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THE FUTURE OF TV
We’ve talked to a lot of people…
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Sir Martin Sorrell
Mark Thompson
Alan Yentob
Peter Bazelgette
David Elstein Daniel Ek
Claire Enders
Steve Ballmer Mathew Horsman
Esther DysonTroy James Surowiecki
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> 4 trends shaping the UK TV market
Strong linear TV brands will
prosper
Pay will re-shape the TV industry
The TV ad model will change – but
slowly.
Social media will fuel the blockbuster.
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> 4 trends shaping the UK TV market
Strong linear TV brands will
prosper
Pay will re-shape the TV industry
The TV ad model will change – but
slowly.
Social media will fuel the blockbuster.
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We love TV.
Over 4 hours a day spent watching TV.
> Strong linear TV brands will prosper
Time Use, 2010
TV
TV viewing hasn’t changed over last 20 years.
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In fact, hours viewing has increased over the last couple of years.
> Strong linear TV brands will prosper
But the pace of technological adoption has quickened
> Strong linear TV brands will prosper
44
66
799
101010
1212
1414
15
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Social Media
No of years to reach 50% penetration
TV on PCAudio on PC
DVDsDigital TV
BroadbandHDTVDTRsDAB
3GColour TV
CD PlayersRadioVCRs
MultichannelTVMobiles
Traditional AV
Digital AV
Web content
1986
1988
1975
1923
1986
1967
2002
2001
2001
2000
1998
1997
2001
1999
2005
2006
UK LAUNCH
Source: O&O
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We have over-estimated our appetite for new ways of watching TV (self-scheduling)…Sky+ usage is 15-20% on average – significantly less than 30%+ that was predicted. No evidence of greater use over time.
> Strong linear TV brands will prosper
Sky + timeshifted viewing by years of ownership (%)
Source: SkyView
1717161615
0
5
10
15
20
25
30
2 31 5+
Number of Years of Sky+ Ownership
4
% timeshifted viewing
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… & the significance of online video viewing
> Strong linear TV brands will prosper
Source: Comscore
56% of all online video viewing is porn
19 mins a day of online video, but 80%+ is porn + YouTube (UGC) - neither of which is likely to become mainstream.
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70% of video viewing will still be to linear TV
Non-linear viewing will nearly treble to 90mins pd, but viewing to
the linear schedule will remain dominant.
> Strong linear TV brands will prosper
14
281
31%
Live
DTR timeshiftTV VOD
Online Video
2020
193
1929
40
2010
259
223
2 19
Estimated video viewing by type 2010-2020 (f), minutes
Source: BARB / Comscore / Mindshare estimates
As content choice increases, channel brands’ navigation role will be more
important
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Strong channel brands will gain share in a VoD world.Distribution of revenue – traditional vs emerging media.
> Strong linear TV brands will prosper
Revenue
Top Bottom
‘The big head’
‘The sagging middle’
‘The Long Tail’
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> 4 trends shaping the UK TV market
Strong linear TV brands will
prosper
Pay will re-shape the TV industry
The TV ad model will change – but
slowly.
Social media will fuel the blockbuster.
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Blockbuster content has held up well in the digital era
-35
-30
-25
-20
-15
-10
-5
0
91-95
81-85
71-75
61-65
51-55
41-45
31-35
21-25
11-15
1-5
TV Viewing Figures by rank (% change 2000 – 2010 )
The top 5 programmes have lost fewer viewers over the past 10 years than the rest of the top 100
> Social media will fuel the blockbuster
UKUS*
Source: BARB / Nielsen* 2001-09
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New forms of access help maintain the viewer-programme relationship
VOD & online video allow additional opportunities to view
Broadcaster player on device
Aggregator player on device
TV platform player
Online aggregator
TV platform web player
Broadcaster site
> Social media will fuel the blockbuster
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Social media ‘chatter’ helps big content get bigger
> Social media will fuel the blockbuster
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Second screen consumption is the driver of Social TV
> Social media will fuel the blockbuster
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Social communities provide ready fanbase for launching content
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Social features enhance the viewer experience to sustain viewing
> Social media will fuel the blockbuster
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> 4 trends shaping the UK TV market
Strong linear TV brands will
prosper
Pay will re-shape the TV industry
The TV ad model will change – but
slowly.
