Media Vision 2020

A vision of the Television Future You need an agile strategy to survive in the TV industry of 2020. A $750 billion dollar industry serving over 8 billion connected mobile broadband subscribers and over 50 billion connected devices all plugged into a global IP network. The old rules don’t apply. This is a world where global brands combine consumer electronics, social media and apps to create disruptive new business models without warning.

Customer loyalty is hard won. A new era of entertainment and connectivity in the Networked Society where consumers demand more choice, better quality and greater personalization. Content owners, broadcasters, TV service providers and network operators that want to thrive must engage in new ways with shifting monetization models that require operational flexibility and a laser focus on the consumer. The year is 2020 and where are you?

The start but not the end Ericsson’s Media Vision 2020 is our view of a future point including the critical aspects that shape the intervening years. Media Vision 2020 is not just this document, a presentation or a collection of statistics but a view that represents a deep and continuous examination of where we stand now, the forces that propel us and what will be the likely outcome for our industry. This introduction aims to set the scene by outlining how we got to this juncture, the current landscape and the biggest trends that revolve around the consumer, technology and business models that impacted TV over the proceeding years to 2020. However, the wider Media Vision 2020 expands out to cover a multitude of variables as well as a dissection of six key Game Changers that every senior TV industry executive needs to have a strategy around in order to navigate a viable path to 2020 and beyond.

“You have to know the past to understand the present.” Dr. Carl Sagan The journey from now to 2020 is a sprint of Olympic proportions when compared to the almost leisurely pace of the media revolution in the last century. Since the birth of television in the 1920s, the journey from the early days to its current form has been an exciting adventure, but our industry is far from reaching its maturity. Milestones have come thick and fast, including the first cable TV service in 1948, the transition to color broadcasts in 1954, satellite transmission in 1962 and the arrival of the first commercial home VHS video recorder in 1970. Even our current decade is still spawning major new innovations such as the first HD live broadcasts across the 4G mobile phone network (which took place in 2013). The next half decade promises to be one of the most exciting and groundbreaking periods for television as a combination of traditional terrestrial, satellite and cable services meet new internet and mobile platforms. A period that will open up a world of new possibilities and more than a few new challenges.

>8 billion connected mobile broadband subscribers

50 billion connected devices

To give it a sense of scale, the opening of the 1948 Olympics in London was televised by the rights holder, the BBC, to roughly 100,000 TV sets in the United Kingdom. Sixty-four years later, the opening ceremony of the London 2012 Games was watched by an audience of 900 million. However, simply just measuring numbers doesn’t allow us to understand the fundamental changes in audience make-up and behaviors, and therein lies the mark of real evolution. A close examination of the viewership reveals a diverse audience watching the Olympic spectacle on tablets, on smartphones, via catch-up services or across the internet. Many of the viewers are also on the move. According to the Ericsson Mobility Report, the largest and fastest growing mobile data traffic segment is video. It is expected to increase by approximately 55 percent annually up until the end of 2019, by which point it will account for more than 50 percent of global mobile traffic.

And as they are watching, this increasingly active and mobile audience is tweeting and engaging in social networking exchanges around the world, turning a previously passive sporting event into an immersive and interactive experience. The power and impact of TV is being amplified; with it the potential rewards on offer for the segments of the industry that are ready to embrace the change.

What will 2020 look like? Ericsson’s Media Vision 2020 is our view of the future, created to paint a picture of how the TV and media landscape will evolve. It is underpinned by our unique position that spans the entire media value chain, across the convergence of media and telecoms backed by our deep insight into consumer trends. Through combining our understanding of the market with quantifiable research we have set out to help our industry recognize what it needs to prepare for the journey ahead.

Key Beliefs and Outlook of 2020 Media Vision 2020 is built on extensive research elements and unique insights that span the media value chain to the TV consumer. Key 2020 predictions include: > The Networked Society is realized – 15bn video-enabled devices are connected to broadband IP, transforming the consumption experience of TV. Mobile broadband is essential in all regions and fundamental in emerging regions. > Bundling of content and services remains the ultimate opportunity – Consumers will value simplicity and perceive value in a single bill, however the essential need for broadband will enable separation of propositions from broadband access and content > OTT delivery for all – Delivery of content over-the-top becomes applicable to all TV service providers or content owners as a way of reaching consumers, and enhancing established broadcast delivery platforms > On-demand has risen to parity with live/linear – IP will have accelerated the ongoing shift of consumers to embrace the convenience of on-demand access to content to 50% of their consumption. > New entrants bring new investment – The acceleration of broadband capacity and penetration, along with ever more connected devices potentially enables a powerful device or social ecosystem to become a premium TV aggregator. > Market revenues have grown to $750bn – Up from $530bn in 2013. The distribution of revenues, however, shifts between content owners, broadcasters, TV service providers and network providers, especially as brands adapt advertising focus.

