The company J’son & Partners Consulting presents main findings of the study "Evolution of video content consumption terminals." In the course of the study J'son & Partners Consulting used its’ own materials, forecasts of the largest consulting and analytical agencies, commentaries of the authoritative industry experts, market performance indicators and official reports of the largest specialized companies.
The main change in the consumption of video caused by the evolution of devices, is the growing popularity of non-linear content. The linear content continues to dominate. Time spent by an average person watching TV continues to grow.
Internet and television hybridization means that all participants in the chain of content delivery to the end viewer have an opportunity to revise their business strategy and to get to the user, bypassing traditional TV operators.
However, Pay TV operators have a great opportunity to include any alternative models in their own strategy. Thus, the success of Smart TV encourages operators to develop their own VoD-services, the emergence of OTT-boxes facilitates DVR-services, and the development of mobile terminals helps to provide TV Everywhere service.
The increasing role of the Internet leads to the emergence of new players in the market. Broadband operators and mobile operators are beginning to compete with terrestrial, cable and satellite networks. Alternative aggregators such as Netflix compete with traditional TV channels. Alternative devices - OTT-top boxes and game consoles - take part of the STB market. Platforms, such as Android or Google TV, are expanding their presence in new models of Smart TV.
However, basic models of selling video such as subscription, fee for a single video, free video with advertising - remain the same.
Evolution of video consumption terminals is considered in terms of three extreme scenarios: the transition from Smart TV to Simple TV; the process of STB-top boxes “OTT-zation”, the development of Netflix mobile terminal. Besides, the report taking considers three alternative scenarios proposed by Pay TV operators: operator VoD-services instead of Smart TV; evolution of DVR in set-top boxes, the development of the mobile terminal model “TV Everywhere”.
The traditional model presupposes the inclusion of the operator in the service of content distribution. Via various communication channels operators are divided into terrestrial, cable, satellite and IPTV. This model is dominant in Russia and in the world, in varying degrees, it covers from 90% to 100% of the population of Russia and the West. The highest point of the traditional system is the operator.
Implementation of video content delivery bypassing the operator and preserving aggregator is “Provider Free model” ("unattended"). In the most complete form this model is reflected in the concept of OTT - providing video over the Internet (as opposed to this approach IPTV broadband operator receives no profit from their activity and thus is excluded from the scheme). The highest point in the chain of content delivery in this model is the aggregator.
“Aggregator Free model” ("without aggregator") involves direct delivery of content to the user. This method can be carried out both by the physical media (HDD-drives, devices Flash, DVDs), and through peer to peer file sharing on the network. The highest point in the chain of content delivery in this model is a device (terminal).
“Device Free model” ("no terminal") implies a direct link between the content and the platform regardless of the device. The central element is the interface and synchronization of user data between different devices. The highest point in the chain of content delivery in this model is the content itself and the platform.
Content consumption evolution in Smart TV
All seven leading TV manufacturers have their own Smart TV platform. However, much of the new TVs have exterior platform, in most cases, Google TV. Thus, in commercial terms the evolution of terminals depends on such IT-companies like Google, Apple, etc.
Development of platforms, integrated into Smart TV provides an opportunity for content aggregators (TV channels and OTT-projects) of reaching their audience bypassing operators and their equipment.
In its full form this process is reflected in the launch of Smart TV applications from the channels. Thus, the application of Euronews channel is now available in 16 Smart TV-platforms (the most common application among the channels). By 2014, Euronews plans to extend its application to 123 million devices on the market, and in 2016 - to be in all Smart TVs.
Another example of channels integration in Smart TV bypassing operators is the launch of HbbTV . Hbb TV specificity is the concept of Red Button. Typically, pressing the red button and moving to the content taken from the network, the user can watch the channel in a small window (as in “picture-in-picture”). This creates an effect of parallel watching and broadcasting, and loads of content from the network.
Advantages for TV channels are obvious: first, the user does not interrupt his viewing and is covered by a linear broadcasting and advertising, and second, the user looking for additional information receives it from the channel and at the moment of view, i.e. remains in the branded space of aggregator.
In 2013, there is a possibility of release of a new device from Apple, tentatively called iTV. The device will make it possible to use all three alternative delivery models - Provider Free (output directly through the network channels and application of aggregators Netflix, HuluPlus, Vudu alternative channels), Aggregator Free (access to the own user files on the internal drive), Device Free (access to cloud user files).
