090122 IPTV Presentation eng final

Television of the future –barriers and success factors of IPTV

Presentation of the 2nd IPTV study

January 2009

2

goetzpartners Company Profile

IPTV – a flop about to make its breakthrough?

Barriers and success factors relating to IPTV in Germany – an empirical analysis

Quo vadis IPTV? Action strategies for IPTV players

IPTV – a future technology on the advance

Structure of the study

3

goetzpartners combines top-tier Corporate Finance a nd Management Consulting under one roof goetzpartners One firm - Two Services

�Mergers & Acquisitions

�Corporate Finance

�Fairness Opinion

�Corporate Partnering

�Strategic Advise

�Organization

�Sales/ Marketing Strategy

�Operational Excellence

�Restructuring

�Transaction Services

� goetzpartners is a top-tier corporate advisory firm, bringing together corporate finance and management consulting services

� Offering these two services under one roof reflects the upcoming shift from traditional specialization to a more integrated approach of advisory activity

� With two sharply defined but interlocked service lines goetzpartners consolidates the market knowledge and the unrivalled networks of two formerly separated organisations for the benefits of its clients

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� goetzpartners has its roots in the U.S. based corporate finance advisory firm CEA (Communications Equity Associates), which was established in 1973 by Rick Michaels

� In 1990 Dr. Stephan Goetz established CEA Europe in Munich and gradually expanded the corporate finance operation to other European countries

� In 1996 Stefan Sanktjohanser joined the group and shortly thereafter TransConnect was established in order to develop business in the field of management consulting

� In 2004 goetzpartners was formed by the combination of CEA and TransConnect taking a single approach to two disciplines

� Today , goetzpartners has about 200 professionals of which 150 employees work in 7 European offices and more than 50 employees in US, Russia and Asia.

History International footprint

Europe: With 7 offices in 5 countries goetzpartners has become one of the leading European corporate advisory firms

US, Russia, Asia*: Through associated offices in the U.S., Russia and Asia, goetzpartners offers a strong worldwide network

goetzpartners aspiration is to become the leading E uropean based corporate advisory firm

goetzpartners One firm - Group history and internati onal footprint

LondonDüsseldorf

PragueMunichParis

Madrid

Frankfurt

*JV / Partner offices

Los AngelesNew York

MumbaiBangalore

Moscow

San FranciscoAshgabat

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Based on in-depth sector knowledge, established bus iness relationships and strong transaction know-how goetzpartners provides signifi cant value add to its customers

goetzpartners One firm - Service offering

Industry /Service portfolioIndustry /Service portfolio

goetzpartnersMANAGEMENT CONSULTING

- Strategic Advise- Organization- Sales/ Marketing Strategy- Operational Excellence- Restructuring- Transaction Services

goetzpartnersMANAGEMENT CONSULTING

- Strategic Advise- Organization- Sales/ Marketing Strategy- Operational Excellence- Restructuring- Transaction Services

goetzpartnersCORPORATE FINANCE

- Mergers & Acquisitions- Corporate Finance- Fairness Opinion- Corporate Partnering

goetzpartnersCORPORATE FINANCE

- Mergers & Acquisitions- Corporate Finance- Fairness Opinion- Corporate Partnering

TMT Automotive IndustrialsConsumer Goods &

Retail

Utilities

� Close industry relationship management via a dedicated senior goetzpartners managing director

� One single point of contact for all business issues enables a fast and efficient communication as well as project execution

� Full service portfolio tailored to the needs of the relevant case and situation

� Links of strategic and operational issues with M&A activities and vice versa

“One firm – two services” approach helps to deliver o utstanding professional results based on extensive sector and deal expertise as well as i ntegrated delivery capabilities

“One firm – two services” approach helps to deliver o utstanding professional results based on extensive sector and deal expertise as well as i ntegrated delivery capabilities

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goetzpartners offers Top Management Consulting serv ices to companies in various stages of development

goetzpartners Management Consultants - Overview

Change Management

Vision

Corporate Strategy

Segment Strategy

Operations

Cus

tom

er

Services

Human Resources IT Implementation

Value Chain

Organization Business Processes

Cor

pora

te B

usin

ess

Leve

l

Service C

overage goetzpartners

Top Management Consulting Services

� Growth and differentiation strategies based on long-term USP achievements

� Marketing/sales strategy in growth and mature markets

� Operational excellence programs to improve clients’margin flow

� Customer care & loyalty programs to secure customer base and stable revenue streams

� Value chain optimization with focus on clients’ core competences and market development

� Corporate recovery services to help companies overcome corporate crisis

� Public private interface management

Transaction Related Services

� Market and target evaluation to assist clients’ market entry and expansion strategy

� Strategic and operational due diligence to support value based acquisition processes

� Post-merger integration to achieve business goals

� Full potential programs to leverage clients’ competences and assets

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Industry FocusIndustrials

CompetenciesStrategy Organization Postmerger Integration

Stefan Sanktjohansermanaging partner

Industry FocusConsumer Goods Retail Telecommunications & Media

CompetenciesStrategy Marketing & Sales Organization Frank Ewerdwalbesloh

managing director

Industry FocusUtilities

CompetenciesStrategy OrganizationOperational Excellence

Michael Sanktjohansermanaging director

Industry FocusFinancial Industries High Tech Industries

CompetenciesStrategyStrategic Due Diligence

Dr. Wolfram Roemhildmanaging director

Industry FocusPublic Sector InfrastructureTelecommunications & Media

CompetenciesPublic Private InterfaceManagement Sales & Marketing

Dr. Hans Gerd Prodoehlmanaging director

Industry FocusGeneral IndustriesTelecommunications & IT

CompetenciesRestructuring

Hans-Jürgen Titzmanaging director

Industry FocusTelecommunications & MediaConsumer Goods Retail

CompetenciesStrategy Marketing & Sales Organization Dr. Alexander Henschel

managing director

The Leadership-Team of goetzpartners Management Con sultants combines industry expertise and functional competencies to create cus tomized client solutionsgoetzpartners Management Consultants - Leadership Te am

