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8/3/2019 YouView and what it means for Sky
http://slidepdf.com/reader/full/youview-and-what-it-means-for-sky 1/9
YouView impact assessmentAssessment of YouViews impact on the media and telecommunications
market and the direct repercussions for Sky
Alex StreetLondon, 17 October 2011
8/3/2019 YouView and what it means for Sky
http://slidepdf.com/reader/full/youview-and-what-it-means-for-sky 2/9
Table of contents
1
1. Market overview Scope of impact assessment
2. Competitive context The impact of YouView on competitive dynamics
New competitive environment
3. Implications for Sky Counter factual and factual forecasts
SWOT
4. Opportunities for growth Response scenarios for Sky
Emerging revenue opportunities
5. Summary and discussion
8/3/2019 YouView and what it means for Sky
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This assessment considers the following actors in the value chain as well as thefundamentals of consumer demand in media and telecommunications markets
Market Context
2
Advertising
Subscription
FundingContent
producerAggregators Network
Platform
aggregatorCPE Viewer
Programme
brands
Content
franchising
Local
distribution
Broadcasters
VOD providers
DVD retailers
Closed networks
- Satellite
- DTT
- Cable
- IPTV
STBs
- FTA
- Pay TV
Device
manufacturers
- TVs- Computing
devices
Viewing
behaviour
- Passive /active
Content
preferences
Price sensitivity
Access
Measurement
- BARB
- VOD views
1
Source: Alex Street analysis, industry sources
8/3/2019 YouView and what it means for Sky
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YouView and IP-delivered services create disintermediation scenarios impactingrevenue opportunities, cost bases, skill-set and technical requirements of actors
Impact of YouView on competitive dynamics
3
2
FundingContent
producerAggregators Network
Platform
aggregatorCPE Viewer
.
Aggregator
Platform
CPE
Network
Content
producer
Source: Alex Street analysis
8/3/2019 YouView and what it means for Sky
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YouView and IP-delivered services create disintermediation scenarios impactingrevenue opportunities, cost bases, skill-set and technical requirements of actors
Impact of YouView on competitive dynamics
4
2
FundingContent
producerAggregators Network
Platform
aggregatorCPE Viewer
.
Aggregator
Platform
CPE
Network
Content
producer
Content owners use channel brands and IP
distribution to reach audiences direct
Aggregators use YouView to develop direct
relationships with viewers around traditional STBs
ISPs subsidise YouView boxes and rely on their content
deals and pricing for differentiation
Incumbents launch new IP services
and develop new STBs in response
Integrated
YouView TVs
ISPs develop their own aggregation
and content relationships
Leveraging of content rights and
original content production
CPEs develop aggregation and
content relationships
YouViews IP
capabilitiesmakes new
funding
relationships
possible:
o Direct pay
( subscription
and PPV
o C ompanion
and
additional content
( transactional,
sponsored
basis)
I mplications
for content
value?...
Source: Alex Street analysis
8/3/2019 YouView and what it means for Sky
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YouView will command majority share of voice in marketing of IPTV but will onlybe a minority player in actual distribution and customer relationships
New competitive environment
5
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2010 2011 2012 2013 2014 2015
VOD PVR DVD Linear
Content owners
Flight to quality hits increase in value
middling content struggles
Fragmentation of standards
Aggregators
Data and billing new entrants? Linear ad revenues decline
VOD supply decreases premium
From scheduling to prominence
New aggregators competition
Network
Take up of fibre increases
Reduction in lower tier channels
Network capacity issues?
Platform
Increased SAC costs Price pressure on bundling
Content acquisition costs increase
CPEs
YouView TVs a game changer
VOD-capable HHs Implications across value chainImpact on viewing
3
0
2
4
6
8
10
12
2010 2011 2012 2013 2014 2015
Sky Anytime+ Virgin
BT Vision 1 YouView
Source: Alex Street analysis, industry sources
Total non linear viewing grows from 7-18%
VOD grows from 1-8% of total viewing
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YouView will have a negative impact on Sky revenues and profitability by reducingdemand for Sky services that ultimately lead to changes to Skys cost base
Implications for Sky
6
9.2
9.6
10.0
10.4
10.710.9
11.011.2
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
2008 2009 2010 2011 2012 2013 20142015
Forecast in counterfactual and factual
3
YouView will lead to a loss of
0 .5m subscribers by 2015
resulting in a £250 m loss in
subscription revenues in 2015
and a cumulative loss of £550 m
Source: Alex Street analysis, industry sources
Strengths
Recognised aspirational brand. Establish pay and premium model
Multiple growing revenue centres
Clearly identifiable competitors and clearly differentiated product
Own customer relationship and data
Secure content rights with little alternative for distribution outside of Sky Ability to go all HD
Strong marketing performance implications for SAC cost?....
