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Are TV and the Internet ‘frenemies’?

21 ноября 2011

“How long would it take (and how much would it cost) for large global companies such as Google and Apple to gain the expertise held by pure TV players?”

Last week the ACT conference was held in Brussels, attended by most of the commercial broadcasters in Europe as well as policy makers from the European Commission and the European Parliament. Everybody was eagerly anticipating the second round table, which featured 'Elliot and Goliath' (alias the traditional TV broadcasters vs. Google). But, to the regret of most of the audience, the verbal fight was not as bloody as expected. Does that mean that after all the Internet and TV are ‘frenemies’ – both friends and enemies? Things may be more complicated than they seem …

From one perspective, Google announced that Google TV will not compete head-to-head with traditional players, as it will position itself as a delivery platform more than a content aggregator/editor. But, as pointed out by Ben Fenton, Chief Media Correspondent at the Financial Times, Google’s financial strength would allow it to purchase key broadcasting rights in many European countries (just as Netflix did with House of Cards a few months ago), without significantly affecting its margins. But this appears to be more a long-term threat than a short-term one. Indeed, let’s not forget that rights owners have interests other than financial ones; for instance, they are interested in the viewing share potential of a delivery platform. Accordingly, although players such as sports leagues may soon negotiate with new players such as Google or Apple, as a first step these discussions are unlikely to be on an exclusive basis.

Pure TV players have a long history and undisputable expertise in editing and aggregating content, as was underlined by David Wheeldon, Director of Policy and Public Affairs at BSkyB. Such pure players also benefit from long-term relationships with studios and content producers, and have in-house capabilities for producing attractive content. But how long would it take (and how much would it cost) for large global companies such as Google, Microsoft or Apple to purchase such expertise and begin to break apart those relationships?

From another perspective, broadcasters see in the Internet an interesting growth opportunity in a period of reduced advertising budgets and slow growth. Being on the Internet also allows traditional players to limit the impact of audience fragmentation and the proliferation of types of devices. For instance, it is expected that within five years, catch-up TV and connected TV will represent about 5% of the commercial revenues of pure TV players; and it seems catch-up TV does not cannibalise the viewing time of linear content. Also, as pointed out by Conrad Albert,  General Counsel at the ProSiebenSat.1 Media Group, since connected TV and catch-up TV represent a structural change for the sector, all traditional players will have to reposition themselves, especially in light of potential larger impacts in the long term. For example, some observers expect non-linear TV to represent 50% of viewing in the USA in the long term.

Now that this ecosystem is becoming more mature and we are starting to foresee some of the major changes that connected TV, catch-up TV and VoD will bring, it is important for policy makers to take the right decisions, which will neither hinder innovation nor put at risk the fragile media ecosystem. It is also critical for market players to position themselves intelligently and to invest time and resources in the right opportunities. Due to the significant uncertainties in the market, the policies of regulators and the strategies of traditional broadcasters should be based on informed scenarios of what could happen in the long term. With many years of expertise in this arena, and unparalleled experience with actors throughout the value chain, Analysys Mason is ideally positioned to support all players in this decision process.

Olivier Pascal, Lead Consultant at Analysys Mason


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