The evolution of content consumption in STB³ (³ Set-Top-Box. Digital receiver) and other consoles
The main STB market remains the market of Pay-TV operators. Major STB manufacturers and developers (Pace, Humax, Cisco, Motorola, TiVo, etc.) have a strong position due to long-term contracts with key operators and accumulated technological expertise.
The integration of television and the Internet means including an attempt to provide all members of the chain of television services to present their technology as the best for this purpose. Along with the massive spread of Smart TV began the increase of hybrid set-top boxes sales (Hybrid STB).
Renewal of TV takes 7-8 years, while the renewal of the STB - 3-4 years. Thus, the STB in the long term will be the main device providing integration of linear and non-linear video. STBs are more able to maintain interest in the linear TV over mobile terminals and they have more opportunities to work with non-linear content than Smart TV.
Demand for the STB in the world and in Russia in particular is cauesd the spread of digital television: satellite (standards DVB-S, DVB-S2), cable (DVB-C, DVB-C2), terrestrial (DVB-T, DVB-T2) and IPTV.
Devices for operators, primarily focused on working with the most complete service operators (linear broadcast reception, work with PPV -services(Pay-Per-View Fee per view of a concrete program in linear broadcasting), DVR-functional). These devices are distributed with the support of the operators who either recommend certain models purchased by the user, or provide equipment leasing.
Devices for a wide range of users include additional features, such as access to OTT. Also, device manufacturers can add services that allow them to focus the user's attention, thus partially replacing Pay-TV operators. But most important for OTT-devices popularity is the presence in the console of an OTT-aggregator (Netflix, HuluPlus, Vudu, YouTube, Amazon VoD).
The evolution of content consumption in mobile terminals (smartphones and tablets)
Mobile terminals market is rapidly developing. In 2009, the main selling devices were laptops, in 2010-2011. smartphones were added to them, up to 2012 there will be sold more smartphones than laptops. In 2012-2013, we expect a strong growth in sales of tablet PCs.
As the number of devices grows the handsets in the hands of users will change with the preferences: mobile applications will be competing for the user's time with other devices such as TV or a desktop PC. The goal to put together watching TV and use of mobile terminals is reflected in the concept of Second Screen. The most popular scenario in the framework of this concept is the use of social networks in parallel with television viewing.
The main feature of mobile terminals is to provide free access to the Internet. Smart TV and set top boxes, as a rule, use Walled Garden model.
Walled Garden model implies that the operator allows the user to enjoy content on the Internet, but the prepared scenarios for him to some extent is controlled by the operator. This means that the user cannot get to any website that he wants to. And those sites to which he would be allowed to enter, will be adapted to the operators statement and presented in a form of application.
The principal difference of mobile devices is that besides the model Walled Garden (application), they give the user the freedom of action on the Internet through a built-in browser.
To date, the major mobile platforms are Apple iOS, Google Android and Microsoft Windows. The main way of users monetizing through the platform is to sell applications through the application store - Apple App Store, Google Play (formerly Android Market), Windows Phone Store.
The role of video applications remains small: nine out of ten most popular paid Apple App Store applications are games, one - the application to work with the camera, there are no video playback applications in the TOP list. Only 1 application out of ten free apps (the tenth in popularity) is video application – Netflix.
Synthesis of traditional and new methods of content consumption
The specificity of alternative models of content delivering is its nonlinearity. The user can choose what content to watch at any time convenient to him. Operators traditionally focus on linear content, simultaneously broadcasted to the whole customer base. However, competition from non-linear models facilitates changes in the traditional operator model.
Evolution of Smart TV creates the opportunity to implement an alternative model, according to which broadcasted content will be excluded from the device. Thus, TV will be just one of the "smart screens", like smartphones, tablets or laptops. In this case, operators will need to find the way to reach specific audiences - primarily through simplified external devices (dongles, small boxes, etc.).
Alternative variant to Smart TV development is a development of the traditional operator model in which the user will have significant opportunities for the use of non-linear content. Major western pay-TV operators are actively implementing this capability, first of all, VoD services.
Evolution of STB devices connected to the TV (first, providing OTT functions, various drives can be reached) will reduce the role of operators due to displacement of their devices - operator STBs. In the UK - one of the traditionally most developed TV markets - the number of OTT devices in 2013 will exceed one unit per household, 30% of households will have different OTT-top boxes (OTT-STB, game consoles with OTT, special Blu-ray players).