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goetzpartners offers a full range of Investment Ban king advisory services to companies in various stages of development

M&A Services

� M&A services include mergers, acquisitions, divestitures, MBOs/MBIs, joint ventures, public acquisitions and public-to-private

� As seller´s agent, goetzpartners typically prepares a detailed information package for distribution to selected qualified prospects. goetzpartners assists in and coordinates the due diligence and management presentations and assists in negotiations

� As buyer´s agent, goetzpartners assists with the development of a business strategy, identifies appropriate opportunities, and handles due diligence and negotiations

Corporate Finance Services

� Corporate Finance encompasses debt and equity fund raising including financial structuring

� goetzpartners assists the clients with the preparation of a financially sound business plan, leads and coordinates the discussions with various debt and equity providers and negotiates the terms of the financing

goetzpartners Corporate Finance - Overview

Expansion Stage

Growth Stage

Mature Stage

Corporate Finance

Mergers & Acquisitions

Company Development

Fairness Opinions/Valuations

Corporate Partnering

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Munich(Headquarter)

Prague

London

Paris

Madrid

goetzpartners offers the full range of investment b anking services to a broad range of industries throughout Europe and …goetzpartners Corporate Finance - Expertise across E urope

Hak Yeungmanaging director

Jose Cabrera-Kabanamanaging director

Franck Portaismanaging director

Vaclav Matatkomanaging director

Dr. Stephan Goetzmanaging partner

Dr. Gernot Wunderlemanaging partner

Dr. Henrietta Schmidt-Wilkemanaging director

Industry Focus

� Telecommunications

� Media & Entertainment

� Software & IT Services

� Automotive & General Industries

� Business Services

� Retail

� Real Estate

� Utilities

Industry Focus




� Production facilities

Industry Focus




� General Industries

Industry Focus




� Retail

Industry Focus� Telecommunications � Media & Entertainment � Software & IT Services� General Industries

10Source: Mergermarket (2008), deal value below € 1bn

TMT – Transactions in Europe (2006-2007) TMT – Transactions in Germany (2006-2007)

Rank Company Name value (in € m) # of transactions

1 goetzpartners 1,198 7

2 Rothschild 466 4

3 Sal. Oppenheim 354 4

4 Goldman Sachs 1,737 3

5 Ernst & Young 760 3

6 UBS 668 3

7 Lazard 611 3

8 Credit Suisse 1,210 2

9 ABN AMRO 1,152 2

10 Merrill Lynch 732 2

11 Deutsche Bank 621 2

12 Numis Securities 290 2

13 Drueker & Co. 103 2

14 Berenberg Bank 302 1

15 Lehman Brothers 302 1

16 Cenkos Securities 266 1

17 Veronis Suhler Stevenson 266 1

18 Europa Partners 200 1

19 PricewaterhouseCoopers 200 1

20 Carnegie Group 54 1

21 Nordea Corporate Finance 54 1

22 Acxit Capital Management 52 1

23 BHF-Bank 40 1

24 KBC Securities 24 1

25 Corporate Finance Partners 18 1

Rank Company Name value (in € m) # of transactions

1 Rothschild 6,551 35

2 KPMG Corp Fin 1,482 25

3 Lazard 6,093 23

4 Deloitte 2,358 22

5 ABN AMRO 3,933 18

6 LongAcre Partners 1,903 16

7 UBS 4,196 15

8 goetzpartners 2,278 15

9 Ernst & Young 1,383 15

10 PricewaterhouseCoopers 1,026 15

11 Deutsche Bank 3,912 14

12 Grant Thornton Corporate Finance 273 14

13 Goldman Sachs 5,944 13

14 BNP Paribas SA 2,854 13

15 JPMorgan 6,134 12

16 Merrill Lynch 4,862 11

17 Investec Investment Banking 616 11

18 Morgan Stanley 4,161 10

19 Citigroup 3,476 10

20 Credit Suisse 4,252 9

21 ING 2,491 9

22 Lehman Brothers 2,099 9

23 Greenhill & Co 1,959 7

24 Seymour Pierce Group 116 6

25 Evolution Securities 88 6

goetzpartners ranks among the top M&A advisors in t he TMT sector in Europe and has a particularly strong footprint in Germany

goetzpartners Corporate Finance - M&A League Tables Europe/Germany

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Why goetzpartners?

goetzpartners’ USPs … leading to excellent results

� Comprehensive service portfolio

� Interdisciplinary thinking and capabilities

� Excellent network to various market players and experts

Our commitment

Our people

One Firm – Two Services

3

2

1

� Focused industry expertise

� Above average seniority compared to the market

� Entrepreneurial spirit

� Value pricing models to reflect success

� Willingness and capability to support implementation

Creative and client-tailored solutions

based on profound expertise

to ensure sustainable competitive advantages

goetzpartners One firm - goetzpartners’ USPs

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− Definition of IPTV

− Developments in the IPTV market in 2008

− IPTV in Germany and within the international context





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Cla

ssifi

catio

n of

Ger

man

IPT

V a

vaila

bilit

y

goetzpartners defines IPTV as the broadcast of movi ng images via Internet protocol

goetzpartners defines IPTV

as the broadcast of (interactive)

moving images via Internet

protocol . The image may be

transmitted as live stream or on

demand, via closed or open

networks . It is immaterial which

broadcast infrastructure is used

and on which end device the

contents are shown.

