Decipher have completed the Q1 analysis for our FutureMedia 2013 Programme. FutureMedia is our regular review of the impact of consumer technology on the UK television market. Reporting quarterly to clients, FutureMedia delivers a highly tech-literate, but accessible review of consumer tech innovation, adoption and market change. Each quarter focusses on one aspect of the changing TV landscape – starting with a review of the evolving connected TV world. We outline our insights from the first quarter below:
FutureMedia 2013 – Quarter 1 ‘A Connected World’
Last year connectivity finally arrived as a mainstream issue in the UK television industry. 2012 saw a flurry of connected device and box innovations hit the markets. It seemed chaotic and confusing, however last year’s FutureMedia 2012 work made some sense out of it. We identified two parallel and competitive strands to ‘connectivity’ innovation in TV: the emerging ‘smart’ environments on connected TV screens and the ecosystems being built around ‘connected set top box’ – and we laid out their competitive strengths and weaknesses.
The first output from this year’s FutureMedia 2013 work show clearly that the connected STBs are winning – successfully fighting off the threat from Smart TVs. As part of this year’s work we looked at comparative rates of usage where consumers had both a connected STB and a Smart TV in the same installation.
Decipher’s Nigel Walley said “There is an assumption that, because of SmartTVs and OTT apps like Netflix, we are moving to a ‘cloud’ TV world, but that is one whole generational leap away. Before then we have a decade where the super STBs dominate home media
Once again, the FutureMedia 2013 work incorporates Decipher’s MediaBug quant output. This shows that where consumers have the same player on both these options (a broadcaster’s ‘player’ in a connected STB and on a smart TV) 73% of them said they favoured the STB. Usage rates varied between providers. STB ‘player’ use was highest in YouView, with 28% of users claiming to regularly use BBC iPlayer. 20% of Virgin Tivo customers claimed regular use with only 8% of connected Sky customers doing the same.
Walley highlighted “the smart TVs haven’t made any effort to integrate on-demand with broadcast in their interfaces. The STBs have a much more UK centric view of the market, and recognise that they need to work with the broadcasters to keep the consumer in the STB environment.”
Where a consumer had both a STB and a Smart TV, then use of the connected screens was reduced to the exceptional apps that don’t appear in STBs – YouTube etc. At the same time evidence of cord cutting or shaving in pay homes that have got Smart TVs is small, but is finally on the radar. Last year, we could find no evidence that this was happening. This year it appears that approx 4% of pay TV customers have reduced or cancelled pay TV subs on purchase of a Smart TV. An element of this fits with the normal churn rates the pay platforms encounter; however, claimed use of pay OTT apps is finally having an impact. We break this down by content genre and provider in the wider report.
Last year’s work also revealed a connected TV screen market struggling to get momentum. Firstly it highlighted the fragmented nature of the Smart TV operating systems and interfaces. The work revealed the hurdles these systems present to commercial partners looking to build apps – flagging up that, at the time, no smart TV had more than two of the UK’s main broadcast player apps. This year the roster has expanded slightly, with Demand Five arriving on Samsung, but still no 4OD.
We also identified the consumer difficulties in using them, or integrating them into wider device use. As a potential solution to this we flagged up the likely outcome of the smart screen manufacturers adopting one of three potential unified operating systems. These were Google (for which read ‘Android’) TV, the Apple TV iOS and Windows 8 on TV (via Xbox). The FutureMedia work this year will continue that analysis and further predict roll-out.
However, the biggest and most damaging omission is the lack of Smart TVs offering PVR capability. The FutureMedia research shows that, after live broadcast, the most compelling features that a TV device can offer are live pause and record. At CES, no screen manufacturer offered this capability.
That PVR still trumps VOD became apparent through 2012, and our work with the US providers and STB makers shows us that this dominance is only going to increase. The FutureMedia 2013 Market Summary shows that that US MSOs are moving towards PVRs configured as complete ‘home media hubs’. In line with the UPC Horizon box being rolled out across Europe, they have launched PVRs with 6 tuners, massive hard disks and smart multi-room functionality that allows full PVR capability simultaneously in 6 rooms. Our major hypothesis from this Q1 work is that pay operators will use connected PVRs to effectively piggy back on the smart TV revolution, co-opting it to their own devices. They will do this by putting their home network apps on any smart screen – connecting it to the PVR in the main room or by using ‘media streamer’ extenders. This will have implications for both player use around the house, and for the ability of pay TV channels to project themselves in a multi-room environment. We forecast that pay channels will increase their share of total viewing, with both live channel and PVR viewing projected into every room.
In this Q1 FutureMedia output, Decipher predict these home media hubs will not arrive in the UK until 2016 driven by Sky and then by an upgraded Tivo/UPC PVR. However we are questioning the ability for the free and quasi-free boxes to follow suit. As an outcome, we predict that pay TV platforms, based on home media servers will dominate the next decade, before OTT and cloud concepts make significant in-roads into the pay markets. The FutureMedia programme address this, and maps the arrival and impact of these boxes onto the UK television landscape.
If you would like to know more about FutureMedia 2013 please contact lucy.hogg@decipher.co.uk or go to the FutureMedia 2013 page on the Decipher web site here.