Social media will fuel the blockbuster.
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Subscription is already the dominant source
of TV fundingSubscription has risen by c6%pa+
over last five years, whereas advertising has fallen by c2%pa
> Pay will re-shape the TV industry
0
1000
2000
3000
4000
5000
2004 2005 2006 2007 2008 2009 2010
Other
BBC Licence Fee (TV)
Advertising
Subscription
TV Industry Revenue (£m) 2004-2010
Source: Ofcom
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The value of a subscriber continues to grow…
Added TV functionality (PVRs, HD etc) and triple-play bundling have increased the value of a subscriber.
> Pay will re-shape the TV industry
541
492
444421
394
250
300
350
400
450
500
550
2006 2007 2008 2009 2010
8.2%
Source: BSkyB company reports, Dec year end
Sky Annual ARPU (£) 2006-2010
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…making content that drives penetration increasingly valuable
If moved to Pay, ITV’s content could drive significant Pay penetration
> Pay will re-shape the TV industry
11
18
7
6
ITV Digital
All ITV 24
4
Much more likely More Likely
Likelihood of subscribing to Pay TV if ITV’s content migrated to Pay (% agreement, non-Pay HHs)
Source: GfK / BoA Merrill Lynch Global Research 2010
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Also offering more diverse income for ITV
> Pay will re-shape the TV industry
Pay TV operators likely to pay strategic premium for ITV content
ML estimate £200m pa revenue upside by 2016
Estimated Revenue mix for ITV Wholesale model(£m, 2008-2015E)
0
500
1,000
1,500
2,000
2,500
3,000
2008 2009 2010
Ad Revenues
2014201320122011
Content
2015
Subscription
Other
Source: GfK / BoA Merrill Lynch Global Research 2010
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The ‘ARPU hole’ will start to be filled in
> Pay will re-shape the TV industry
# of viewers
ARPU
Where is the pay-lite TV model?
‘Over-the-top’ access through connected TVs & YouView will help growth of pay-lite
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> 4 trends shaping the UK TV market
Strong linear TV brands will
prosper
Pay will re-shape the TV industry
The TV ad model will change – but
slowly.
Social media will fuel the blockbuster.
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The TV ad market will evolve slowly
Advertising will become a smaller source of revenue for the TV industry. New advertising revenue streams will be constrained.
Subscriptions
Advertising
Public Funds (BBC)
Other
2020 (f)
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49%
24%
17%10%
2010
12
41%
30%
23%
6%
AddressableContent
Spot
2020(f)
100
155
80
TV industry revenue £bn, real terms 2009 -2020 (f)
> The TV ad model will change – but slowly
Advertisers will become increasingly involved throughout the value chain
Content funding will grow but within limits
Challenges
Transaction costs
Suitability (genre / advertiser)
Risk for advertiser
Demonstration of ROI
> The TV ad model will change – but slowly
Platform owned data
3rd Party integrated data
Eg Experian
Eg DemographicsViewing habitsStated preferences
ITV (VOD / Linear)
Car insurance up for renewal
Home insurance up for renewal
ITV (VOD / Linear)
Pre roll / linear break
Pre roll / linear break
Price comparison site Home execution
Price comparison site Car execution
Addressable advertising is the bigger opportunity> The TV ad model will change – but slowly
But a combination of factors will constrain the growth of addressable advertising
Creative
Data AnalysisTrading
Production
- Creating tailored TV content cost efficiently
- Speed of production
Implementation
- Market power of platform owners
- Integration of data across platforms
Messaging
- Tailoring messaging across multiple segments
- How explicit should understanding of past behaviour be?
Targeting
- Balancing mass reach with precision targeting
- Ability to select targets & messaging dynamically
> The TV ad model will change – but slowly
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> 4 trends shaping the UK TV market
Strong linear TV brands will
prosper
Pay will re-shape the TV industry
The TV ad model will change – but
slowly.
Social media will fuel the blockbuster.
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Thanks