goetzpartners definition of IPTV

User generated video content


Video-on-DemandVideo-on-Demand

Web TVWeb TV

IPTV via closed networks


Closed

platforms

Open platform

s

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IPTV market penetration is influenced by numerous f actors

IPTV elements

Most important

elements of IPTV

Revenuemodels Infra-

structure

Encryp-

tion

Content

Legalaspects End

devices

UsersAddi-tionalfunc-tions

� Strong increase in the use of open IPTV platforms

� Users especially aspire to “time sovereignty” and quality

� Content procurement is difficult due to the licensing practice of the studios

� Content breadth and quality important, but also the strong use of UGVC

� Link with interactive elements still in their infancy

� Tiered permit obligation for broadcasting providers (at > 500 simultaneous accesses)

� Platform regulation

� Copyright and data protectionto be factored in

� Advertising industry has not yetadapted to IPTV

� Problem of paid content and the fact that the Internet is cost-free

� IPTV is independent of infrastructure

� Generally speaking 3 Mbit/s allows SD and 12 Mbit/s allows HD

� Broadband penetration is still too low

� Killer applications for IPTV

� Time-shift and PVR most important to users

� Interactive functions offer additional revenue

� Merging of encryption and digital rights management

� Challenge to security of digital rights management systems

� Most promising future for end device enabling a combination of PC and set top box in

living room

� Wireless technology of increasing importance

� Plug & Play and simple operation

15










16

The development of the IPTV market in 2008 was infl uenced by six key driving forces

IPTV market 2008 – current driving forces

IPTV market 2008

Infrastructure

Regulatory changes

Products and offers

User behavior Technology and services

Generalconditions

� The number and variety of offers available is growing significantly

� Reduction of existing price structures

� Further development of existing offers

� Numerous innovations in the end device, technology, software and middleware areas

� Regulatory changes to the 10th and 12th Broadcasting Agreements have brought in new regulations

� VoD is becoming increasingly importantwithin the value chain as a discrete usage right

� VoD will not only change the DVD market but also the TV market

� Increasing user figures demonstrate increasing popularity

� Development of consumer to prosumer

� Interactive applicationsare, however, not the sole driving force behind IPTV

� Broadband penetration and bandwidths and still not high enough to provide full, area-wide geographical coverage

� The future of possible IPTV applications is already reflected in new services

17

In 2008 the IPTV market was driven by falling price s, the expansion of existing offers and the development of new ones

IPTV market 2008 – products and offers (excerpt 1/2)

Web TV offers


� Price reductions for closed offers

� Telekom reduced the rate for its IPTV package in March to € 49.90

� Hansenet has marketed Alice home TV since August 2008 for € 19.90 per month

� Campaign offers define the market

� At the same time all providers are extending their services to up to 150 channels

� Existing web TV providers such as Zattooare extending their range

� There is a large number of new offers such as interactive live programs

� ProSieben has launched a player with a new navigation structure for its web TV

� TV providers such as ARD with the new Tagesthemen.interaktiv format are expanding their online presence

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New market participants and formats define the over all look of t he IPTV market in 2008

IPTV market 2008 – products and offers (excerpt 2/2)

� Established providers such as maxdomeare successively expanding their range and achieving high access rates

� Apple has been able to position itself as a new market player with Apple TV

� Cable network providers such as Kabel Baden-Württemberg are intensifying efforts to establish their own VoD platforms

� There is an ongoing trend towards theprofessionalization of content

� Sevenload cooperates with Telekom by integrating professional content

� Professionalization, also in the marketing context, as evidenced by the new tool YouTube Insight, for example

Video-on-Demand


19

The necessary bandwidths and digitization of networ ks for the distribution of IPTV are still not sufficiently available in 2008IPTV market 2008 - infrastructure

Penetration in Germany

[ths. of TV households]

Data rates of screen formats

3

12

16

1

2

6

8

0 2 4 6 8 10 12 14 16

HD 1080/i25

HD 720/p50

SD 576/i25

YouTube

MPEG-2

MPEG-4

SVCD DVD video

Screen format

Data ratein Mbit/s

1) Connections with a transfer speed of >1 Mbit/s 2) ARD/ZDF online study (2008) Source: goetzpartners analysis; EBU, Federal Ministry of Trade and Industry (2008): ePerformance Report 2008- IKT “Standort Deutschland im europäischen Vergleich”, ANGA – Association of German cable network providers

� IPTV via open networks requires a data rate of at least 1 Mbit/s

� In order to broadcast IPTV via proprietary networks, 3 Mbit/s are required for SD quality and 12 Mbit/s for HD quality

� About 60% of the accessible TV households use broadband via DSL

� However, only 28% of all broadband connections have a bandwidth of over 4 Mbit/s2)

� Digital shutdown planned for 2012, digitization rate of 32% (2008)

� IPTV via open networks requires a data rate of at least 1 Mbit/s

� In order to broadcast IPTV via proprietary networks, 3 Mbit/s are required for SD quality and 12 Mbit/s for HD quality

� About 60% of the accessible TV households use broadband via DSL

� However, only 28% of all broadband connections have a bandwidth of over 4 Mbit/s2)

� Digital shutdown planned for 2012, digitization rate of 32% (2008)

Bro

adba

nd

conn

ectio

ns

114

31,00019,920

DSL

22,0001,350

Cable

35,000Satellite

Number of subscribers

Technical potential of TV households

20

Existing revenue models are not yet fully developed , representing an obstacle to the further advance of IPTV

