The Business of Broadcast & Media · • IPTV (subscription-based services provided by e.g. telecom operators) is expected to grow significantly adding over 80 million subscribers

The Business of Broadcast & Media Global Trends – Focus on APAC

Peter White, IABM CEO

IABM Copyright 2019@THEIABM www.theiabm.org

Asia-Pacific TV distribution - ForecastNumber of TV households in APAC region expected to increase from about 900 million in 2018 to 970 million in 2024

Source: Digital TV Research, IABM

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APAC TV households by distribution platform (million)2018 2019 2024

• APAC’s Pay-TV sector is vibrant, with both subscribers (+68 million) and revenues (+US$ 2.35 billion) forecast to rise during the next 5 years, while the growth will be slower-than-expected due to many cable subscribers in China converting to OTT

• China and India combined will account for 80% of APAC’s roughly 680 million Pay-TV subscribers by 2024

• IPTV (subscription-based services provided by e.g. telecom operators) is expected to grow significantly adding over 80 million subscribers between 2018 and 2024, rising to 272 million

• The majority of IPTV growth in the APAC region will originate from China with an additional 40 million subscribers by 2024, followed by India with about 30 million new subscribers

• Digital cable subscriptions will be flat overall, and China is expected to lose 25 million cable subscribers between 2018 and 2024


Global Pay-TV market maturing due to growth of OTT

Source: Digital TV Research, IABM

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Top countries by number of Pay-TV subscribers (million)2017 2023

China (33%) and India (16%) combined are forecast to have nearly half of the world’s total Pay-TV subscribers by 2023.

The US will be the biggest loser in terms of Pay-TV subscribers, going down by 10 million subscribers.

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Pay-TV penetration continues to decline in the US due to the high costs related to Pay-TV subscriptions vs. OTT services.


Asia-Pacific Pay-TV market by country China and India combined will account for 80% of APAC’s Pay-TV subscribers by 2024

Source: Asia Video Industry Association (AVIA), Media Partners Asia (MPA)

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APAC Pay-TV subscribers by country (000s)

China India South Korea Japan

Vietnam Taiwan (of China) Thailand Indonesia

Philippines Malaysia Australia Hong Kong (of China)

Singapore New Zealand

0% 20% 40% 60% 80% 100% 120%

China

India

South Korea

Japan

Vietnam

Taiwan (of China)

Thailand

Indonesia

Philippines

Malaysia

Australia

Hong Kong (of China)

Singapore

New Zealand

APAC Pay-TV penetration rate of TV households2018 2017Total: ~630 million

Total: ~ 610 million Total average: 57%


Growth of IPTV in Asia-Pacific - ForecastIPTV expected to be the fastest growing multichannel platform in APAC

Source: Digital TV Research, Asia Video Industry Association (AVIA)

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Number of TV households in APAC with a Pay-IPTV subscription (2018-2024*)

• Asia-Pacific region is the world’s third-largest IPTV economy after North America and Western Europe, with China Telecom being the largest IPTV operator globally by subscriber base

• In APAC, other major IPTV providers include KT Corporation (South Korea) and Sky Perfect JSAT Corporation (Japan)

• China alone accounts for about 80% of all IPTV households in the APAC region, thanks to China Telecom’s fast expansion over the past few years

• In terms of IPTV subscription revenue, South Korea leads with US$2.3 billion (2017), followed by Japan’s US$1.4 billion and China’s US$1.2 billion

• In 2017, China had APAC’s lowest IPTV ARPU (average revenue per user) at US$0.92 per month because China Telecom and China Unicom have both marketed IPTV as a promo service add-on to fixed broadband services. In comparison, IPTV ARPU was highest in New Zealand at US$49.24

• Many governments (e.g. Australia, New Zealand, Singapore, Malaysia) are funding fiber rollouts to support the IPTV market in the long term


Trends in Asia-Pacific Pay-TV marketAPAC’s Pay-TV industry is currently in the midst of transformation

Source: Asia Video Industry Association (AVIA)

Emergence of online video platforms (home and mobile broadband, IPTV/OTT): Pay-TV operators launching their own SVOD services, rolling out Android set-top-boxes (STB) and shifting to IP-based distribution and STB integration with OTT operators.

