The State of Multiscreen Delivery 2013

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As a result, online and interactive revenue grew about 20% in 2012 to generate around £100 million (about $157.9 million) in revenue -- not bad, but it's still less than 5% of ITV's total income.

It faces a challenge in charging for content that viewers are accustomed to receiving for nothing or can view elsewhere, and there are sceptics who believe the "culture of free" cannot be quickly overturned.

"Micropayments appear promising, at the right price point, with a low-friction payment system, but the model has yet to be proven," says William Cooper, who runs convergent media consultancy informitv. "The price points ITV has established, starting at 49 pence [about 77 cents] per episode, represent a questionable value proposition for consumers. Paying for an individual programme with a credit card makes little sense for either the vendor or the prospective purchaser."

IHS Screen reports 2012 transactional revenues for all U.K. online video activity were £51.5 million (about $81.3 million) on-demand ad revenues were £92.6 million (about $146.2 million). By 2016 it predicts ad revenue will double to £192.6 million (about $304.1 million) while transactional revenue will rise by only 70% to £88.2 million (about $139.2 million). In 4 years' time it forecasts that slightly less than 70% of online TV consumption will be ad-funded; slightly more than 30% will be subscriptions with only half a percent transactional.

"Companies like Apple and Amazon demonstrate that people are prepared to pay for online purchases if the process can be reduced to a single click," Cooper adds. "Broadcasters have yet to offer anything as easy. They appear to resent the idea of sharing revenue with an online retailer but they have failed to invest sufficiently in their own transactional platforms."

The broadcaster's realigned sales team -- which no longer trades just the 30-second spot but an inventory which encompasses digital -- has introduced new online ad formats (e.g., Ad Explore, which offers viewers a choice of creative executions) that are currently being tested by media agencies.

Since May it has also enjoyed an exclusive U.K. relationship with Shazam Entertainment Ltd., which has synced select ads to the second screen around programming such as Britain's Got Talent, and delivered approximately £1 million (about $1.6 million) to the bottom line.

‘BBC iTunes'

Perhaps the most significant European VOD project of 2013 will be BBC Store, previously codenamed Project Barcelona. Although no launch date has been set, this download-to-own service could be as influential on the pay-per-download culture as iPlayer was to kick-starting the VOD habit.

The service, which is intended to allow users to browse and micropay for content from within the BBC's vast archive (some 600,000 hours of content dating from 1936 has been recorded, although only the most recent programming will be available), has been given the tagline "making the unmissable, unmissable forever" -- a twist on the subheading of iPlayer.

Originally conceived as a not-for-profit initiative, there are reports that the BBC will in fact seek to make a profit once rights and launch costs have been cleared.

The whole enterprise has to pass the scrutiny of overseer BBC Trust, which does not have the best record for rapid response given the time it took to greenlight previous initiatives, such as YouView.

Sports Drive Innovation

Both Sky Go and (soon) Now TV offer consumers live streaming access to its prized sport portfolio. This will be important for Sky as it looks to head off aggressive competition from BT Vision when it launches two new pay sports channels in August.

The pay TV division of telecom BT is poised to mount the first serious challenge to Sky's sport supremacy since 1992 after it shelled out more than £1 billion (about $1.6 billion) on rights including £738 million (about $1.2 billion) for 38 live English Premier League matches from 2013 to 2016.

BT Vision CEO Marc Watson aims to ramp the platform's existing customer base of 750,000 and has spoken of his desire to maximise the benefits of BT's "super fast" broadband pipes, hinting at greater interactivity. Sports producer Sunset+Vine landed the £100 million (about $160 million) contract to innovate BT's live sports production and will be tasked with delivering new second-screen apps.

BT Vision has also signed a distribution deal with Eurosport including tennis grand slams and MotoGP. Eurosport has just launched a multiscreen subscription offering for its online Eurosport Player service, making it available on iOS and Android devices, Kindle Fire, and smart TVs from Panasonic and LG.

Eurosport is now 20% owned by Discovery Communications, a £138 million (about $218 million) deal that includes an option to buy a majority of the sports broadcaster in 2 years' time.

This was one of several overseas acquisitions made by Discovery last year, including paying £1 billion (about $1.6 billion) for Nordic broadcaster SBS, but the move into live sport is a departure from its factual programming base.

Eurosport is in 130 million homes across Europe and 19 territories in Asia. According to analyst Kate Bulkley, writing in Broadcast, the plan is to plug them into Discovery's global distribution and advertising network, adding scale and reach as a hedge against cord cutting.

Sky's Roku Play

It's worth noting two recent strategic tech investments that point to the future of pay TV over the internet. Last July, Sky and News Corp. were among investors injecting £28.8 million (about $44 million) into Roku. Sky's commitment was £6.5 million ($9 million) and sparked suggestions that it could use Roku, on which News Corp. already has apps including FOX News and X Factor, as a foothold for distribution in the U.S. market.

