Broadband providers across the region have been building their networks over the last few years to conquer the living room and when I take a look across the larger markets in the Europe, I see that there is really no place where IPTV hasn’t been introduced. In most markets, if one takes a look at the subscriber counts, it has been quite a success in a short period of time.
- France – approximately 7.7 Million subscribers
- Germany – approximately 1 Million subscribers
- Italy – approximately 750,000 subscribers
- UK – approximately 600,000 subscribers
- Scandinavia – approximately 650,000 subscribers
- European Market – Expected to have 40Million+ by 2010
French broadband providers have been offering IPTV for quite a few years now and this is reflected by the subscriber counts while Germany started IPTV, in earnest, late 2008. Italy while also having offered IPTV for a few years only offers the service in select markets therefore placing an artificial “cap” on their subscriber counts.
But are they making any money……????
Obviously they are earning revenue but there are a number of factors that lead me to believe that they aren’t covering their costs.
Monthly Charges
From my point of view, the average monthly charges I see are much less than what I would expect to pay for “triple-play” (Voice, Video and Internet) services. If we take a look at the numbers below we can readily see which markets are in “Promotional” stage; France, Italy and UK have multiple providers which fight aggressively over the same set of consumers.
- France – 30Eur per month with bundled Internet and Telephone
- Italy – 20-70Eur per month Tiered Access with Internet and Telephone
- Germany – 45-65Eur per month with bundled Internet and Telephone
- UK – 25-55Eur per month including Internet and Telephone
- Nordics – 30-70Eur per month including Internet and Telephone
If we take a look at the numbers above we can readily see which markets are in “Promotional” stage; Obviously from this data we can see that France, Italy and UK have multiple providers which fight over the same consumers. While this may be good for consumers in the short term it remains to be seen if this price level can be maintained.
Hollywood
One of the primary problems that Service Providers face when implementing an IPTV project is how to get content people will watch. The answer is easy….Hollywood. Unfortunately the licensing structure, the licensing fees, the obligatory DRM costs that the Carrier must shoulder and the limited use Terms and Conditions of said content make this a very difficult business case.
One big upside to this is that European Sports is high demand content and has spent a good amount of time working with the local Carriers to come up with a good solution.
User Interface
I have commented on this issue before in this post as I have heard it from multiple Carriers across the EMEA market at various times. When there are literally tens of 1000s of Videos/TV shows on demand and 10s of Millions of “Youtube/Clipfish/Hulu” video clips; How on Earth would anyone find what they are looking for?
The fear is that the consumers would spend so much time looking for something to watch that they would give up and not purchase anything. Even Apple Computer with their Apple TV has a user Interface that makes me want to throw that little remote control out the window. Then the consumers become passive TV watchers and the Carrier has only the monthly subscriber fees listed above as revenue.
Engineering the Network
Engineering the network for IPTV is a real feat. Bandwidth, QoS, Zapping times and relative continuity of service all have to be taken into account at various points in the network simultaneously. Every single user on the network will have an effect on the Access, Aggregation and Core layers of a Carriers network.
We have to consider that the amount of bandwidth a consumer needs for a good experience is somewhere in the 20Mbit/second range and the “Zapping” times they need are under 1 second and that complex protocols need to be implemented to achieve bandwidth efficiencies necessary to protect the network from melting down. All of these factors increase the cost of providing this service in many ways.
Before anyone else says so, I know that the cost of the infrastructure is shared amongst various service offerings and I cannot count IPTV traffic as the only traffic on the network….but….one cannot discount the impact IPTV has on engineering the network.
Conclusion
Clearly the Market wants IPTV services and the subscriber uptake tells us where the offerings need to be priced. Unfortunately, I see an imbalance between investment and return when all things are considered.
If I’m wrong and they are making good money with this offering, then I stand corrected and I’ll be pleased that the consumer wins with fantastic value but I cannot imagine that is happening when we consider all of these factors.
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