Pure direct-to-home (DTH) satellite segment declining: DTH satellite operators struggle, while bundled service operators with IPTV and high speed internet continue to grow in countries such as Indonesia, Malaysia and India where customers are shifting to packages with broadband and OTT.

Increasing investment in online video content: Premium entertainment and sports growing at a significant pace.

Emergence of telcos as content distributors and aggregators of video services: Telcos actively investing in video content, distribution, e-commerce and gaming across Asia-Pacific.


Asia-Pacific OTT market continues to boom

Source: Digital TV Research, Media Partners Asia (MPA)

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Legal SVOD OTT penetration per capita in APAC (2018)

APAC region has some of the highest rates of video piracy in the world. For example, Singapore ranks 9th in the world for the most number of visits to piracy sites per capita, according to Asia Video Industry Association’s study.

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OTT TV and video revenues by country in APAC (US$ million, 2018-2024*)

2018 2019* 2024*


Internet economy – China vs. US

Source: US Census Bureau, CNNIC, Statista

778 million users(98.3% of total internet users)

650 million users(46% of total population)

262 million users

(95.3%)

55 million users

(20.2%)

Internet Mobile internet Mobile payment

802 million users(57.7% of total

population)

275 million users (89%)

Population: 1.42 billion

Population: 327 million


Technology mix horizon – China, India and US

Source: GSMA 2018. Note: Share of mobile connections by technology

Technology mix - China

2G 3G 4G 5G

2017

2025

Technology mix - India

2G 3G 4G 5G

2017

2025

Technology mix - US2G 3G 4G 5G

2017

2025


AI technology pioneers including US, China, Israel and UKUS leading AI development, but China catching up

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131 113 109 106 82 55 45 42 39 35 28 27 26 26 22 19

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Number of AI startups by country in 2018

Sources: Roland Berger, CMN, CISTP

1.62.1

3.4

6.2

10.2

14.3

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AI market size in China - Growth forecast (2015-2020, US$ billion)


The Chinese government promoting AIBaidu, Alibaba, Tencent and iFlyTek the driving forces behind China’s AI advancement

Source: SCMP


4K/UHD adoption globally China continues to lead in 4K/UHD adoption

Source: IBC365, IHS Markit

• China will continue to dominate the 4K/UHD TV market, with 42% of all TVs in 2017 shipped with 4K panels. By 2020, 4K TV shipments in China are expected to reach 44 million units – the same as North America and Western Europe combined

• In the US, the adoption of 4K/UHD is driven by Pay-TV operators differentiating their offerings and terrestrial broadcasters who are increasingly adopting the new ATSC 3.0 standard. In South Korea, the adoption of ATSC 3.0 has catalyzed 4K/UHD adoption at terrestrial broadcasters

• OTT operators such as Netflix and Amazon already offer 4K/UHD content in several countries

• China will dominate 8K shipments as its early-adopting consumers are seeking new features and as pricing of 8K sets becomes more affordable

• While Japan is planning 8K broadcasts from 2020, currently shipments in Japan remain constrained by consumer preferences for screen sizes too small to support even 4K

• In 2018, the FIFA World Cup and the Wimbledon tennis championships were covered in 4K/UHD

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4K TV shipments forecast by region (2015-2020)

China North AmericaWestern Europe APAC (excl. China, Japan)Latin America Eastern EuropeMiddle East and Africa Japan

Nearly 100 million 4K/UHD TV sets were sold in 2018, and the number is expected to double by 2022.

Better visual experience, availability of 4K content, affordable pricing of 4K sets driving demand globally.


Source: CTGN, Broadband TV News

2018 2019

In October 2018, China Media Group (CMG) launched its first 4K TV channel, CCTV 4K Ultra HD

• The new channel broadcasting 18 hours per day and is available in 13 municipalities and provinces including Beijing, Shanghai and Guangdong

• CMG also upgrading its production and broadcasting systems to fully support 4K/UHD, with the roll-out happening in stages between 2019 and 2021

• Shanghai Oriental Pearl’s BesTV platform and Insight TV (4K UHD content provider) signed a distribution deal giving Shanghai Oriental Pearl’s viewers access to a wide range of Insight TV’s popular shows in 4K/UHD format