IPTV market 2008 – a lack of revenue models

Willingness to pay 1) Insights

Advertising revenue 2)

55% 52% 51%52%

52%

22% 18% 17% 10%

23%

Livesport

Document-aries

32%

Movielibrary

38%

Series

3%

45%

Erotic

> 20 €

< 20 €

not willingto pay in

general 30%

� Business models based onexpensive price structure are not accepted

� Additional costs for necessaryhardware are an entry barrier

� Refinancing of IPTV offers via development of advertising-based revenue models

� Above-average rise in expenditure on online advertising

� Platform operators profit primarily from moving image advertising on the Internet

� Numerous future challenges

689495332271

2006

20,350

2005

19,884

2004

19,583

Online

All advertising media

+6%

+154% 20,761

2007

[mill. €]

(1) Source: goetzpartners consumer survey(2) Source: goetzpartners analysis, PWC (2008) : German Media and Entertainment Outlook

[% of interviewees]

21










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Low level of cable penetration shows strong correla tion with high level of IPTV penetration

IPTV distribution in selected countries (2008)

Penetration infrastructurePenetration infrastructure

[ths. of users]18,0%

76,0%44,3%

Hong Kong

17,6%25,0%

20,4%France

28,0%29,0%

8,0%Sweden

33,0%24,0%

1,3%UK

67,0%53,0%

1,0%USA

55,7%24,0%

0,9%Germany

cable

broadband1)

IPTV2)

300

1.126

318

320

1.019Hong Kong

4.690France

Sweden

UK

USA

Germany

Broadband penetration does not give any indication of IPTV penetration

The user figure of four million in France indicates future market potential

Source: Deloitte, (2008): “Next Generation TV- Der Kunde im Zentrum der IPTV- Welt”, www.worldscreen.com (2008), Federal Ministry of Trade and Industry, (2008): ePerformance Report 2008-IKT “Standort Deutschland im europäischen Vergleich“, company information, (2nd quarter, 2008)

(1): Connections with transfer rate of >1 Mbit/s, in % of the population (2): goetzpartners analysis (3): Company information, (2nd quarter, 2008)

Users of closed IPTV platforms 3)Users of closed IPTV platforms 3)

[% of TV households]

23

France is the world’s largest market for IPTV via c losed networks

Case study: France 2008 (1/3)

18%

11%

51%

20% IPTV

Cable

Satellite

Terrestrial

117

7

51

5

78

5

54

20

Free TVShort Tail

[A]

Free TVLong Tail

[B]

Pay TVPremium

[C]

Pay TV Basic

[D]

France2)

Germany3)

Market shares of TV platforms 1)Market shares of TV platforms 1) Media landscape (number of channels) 4)Media landscape (number of channels) 4)

� Limited free TV offer creates ideal conditions for IPTV penetration

� High pay TV penetration (49%) shows high willingness to pay

� Aggressive roll-out of ADSL2+ and FTTH in conurbation centers with average bandwidths of 44 Mbit/s

� Digital shutdown planned for 2011, digitization quota 56% (2008)

� France has always had an innovative media market (e.g. Minitel)

� Directives issued by regulatory authority promote competition

� Limited free TV offer creates ideal conditions for IPTV penetration

� High pay TV penetration (49%) shows high willingness to pay

� Aggressive roll-out of ADSL2+ and FTTH in conurbation centers with average bandwidths of 44 Mbit/s


� France has always had an innovative media market (e.g. Minitel)

� Directives issued by regulatory authority promote competition

(1) goetzpartners analysis based on Deloitte (2008): “Next Generation TV- Der Kunde im Zentrum der IPTV- Welt”(2) [A] chaînes nationales; [B] not including promotional and very small-scale stations; [C] Canal+ [D] ABSat and CanalSat not including Canal+(3) [A] Full channels and third channels; [B] private special interest channels and public digital channels [C] Premiere; [D] additional digital package, cable and satellite(4) Source: Websites Astra, Eutelsat, CanalSat, ABSat, Canal+, Premiere, various cable network providers, http://www.tg-satellit.de


24

TVTV

VoDVoD

TV PersoTV Perso

Télé sitesTélé sites

MultimediaMultimedia

Free is the most successful provider in France, the world’s largest IPTV market

Free is the most successful provider in the world’s largest IPTV market

0.130.42

1.26

2006

1.10

2.10

2007

0.75

1.54

2.40

Q2 2008

+90%

Case study: France 2008 (2/3)

Users of closed IPTV networks [in mill.]Users of closed IPTV networks [in mill.] IPTV as offered by FreeIPTV as offered by Free

Over 250 national and international channels, 100 included in flat rate

20.4%

23 mill. TV-households

7 VoDplatforms

User-generated video content platform for subscribers

Adapted Internet offer for usevia Freebox

Can be used on a TV and several PCs

Sources: Deloitte, (2008): “Next Generation TV- Der Kunde im Zentrum der IPTV- Welt”, company information, (2nd quarter, 2008), www.worldscreen.com

25

� Penetration pricing with free IPTV entry packages since July 2007 with interesting content as a DSL add-on

� Penetration pricing with free IPTV entry packages since July 2007 with interesting content as a DSL add-on

Free has become the world’s largest provider of clo sed IPTV by way of penetration pricing of interesting content

Case study: France 2008 (3/3) – Free as a success mo del

Source: Company information, Deloitte, (2008): “Next Generation TV- Der Kunde imZentrum der IPTV- Welt”

USPUSP

SalesSales

MarketingMarketing

OfferOffer

TechnologyTechnology

� Large customer base as market leader for broadband connections, used for cross-selling (basic IPTV package for all broadband customers)

