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Strategy and Business Development
by Farhad Gafarzadeh
Head of Business Development
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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
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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
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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
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TV HH ~ 1.800.000
The number of TVs - approx. 2.000.000
Penetration of Pay TV (% of HH) 15,16 %
Source: Digitag; Teleradio
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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
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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)
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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
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Channelsand Content
DTT
networkoperator
DTT
platformoperator
Pay TVoperator
Distributionnetwork Retail
Cost stream Cost stream
Revenue stream:Channel carriage;
Advertising;
Subscription
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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
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# 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
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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
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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
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> 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
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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
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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)
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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
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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