An alternative to the increasing role of such devices is the launch of new operator STB.s Thus, the European cable networks (Virgin Media, Ono and others) have already started to offer an advanced set-top box TiVo as the main device. A specific feature of this console is the active use of Internet connections for users' best interests and to provide VoD. Satellite operators actively offer DVR-devices, i.e. boxes with recording broadcasted programs. These innovative devices ensure conservation of carrier dominance in the television market.
The evolution of mobile terminals is a threat to the traditional model of providing video content to users as well. First, mobile terminals (smartphones and tablets) are beginning to take the users time which has been previously spent on TV viewing. Due to this fact these devices are referred as Second Screen, i.e. second, an additional screen (relative to the TV screen).
The use of mobile devices as a terminal for video facilitates the growth of video applications role. This means that the traditional operator model will experience pressure from mobile video as it will spread. Due to this, the major operators have already started the service TV Everywhere, the meaning of which is the integration of the traditional consumption of carrier content (both linear and nonlinear) and use of mobile gadgets.
During next 5-7 years operators wil preserve their dominant position, there will be observed an explosive growth of alternative schemes to provide video (including illegal). The result of the video terminals evolution of preview will be, above all, redistribution of the advertising market, i.e. growth of new methods of advertising, such as mobile advertising, advertising in the Smart TV applications, etc. The growth of connected devices will reduce the cost of various consoles, from OTT-STB to game consoles. The variety of content, development of mobile terminals will improve the quality of offer of the largest producers and aggregators of content.
Contents of the full report “Evolution of video content consumption terminals”
Traditional model of content delivery
Alternative models of content delivery
2. Smart TV devices
2.1. Main manufacturers of Smart TV devices
HbbTV model (integration of channels and additional content)
Lenovo TV model (gaming opportunities of TV)
Ikea Uppleva model (integration of external video devices)
2.2. Audience size: current indicators and market development forecasts
2.3. Characteristics and opportunities of Smart TV devices
Extreme scenario 1: Moving from Smart TV to Simple TV
Extreme scenario 2: Operator VoD services
3.1. Main manufacturers of STB terminals
Consoles manufacturers model (Xbox 360, Sony PlayStation 3, Nintendo Wii)
Apple TV, Roku, Boxee Box model
3.2. Audience size: current indicators and market development forecasts
3.3. Characteristics and opportunities of STB terminals
Extreme scenario 1: “OTT-zation” of devices
Extreme scenario 2: DVR evolution
4. Mobile terminals (smartphones, tablet PCs)
4.1. Main manufacturers of mobile terminals
Walled Garden model
Web Video model
Data Storage model
4.2. Audience size: current indicators and market development forecasts
4.3. Characteristics and opportunities of STB terminals
Extreme scenario 1: Netflix model
Extreme scenario 2: TV Everywhere model
List of Figures:
Figure 1. The number of Smart TV in Russia (million units)
Figure 2. STB market dynamics in Russia (th. units)
Figure 3. Smartphones sales in Russia (th. units, 1H2012)
Figure 4. Tablet sales in Russia (th. units, 2011)
Figure 5. Current park of TVs in Russia (manufacturers)
Figure 6. Current park of Smart TVs in Russia (manufacturers)
Figure 7. Devices sales in natural terms (STB and consoles), 2009-2012
Figure 8. Devices sales in monetary terms, billion rubles (STB and consoles), 2009-2012
Figure 9. STB market dynamics, 2010-2012F
Figure 10. STB manufacturers, the share of sold devices %, 2011
Figure 11. Devices sales in natural terms (laptops, tablets, smartphones), 2009-2012
Figure 12. Devices sales in monetary terms, billion rubles (laptops, tablets, smartphones),
Figure 13. Time of game consoles use (Xbox, PS3, Wii)
List of Illustrations:
Illustration 1. Smart TV application interface
Illustration 2. HbbTV applications interfaces
Illustration 3. Lenovo IdeaTV K91 interfaces
Illustration 4. Ikea Uppleva interface
Illustration 5. Dish Hopper and 3 Dish Joey interface
Illustration 6. Dish Network Sling Adapter (USA) interface
List of Tables:
Table 1. Traditional scheme of content delivery to the end user
Tables 2-5. Alternative schemes of content delivery to the end user
Table 6. Examples of realization of alternative models of content delivery
Table 7. New line of Smart-devices (including iTV devices)
This Information Note is Prepared by J’son & Partners Consulting, We strive to provide factual and prognostic data that fully reflect the situation and are available to us before issuing the material. J’son & Partners Consulting reserves the right to revise the data after publication of new official information by the market players.
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