� Use of all sales channels for the offer of the triple-play product

� Large customer base as market leader for broadband connections, used for cross-selling (basic IPTV package for all broadband customers)

� Use of all sales channels for the offer of the triple-play product

� Benefit-oriented communication� Marketing of free hardware to lower entry barrier� Benefit-oriented communication� Marketing of free hardware to lower entry barrier

� Interesting content packages in HD quality� Offer of features subject to charge� Interactive services closely geared to TV program (EPG)

� Interesting content packages in HD quality� Offer of features subject to charge� Interactive services closely geared to TV program (EPG)

� Market standard for set-top boxes� Hybrid set-top boxes (incl. DVB-T)� Market standard for set-top boxes� Hybrid set-top boxes (incl. DVB-T)

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The structural preconditions of almost unlimited in frastructure account for the very high IPTV penetration level in Hong Kong

Case study: Hong Kong 2008 (1/3)

108

3044

4

78

5

54

20

Free TVShort Tail

[A]

Free TVLong Tail

[B]

Pay TVPremium

[C]

Pay TV Basic

[D]

Hong Kong2)

Germany3)20%

33%3%

44%

IPTV

Cable

Satellite

Terrestrial

Market share of TV platforms 1)Market share of TV platforms 1) Media landscape (number of channels) 4)Media landscape (number of channels) 4)

� IPTV has replaced cable and satellite as the leading TV distribution platform

� Limited free TV favors high IPTV penetration

� Pay TV penetration of 60% shows a high willingness to pay for content which is subject to charge

� 76% broadband penetration with average bandwidth of 93 Mbit/s


� Dense urban development facilitates next generation network roll-out

� IPTV has replaced cable and satellite as the leading TV distribution platform

� Limited free TV favors high IPTV penetration

� Pay TV penetration of 60% shows a high willingness to pay for content which is subject to charge

� 76% broadband penetration with average bandwidth of 93 Mbit/s


� Dense urban development facilitates next generation network roll-out

(1) goetzpartners analysis based on Deloitte (2008): “Next Generation TV- Der Kunde im Zentrum der IPTV- Welt”(2 [A] Full program channels; [B] not incl. promotional and very small-scale stations; [C] i- Cable, TVB Pay and TV- Star [D] additional digital package, cable and satellite(3) [A] Full channels and third channels; [B] private special interest channels and public digital channels [C] Premiere; [D] additional digital package, cable and satellite(4) Source: Astra, Eutelsat,i- Cable, TVB- Pay Vision, Premiere, various cable network providers


27

PCCW dominates the highly developed IPTV market

0.12

0.64

2006

0.13

0.85

2007

0.14

0.88

2008

+38%

PCCW as success model

With exclusive package content and individually ada ptable package options, PCCW successfully dominates the highly developed IPTV ma rket in Hong Kong

Case study: Hong Kong 2008 (2/3)

Users of closed IPTV networks [in mill.]

44.3%

Source: goetzpartners analysis, company information, (2nd quarter, 2008), Deloitte, (2008): “Next Generation TV- DerKunde im Zentrum der IPTV- Welt”, www.worldscreen.com

TVTV

Á la carte model

Á la carte model

Exclusive content

Exclusive content

Additional services

Additional services

MultimediaMultimedia

Premium strategyhighlights quality andcontent

Integration of innovative additional services such as sports betting

Can be used on a TV and several PCs

TV packages, with 30 free TV and 136 pay TV channels

Individually configurable offer of channels

2,3 mill. TV-households

28

With exclusive package content and individually ada ptable package options, PCCW successfully dominates the highly developed IPTV ma rket in Hong Kong

Case study: Hong Kong 2008 (3/3) – PCCW as a success model

USPUSP

SalesSales

MarketingMarketing

OfferOffer

TechnologyTechnology

� Exclusive content with individually adaptablepackage options

� Exclusive content with individually adaptablepackage options

� Sale of triple play and stand-alone offerpackages possible

� Exclusive content supports sales

� Sale of triple play and stand-alone offerpackages possible

� Exclusive content supports sales

� Hardware barrier is overcome by means offree set-top boxes

� Marketing of qualitative premium strategy

� Hardware barrier is overcome by means offree set-top boxes

� Marketing of qualitative premium strategy

� Attractive individually adaptable program packages(à la carte system)

� Accompanying interactive services (live sports betting)

� Attractive individually adaptable program packages(à la carte system)

� Accompanying interactive services (live sports betting)

� Low development costs of the set-top boxes (originally a DVD recorder-based development)

� Low development costs of the set-top boxes (originally a DVD recorder-based development)

1)offer

(1) Average package price from à la carte offerSource: goetzpartners analysis, Deloitte, (2008): “Next Generation TV- Der Kunde im Zentrum der IPTV- Welt”, Lfm, (2008): IPTV- Über Internet anders fernsehen?!- Mehrwert oder nur mehr Kosten?