Of course, precisely predicting the future is impossible. But it is possible to create a vision of what is likely to come. A vision of what media will look like in 2020 is an attempt to synthesize all the variables guided by expert knowledge to predict likely outcomes. However, it is also true that this media vision alters depending on country, operator, audience demographic and a host of other factors. We see significant differences in timing based on regional variation and unique approaches. For example, many emerging markets have not invested in fixed broadband infrastructure and will likely rely extensively on mobile broadband to compliment the one-way delivery of content via satellite. Of all the facets that make up our media vision, there is a clear narrative that underpins the different technology challenges, social factors and business models. At its heart, we assume progress through innovation, but technology is not the only driver. An equally important motivating factor is human nature. People have always expressed a fundamental desire to attain exactly what they want, when and how they want it! This consumerization driver has been present for a very long time and we are certain that it is not going away anytime soon. Media Vision 2020 brings together the concerted efforts of hundreds of people and includes statistical data, detailed surveys, and interviews with individuals, focus groups, industry participants and consumers from across the globe. But it’s not an exact science; if you ask three people to predict the score of a football match, you are likely to get three different answers. So, for the purpose of this introduction, we are going to settle on three areas where we believe we see a coherent vision of the future forming.

When internet met TV The first and probably most fundamental foundation of our media vision is that the internet is going to have an increasingly critical role to play in the television industry. From Silicon Valley to rural China, by 2020 penetration of mobile broadband will have exceeded 8 billion subscribers and fixed broadband will have exceeded 1 billion home subscriptions, representing around 75 percent of digital TV homes according to research by Ericsson. When you factor in the far more rapid rollout and up-take of mobile broadband, over 90 percent of the population of planet Earth will have easy access to the internet. This access will be through a smartphone, a tablet, possibly a computer or simply via a smart TV – either way, we see more than a quadrupling of the amount of people connected to the internet by 2020, fueled by mobile. The prospect of what experiences and visual sensations will be enjoyed by a global audience as television is delivered over IP protocols is mindboggling, and dramatically changes the dynamics of the industry. Even as the battles rage over censorship, net neutrality and piracy, TV is exploiting the all-encompassing nature of the internet to serve up video content that reaches a broader and more diverse audience. Behind the scenes at broadcasters, TV service providers and even within operators like telcos and broadband providers, this IP revolution is forcing changes. Where digitization has moved TV from tape to file in just a single generation, the next leap takes content into the cloud as the sheer volume of demand forces a dramatic change to provisioning and delivery.

15 billion connected devices that are video enabled

50% content viewed on-demand

Again, mobile data traffic is expected to grow the most dramatically. Ericsson’s November 2013 Mobility Report predicts a CAGR of around 45 percent (2013-2019). This will result in an increase of around 10 times by the end of 2020. The rising number of smartphone subscriptions is the main driver for mobile data traffic growth while users consume ever more data per subscription – mainly driven by video. The almost anarchic nature of the internet is a blessing for disruptive change. However, meeting the service delivery requirements of content owners, new aggregators and pay TV service providers will need agreement on the ways to drive the quality of experience consumers expect with network capability that others will provide. CDN technologies and next generation fixed and mobile internet with quality assurance will be vital to keep up with demand. The relatively sedate data demands of the current internet will accelerate, with research from Ericsson suggesting that by 2020 there will be 15 billion connected devices that are video enabled. CDN technology is likely to be a compulsory component of any premium pay TV service while “freemium” business models may be forced to rely on best effort.

Do take this personally! But the internet and IT-associated technologies are predominantly a connectivity mechanism. Although important, the internet in many ways reflects the desire expressed by the viewer that equates simply to “More for less!” That “more” could equate to choice or simply additional content to expand an experience, but either way, TV service providers need to meet demand. Irrespective of whether it’s a viewer wanting the Hollywood blockbuster or the latest match from a favored team, content providers need to be able to service a wider spectrum of expectation. In 2020, the mantra “content is king” will be as true as it has always been. However the kingdom will stretch from a sell-out concert delivered on the big screen living room 4K Ultra HD screen to an old episode of the U.S. sitcom “Friends” on the 7” tablet for the commuter on a busy train. Although vastly different experiences, each group offers an exciting opportunity. It is clear that the consumption model is changing and fueled, in part, by new technologies. For example, a survey by Procera Networks, a company that analyzes technology trends, showed that 2 percent, or roughly 600,000, of Netflix users in the United States powered their way through all 13 episodes of a popular new political drama “House of Cards” on its weekend of launch. Even with the rise of predominantly solo “binging” habits, the shared experience is still appreciated. However viewers are now expressing a desire to gain access to the content they want, in a way they need. Also critical is the requirement for varying pay points ranging from advertisement-funded all the way through to pay-per-use and subscriptionbased models. The demands of TV viewers in 2020 will be varied, but this very independence should be embraced as it opens up new niches for exploitation, including the ability to market beyond the household to every connected consumer. The linear TV dominance of the proceeding fifty plus years will reach a tipping point in advanced markets in 2020, with research from Ericsson suggesting that 50% of all viewed content will be on-demand versus live and linear TV, driving many linear channels such as +1, NVOD and long tail niches to on-demand models.

