We are entering a new global landscape, defined not by the traditional rules of engagement but by the super-connected demands of the Networked Society. It presents a complex future for broadcasters, but one with which they must engage, and one that is rich in opportunity. One of the leading voices in this field has been Ericsson, and to explore how a Networked Society will impact the broadcast sector, James McKeown spoke to Simon Frost (pictured below), the company’s head of TV marketing in the first of a two-part feature into the technology and market forces driving tomorrow’s world.
How should the Networked Society change the way we think about the digital landscape?
Looking ahead over the next six years, it’s patently clear that the old industry rules will no longer apply. We are entering a brand new global landscape; by 2020 there will be nine billion people, over eight billion mobile broadband subscriptions and 1.5 billion homes with digital television. Our research indicates that penetration of fixed broadband will have exceeded one billion home subscriptions, representing around 75% of digital TV homes.
In the Networked Society of 2020, there will be more than 50 billion connected devices, of which 15 billion will be video enabled devices, and they will be reliant on mobile IP (internet protocol) networks dominated by video. This will completely transform the consumption experience of TV and herald a new era of entertainment and connectivity. In a world where global brands combine consumer electronics, social media and apps, we will see new disruptive business models emerging without warning.
When you consider IP as a fundamental part of this enhanced consumer experience, it underlines the point as to why TV service providers will need to find new ways of delivering or leveraging platforms that are both flexible and intelligent. This will require better dialogue with consumers and a desire to push boundaries by testing new services and driving innovation.
The potential opportunities for the TV industry are enormous. The power of inter-connected social interaction, the simplification and aggregation of the most compelling content is now in the hands of the TV service provider. There is a lot of money at stake; the global TV market of 2020 is estimated to be worth $750 billion. However, to succeed, or indeed, even compete in this new digital landscape, our industry needs to consider how to take advantage of this fundamental change and the opportunities they present.
We are set to enter a world of universal broadband access, which completely redefines what television is and what it will become in the longer term. A plethora of connected devices will provide unprecedented availability of content, which can be both found and consumed easily and directly. In 2020, content owners will need to create the most compelling and differentiated consumer experiences in order to meet ever-increasing expectation.
To that end, connectivity will be matched by cloud services, which will bring ‘anything to everything’. This will irrevocably change consumer demand for ownership and the necessary storage of assets. They will expect, and become reliant on, their devices always being connected to high-speed and universal broadband access. This will enable them to prioritise, personalise and share content, capturing their individual preferences. Success in the TV game of 2020 will force players to innovate and deliver what consumers are demanding; namely multi-screen services which enable seamless, convenient and simple ways to consume any content, in any way, anywhere.
How is the Networked Society affecting the production and consumption of today’s broadcast media?
The Networked Society is driving radical change across the entire TV landscape, particularly with regards to the consumer experience. Quality and quantity are now considered vital proponents, ranging from the living room TV and extending down to a proliferation of new home and portable devices. Mobile devices are making up an increasing share of TV and video. Ericsson ConsumerLab’s 2013 TV and Media research indicates 72% of viewers use mobile devices at least weekly for video viewing, while 42% do this outside the home. Furthermore, consumers are increasingly moving away from choosing content based on a TV schedule on a single domestic device, to one where the source is chosen based on the availability and suitability of the given situation.
In the future, the television experience will continue across platforms, services and time. This evolution is already accelerating as consumers embrace internet-connected technologies and devices. In fact, Ericsson ConsumerLab found that more than 50% of all people surveyed stated that their computer and internet connections form an integral part of their TV and video consumption habits. Mobile devices are being used to discuss live TV content and have taken a focal point in the home TV set up. Our research found that 49% of people are using apps or browsing the internet to find out more about what they are currently watching. The content experience in the Networked Society of 2020 is going to be part of a wider shift encompassing how viewers manage their work and leisure lifestyle balance. The already eroded notion of entire families gathering on a couch to watch linear TV will change forever.
By 2020, we predict that consumers in advanced markets will have shifted their viewing patterns to a 50:50 split of time spent with on-demand and time-shift versus linear and live TV. Thanks to the seismic change in consumption models towards on-demand and multiple mobile devices, we will see the rapid adoption of IP to become the dominant delivery technology for video. Consumers will not accept buffering, stuttering and ill-performing services on any of their devices, in the same way today’s generation demands and expects a particular standard of experience from the high quality digital platforms which deliver to their main living room television screens.
As we move towards 2020, consumer expectation for immediacy and relevancy will diminish the value of the traditional multi-hundred linear channel pay TV package. Consumers will concentrate on building their own schedules and their personalised packages of ‘channels’. This will negate the need to navigate through large amounts of content, which is rapidly putting consumers off watching, and paying for, TV content. Instead, they will be able to pick and mix from smaller bundles of linear and live content.