29

By international comparison, use of closed IPTV off ers in Germany lags far behind

International benchmark summary

Explanatory hypotheses

1. Market penetration of broadband Internet connections in Germany is not high enough by comparison with other countries

(1) Sources: goetzpartners analysis, company information for 2nd quarter 2008, www.worldscreen.com

IPTV penetration of closed platforms (in % of TV households)1)

2. There is no need for customers to change due to the extensive free TV offerings available in Germany .

3. Many IPTV offerings simply copy conventional broadcast TV and do not offer any added value

4. The high degree of cable penetration in Germany limits the development of IPTV in Germany

5. Closed and open IPTV offerings are marketed insufficiently

6. The advertising market is not yet geared towards IPTV financed by advertising

Hong Kong

France

Sweden

Germany

44.30

20.40

8.00

0.86

30



Barriers and success factors relating to IPTV in Ge rmany

− Changing TV usage behavior

− IPTV technology

− Sales and marketing of IPTV offers




31

(1) Short and long-tail channels; there are also very small-scale channels and promotion channels(2) ∅ of pay TV penetration calculated (3) = several times a week or dailySources: goetzpartners consumer survey

Due to the high appeal of the existing TV offerings , market penetration is difficult for IPTV in GermanyHigh appeal of TV offer

� Germany has the largest range of free TV in Europe :

� Virtually all the relevant sporting events are broadcast live or in extensive summary via public channels (protection list)

� High-quality fiction content (series, documentaries, feature films) is available every day on free TV channels

Regular media use 3

� In comparison to the western European average (41%2) there is a low level of pay TV penetrationespecially due to the appeal of free TV

� Major increase in diversity of offerings – in addition to Premiere there are now 4 large-scale basic pay TV providers on the market (cable)

Media landscape

85,9%Internet

79,3%Free TV

18,8%Video/DVD

11,0%Pay-TV

0.6% (VoD) – 20,0% (UGVC)IPTV

[% of interviewees]

32

IPTV accounts for only a small part of moving image use in Germany, especially since many offers are only used sporadically

IPTV in Germany - status quo

Number of offers

Users according to gp consumer survey

User-generated video content

Video-on-Demand

Web TV offers


IPTV offer diversity Germany

3

1771)

261)

122)

[% of interviewees]98.2%

0.6%1.2%

Non-users

Regular users

Irregular users

49.7%8.2%

42.1%

83.8%

0.6%15.7%

35.4% 20.0%

44.6%

(1) German language(2) Selection of the top online video websites in Germany with over 100,000 visitors/month (Comscore Media Trend Report, 2008) Sources: ARD/ZDF online study, (2008) , goetzpartners consumer survey

� Free IPTV offerings such as UGVC and Web TV are already used regularly by consumers

� On the other hand, VoD and closed IPTV offers subject to a fee have not yet been accepted by consumers

� Only 16% and 2% of consumers respectively make use of VoD and closed IPTV offers

� The main reasons here are to be found in the insufficient differentiation of existing moving image offers

Insights

33

21.1%17.8%14.1%

0.2%

Personal videorecorder

46.0%17.0%18.4%18.0%0.6%Time-delayed

viewing

36.8%17.2%25.6%20.2%0.2%Range of

language versions

33.3%19.8%21.5%25.2%0.2%ElectronicProgram

Guide

31.7%

60.1%22.3%10.2%6.7%

0.8%

High quality

46.8%

22.1%25.6%0.8%Video onDemand

26.2%

19.8%

27.6%22.7%0.6%Additionalinteractive

services

50.0%

22.9%

Interest in additional IPTV functionalities Insights

� A high level of quality in terms of quality and content and “time sovereignty” in TV usage are the most important additional functions for the consumer

� Low interest in additional interactive services is due to lack of offers and interviewees' low information levels

� Time sovereignty thanks to freely accessible, attractive content is among the most important arguments in favor of IPTV according to experts

� The basic precondition for IPTV success is to eliminate the information deficit and clearly convey the added value provided by additional IPTV servicesNo

informationVery interesting

Not interesting at all

Interesting Not very interesting

Additional functionalities are the central success factor for IPTV offers

IPTV additional factors – consumers interest

[% of interviewees]

34





− IPTV technology





35

Distribution in the consumer survey and low level o f willingness to change infrastructure reflect poor infrastructureInfrastructure and willingness to change

Infrastructural distribution

46%

41%

14%

Satellite

Cable

Others/no info.

164(70.4%)

yes50(21.5%) no

19(8.2%)

don’t know/no info

130(62.2%)

yes64(30.6%)

no15

(7.2%)don’t know/no info.

Willingness to change

Current means of reception DSL connection

Sat

ellit

e cu

stom

ers

Cab

le c

usto

mer

s

84%No

7%Yes

9%Haven’t

consideredyet

0%No info. DSL

6%Committed

18%Satellite

Cable 47%

Terrestrial 24%

6%

65%No

21%Yes

13%Haven’t

consideredyet

1%No info.

9%Committed

52%e

5%Cable

25%Terrestrial

9%DSL

� Bandwidths, compression procedures and transmission protocols determine the reception channel - infrastructure can become a limiting factor for IPTV

� Many satellite and cable TV households already have the necessary infrastructure for IPTV

� Due to the higher costs of a cable connection, the main area showing willingness to change isfrom cable to satellite

� Planned change DVB-T impedes IPTV, since DVB-T is poorly suited for distribution of IPTV due to low bandwidths

[% of interviewees]

[% of interviewees , satellite and cable customers]

36

Simple operation and reusability are the main end d evice properties that consumers value

Properties of IPTV end devices

6% 9%5%1% 1%1%

70%

20%

4%

Re-usability

69%

19%

2%

Simpleinstallation

(plug & play)

65%

29%

Price

45%

39%

13%

3%

Integratedhard driverecorder

78%

17%

4%

Simpleoperation

22%

21%

43%

14%

Design

Important

Fairly important

Fairly unimportant

Unimportant

No information

� The equipment level of German TV households in terms of technical reception devices for media consumption is quite high

� A rather low willingness to payfor end devices contrasts with the desire for functionality and quality

� For consumers, simple operability, low price, reusability and simple installation are the main properties a receiver should feature

� Among older respondents (age 50 – 69), simple operation and plug & play installation are becoming increasingly important

Desired end device properties Insights

[% of interviewees]