• China’s first test of 4K UHD video transmission used 5G-based network in Shenzhen

• This enabled 4K/UHD live broadcasting in a separate Shenzhen studio during the 2019 Spring Festival Gala

• China Media Group (CMG), China Mobile, Huawei already launched the first national-level 5G new media platform in December 2018

In December 2018, Shanghai Oriental Pearl’s BesTV and Insight TV signed a distribution deal for 4K UHD content

In January 2019, China successfully carried out its first test of 4K UHD video transmission using 5G-based network

Latest 4K/UHD initiatives in ChinaCCTV China launched 4K channel at the end of 2018

Drivers of Change


Sources: IABM

Digital WarfareMore companies launch DTC offerings in increasingly competitive market

Digital InflationGrowth in content and number of platforms increases complexity

Digital SpeedMedia companies increasingly streamline their operations to be quicker

Shifts in Buying Trends• From Media Company to Media Factory• From Transactions to Partnerships (and BIY)• From Hardware to Software (and Cloud)• Increasing Importance of Data (and AI)• Decreasing Importance of Immersive Formats

Drivers of ChangeForces disrupting the broadcast & media industry


Digital WarfareNew DTC offerings

Sources: IABM, Digital TV Research

• Disney launched ESPN+ in 2018 and set to launch Disney+ this year

• Apple set to unveil its streaming service this year after 1$bn investment in 2018

• WarnerMedia to launch a streaming service this year

• BBC and ITV to launch joint UK streaming service this year

• BBC and Discovery to launch joint streaming service focused on wildlife programming

• TF1, Télévisions and M6 removing content from Netflix and Amazon after 2018 streaming launch

More Media Companies Go Direct!

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Global Subs: Pay-TV vs. SVOD


Digital WarfareWorldwide battle

• Disney launched ESPN+ in 2018 and set to launch Disney+ this year. Planning to expand Hulu and Disney+ internationally

• Apple to launch a global SVOD service

• WarnerMedia to launch a global streaming service this year

• Comcast plotting a global streaming service following Sky acquisition

• BBC and Discovery to launch joint global streaming service focused on wildlife programming

• Discovery to launch global streaming service focused on golf

More Media Companies Go Global

Sources: IABM

Implications

TV Exports RiseData from the UK, France and even emerging content markets like Turkey points to double digit growth

Scale & ComplexityScale needed for global services. Added complexity in making it work, from content localization to rights management


Digital WarfareAlliances

OTTMany joint DTC initiatives in Europe –France (Salto), UK (Britbox), Spain (LOVEStv), Germany (Joyn). Broadcasters also vouching to collaborate on streaming tech

AdvertisingRise in number of collaborative initiatives to increase audience size and improve addressability (European Broadcast Exchange, Blockchain Insight Platform, Sky/Virgin partnership, Project OAR, RTL/Prosieben partnership)

Alliances Focus on Revenue-Generating Activities Investment in Tech Suppliers Following Similar Pattern


Digital WarfareAlliances

Pier Silvio Berlusconi, Mediaset Deputy Chairman & CEO

May 2019

European media companies like us need to join forces if we are to

continue to compete, or even just resist, in terms of our European cultural identity,

eventual attacks by the global giants

Is More Consolidation Coming to Europe?

• Canal+ bought Pay-TV operator M7 for $1.1bn at the end of May 2019

• Mediaset bought 9.6% in ProSiebenSat.1 for $380m at the end of May 2019

• Market is very fragmented, more could happen as European broadcasters search for scale

• Consolidation and collaboration aim to address cost of competing with FAANGs on ad revenues, streaming and content


Digital WarfareData Snippets

Sales & Profits in the Broadcast & Media Industry

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-1%

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5%

7%

9%

11%

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H2 2017 H1 2018 H2 2018

Sales Change Profit ChangeSources: IABM


Digital WarfareData Snippets

Sales & Profits – Broadcast vs. FAANGs

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Broadcast FAANGs

Sales Change

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Current Market Capitalization

Sources: IABM


Digital InflationContent bonanza

Sources: IABM, Variety, MSCI, Statista

Given the success of Hulu so far in terms of subscriber growth

and the relative brand strength and other things too like

demographics, we think there’s an opportunity to increase

investment in Hulu notably on the programming side

Bob Iger, Disney CEONov. 2018

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Number Of Original Scripted Series In The US The FAANGs Double Down on Media

