Old-fashioned TV broadcasters have been having a pretty tough time over the past three years, squeezed by falling television advertising revenues during the recession, by the growth of internet advertising and by the rise of new content distribution platforms such as over-the-top TV (YouTube, Joost etc), Apple TV and, this month, Google TV.
Len Fertig
But all this is about to change as the sleeping giants of the media wake up to the potential created by the switchover from analogue to digital terrestrial television (DTT).
For years commercial television broadcasters enjoyed almost monopolistic revenue positions, with analogue frequency availability limiting channel numbers and with regulatory controls limiting competition. With deregulation and the rise of competing platforms on satellite and cable, revenue sources came under pressure. Slow to get into pay platforms, broadcasters were hit harder than they expected by the rise of new distribution channels and the shift of commerce to the internet. And the growth of personal video recorders (PVRs), now at 32% penetration in the United States, means more ad-skipping.
Now, however, global switchover to DTT, rather than being another threat, is about to create the biggest re-birth of an industry since commercial radio revived itself in the ’90s.
Four factors are driving this.
The first is analogue switch-off. Under International Telecommunications Union regulations, 1.2 billion TV homes worldwide have to upgrade their TV receiving equipment by 2015. In the EU, the deadline for analogue switch-off is 2012. Whilst many countries, such as the United States and Spain, have already switched off analogue, 780 million TV sets are still analogue and will have to use a DTT set-top box or be replaced by DTT receivers. With the advent of DTT, broadcasters are forcibly dragged into the digital age and are beginning to see that DTT offers not just a threat but also an opportunity to offer premium services.
Mick Pilsworth
Secondly, the advent of the hard drive equipped set-top boxes means that DTT broadcasters can, in effect, become platforms, offering premium content via local storage of DTT-delivered content on the hard drive in the home. Time-shifting has proven to be far more popular than expected. The BBC iPlayer and Sky+ have shown that, given the opportunity, audiences love to watch TV in a non-linear way. And the need to store greater quantities of digital information in the home, such as digital photos, movies and data, is driving the adoption of high-capacity PVRs. Now it is possible to buy 1 terabyte hard drives, capable of storing 100,000 hours of content, for around £100. Broadcasters can now, using newly available software, download high-quality premium content to hard drives on a 24/7 basis without the need for a return path. They can also control STBs remotely, automatically recording the best programmes for later playback, thus offering catch-up TV. And it is also possible to download premium and specialist advertiser-funded content overnight and even via the metadata stream of the DTT signal, thus downloading alongside the main broadcast stream, albeit it at reduced bit-rates. Additionally, the latest STB’s are hybrid versions, having both a DTT tuner and an Ethernet port, allowing access to both DTT reception for mass appeal content, and to the internet for “long-tail” programming.
Thirdly, broadcasters still own compelling content, such as soaps, local news and information, and sport, which are proven to drive viewer loyalty. During the recession, viewing of linear broadcast channels has actually increased. And broadcasters brands are preeminent everywhere, enabling them to achieve much faster consumer traction with new STB offerings that newer platforms. National and local broadcasters have an extraordinary level of trust among consumers, built over years of public service. When Freeview launched in the UK, it became the fastest-selling consumer electronics produce ever launched, and it is now in 19 million of the UK’s 25 million homes, largely on the back of extensive on-air promotion.
Finally, the launches of internet protocol based television delivery services have begun to face economic and technical problems. There is as yet no business model that seems to be viable, as viewers are difficult to convince to pay for content. Additionally, the cost of creating edge server networks for simultaneous delivery of high-definition and 3D content, is prohibitive. It has only recently become apparent that the “backbones” of internet delivery networks are engineered for downloading, not for simultaneous mass live IP streaming. BT had to re-configure its entire network to cater for a maximum of 1 million live feeds of the recent IP-only England football qualifier. The live feed on the internet of the World Cup Final in 3D will be, technically, impossible for decades. Economically, it may never be viable.
By contrast, the variable cost to the DTT broadcaster of distributing content to the home is almost zero; once the network has been built, the cost of adding an extra home is the cost to the consumer of buying a DTT TV or an STB, with little additional distribution cost to the broadcaster.
In Italy, the biggest commercial broadcaster, Mediaset, is using a new technology, BesTV, to offer catch-up TV, live pause and premium movies to the home using only the DTT network for delivery. With BesTV-enabled STB’s selling retailing in Italy at €129.99, sales are expected to reach 500k units by the end of this year.
While no one can argue that broadband is the best way for households to access “long tail” content, it has become painfully evident that the most cost-effective way to distribute mainstream, mass-interest programming, weather news, entertainment, or sports, is digital terrestrial distribution. Ultimately, this argues in the longer term for a hybrid combination of DTT for mass interest viewing, and broadband delivery for long tail content.
But for the 70%+ of the world population that receives their TV over the air, and doesn’t have broadband, the future is clearly DTT. Even in the UK, one of the most advanced television markets, 19 million out of 25 million households receive Freeview today, including most satellite households.
Mediaset is not the only broadcaster in the world to offer premium content to the home via DTT, but the success of its low-cost Pay TV model is attracting worldwide attention and many more DTT broadcasters will soon be in a position to offer premium TV at less than half of the monthly cost of DTH, cable or IP platforms.
As Easyjet and Ryanair have proved in the airline business, consumers are hungry for low-cost offerings, and this seems to also apply in the cut-throat world of Pay TV. And with TV ad revenues on the rise again, broadcasters everywhere are considering turning themselves into DTT Pay TV platforms and once again taking their rightful position in the media landscape: the best monetizers of content the world has ever seen.
Len Fertig is CEO and Mick Pilsworth is Executive Chairman of Motive Television PLC, worldwide distributors of BesTV.