37

Experts forecast increased use of combined devices consisting of a TV set and a set-top box for consumption of IPTV content over th e next 3-5 years

Expert forecast – development of IPTV end devices

Development of the use of IPTV end devices Insights

33%

60%

40%

60%

27%

13%

27%

20%

13%

7%TV set +

set-top box

13%PC/notebook

47%Game consoles

47%13%

Mobile phoneswith multimedia

capability/smart phones

60%20%Portable multimedia

receivers

Very widespreaduse

Widespreaduse

Very fewNot at all

Expert forecast for the next 3 to 5 years� Experts forecast that a

combination of TV set and set-top box will see the most widespread use in the years to come

� Portable multimedia receivers are predicted to find only moderate use , since consumers will become increasingly accustomed to the comfort of large screens and will not want to do without this comfort

� In order to win over users for mobile IPTV, innovative business models are required which are designed for small screens , offering genuine added value over applications and formats for stationary devices

[% of interviewees]

38





− IPTV technology





39

Telecommunication providers and TV broadcasting com panies are the preferred providers of IPTV offers from the consumer’s point of view

Provision of IPTV offers

19%25%24%Telecommunication

companies

4%26%21%34%15%TV broadcasting

companies

5%40%26%15%14%Internet access

providers

3%

43%27%15%10%Software

companies

4%42%31%16%7%Internet

providers

3%46%38%9%

3%

Media companies

29%

4%

Insights

No information

Probably Fairly probable Improb-able

Not very probably

� IPTV offers are made available by various providers

� The goetzpartners consumer survey shows clearly that consumers place their greatest trust in telecommunications providers, television broadcasting companies and Internet access providers in terms of the use/purchase of an IPTV offer

� By contrast, pure Internet providers and media companies have difficulty in successfully positioning themselves as IPTV providers in the eyes of consumers

Preferred IPTV providers

[% of interviewees]

40

Complexity of IPTV products results in the need for expert consultation in the purchase of offerings subject to a charge

Sales outlets for IPTV offers

Online shopof a provider

3.7%

Stationary shop ofa provider

20.0%

16.6%Retail

Specialist store suchas consumer

electronic store25.8%

Internet 20.8%

Telephone sales

13.1%

� In addition to the provider, thepoint of sale is also a key factor for consumers in purchasing IPTV offerings

� Specialist stores are cited here as the most important source , both by experts and consumers themselves

� For IPTV offers subject to a charge, the relevant market presentation can only be realized via a presence in stationary sales – i.e. in specialist stores or shops

� The study shows the consumers’ need for expert consultation in purchasing an IPTV offer

InsightsPreferred sales outlets for IPTV offers

[% of interviewees]

41

Friends and recommendations are the most important information channels for IPTV

Information media of IPTV users

66%25% 91%Friends/recommendations

47%44% 91%TV reports

59%31% 90%Provider homepages

Very importantimportant

49%

56%

67%

26%23% Forums/communities

32%24% Newsletters

36%31% Internet advertising

not very importantirrelevant

Preferred information media IPTV offers Insights

� A high-priority goal of IPTV providers is to fill the information gap among potential customers

� When gathering information, interviewees place greatest trust in the recommendations of friends

� TV reports and provider homepages also enjoy high status

� Newsletters and Internet advertising are virtually irrelevant in gathering information

� Word-of-mouth is the most important information source for end customers - reflecting the high importance of a powerful brand with far-reaching appeal

[% of interviewees]

42



Barriers and success factors relating to IPTV in Germany


− Central Barriers and success factors relating to the distribution of IPTV

− Recommended courses of action for market participants



43

Media landscape and infrastructure are the major ba rriers impeding the spread of IPTV in GermanyCurrent barriers to IPTV distribution in Germany

Infrastructural barriers

Infrastructural barriers

High appeal of TV offer

High appeal of TV offer

Existing IPTV offers

Existing IPTV offers

Marketing of IPTV offers

Marketing of IPTV offers

Lack of revenue models

Lack of revenue models

� The critical mass of broadband Internet connections for mass use of IPTV has not yet been reached in Germany

� There is high degree of cable penetration which provides customers with television (non-IP) and telephone services and ties them with licensing contracts

� The existing TV offerings in Germany are so extensive and attractivethat there is a low level of willingness to change to IPTV offers

� A relevant proportion of existing IPTV offerings are no more than a 1:1 copyof conventional television content , simply broadcast via Internet

� Content quality is often low (C movies)

� The marketing of IPTV in Germany is suboptimal , both for free offers and for those subject to a fee

� At the same time, consumers have very little knowledge of existing offers

� The advertising industry is not yet geared towards the new formats of IPTV which is why the refinancing of the relevant IPTV offers is still not feasible

1) Multi-user contracts between cable provider and building company

44

5 success factors are crucial to providers of IPTV offerings

IPTV success factors

18,4%

22,1%

17,8%

17,0%

19,8%

21,1%

46,0%

31,7%

46,8%

18,0%Time-delayed TV

25,6%VoD

14,1%Pers. VCR

Only powerful, target-group-specific brands will be successful; sales and distribution must be regarded as a core competence

� 1 million registered users� 200,000 active accounts

Brand & salesBrand & sales

1 Example:

Offerings should be free or very favorably priced; the advertising market still has to be prepared for financing through advertising

PricePrice

3

IPTV must provide additional benefits over conventional television (e.g. time shift, exclusivity, social networking)

ProductProduct

2 Example: Customer interest

Offerings, hardware and additional functions must be user-friendly

Plug & PlayPlug & Play

4 Example: Customer preferences for end device

78%

69%19%Simple installation

17%Simple operation

� Successful benchmarks lure customers with free hardware

In order to achieve sustained IPTV penetration, digitization and bandwidths must be expanded on an ongoing basis