Investment up by over 40%


Digital InflationM&A and content landscape in the US & beyond

Sources: IABM


Digital InflationContent fragmentation

Content Divide

Content SupermarketsNetflix, Amazon, DAZN and now Disney offering a varied slate of content

Niche ProvidersRise of niche OTT offerings by emerging players and existing broadcasters

Sources: IABM


Digital SpeedDemand for content & tech spurs consolidation

Sources: IABM, Multichannel News

[The new offering will be funded through] incremental efficiencies

within the WarnerMediaoperations, consolidating resources

from sub-scale D2C [direct-to-consumer] efforts, library content,

and technology reuseAT&T’s SEC Filing

Oct. 2018

Our strategic purchase of BAMTech allowed us to enter this arena quickly and effectively, as evidenced by our

successful launch of ESPN+ six months ago. More than 1 million users have already subscribed. And we continue

to see impressive growth.

Bob Iger, Disney CEONov. 2018

BIY

Efficiencies


Digital SpeedVelocity

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Multi-Platform Content Delivery

4K/UHD Production/Delivery

IP infrastructure

Media Asset Management

File-Based Workflows

Social Media Broadcasting

News Operations

Remote Production

Upgrading Operations to HDTV

Cloud-Computing

Cyber Security

Big Data Analytics & AI

Back Office Systems

Programmatic Advertising

VR Production/Delivery

Top Media Tech Priorities (Broadcasters)

Sources: IABM, Financial Times

[The iPlayer] is the way people will consume the

BBC in the future. We need more content there and for longer. This is no longer a

catch-up service… it’s a destination

Tony Hall, Director General, BBCDec. 2018


New MarketsSecurity Monitoring, eSports and Mobile/Telecom as new growth segments

• An increasing share of broadcast and media technology suppliers’ customer base comes from a non-media background

• These markets have radically different needs compared to broadcast and media, requiring suppliers to adapt their marketing and selling practices

• According to IABM’s Supply Trends Survey 2019, 71% of respondents said that broadcast and media was a stable or declining segment, while all the non-media segments were reported as high-growth:

• Gaming (100% of respondents saying it is a growing trend)

• Security Monitoring (92%) • eSports (91%)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Broadcast & Media

Government / Military

Worship

Education/Training

Corporate

Marketing/Media

Sports

Signage

Mobile/Telecom

eSports

Security Monitoring

Gaming

Growth Parallel Markets vs Broadcast and Media

Growing Stable Declining

Sources: IABM, Vendors asked which parallel markets they serve are growing


New markets – eSports APAC region expected to account for nearly 60% of the global “eSports enthusiasts” in 2019

Source: NewZoo Global Esports Market Report 2019

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Occasional viewers eSports ethusiasts

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eSports enthusiasts by region in 2019

APAC EU North America Rest of the world

Buying Trends


Sources: IABM

0% 20% 40% 60%

Makes us more efficient

Total cost of ownership

Makes us more agile

Cutting-edge technology

ROI

Installation support

Interoperable with other products

After sales services & support

Reputation of vendor

Vendor roadmap

Vendor's understanding of needs

Personal relationship with vendor

Availability of training

Top Factors Influencing Technology Purchase Top 3 Priorities in Content Chain Management

Optimizeresource utilization and avoid effort duplication

Predictunknown variables and events

Gatherdata on content, rights, operations, audiences

From a Media Company to a Media FactoryMedia companies continue to streamline operations for the multi-platform world