1 billion fixed broadband home subscriptions

90% of world’s population covered with mobile internet

When you consider IP as fundamental to this enhanced consumer experience, it highlights how TV service providers need to leverage or deploy platforms that are inherently both flexible and intelligent. In practical terms this equates to listening to consumers, testing new services and pushing innovation. This feedback loop has been well proven in the battleground of e-commerce and web philosophies for many years. As a consequence, the notion of A/B testing, deep data analysis and the ability to make subtle changes to services and user experiences in days not months is the paradigm of the future of TV. Of course, the launch of every new service is tempered by the cold hard reality of profitability. In the end, the industry can only flourish if there is money to support it, so the last fundamental pillar of our media vision is about understanding how the finances stack up as we move through the next few years of rapid change.

Makes the world go round… Television and multimedia entertainment is big business. According to research by Ericsson, the pay TV subscriber market alone will be worth $460 billion by 2020, but when you add in advertising revenue, licensing, merchandising and a whole host of TV dependent sub-markets, we are sitting in a multi-trillion dollar global business. Every part of the TV business is fundamentally connected and impacted by the rapid nature of change. Like a biological ecosystem, the dependencies between artists, content creators, owners, distributors, infrastructure vendors, application developers, consumer electronics manufacturers and a host of ancillary concerns all form a complex weave of symbiotic relationships. The status quo established before the internet dawn has visibly altered as the once dominant national broadcasters and international content owners start to bump heads against telecommunication providers and internet giants. The opening up of broadcast spectrum, coupled with competition within satellite and cable markets, has forced incumbents to evolve. Co-operation is the name of the game for content owners and broadcasters engaging 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 the industry incumbents go through a period of consolidation. For some, the motivation is purely aimed at earning direct revenue from subscribers, while other national and international brands look at the TV industry as a way of reaching trend-sensitive consumers. In line with the global economy, the TV economy is also embracing developing markets. As per capita earning in emerging nations such as Brazil, Russia, India and China (the BRICs) slowly reaches parity with more developed counterparts, the revenue potential from a whole new generation of viewers poses a tempting opportunity for the TV industry. According to data from Digital TV Research, digital TV penetration is rocketing in Latin America, from less than a third of homes at the end of 2012, to nearly 45 percent by the end of 2013, and growing to a predicted 84 percent by 2018.

$460 billion pay TV subscriber market

So although the consumer experience of, say, watching a sporting event may share a global commonality, the corresponding financial model experiences local nuances. Based on 2012 research from Ofcom, the UK TV regulator, the pay TV average revenue per user (ARPU) varied greatly across the globe, with an average of just £24 in India compared to the £810 annual spend by Australians. So the economics of serving a live cricket match to a minimum wage worker in Mumbai is vastly different for his contemporary in Melbourne. However, this disparity is rapidly changing. A 2013 UN report predicted that the combined output of BRICs will surpass the aggregate GDP of the U.S., Canada and other European nations by 2020.

Game Changers Internet adoption, consumer experience and the business model of television are all likely to adapt dramatically as we head to 2020. As an industry, a bold examination of some of these factors is the essence of our Media Vision 2020. Over the next year, we are going to look at many of the game changing trends that we believe our industry needs to consider to prepare for the future. The full list of Game Changers identified by the Media Vision includes: > Forever evolving experience > The IP imperative

$750 billion TV business in 2020

> Brand-casting > Changing consumption models and bundles > Cloud and web approach to TV > New money, new players. These Game Changers are trends, shifts and innovations that are driving and shaping the future of TV and media towards 2020. They come from unique perspectives, but they impact the same three cornerstones of critical technologies, shifting consumer behaviors and revolutionary business concepts. They are all interlinked and affect each other by creating whole new opportunities and challenges. Leading TV industry players will need to understand the Game Changers and play them to win. The fundamentals of the future of TV will remain the same – amazing programming that captures audiences and shapes lives. It is the transformation of that experience, the immediacy, choice and access that shapes our vision. The hope is that by sharing our vision and Game Changers, and engaging with Ericsson to delve deeper together, you will build and refine your own dynamic strategy to a successful future. The industry in 2020 is an exciting place – TV is a new game. It’s time to play.

2020

where are you?

Ericsson is a world-leading provider of telecommunications equipment and services to mobile and fixed network operators. Over 1,000 networks in more than 180 countries use our network equipment, and more than 40 percent of the world’s mobile traffic passes through Ericsson networks. We are one of the few companies worldwide that can offer end-to-end solutions for all major mobile communication standards. Our networks, telecom services and multimedia solutions make it easier for people, across the world, to communicate. And as communication changes the way we live and work, Ericsson is playing a key role in this evolution. Using innovation to empower people, business and society, we are working towards the Networked Society, in which everything that can benefit from a connection will have one. Our vision is to be the prime driver in an all-communicating world.

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