Redshift Strategy 2012

Session 3: Preparing for change Will content, platforms or technology drive future growth?

Janice Hughes, Redshift

Redshift Strategy 2012

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The connected living room

Redshift Strategy 2012

Rapid take-up and usage of connected TV devices

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Smartphones

Tablets

OTT devicesand smart TVs

Connectedset-top-boxes

Today by 2020

Connected device forecasts, m

Source: Redshift analysis

“50% of TiVo subscribers begin their viewing experience in the ‘My Shows’ section”

– Neil Berkett, CEO Virgin Media

“Users of our smart TV portal average 20-25 TV app sessions per month”

– Senior director, Philips Smart TV

Penetration of connected TV devices on the primary set: Today: 22% 2016: 65% 2020: 90%

“By 2014 nine out of ten TVs shipped in the UK will be a smart TV”

– Rovi

“Of the 78% of tablet owners who multitask while watching TV, 57% are accessing content related to the programme or advert”

– Yahoo

5.7m HHs have a primary

connected TV device today,

24.6m by 2020

20m 40m 80m 60m

Redshift Strategy 2012

Enablers of new content experiences

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• Creating a marketplace for content providers via app stores

• Redefining the EPG

TV app stores Voice and gesture control Second screen

• Opening access for content providers

• Providing opportunity for new types of content, ie. second screen, AR

• Gesture control and voice control

• Enable new types of content

• Redefine the way content is accessed

Redshift Strategy 2012

New sources of content creation and investment

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New content creators are entering the market, including publishers, brands, retailers, etc.

How do we maintain high quality of content production?

M&S TV

All3Media VOD store

• App offering 230hrs of All3Media content on a PPV basis

YouTube TV

Drama Factual YouTube

A wider pool of content creators are investing in content

… but the sums invested

are relatively small

£2-10k

Jamie Oliver iPhone & iPad apps

Source: Redshift analysis

BROADCASTERS

£1m

£200k

Typical TV spend-per-hour Illustrative

Redshift Strategy 2012

Have we reached the limit of what current funding can invest in content?

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Revenue vs. originated content spend, £bn New monetisation opportunities

£4.8bn

£2.4bn £2.7bn

£0.4bn

£1.3bn £1.2bn

Pay TV Licence fee Ad-funding

Revenue

Originated content spend

Note: Licence fee revenue for year-end March 2011, only includes portion spent on TV Sky’s pay TV originated content spend does not include sports rights Revenue and originated content spend from advertising includes ITV, C4 and C5 only Source: Redshift analysis, Ofcom communications market report 2011, Ofcom PSB annual report 2012, BBC annual report 2011, Sky annual report 2011

% Change 2006-2011

1. Broadening the scope of the TV ad market:

• Interactive advertising, targeted advertising, connected TV advertising (e.g. product placement, sponsorship)

2. Pay-as-you-go and in-app purchases

3. Second screen

-15% Includes sport &

news

- 21%

Redshift Strategy 2012

Gaming monetisation: an example of multiple revenue sources

Case study: Rockstar Red Dead Redemption

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Game lifecycle

Sale of game:

• Standard edition • Limited edition

Micro-transactions:

• In-game virtual goods • Eg. Weapons, missions,

etc…

Add-ons:

• Legends and killers • Liars and cheats • Free roam pack • Undead nightmare pack

£60

£40

£8

£0.99+

1 3

2 Rockstar Social Club:

• Game is registered by user

4 Rockstar’s

Grand Theft Auto IV:

Sold 6m copies in week 1 worth $500m of revenue

Redshift Strategy 2012

Increasing competition from global platforms and non UK players

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30% platform fees

Foreign imports of new content

UK format and programme exports

Licence Fees

Advertising

Pay TV

Outflow of platform and content licence fees to overseas players

Redshift Strategy 2012

Do broadcasters and content creators have enough time to adapt to a mixed media an IP-based ecosystem?

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TV Mobile From 2015

TV free TV Mobile Today

TV Mobile Future

500 band 600 band 700 band 800 band

“The universal take-up of broadband could enable IPTV services to provide a viable substitute for the DTT platforms,

enabling a potential future DTT switch-off scenario”

Consultation: Strategy for UHF bands IV and V

Loss of spectrum is accelerating the shift to connected TV

0% 50% 100%

Originated contentspend

Viewing share

PSB Non-PSB

DTT /PSB ecosystem supports high viewing shares and high revenues to reinvest in original content

4.23 Our analysis from phase 1 of the review shows that originated spend by the five main public service channels and the BBC’s digital channels reached £2,485 million in 2007, but had declined on average by 3.8% a year since 2004. The public service channels continue to represent over 90% of all spend on original UK television programming in areas other than sport. Ofcom’s Second Public Service Broadcasting Review: Putting Viewers First (2009)

Source: Redshift analysis, BARB data, Ofcom PSB annual report 2012

Redshift Strategy 2012

Issues for discussion

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Content

• How do we retain viewership and revenues for PSBs and commercial broadcasters to invest in UK originated content?

• How do we increase funding for existing broadcasters and producers?

• What new monies can we target to increase investment in content? eg. New data sources, second screen and in-app add-ons…

Platforms and technologies

• How do we tap into consumers’ willingness to spend more on entertainment through on-demand, pay-as-you-go and other micropay enablers?

• How do we maintain or increase the UK’s net trade surplus from content exports?

• Issues from the floor…

Redshift Strategy 2012

2 Cavendish Square London W1G 0PU +44 (0) 207 636 6488 janice.hughes@redshiftsc.com

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