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Cable in Europe: Innovation-driven
growth in a hyper-competitive market Maria Rua Aguete, IHS Markit
Executive Director
January 2018
maria_aguete
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2
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European Broadband Cable 2017
Published in December 2017
Now in it’s 17th year
The only definitive and fully comprehensive data report on the
EU28 cable markets
Historic and current data on the size and value of the industry
Review and analysis of latest industry trends
3
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
0
10
20
30
40
50
60
70
80
90
100
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Penetr
ation (
%)
Pay TV penetration by region
Asia Pacific Eastern Europe Latin America Middle East and Africa Western Europe
Source: IHS Markit
Traditional pay TV is still growing everywhere except North America – cord-cutting
has not spread
• Other regions have not fallen victim to
the same factors that left North America
vulnerable:
> High pay TV penetration – little room
for organic growth
> High price of subscriptions
> Slow response to competition in the
online-video space with innovation of
their own
> Poor and much-maligned customer
service
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
0
10
20
30
40
50
60
70
80
90
100
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Penetr
ation (
%)
Pay TV penetration by region
Asia Pacific Eastern Europe Latin America Middle East and Africa North America Western Europe
Source: IHS Markit
Traditional pay TV is still growing everywhere except North America – cord-cutting
has not spread
• Other regions have not fallen victim to
the same factors that left North America
vulnerable:
> High pay TV penetration – little room
for organic growth
> High price of subscriptions
> Slow response to competition in the
online-video space with innovation of
their own
> Poor and much-maligned customer
service
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
What is the ARPU for Cable TV in the US vs the rest of the world?
$86
$23
$6
$7
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
Triple play package Unbundled set up
£48 a month
£33.49 a month
£7.99 a month (HD Package)
£7.99 a month
(Standard Entertainment
pack)
£7.99 a month
£57.46 a month
Broadband
Netflix
NowTV
Amazon Insant Prime
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
In Europe pay TV is still growing and most Europeans still receive their pay TV via
cable
8
Source: IHS Markit
46
48
50
52
54
56
58
60
62
0
20
40
60
80
100
120
140
160
180
200
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Penetr
ation (
%)
Subscriptions (
m)
Pay TV and online video subscriptions in EU28
Online video
Pay DTT
IPTV
Satellite
Cable
Pay TV penetration (%)
• The role online video has played has been to expand the overall market for subscription video
55.5m
50.1m
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But Cable TV subscribers have been declining since 2009
0
10
20
30
40
50
60
70
80
-1,200
-1,000
-800
-600
-400
-200
0
200
400
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Penetr
ation (
%)
Net
additio
ns (
000)
Cable TV net additions and digital TV penetration in EU28
Cable TV net adds Digital as a % of total cable TV
9
Source: IHS Markit
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
However, digital transition is helping drive up cable TV ARPUs – up 17% in last 5
years
0
2
4
6
8
10
12
14
16
18
0
2
4
6
8
10
12
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Month
ly A
RP
U (
€)
Revenue (
€bn)
Cable TV revenues by type and monthly ARPU in EU28
Analogue
Digital
TV ARPU
10
Source: IHS Markit
• The higher value of digital TV subscriptions has compensated for overall declines in cable TV customers
• Cable TV subscriptions were worth an average of €16.75 a month in 2017 – lower than satellite (€31.40/month) but higher than IPTV (€14/month)
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The power of the bundle: cable operators have grown total ARPUs 21% in 5
years by selling more services
0
5
10
15
20
25
30
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
AR
PU
(€)
RG
Us (
m)
Total Europe: cable operator revenue generating units
Total TV Internet Telephony ARPU (€)
11 © 2016 IHS
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
-10
-5
0
5
10
15
20
Western Europe Eastern Europe North America Latin America Middle East and Africa
Net
additio
ns (
m)
Cable Satellite IPTV Pay DTT
0
20
40
60
80
100
120
140
Asia Pacific
Net
additio
ns (
m)
Pay TV net additions by region and platform, 2011-2017
Source: IHS Markit
Cable’s loss has been IPTV and satellite’s gain, with telcos driving subscriber growth
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Cable broadly achieved solid growth in 2017, with broadband the star performer
13.5
4.9
3.5
2.2
-0.1
-5 0 5 10 15
Digital cable TV subscribers
Cable Internet subscribers
Cable telephony subscribers
Total cable RGUs
Total cable TV subscribers
% change
Subscribers and revenue-generating units
13
7.1
4.5
3.8
3.5
1.5
3.4
2.7
-0.8
-2 0 2 4 6 8
Cable Internet revenue
Total cable revenue
Cable ARPU
Cable TV ARPU
Cable Internet ARPU
Cable TV revenue
Cable telephony revenue
Cable telephony ARPU
% change
Revenues and average revenue per user
Growth in key cable metrics in EU28, 2016-2017
Source: IHS Markit
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
Cable has been a high-speed broadband pioneer with DOCSIS 3.0, kick-starting
Next-Gen Access (NGA) broadband network deployments across Europe
14
0%
10%
20%
30%
40%
50%
60%
70%
80%
2012 2013 2014 2015 2016
% o
f all
household
s
Availability of NGA technologies in EU big five
DOCSIS 3.0 VDSL FTTP Overall NGA coverage
Source: IHS Markit
• DOCSIS 3.0 services have been
available to more than a third of homes
in the EU big five for several years
• This has spurred competition –
availability of NGA technologies in the
these markets now exceeds 75%
• Telco rollouts have accelerated –
VDSL now passes more homes than
DOCSIS 3.0 in these markets
Note: NGA technologies typically deliver download speeds of at least 30 Mbps – some VDSL
connections can drop below this (to around 24 Mbps), depending on the distance from the cabinet
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
But cable is doing a better job of maximising the return on its NGA investment,
converting a higher percentage of subscribers to the faster top-tier technology
15
0%
10%
20%
30%
40%
50%
60%
70%
2011 2012 2013 2014 2015 2016
Convers
ion r
ate
(%
)
DOCSIS 3.0 and VDSL and as a % of total cable and DSL connections in EU big five
VDSL as a % of all DSL connections DOCSIS 3.0 as a % of all cable connections
Source: IHS Markit
• More than two-thirds of all cable broadband subscriptions in the EU big five are NGA, compared to around 15% for DSL
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
DOCSIS 3.0’s success has put broadband on the path to becoming cable’s biggest
revenue generator
€9.6bn 53%
€4.9bn 27%
€3.7bn 20%
2010
TV Internet Telephony
€11.1bn 45%
€8.5bn 35%
€4.9bn 20%
2017
TV Internet Telephony
16
Source: IHS Markit
Cable revenue by source in EU28
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
How important is content for a cable operator?