Sources: IABM

BIYThrough acquisitions and internal SW development

PartnershipsThrough increased

collaboration with suppliers

We are not looking for products anymore, we

are looking for partnerships where

product development is driven by our requirementsEuropean broadcaster

responding to our Buying Trends Survey

Digital SpeedNeed to do things

quickly and effectively in multi-platform

world

From Transactions to PartnershipsRelationships have changed


Digital SpeedBIY Update

Sources: IABM

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Store

Monetize

Consume

Support

Publish

Connect

Manage

Create

Produce

Top Areas for BIYSW Development Investment

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Buying TrendsCloud

Sources: IABM

Cloud – Adoption Tracker Cloud – Top Application AreasUP from 37%


Buying TrendsCloud

Sources: IABM

Cloud – Top Challenges Cloud – Preferred Deployment Model


Buying TrendsAI

Sources: IABM

AI – Top Application AreasAI – Adoption Tracker UP from 13%


Buying TrendsAI

Sources: IABM

AI – Top Challenges AI – Preferred Deployment Model0% 10% 20% 30% 40% 50% 60%

Leverage cloud service provider's AIcapabilities

Leverage specific AI functionalities invendor's solution

Internal deployment/recruitment

Specialist AI platform

Other


Buying TrendsAI driving Cloud Adoption

Sources: IABM

0% 10% 20% 30% 40% 50% 60%

Leverage cloud service provider's AIcapabilities

Leverage specific AI functionalities invendor's solution

Internal deployment/recruitment

Specialist AI platform

Other

NASCAR moves 500,000 hours of content archive (18-petabyte)in the cloud

AI – Preferred Deployment Model

We started to digitize six or seven years ago. We are

jumping into machine learning to automate processes and

add metadataSteve Stum, NASCAR VP Operations and Tech Production

June 2019


Buying TrendsIP

Sources: IABM

IP – Adoption TrackerEfficiency DriverEfficiency-boosting activities like remote production continue to drive IP deployments

Quality Driver69% of respondents want to go UHD with IP or hybrid SDI-IP

New FacilitiesMajor upgrades driven by new facilities so far0%

5%

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30%

35%

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45%

2018 NAB 2018 IBC 2019 NAB

We are already doing it today Very likely Likely Unlikely Very unlikely


Buying TrendsUHD

Sources: IABM

The HDR FactorHDR the preferred enhancement, most companies still want to marry HD with enhancements

Production: Infinite ContentHigh priority for production and post companies for future-proofing content and sell to Amazon/Netflix ($20bn)

Distribution: Limited ContentLimited content distribution aside from Pay-TV and OTT operators. Major events as driver of spending0%

5%

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20%

25%

2017 NAB 2017 IBC 2018 NAB 2018 IBC 2019 NAB

UHD – Adoption Tracker


Buying TrendsVR

Sources: IABM

Sports: The Silver LiningAlmost all initiatives in Sports where VR provides attractive consumer experiences

MonetizationMost initiatives have not been monetized. Lack of clarity around business models is major hurdle

ComplexityProduction complexities coupled with costs of deployment/storage other constraints

0%

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2017 NAB 2017 IBC 2018 NAB 2018 IBC 2019 NAB

VR Linear (VR)

VR – Adoption Tracker

Content Chain Trends


Sources: IABM

Each link of the chain maps to

specific investment areas

The BaM Content Chain®An Investment Compass


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Create Produce Manage Publish Monetize Consume Connect Support Store

Positive Business Sentiment Reliance on Hardware

Content Chain TrendsInvestment is Shifting

Sources: IABM

Suppliers’ Business Sentiment

Monetize & ConsumeBroadcasters investing more in Monetize & Consume as they move direct-to-consumer. This is to establish relationships with consumers and monetize them effectively

PublishIn Publish, 67% of suppliers say that their customers are focusing investment on internet distribution


Content Chain TrendsSuppliers Move to New Business Models

Sources: IABM

0% 20% 40% 60% 80% 100%

Hardware revenues

Software revenues (on-demand)

Software revenues(permanent licences)

Software revenues(subscriptions)

Will increase Will stay the same Will decrease

Suppliers’ Revenue Sources, Outlook Sales & Profits

-30%

-25%

-20%

-15%

-10%

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0%

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H12014

H22014

H12015

H22015

H12016

H22016

H12017

H22017

H12018

H22018

Sales Growth Profit Growth



Sources: IABM

Demand Drivers Demand in last 6 months

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Hardware revenues Software revenues

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30%

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Reduced in the last six months

Hardware revenues Software revenues



Sources: IABM

Average R&D Spending as % of Sales R&D Focus

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H2 2016 H1 2017 H2 2017 H1 2018 H2 2018

Documents

The Business of Broadcast & Media · • IPTV (subscription-based services provided by e.g. telecom operators) is expected to grow significantly adding over 80 million subscribers