue potential from the Internet and mobile devices in spite of declining revenues. Explicitly, almost three quarters (73%) of global media and entertainment CFOs say digital and mobile content form the greatest future revenue opportunities despite current profit pressures. In addition, and in what can be considered an


Despite the best efforts of the industry to fashion a business model according to its needs, consumers are firmly in the driving seat of this armchair revolution. Nobody told teenagers that they should, could, or even would use their laptops and phones to watch TV - they just did.


indication of the business that the new revolution could generate, two thirds (66%) of CFOs considered disruptive business models, such as ebooks and mobile content, to have the greatest impact on the media and entertainment industry during the next two to three years. The new model for video


distribution around the home actually is its own driver for growth: more people using more platforms in more places will likely equal more opportunity. "CFOs see growth in new distribution channels, products and services,” said Howard Bass, senior partner, Global Media & Entertainment Advisory Services, Ernst & Young. “Publishers and similar content companies are embracing the fact there are almost 2 billion digital media users to leverage their content and core products and services to the web, mobile devices and electronic gaming globally."


The survey indicated that digital media consumption across the home will continue at a rapid pace. For example, said the report, the number of US households with both broadband connectivity and at least one 3G mobile device has quadrupled during the past five years, and increased more than 600% on a worldwide basis. It predicted global penetration of households with broadband to reach 27% by the end of 2010 and 3G mobile device penetration to reach 55% by the end of this year. Ernst & Young also expects its index of digital media users, which is increasing by an annual rate of 32%, to reach 2.2 billion by 2011 - more than double the number in 2007.


Despite the predicted growth, generating good business numbers was not a given. In fact, the survey suggested that it will be somewhat testing for the industry. “The phenomenal proliferation of digital entertainment among consumers continues to challenge media and entertainment companies,” explained John Nendick, global media & entertainment leader for Ernst & Young. “Revenues are dropping due to the unbundling of media and the reduction of ‘per unit’ pricing, challenging CFOs to identify innovative ways to reach their financial objectives. However, as the demand for digitally delivered entertainment continues to increase significantly, CFOs feel optimistic about revenue potential.”


In these revolutionary times, CFOs S18 l ibe l OFFICIAL GUIDE TO IPTV@IBC2010 september/october 2010 l www.ibeweb.com


appear thankfully aware of the need to formulate new business models. In fact this will be essential. Given the discrepancy between increasing consumption of digital content and falling revenues from new platform adopters who increasingly expect content to be delivered free of charge, CFOs agreed that the industry must determine if and how much they can bundle media content and then settle on appropriate pricing.


Ernst & Young calculated that in June 2010, the average per unit price of video content is US$6 for video yet what may alarm the industry is Ernst & Young finding that by 2012, the average per unit price of video content will likely have decreased by almost 25% compared with the per unit price of 2009. And this would be on top of a 12% decrease in the price of video between 2006 and 2009. Furthermore, the survey suggested that total home video and music end-user spending for 2010, including digital and physical products, would be US$28.5 billion compared with US$36.4 billion in 2006. As a consequence, said the CFOs, companies need to assess the business-heavy costs such as content production, acquisition and distribution, and increase shared processes for finance, IT, research, call centres and even content


development, both inside and outside their companies.


Truly, everything is changing: from what platforms content will be consumed on and where these platforms will be located, to the very nature of the broadcasting companies themselves. The Armchair Revolutionary sessions at this year’s IBC will set out to examine this new and challenging landscape in greater detail, showing exactly how it will be users, and not the providers, who will set the agenda in tomorrow’s broadcast industry. The sessions will consider the current state of the market and future trends, highlighting the core elements of the so-called ‘TV Everywhere’ environment which users have adopted, and from which providers can introduce new services which will bring about business transformation, delivering prosperity to all corners of the broadcast market. In short, the talk in the TV world should not be that of recession, nor even recovery, but that of renaissance. Vive la revolution!


Full details of the Armchair Revolutionary sessions at IBC2010 can be found on pages S10 & S11.


Continued from Page S16.


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