Club-Internet, French T-Online subsidiary, is one of the first Internet Service Provider (ISP) worldwide to have achieved Microsoft TV platform roll-out, in one of the most competitive IPTV market. 7 months following commercial launch, a survey was conducted by IPSOS, major French survey institute, addressed to 2000 IPTV subscribers among all French ISP. From a customer point of view, no doubt that IPTV is tomorrow’s TV!
Review hereafter all the results of this survey and an in-depth analysis on radical changes linked to IPTV technology and resulting business opportunities.
A marketing success!
In less than two years, with the launching of the different ISP offers between December 2003 à Q3 2006, a virtuous ecosystem has emerged around IPTV in France:
- Robust competition: each ISP offers IPTV. This creates competition and gives consumers leading innovation and low prices. The French consumer enjoys an « all exclusive» Triple Play offer for 29.90 €. The whole world is jealous!
- A fast-growing and expanding customer base: according to the British research firm, Screen Digest, the number of European subscribers reached 3 million at the end of 2006. This increase represented 19% in 3Q06 whereas in France alone, the growth of subscribers was clearly higher, around 30% according to Dittberner’s Global Broadband Subscriber Survey. At the end of Q1 2007, overall French market overpasses 1,6 million subscribers. Orange is leading the uptake with 745 000 subscribers and 29% growth over Q1 2007: Orange has become worldwide IPTV leader, overpassing historic IPTV leader such as PCCW (Hong-Kong, 638 000 subscribers Q3 2006), Telefonica (Spain, 304 400 subscribers Q3 2006), and Fastweb (Italy, 161 100 subscribers Q3 2006).
- Customer loyalty and satisfaction: A recent study conducted in March 2007 by Ipsos for Club Internet, showed that 87% of IPTV subscribers from different service providers are satisfied with overall screen picture quality, 85% with the quality of the TV decoder and 87% agree that IPTV offers a wider range of programmes. Low TV decoder returns and churn are consistent with this good overall customer satisfaction.
- Additional revenues: In the same Ipsos study, subscription to an IPTV pay-TV offer (channel or bouquet supplied by TPS, Canal + Le Bouquet, Canalsat or an Internet provider) is at 47%, representing the double of that previously recorded for a pay-TV offer in the same households. In other countries, such as historic Italy, TV and VOD revenues represent an additional income of € 25 per month, 2/3 for pay-TV and 1/3 for VOD. In an audiovisual setting abound in platforms (hertzian, cable, satellite, and TNT), IPTV knew how to quickly work its way into the market and, in 2007, the number of subscribers is expected to exceed those of its conventional pal, Cable Television.
A very different technology leading to many new services
Due to this virtuous ecosystem, analysts are predicting that IPTV market will continue to grow. According to Screen Digest, subscriptions will double in Europe in 2007 to 5.6 million and revenues will exceed the thousand million of euros mark. Deployment of MPEG4 encoding format coupled with continual improvements of this new technology will also increase this market. With 10 million eligible clients in France in 2007, IPTV is becoming a major television platform. By fundamentally underlining the differences between IPTV and other television platforms, there still remains a multitude of services still to be discovered and developed within a highly promising audiovisual sector. The great amount of people who own a DVD recorder and the break through of HD television highlight the ever strong craze for screen picture quality. IPTV differentiation can be summed up by two radical changes:
- IPTV establishes a unique and interactive link with households (unicast flux and backward channel), even with the consumer, when we consider several televisions per household: thus, AT&T deploys the Microsoft TV system in the US and automatically supplies customers with three TV decoders; Telus TV in Canada supplies its customers with two decoders.
- IPTV is intrinsically linked to the Internet World
Taking this progress into consideration, let us see what other new innovations IPTV holds in store.
On-demand entertainment services
With its unique and interactive qualities, IPTV offers a wide range of new on-demand services to customers:
- Real-Time TV viewing: live shows to chose from 150 channels
- Digital recorder: subscribers can record a show on their own video recorder with over 50 hours of available recording space (PVR)
- VOD: subscribers can select a film, a concert, a documentary film or a cartoon from their VOD movie catalogue. Over 2000 programmes to chose from with Club-Internet, Free or Orange, for a per unit fee or via a VOD subscription
- Catch-up TV : this service provided by “Club-Internet Catch-up TV” or “BBC Replay TV” enables subscribers to watch a film that has already been aired and that they have missed to record
As of 2006, most of these services have been available to customers: certain services, such as the digital recorder, were immediately adopted by customers (on average 34% of clients use this service. This percentage reaches 87% for Club-Internet customers who have a particularly clear and flowing interface created by Microsoft TV – Ipsos survey) or the catch-up TV which meets needs never addressed until now; other services, such as VOD, are progressively completing or substituting current film rental routines by simplifying the steps for customers (no need to leave home, no late charges, films always available) and by providing a vast video library of programmes with clear benefits: no line space constraints, « long tail » approach, guiding subscribers to discover less famous films.