Furthermore, we will see new opportunities and challenges emerge in advertising placement and revenues, not only around live content and popular linear scheduled TV, but also due to the shift towards on-demand consumption. In other words, the personalisation of content will be key. By 2020, successful TV service providers will already be offering intuitive and automated recommendation of personalised offers. This will encompass everything from TV, film and gaming experiences, as part of one integrated model.
How will its effects reach into the future?
The internet is set to play an increasingly critical role in the television industry with mobile broadband taking an essential position. Today’s rapid rollout and ever growing uptake of mobile broadband is being driven by the availability and convenience of smartphones, tablets, computers and smart TVs. Over 90% of the world’s population will have easy access to the internet by 2020 – more than quadruple the number of people that enjoy connectivity today.
As the importance of mobility, broadband and cloud enablement takes hold, the growth in IP delivery will demand video-centric networks in order to deal with an unprecedented amount of video traffic. Ericsson’s November 2013 Mobility Report predicts mobile data traffic will increase at a compound annual growth rate (CAGR) of around 45% (2013 to 2019). This will result in an approximate tenfold increase by the end of 2019. These networks will open up new monetisation opportunities through sales of assured delivery capabilities in unmanaged networks, which offer highly efficient video processing.
The early part of this decade outlined the potential impact of disruptive internet delivery of video. We can now engineer and understand the value of these video-capable networks and the huge opportunity for traditional pay TV operators. It’s abundantly clear that by 2020, the over-the-top (OTT) model for the delivery of content will become just as applicable to TV service providers and content owners as a way of reaching consumers, as it will be for new disruptors. The stage is set for broadcast-focused pay providers (such as satellite) to adopt this model and enhance their delivery platforms. This year, we have already seen Netflix complete deals with Verizon and Comcast for the direct access of their networks, in order to improve streaming video quality for viewers. By 2020, collaborative business models such as these will become the norm, with each individual player understanding its specific role in the TV game.
The realisation of the Networked Society will see a variation in the demands of TV viewers. Although we will see a rise in the number of predominantly solo ‘binging’ habits, shared experiences will still be appreciated. However, viewers will expect to gain access to the content they want, in a format they need. This independence will open up new niches for exploitation, including the opportunity to target a connected audience that extends beyond the confines of the household. Consumers will value simplicity and perceive value in a single service, combining content and services together.
Ericsson research suggests that the pay TV subscriber market will be worth $460 billion by 2020 – but that excludes factors such as advertising revenue, licensing, and merchandising. The opening up of the broadcast spectrum, coupled with competition within satellite and cable markets, has forced incumbents to evolve. Content owners and broadcasters will need to co-operate and engage with TV service provider aggregators as they focus on continued bundling of all related services such as broadband, telephone, TV and mobility. The TV industry players of 2020 can adopt multiple roles to best fit their competence and focus as they undertake a period of consolidation. The acceleration of broadband capacity and penetration, along with ever more connected devices, potentially enables a powerful device or social ecosystem to become an ultimate content aggregator.
Is digital transformation a danger for the separate components of converging industries? For instance, is the merging of the telecoms and media sectors a precursor to the collapse of one industry into the other, or the creation of a whole new ecosystem that forces companies to evolve away from their core competencies?
There will be no collapse in terms of the industries. Rather than the ‘convergence’ of industries, we will see collaboration between the telecoms and media sectors and they will learn how to interact with one another in a far deeper way. It’s ultimately about the growth and spread of entertainment and information, enabling content to become a continuous viewing experience, alongside the management and distribution of various service offerings. In order to reduce complexity and rising costs, we will see these industries intertwine and cross-pollinate. Instead, the greatest challenges facing these industries will be the distribution of video/TV in a fully connected (and predominantly IP) world. In order to serve a TV industry of over eight billion connected mobile broadband subscriptions, with over 15 billion connected video devices plugged into a global IP network, the telecom industry will need to align itself accordingly. IP will become utterly essential for consumers and business; broadband access will help drive national economies and offer a level of connectivity which will enable a seamless transition between devices and the realisation of a true TV Anywhere world. If broadband providers (including telcos, cable operators and other ISPs) understand this opportunity, they will be able to focus on rebuilding their business model to become a critical consumer service, and leverage their capability and core competence towards the media industry and its core competence of great content.
Co-operation between content owners, broadcasters and TV service providers will be key in this digital transformation. The industry will target the bundling of all related services such as broadband, TV, internet, telephone and mobility. Collaboration will be fundamental to driving the quality of experience that consumers expect; a service that will consist of easily accessible, interactive and compelling content, offered in a simple and engaging way. This means deeper engagement with content formats, the seamless addition of social networking sites and forums, the distribution of content on any network to any device and becoming a more relevant and accessible proposition to the consumer.