Weaknesses
Churn
Half of subs are on basic packages
Price sensitivity of basic subs
VOD and broadband are not market
leading products Capture of customer data and billing
no longer unique
Are revenue and cost centres aligned
to market trends?
Threats
New entrants Tesco, Amazon, Facebook,
Google, Apple have billing and data expertise
Loss of carriage revenues as some
broadcasters go direct
D
irect loss of revenue in film as substitutesemerge
Threat of unbundling
Trend towards end-user device and network
competitor bandwidth advantages
Could all shift revenue and cost centres
8/3/2019 YouView and what it means for Sky
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Sky is not defined by satellite distribution Skys real strengths are in contentaggregation, rights acquisition and as a marketer of services
Focus on infrastructure and content advantages:
Go all HD
Leverage Anytime+ as parity experience
Acquire critical rights. Compete in breadth and depth
Current operational efficiency and profitability gives scope to give
away more: Churn currently at 10% PA needs to be reduced
Give away low cost or free broadband
Price cutting of services
7
Retrenchment
Response scenarios and opportunities for growth
Launch fibre-based services and reduce reliance on satellite as only
distribution medium:
Major investment in fibre
Collapse channel number and distribute via multicast IP
Build on breadth and depth content proposition
Implication:
Profitability and cost centres hit by change in services and
consumer proposition
Embracing change
4
Sk y Mall and Sk y C redits
An open platform for third parties to develop retail experiences on
TV with Sky taking a % of each sale
Have we exhausted the consumers willingness to spend?
Broadcast development platform
Develop in-broadcast transaction platform enabling incremental transactional opportunities around content
Ex pand upon device subsidy
Opportunity to tie customers into longer contracts by subsidising
additional devices either through JV ( i.e. with 3) or with screen
manufacturers such as LG
Source: Alex Street analysis, industry sources
O pportunity: 40% of populationhas access to Sky but 83% of
population currently buys
nothing from you
C ontract duration tiered pricing
Introduce 36 month contracts with price incentive
JV partnerships and collaborations
Develop new partnerships Tesco / Blinbox, Amazon
H ome cinema
Develop home cinema proposition with studios
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YouView will drive broader take up of pay TV but in the process YouView willundermine the walled garden concept and threaten the economics underpinning it
Summary and discussion
8
Source: Alex Street analysis,
DISINTERMEDIATION
SCENARIOS
Revenue opportunities in direct to market
Requires new skill sets, shift from B2B to B2C and
platforms for billing / data capture
Increase in options and IP connectivity will impact the
value of content
SHARE OF VOICE
Terrestrial promotion of YouView will enhance its
impact and threat
Changes in viewer behaviour will have to be
monetised and audiences flowed effectively
Network capacity management issues
NEGATIVE IMPACT ON SKY
Compared to the counterfactual YouView will have a
negative impact on Sky revenues and profitability
Increased competition impact pricing and changes to
Skys cost base
OPPORTUNITIES FOR
GROWTH
Sky is not a satellite platform Sky is a premium brand
with USPs in r ights acquisition, aggregation and
marketing
3
4
4
2
Trends are not entirely unpredictable
but the challenge is in realigning
Fundamental question over whether the
viewer comes to us or do we have to go
to them
Who will own the data? GAFAs?
A lot of potential threats not a lot of
them will materialise
Opportunity: 40% of population has
access to Sky but 83% of population
currently buys nothing from you
Wheres the next £100m
revenue stream coming from?
Challenge: Realign the walled garden
to a managed open model in which
Sky subs have more transactional
relationships with more companies
some of which are global or have
content aspirations
5
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