Bundling Strategies, Broadband Penetration will Shield Europe's IPTV in Economic Downturn

Tuesday, June 9th, 2009
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CAMBRIDGE, Mass. — The ongoing economic downturn will impact IPTV adoption and service revenue growth differently across Europe during the next year due to varied broadband penetration levels, the availability of cheaper alternatives, and telcos’ response to competition, according to a new report from Pyramid Research, the telecom research arm of the Light Reading Communications Network.

Europe’s Five-Year IPTV Forecast: Mostly Cloudy, but Temperatures Slowly Rising examines the short- to medium-term future of European IPTV in the current economic climate. This 21-page report focuses on the three factors affecting IPTV growth: the combination of the level of broadband penetration and operators’ capex, availability of affordable alternatives, and telcos’ strategies. Case studies of four markets, two CEE (Russia and the Czech Republic) and two WE (France and Germany), are presented.

At year-end 2008, IPTV subscriptions accounted for only 8.2 percent of total pay-TV accounts in Europe, generating more than US$3 billion (Euro 2.1 billion) or 8 percent of total regional pay-TV revenue, notes Stela Bokun, analyst at Pyramid Research and author of the report. “Although Pyramid projects that by 2014 IPTV will double its share of the total pay-TV market with both subscriptions and revenue, Pyramid predicts the economic crisis will have a negative impact on IPTV service adoption only in certain European countries, while it will reduce revenue growth across the region within the next 12 months,” she says.

Telcos’ capex cuts will affect IPTV only in countries with low broadband penetration. “If the country had low broadband penetration pre-crisis, its IPTV target market will stay at low levels during and immediately post-crisis; one such example is Spain, which is currently seeing a slowdown in IPTV adoption rates,” say Bokun.

Although service quality and convenience play a significant role when the economy is doing well, price plays a crucial role in the adoption of any service. Customers are opting for more affordable offerings from other pay-TV providers. “In Poland, TVN attracted new customers with its affordable prepaid pay-TV service,” says Bokun. “In fact, TVN is expected to achieve a 91 percent year-over-year growth for its IPTV subscriber pool in 2009, while total Polish IPTV subscriptions will grow by 34 percent in the same year,” she adds.

“If other pay-TV operators in their market are offering very cheap and affordable plans, they should slash their own prices in times of crisis to prevent the erosion of your IPTV subscriber pool,” recommends Bokun. “Creative and affordable bundled packages will be a way for telcos to mitigate the adverse effects of the economic recession on IPTV service adoption.”

Europe’s Five-Year IPTV Forecast: Mostly Cloudy, but Temperatures Slowly Rising is part of Pyramid Research’s Europe Telecom Insider report series. Telecom Insiders are packed with trend analysis, industry best practices, market sizing and forecasting, competitor analysis, and case studies, providing you information you can leverage to make better business decisions.

More: Report Excerpt