Commercial DTT: Strategy and Business Development

7/30/2019 Commercial DTT: Strategy and Business Development

1/18

Strategy and Business Development

by Farhad Gafarzadeh

Head of Business Development


2/18

Azerbaijans economy is on the rise

Non-oil GDP rose up 7,9 % in 2010

ICT accounts for 4,3 % on non-oil GDP

26.4

34.5

25,0

10.8 9.35,0

0

10

20

30

40

2005 2006 2007 2008 2009 2010

GDP growth (annual %)

39,8

25,2 27,5

30,9

6.64

29.7

0

10

20

30

40

2005 2006 2007 2008 2009 2010

ICT sector growth (annual %)

Source: www.azstat.org; mincom.gov.az; economy.gov.az


3/18

2.014.0

1.1 0.216.2 10.0

1.814.0

14.5 10.7 13.3

53.2 42.9 43.9 58.675.0

36.519.3

10.8 18.4

6.0

14.6 2.0

11.055.0

36.0

26.7

68.9

62.2

83.9

55.9

68.2

100.0

91.084.1

93.5

85.8

58.2100.0

100.0

65.2

60.8

0%

20%

40%

60%

80%

100%

UK Italy Spain France Germany Sweden Finland Denmark Netherlands

Breakdown of customer base between DP

DTV

Pay TV

DTH

Cable

DTT

Source: MAVISE database; Ofcom ICMR 2010; IDATE TV 2010

Penetration of Pay TV on average is 61,86 % of HHs

Penetration of DTV on average is 82,07 % of HHs


4/18

Traditional TV content distributors are failing to satisfy increasing consumer demand for TV and video content

due to:

Unattractive services: Services dont let consumers watch TV/video the way they want; Providers charge too much for their

content

Lagging regulations: Existing regulations prevent operators from creating compelling propositions

Why people watch TV/video:

The social role of content

Entertainment

Information

New requirements for TV/video content:

On-demand

Time-shift

Unmanaged TV

Paying for TV and Video:

The investments in money is not proportional to invested time

Future share of wallet will more likely resemble the actual share of time

Consumers will always choose the solution that best fits their needs

Source: Ericssons TV Consumer Insights 2010 report


5/18

TV HH ~ 1.800.000

The number of TVs - approx. 2.000.000

Penetration of Pay TV (% of HH) 15,16 %

Source: Digitag; Teleradio


6/18

Todays television market are characterized:

Lack of interaction between players

Empty boxes no complementary products

Low consumer awareness

Low growth of corresponding markets

Digital television:

Digital tuners are main innovation in realm of digital television

Like analog TV, with multiple TVs meeting demand of various HHs,

DTV has to follow the same model with STBs and IDTVs

To quicken diffusion of innovation and take up curve,

availability of various devices is crucial

Consumer

ConsumerElectronics

Aerialinstallers

Pay TV

Content


7/18

Pay TV market will be likely rapidly developing in years to come due to:

Low level of domestic channels

Social-demographic factors (Russian speaking audience; linguistic affinity with Turkish language;

Importance of access to information)

Increased availability of DPs

More value for money (Availability of an attractive, tailored and exclusive content and services on Pay

TV platform)


8/18

Vendors

Opt for open standards to fuel competition and drive down costs

Decrease possible switching costs in the long run

Content providers

Exclusive right acquisition

CEs

Let CEs make money while doing job for us

Incorporated tuner - increased CLC

Increase entry barriers to them for rivals

Aerialinstallers

Consumers

Offer more value for money

B&BTV

Vendors

Contentproviders

CEsAerial

installers

Consumers


9/18

Channelsand Content

DTT

networkoperator

DTT

platformoperator

Pay TVoperator

Distributionnetwork Retail

Cost stream Cost stream

Revenue stream:Channel carriage;

Advertising;

Subscription


10/18

Having deployed DTT network, B&BTV will likely play various roles and be engaged in various businesses.

Therefore, we should streamline our costs through:

Carriage of new channels as a DTT network operator

Advertising opportunities as a DTT platform operator

Subscription based revenues as a Pay TV operator


11/18

# Analog Cable Digital Cable Digital Terrestrial

Capital intensity High High High

Capacity (channels) < 70 ~ 200 ~ 100

Scope Urban Urban Urban+Rural

Capex/Sub High High Low

Convenience of bundling -High:

Video/ Data/Voice

Low:

Video

STBs availability - High High


12/18

Due to high fixed costs and marginal costs price competition is unlikely

WebTV is emerging in urban areas and in the long run will threaten. Therefore, extensive investment in generic programming is

not a panacea. Must leverage it in our favor by more personalized TV experience offering. Piracy is another headache for Pay

TV operator. In case of offering exclusive channels on Pay TV most secure solution is needed to protect revenues.

# Analog Cable Digital Cable Digital Terrestrial

Variable costs High High Low

Marginal costs High High Low

Switching cost for

consumersLow High High

Access to distribution

channelsNone None Must cooperate

Substitutes Illegal media distribution WebTV and piracy


13/18

As we embark on new technology and markets, that change our whole business, we need new vision and

philosophy. That is embodied in a new brand.

Why Efir?

Common word tightly associated with TV

Appropriately define mean

Imply availability and omnipresence

Carry positive meaning

Flexible for communications (Sizin kanallar Efirddi) and WoM


14/18

> 20 AZNDual play high end

customized offer

15 AZNCostly customized

offer

9 AZN Generic offer

9 AZNLow cost fully

customized offer

4 AZN Generic offer

Free Generic offer

< 20 20-50 50-80 > 100

DTH

Free

DTT

Free

DTT Pay

DTT Pay

Cable

Cable

IPTV

Compete with

Compete with

Target to:

FTA HHs (Terrestrial and satellite) total 1,5 M HHs Pay HHs (Analogue cable) total 235 K HHs

Second sets


15/18

Wide coverage area Portable receptionOmnipresence

Plug and play

Self-serviceEase of use

Horizontal market of STBs

Low monthly feeLow entry barriers

Multitier packages

LigTV

VoD; PPV

Exclusive content and more value formoney


16/18

VAS and Bundles

Linear programming

PVR Internet

DTT

DTT+IPTV

DTT+IPTV+4G

As market matures and competition intensifies we will defend our position by:

Augmented offering of discounted services (Internet)

Enhanced TV experience (PVR, PPV)

Groups companies capacities (IPTV, 4G)

Multiscreen offering (One subscription, various devices)


17/18

DSO enables to shape industry in our favor . To this end, we need:

To lead an industry and embody Digital Television

To found Digital Forum, which will be ruled by B&BTV and involve all stakeholders in a transition process

Communicate clearly about benefits of Digital Television

To establish certification process for STBs and iDTVs with AzStand

To limit delivery of not certified DVB-T/T2 tuners and IDTVs to Azerbaijan

To label all approved STBs with our logo


18/18

Market research in each region has to be conducted in order to:

Know WTP and desired Service Proposition attributes

Estimate market share and take-up curve

Blueprint the initial network roll out

Consumer

value

proposition

Networkplanning

Businesscase

Documents

Commercial DTT: Strategy and Business Development