Roland Berger Strategy Consultants study "The economics of IPTV – Making IPTV profitable"
IPTV is leaving behind its initial technical glitches and slowly moving out of its niche position in terms of subscriber numbers to compete head to head with established media players in the living room: At the end of 2007 IPTV reached over ten million subscribers worldwide. While this number is still relatively small compared to a telecommunications customer base of several hundreds of millions, experts are forecasting an increase of over 500% in the global IPTV subscriber base, reaching 60 million by 2010. According to the study all these IPTV deployments however will have to be carefully managed to achieve their intended financial benefits.
The future and success of IPTV will be strongly influenced by the ability of telecommunications operators to shift the focus of their IPTV strategies and operations away from technical features (e.g. interactivity, time shift, advertising capabilities) and subscriber numbers to generating sustainable financial returns. "Most companies understand that the economic benefits of IPTV do not come easily" says Tim Bottke, Senior Project Manager and Broadband and IPTV expert at Roland Berger Strategy Consultants. "Many originally positive IPTV business cases are now conveniently forgotten by responsible managers, as they reveal significant gaps to real performance in terms of both revenues and spending."
IPTV operators and prospects must act now
A wide range of available business models, middleware platforms and technical infrastructure options supporting IPTV finally represents the long awaited opportunity for telecommunications companies to enter the media market and can help to achieve several important strategic objectives like access churn reduction. However, making IPTV a profitable product standalone mid- to long-term remains a major challenge: "IPTV is not suitable for every operator." says Klaus-Ulrich Feiler, Partner and Telecommunications expert at Roland Berger. "Telecommunications companies can only succeed if they build the often lacking media skills and address – already from day one – key profitability drivers in their subscription models, content portfolio, customer premises equipment, IPTV middleware and infrastructure" adds Alexander Mogg, Partner and Broadband and Media expert at Roland Berger
Based on a wide range of international assignments Roland Berger's IPTV experts have financially modeled the "typical IPTV deployment" in full, building on aggregated real life operational data for standalone IPTV products. Founded on in-depth IPTV implementation and optimization experience, rigorous quantitative simulation methodology has been used to identify the highest sensitivities and therefore, most important focus areas for improving the profitability of IPTV deployments.
However, "the devil is in the details" says Dr. Gustav A. Oertzen, Partner and Telecommunications expert at Roland Berger, "within each focus area we have found dozens of specific measures required to make IPTV (more) profitable – there is no one size fits all solution". Nevertheless there is room for hope: "If approached with a clear focus based on deep insights into key financial value drivers the profitability of many IPTV deployments can be improved significantly" adds Tim Bottke.
Eight key statements for IPTV:
The future and success of IPTV will be strongly influenced by the ability of telecommunications operators to shift the focus of their IPTV strategies and operations away from technical features (e.g. interactivity, time shift, advertising capabilities) and subscriber numbers to generating sustainable financial returns. "Most companies understand that the economic benefits of IPTV do not come easily" says Tim Bottke, Senior Project Manager and Broadband and IPTV expert at Roland Berger Strategy Consultants. "Many originally positive IPTV business cases are now conveniently forgotten by responsible managers, as they reveal significant gaps to real performance in terms of both revenues and spending."
IPTV operators and prospects must act now
A wide range of available business models, middleware platforms and technical infrastructure options supporting IPTV finally represents the long awaited opportunity for telecommunications companies to enter the media market and can help to achieve several important strategic objectives like access churn reduction. However, making IPTV a profitable product standalone mid- to long-term remains a major challenge: "IPTV is not suitable for every operator." says Klaus-Ulrich Feiler, Partner and Telecommunications expert at Roland Berger. "Telecommunications companies can only succeed if they build the often lacking media skills and address – already from day one – key profitability drivers in their subscription models, content portfolio, customer premises equipment, IPTV middleware and infrastructure" adds Alexander Mogg, Partner and Broadband and Media expert at Roland Berger
Based on a wide range of international assignments Roland Berger's IPTV experts have financially modeled the "typical IPTV deployment" in full, building on aggregated real life operational data for standalone IPTV products. Founded on in-depth IPTV implementation and optimization experience, rigorous quantitative simulation methodology has been used to identify the highest sensitivities and therefore, most important focus areas for improving the profitability of IPTV deployments.
However, "the devil is in the details" says Dr. Gustav A. Oertzen, Partner and Telecommunications expert at Roland Berger, "within each focus area we have found dozens of specific measures required to make IPTV (more) profitable – there is no one size fits all solution". Nevertheless there is room for hope: "If approached with a clear focus based on deep insights into key financial value drivers the profitability of many IPTV deployments can be improved significantly" adds Tim Bottke.
Eight key statements for IPTV:
- Despite the recent strong global growth of IPTV in terms of subscriber numbers, making IPTV as a product pay off financially remains the key challenge
- IPTV does not turn out to be the "silver bullet" for telecommunications companies, but has to be very carefully managed to succeed.
- Subscription revenues as the dominant value driver should be actively pursued through stronger focus on content promotion in the case of the analyzed business model of a lower prices base package with a range of buy-through options. This requires superior customer segmentation, ease of ordering and smart content bouquet design.
- Content costs must be carefully negotiated with content providers – especially for premium content, such as HD channels and on-demand content.
- Customer premises equipment should be priced to promote IPTV penetration. Achieving excellence in CPE procurement and distribution will have a direct impact on the bottom line.
- IPTV middleware platforms have to be carefully selected based on their revenue generating features and different demands on infrastructure as well as the ability and willingness of the vendor to flexibly adhere to operators' requirements and change requests in a timely manner.
- Infrastructure must be properly dimensioned and architectural bandwidth equipment tradeoffs taken into account to avoid massive over-investment.
- For a successful IPTV portfolio, telecommunications companies often lack skills that are much more specific to the media and TV market. To ensure success in IPTV, they must effectively close the expertise gap by partnering or recruiting.
To download the complete study, please click on the following Link.
Roland Berger Strategy Consultants study "The economics of IPTV – Making IPTV profitable" (PDF, 2187 KB)
Language
English | German
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