Infra-

structure

Infra-

structure

5� Successful benchmarks create

conditions for IPTV penetration by investing in infrastructure

Interesting Very interesting

Fairly important Important

45





− Central Barriers and success factors relating to the distribution of IPTV

− Recommended courses of action for market participants



46

IPTV providers via closed networks have to overcome the information deficits by means of emotional marketing and reduced price stru ctures

Recommended courses of action – IPTV providers via c losed networks

Brand and sales & distribution

Brand and sales & distribution

� Market orientation of offers

� Sustained, emotional marketing offensive

� Active marketing of additional functions

� Reduction of inhibition threshold in relation to technical complexity

Overcome information deficits

1

� Lower prices and shorter contract terms

� Usage-related revenue models

� Free hardware

Reduction of pricestructure

2

Optimization ofsales and distribution

4

� Use of sales channels through electronics stores, own shops and Internet

� Competent, effective customer consultation

� Efficient, smooth sales processes

Strategicco-operations

6

� Co-operations with content and service providers

� Use of co-operation potential with business models based on profit sharing like VoD providers

Communication ofadded value

3

� Communication of the benefits such as time flexibility and interactivity

� Extensive offer of basic TV services (free and pay TV)

� Expansion of VoD libraries with high-quality content

Increase user-friendliness

5

� Plug & Play functions for installation and operation

� Simple operation of additional functions

47

In order to achieve higher coverage, web TV provide rs have to cultivate and extend their brand familiarity by offering attractive cont ent

Recommended courses of action - Web TV providers

Brand & sales and distribution


� Identify own target group

� Achieve high ranges in own target group by using small but specific marketing instruments

� Address target group mainly through the Internet

Achievingrange

1 Presentation ofattractive content

3

� Brand name on its own cannot guarantee success (cf. Joost)

� Presentation of appealing, high-quality

� Co-operations with TV broadcasting companies, for example

Increase of user-friendliness

5

� Graphically appealing user interface

� Simple-to-operate additional functions and user interface

Entertainment character

6

� Emphasis on entertainment character of own offer

� Differentiation from other offers by creating a variety of entertainment formats

Integration ofadditional services

4

� Expansion of own product portfolio to include additional IPTV functions

� Emphasis of additional functions as USP

� Integration of on-demand or subscription channels

Establishown brand

2

� Clustering and presentation of content specific to target group

� Active marketing of own brand

48

VoD providers must establish themselves in the high ly fragmented market by means of attractive and if possible exclusive content

Recommended courses of action - VoD providers

� Website as central sales channel

� High-performance hardware and software to ensure efficient processes

Powerful salesstructures

2



� Content is king

� Co-operations with producers or TV broadcasting companies

� Secure exclusivity of content

� Right mix of major content and special interest movies

Attractive andexclusive content

1

Integration ofadditional services

6

� Customer loyalty can be enhanced by integrating additional services

� Generation of new sales sources by introducing new formats and structures such as direct response offers

Branding andhigh coverage

3

� Familiarity and branding as a basis for differentiation from other providers

� Active marketing of platform via co-operations

� Secure high level of recognizability

Attractive price-performance ratio

5

� More economical price structures

� Development of new revenue structures for business models financed by advertising

Increase user-friendliness

4

� User-friendliness of platform as a key to successful customer acquisition and generation of customer loyalty

� Transparency of charging methods

� Active customer management

49

Providers of UGVC portals can only achieve high cov erage and differentiation from other portals by the content they offer

Recommended courses of action – UGVC providers



Develop arevenue model

6

� High ranges must be converted into an effective revenue model

� Co-operation with e-commerce providers to market online videos offers an opportunity here

� Use of marketing co-operations and additional services such as video recommendations as an instrument to generate range

Extendranges

2

Copyright problem5

� Professionalization of content can also solve copyright problems

� User acceptance is crucial for a successful portal

� The only way to achieve a high profile for the portal is to extend network and ranges

Achieveuser acceptance

1

Professionalizationof content

4

� Co-operations with TV broadcasting companies so as to be able to offer professional content as well as UGVC

� YouTube and Sevenload are already pursuing this strategy

Content offered

3

� Differentiation from other portals primarily by means of content offered

� In addition to short video clips, other formats should also be made available on the portals

50







51

Convergenceof platforms

Co-existence of open (Web-TV, VoD, UGVC) and closed IPTV platforms

In the course of convergence, IPTV will become esta blished as an alternative to conventional TV platforms and offer a wide range of “business opportunities”

10,462300

10,762

2008

13,000

1,000

14,000

2010e

17,000

2,500

19,500

2013e

30,000

2017e

Open platforms

Closed platforms +41%

Summary and prospect: evolutionary course of IPTV d evelopment

User development [in thousands] 1)

Closed platforms

� Guaranteed bandwidth, but high prices

� Mainly used to support sales DSL sales

Integrated platforms

� IPTV will move into the living room (e.g. hybrid boxes)

� Bandwidths and compression methods will secure quality

� High level of offering diversity

� Coverage, range will be included in ratings

� Benefits will be extended and recognized by consumers

1) Based on goetzpartners consumer survey, expert discussions and goetzpartners analysis

Open platforms

� Use dominated by free video clips

� Finance through advertising is still in its infancy

Closed platforms

� Further development of offers in terms of variety and additional functions

� Improved marketing of USPs

Open platforms

� Intensity of use is increasing

� Increasing use in the living room

� Advertising market is adapting to opportunities offered by IPTV

Documents

090122 IPTV Presentation eng final