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
Pay-TV operator strategies reflect the increased competition for
consumers’ time and spend
VALUE ADD
Boxsets
Same day release
INNOVATION
Advanced STBs, cloud based
storage
Partnerships beyond video
ENTERING THE OTT SPACE
3RD Party Apps Multiscreen Pay TV Lite
CONTENT
Exclusive content
Original programming
Enhanced Pay TV Propositions
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
Production &
Distribution
Altice Studio
€40m production
budget for film
Orange Studio
€100m content
creation spend over 5
yrs
Telefonica Studio
€100m investment for
original production
All3 Media (50%),
Lionsgate (3.4%)
Sky Vision
€600m on originals
content creation
spend over 5 yrs
Pay TV operators, particularly telcos, are increasingly investing in original
content
19
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How much is a series ($)?
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
0
1
2
3
4
5
6
7
8
9
10
Disney NBC Universal Viacom HBO Sky Discovery Netflix Amazon
Spend (
$bn)
Original and acquired programming spend for selected groups
2014 2015 2016 2017
6.7bn
Source: IHS Markit
New online entrants are offering consumers unique content that, in many cases,
complements pay TV
• Scale achieved is driving significant investment in original programming, perpetuating growth
7bn
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
But it is not only pay TV operators investing in content
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
Major online services are operating consumer facing services at
unprecedented global scale
0
50
100
150
200
250
300
Netflix Amazon iTunes BeIN Media Liberty Global DirecTV Sky Telefónica DeutscheTelekom
Vodafone Comcast
Number of countries & territories with consumer video services
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
Virgin Media (UK)
Com Hem (Sweden)
Waoo (Denmark)
Atlantic Broadband (US)
Grande (US)
RCN Corp (US)
Suddenlink (US)
GCI (US)
Midcontinent (US)
Cable ONE (US)
Proximus (Belgium)
Bouygues (France)
Orange (France)
Deutsche Telekom (Germany)
BT (UK)
Dish (US)
TalkTalk (UK)
Optus/Fetch TV (Australia)
Elisa (Finland)
Totalplay (Mexico)
Telecom Italia (Italy)
Vodafone (Spain)
KPN (Netherlands)
Vodafone (Portugal)
Bell (Canada)
SingTel (Singapore)
Vodafone (Ireland)
PCCW (Hong Kong)
StarHub (Singapore)
D’Live (South Korea)
Comcast (US)
Liberty Global (global)
Telia (Finland, Sweden)
Orange (Spain)
2013 2014 2015 2016 2017
Telenor (global)
Bharti Airtel (India)
Videocon (India)
Partner (Israel)
Altice (global)
Telekom Malaysia (Malaysia)
DNA (Finland)
Orange (global)
Cox (US)
Deutsche Telekom (global)
Verizon (US)
Attitudes to Netflix have softened – pay TV’s ‘frenemy’
Support subscriber acquisition by
enhancing content offering – including
4K content
Upsell customers to higher-tier bundles with higher-spec
CPE
Boost the appeal of high-speed
broadband required for streaming video
Boost customer satisfaction/loyalty and reduce churn
Strategic goals of online video partnerships for pay TV operators
Confidential. © 2017 IHS MarkitTM. All Rights Reserved.
Conclusions and
recommendations:
• Cable companies should continue to invest in infrastructure to
make sure that they provide fast and reliable connections
• Make ‘frenemies’ of new online channels that add value to your
customers’ subscriptions
• But also consider going beyond partnerships – be on the look out
for strategic investment opportunities
• Seek opportunities to execute a pay TV strategy of your own –
don’t lose touch with the mobile-first generation
• Focus on the core, high-ARPU bundled proposition by delivering
on the promise of anytime-anywhere TV and video
• Invest in new video technologies and standards; metadata, voice,
personalization, smart home.
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