It will help Roku grow share in the U.K., with NOW TV available on Roku boxes in the Roku Channel Store, alongside companion apps already out for iPhone, iPad, YouView PC, Mac, and a selection of Android devices.

In January 2012, Sky took a 10% stake in Zeebox, the second-screen experience and synchronised ad platform devised by BBC iPlayer developer Anthony Rose.

The funding helped zeebox roll out in Australia and the U.S. -- where it is backed by Comcast and NBCUniversal -- while Sky integrated zeebox's social media functionality into Sky+ and Sky Go apps. The platform will enable Sky to run ads simultaneously on TV and on the companion app, and to introduce ecommerce.

Then, this summer, watch for the broadcaster's launch of its addressable advertising service, Sky AdSmart, which is based on NDS Dynamic technology. This essentially turns Sky+ DVRs in 7 million homes into individual servers on Sky's own channels, offering advertisers around 90 different attributes to target viewers including segmentation by age, region, financial outlook, and affluence.

The summer tests involving agencies and advertisers will be followed by a move to "true flexible" targeting from summer 2014, according to Jamie West, director of AdSmart and commercial development, Sky Media.

"Our vision is to extend the targeting across all platforms that Sky is on," he says, adding that Sky would make AdSmart available to other commercial U.K. partners such as ITV.

iPlayer Trends on Mobile

As if to emphasise the growing integration between online services and traditional broadcast TV, researchers GfK estimate that 20% of the U.K. adult population -- about 10 million people -- use the iPlayer every week.

The total number of TV viewing requests on the BBC service during 2012 exceeded 1.5 billion, with an average of 200 million monthly requests. New Year's Day saw a peak 6.7 million TV programme requests, breaking the previous 1-day record of 6.4m on 7 Aug. during the London 2012 games.

As astonishing as this growth is, the more notable trend is on what devices people are watching. Roughly half of iPlayer views were from a computer in 2012, illustrating the speed at which video viewing on tablet and phone is growing with total downloads for the iPlayer app topping 13 million.

The BBC has also just unveiled its first synchronous app for smartphones, running in tandem with long-running prime-time show Antiques Roadshow.

This follows remarkable take-up of a red-button game enjoyed by 1.5 million fans of the programme since September. Antiques Roadshow has an older demographic, and intriguingly the live multiple-choice valuation game attracted 62% of users aged 55 and older.

Indies Embrace YouTube era

European producers have hailed YouTube's investment in original content as a new era for content creators. The Google-owned video-sharing platform unveiled 60 European niche channels in October, a third of them owned and controlled by U.K. indies.

Among those receiving up to £600,000 (about $947,000) for year one development are BBC Worldwide, ALL3MEDIA, Liberty Bell, ITN Productions, Bullseye in the U.K.; UFA/FremantleMedia Ltd. and Endemol in Germany; and Kabo Productions in France.

The winners face challenges around marketing, scheduling, and audience enjoyment with some, such as Bullseye, teaming with digital specialists (Diagonal View). The prospect of dramatically extending the reach of their content in the living room on the ever-widening base of connected TVs has indies energised.

YouTube intends to recoup advance funding through ad revenue generated by the channel, although global head of content Robert Kyncl has hinted that subscription models are under consideration.

The project was preceded by launch of 100 channels in the U.S. last October 2011, of which only 30-40 have had their funding renewed.

U.K. firm Base79 has become one of the key beneficiaries of the programme, winning contracts to deliver four new channels for YouTube, covering topics ranging from parkour and football to Guinness World Records and comedy with producer Hat Trick.

Base79 chief executive Ashley MacKenzie said the real measure of success will come not from the volume of views but if the channels become sustainable after YouTube stops advancing them funds.

"We've got to a point where online content production has become sustainable," he says. "The viewing you can generate around content can pay for the cost of producing the content in the first place. It's because YouTube is getting so large and increasingly attractive to advertisers."

He said some of the traditional indies that had won advances as part of YouTube's investment would struggle if they failed to adapt to the online platform.

"There will be some surprising learnings about why a piece of content that is beautifully shot in high definition with wonderful production values might not be viewed," he said. "It's vital to find things users engage with, and outreach into the community is vital. YouTube is not just a place to drop video and forget it."

Base79 -- previously branded -- is a company to watch. The Chernin Group (TCG) recently paid $10 million for a 25% stake in the company, which said it will use the cash to invest in technology and to launch channels in new territories.

Alex Carloss, YouTube's global head of entertainment, says: "We view The Chernin Group's investment in a key partner like Base79 as a sign of the growth of the YouTube ecosystem in Europe. Base79's deep expertise in rights management and the YouTube platform will continue to help partners control and grow their content businesses on YouTube."

This article appears in the 2013 Streaming Media Europe Industry Sourcebook.

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