Beyond these real consumer advantages, VOD will breakthrough all limits of the current video renting sector as soon as people can subscribe to a VOD Movie catalogue (following Singapore Telecom model with Universal, Sony and Fox), to avoid buying videos repetitively and creating healthy recurrence. Latest blockbusters need also to be available to rent just like in the video store (6 months after they come out in the cinema). In the development of VOD service on line, service operators play a key role in stocking the video library, inserting producer content just-in-time, presenting videos and guiding the user, including special offers and events in the VOD catalogue and offering package special at interesting prices: once technical process is in place, the next step is marketing the content!
IPTV service providers such as Homechoice (UK) have already set up interactive advertising channels, i.e. telespectator voting. Moreover, the IPTV link can also integrate specific advertising spots in the video programme guide. This gives way for a new market, the interactive and targeted advertising, which will be crucial once the number of subscribers reaches a qualified and significant level. Different mechanisms are under construction: splicing TV broadcast or VOD play list. This market is substantial: for example, advertising revenue for American cable service corresponds to $ 5 per month for each user.
IPTV interactive link is illustrated by the use of the EPG, (used by 64% of IPTV clients and 88% of Club-Internet customers, Ipsos survey), and direct control service (used by 27% of IPTV customers and 75% of Club-Internet customers, Ipsos survey). It is also used to look for keywords in the programme guide and in the VOD catalogue (search engine) and for other “on-line” services such as the weather or traffic info with Neuf Télécom (France), the stock exchange with AT&T, meetings or games with Fastweb (Italy). This field has yet to be discovered and added value has to be more actual for the consumer. There is a need for these services which at the moment can be already be accessed using Internet and a PC, and offering the same services via TV using a remote control, sometimes hinders the service quality. In collaboration with its partner Kewego, Club Internet is working on an available video sharing application via the TV and is exploring a new dimension of online service in which the consumer naturally values the importance of the TV screen.
Converging with the Internet
If the Internet provides a basis for certain interactive services already mentioned, it naturally provides as well a new opportunity for convergence. With the Web recorder (remote PVR), Cub-Internet customers can read their television guide on the Net and select the programmes they wish to record. All this is possible with an interface similar with the one of their television and with the Web 2.0 technology advantages such as keyword group search, mail alert and RSS, ultra quick listing of Ajax content. Service providers are also looking into how to tie together instant messenger and other popular Web applications to the television.
More specifically, IPTV is part of the digitally-equipped households and clearly meets consumer behaviours. For our customers, Internet is omnipresent in society and it is only natural to be able to pass content around different household devices (TV, PC, Mp3 recorder), to download photos on the TV-box, to use your PC as a TV, to podcast the radio or video via the TV… Lastly, the flexibility of IPTV enables service providers to quickly join together a great number of channels and to develop HD content. For example, Free (French ISP) implemented specific channels to follow-up different Roland-Garros tennis game in parallele, for the duration of the tournament; AT&T offers the choice of 450 channels, 25 of which are HD channels; Club-Internet has launched a specific HD VOD catalogue.
What the future holds: IPTV or TV on the Internet?
For 86% of customers questioned by Ipsos, IPTV is the TV of the future. Other platforms are appearing on the Internet. Due to the potential of audiovisual market, Apple or the Joost project, the peer to peer system, launched by the founder of Kazaa and Skype, have just come up with an ‘a la carte’ television programme on the Net, accessible via a PC. For Joost, advertising is the main part of business; 90% of programmes are said to be free-of-charge, when live TV, such as football games, represents the 10% fee-based programmes. Therefore one often asks me who will win, free Internet TV or paid-for IPTV? The former is accessible today via a PC and maybe in the future on a TV-set via a media centre and the latter is accessible via an Internet provider on the TV-set. IPTV delivered by ISP targets high-class quality service (technical quality service and customer service) and personalized content marketing, resulting in excellent customer experience, not to mention the IPTV provider’s billing and content security, which is key for content providers. The answer may lie within the question itself: instead of substituting one over the other, both solutions could be joined together to meet different customer needs. No one however doubts that IPTV has not ceased to impress!