Laurence Meyer is Senior Analyst at Forrester Research.

What are the major technological changes taking place in the television industry?
Anthony Rose, technical director of BBC iPlayer, the highly celebrated British catch-up TV, has summed up the key points of the new market for television: «Until 2007, the BBC chose what you watched. With BBC iPlayer, 2008 was the year viewers chose what they watched. 2009 will be the year your friends choose what you watch».
Television becomes omni-present, it is accessible with all types of equipment. It is moving progressively from a linear model to a non-linear on demand model. TV integrates new dimensions such as, notably, sharing, recommendation, and personalisation.
This comment illustrates rather well the way in which TV and the Internet will end up by converging.

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What is the position of online video and TV in European media consumption?
For a good understanding of the position of the TV industry today, the new modes of consumption and the place occupied by video must be understood. For two or three years now, following the dazzling success of YouTube, video online has stimulated a great deal of commentary.

Is the analysts’ passion for video online justified?
Yes, because the consumption of video online has doubled in three years among the youngest generations.

Following this evolution, a very normal consequence is Europeans now consider the PC an entertainment platform. We are moving towards an audience that is more and more multi-screen.
In 2008, 27% of Europeans used two PC screens to watch video. On PC there is a tendency to consume short format video content, or content that is generated by Internet users themselves. Users also watch DVDs. In 2007 only 18% of Europeans regularly watched video on PC. In 2008 this became 27%.
This evolution particularly concerns the young generations. Young people between the ages of 15 and 24 are the largest group of video online consumers via PC (36%) and are even more numerous in watching videos on mobile telephone (52%). The consumption of the under-30s tends to concentrate on the new media. The Internet has become the foremost media for consumers under 24 years old.

The young generations consume even more media than the oldest generations. If we compare the media consumption of the under-34 group, with consumption among over-55 year olds, it is seen that the young on average tend to consume 20% more media per week than the oldest group. Relatively less television, but nevertheless more media on the whole.

How is the phenomenon of social networks placed in this context?
Among young people the social networks have become inescapable, over one third of young people under 15 are members of at least one social network, and only a third claims they are not interested by the social networks. It can also be seen that online video is well integrated, with 70% of under-15s watching video online. More than a hundred platforms are available on the Net.
Watching video online is now a fairly widespread activity, concerning not only the young, but also adults to a greater and greater extent. At Forrester we estimate a European video online audience for 2008 of 90 million adults. The audi- ence exploded in four years to become four times larger than in 2004.
YouTube remains the most emblematic of the video exchange platforms with more than 88 million users in February 2009. One can state that the position of social networks relative to TV has probably changed in the last two years. Some services such as MySpace or Bebo are located in entertainment. They welcome TV networks such as the BBC or National Geographic.
On the other hand, services such as Facebook tend to take a position in communication. TV operators’ relations with Facebook are intended to reinforce their audience and furnish new means of promotion.

However, Europeans continue to like television, and in this increasingly competitive universe, TV resists well…
Yes, TV consumption stands at 12 hours a week for Europeans, which is double their personal use of the Internet. Against the undeniable growth of video online, TV remains despite everything the media of predilection for Europeans.

Weekly consumption of television is more than ten times greater than consumption of video online.

What turnover is generated by video?
According to our estimates, video online in Europe generated 200M€ in 2007, whereas the television services registered an income of 70B€. If we project this into the future, despite a rapid growth of advertising investment in the Internet, the ratio will not be reversed in the medium term, as we estimate a video online turnover in 2012 of close to 1.5B€ at the European level, while the figure for the television services will be 85B€.

Even if there is much talk about video online, the opportunities for growth and revenue from this new media remain rather limited in the medium term.

What is happening with respect to offer of services?
TV is far from static regarding technological advances. From the mid-90s, operators have continually deployed innovation in the field of television. This began with high-definition television, digital television, and innovations have continued to flood in: the launch of Digital Terrestrial Television; IPTV; video on demand; mobile television..
In the same way, technological innovations have been numerous in the Internet field, with increasingly powerful research engines, high bandwidth Internet, instant messaging, the social networks.. quite simply Web 2.0.
Video on demand and catch-up TV began to create a convergence between the worlds of Internet and television. With the launching of the «over the top» services, set-top box hybrids, or again Internet connectable TVs, the convergence will go further.

How is video on demand evolving on the TV receiver?
Over the last four years, the European market for video on demand has been particularly dynamic. Referring to the figures published by the European Observatory for the Audiovisual, at the end of 2007 in Western Europe there were 200 services available for video on demand. The majority of these services were accessible via PC. Television VoD services were quite recent, having been launched in 2004, mainly on the IPTV networks and numeric cable networks.
In spite of a dynamic offer, Europeans cannot easily access this service. It is estimated that only 14% of Europeans can reach these types of services. The reasons are quite simple: on the one hand the incapacity of digital terrestrial and satellite systems to offer this type of service; while on the other hand, observing the networks able to deliver this type of service, the IPTV, we see that their penetration remains relatively limited.
This said, even if their audiences remain low, VoD services on the TV set have a shown some success. It is true that the figure of 7% (percentage of Europeans using VoD services) may appear disappointing, but again, this figure must be set against the number of people who are able to access VoD on their TV set. The majority of the population is not aware this type of service exists; hence 7% is absolutely encouraging.
The interest shown in VoD by television viewers is apparent in studying the statistics published by operators providing VoD for television sets: we see that there is a real interest in such services, which meet a real expectation. One example is VirginMedia which offers a VoD service for TV set viewing. With 3.5 million subscribers, VirginMedia has registered 203 million requests for VoD. In the case of VirginMedia, it should be noted that the BBC’s catch-up service has greatly helped VirginMedia to develop its activity, and that a large part of the service offer is free of charge.
At the European level, wherever VoD is available on the TV receiver, at least one third of subscribers use this service regularly, and over 50% in the case of VirginMedia.
Viewers appreciate programmes on demand, so long as they are free of charge. They also appreciate «day-and-date» VoD, meaning the simultaneous release of the VoD with the DVD release. This type of offer is made by companies such as Warner.
2007 and 2008 can without doubt be named the years of catch-up television in Europe. According to the European Observatory for Audiovisual, there were some 50 catch-up television services in Europe by the end of 2007. As a rule, the services are provided by the broadcasters, who see them as a method for satisfying and gaining the fidelity of their audience, while also capturing a proportion of young viewers who tend to prefer the Internet.
Today there remains no large TV network that has not made the step to catch-up television. The services are usually free; nevertheless some operators have opted for subscription. There too, whether free or paid for as in Belgium on cable or via IPTV, this service appears to meet a desire of the viewers.

With an increase of VoD offers on the TV receiver, will these services become more available in the medium term?
Our reply is ‘yes’ at least for two reasons: Firstly, because VoD is seen as necessary by the TV operators to face competition. Secondly, the video industry is experiencing some difficulties, with a downward trend in DVD sales and a fairly constant growth of video piracy. Therefore, it is advisable to find a solution for this problem, and video on demand via the TV receiver could be an answer.
The main interested parties must make VoD work, and they will push these services despite everything, even during a period of recession.

How do you define the hybrid and over-thetop television offers?
The will of the market actors to bring together television and the Internet via the TV set marks a major change over the last few months. The concept of hybrid television or the TV over-the-top solution rise from the convergence of three types of network: the traditional TV network, the IP network, and the public Internet.
These concepts cover several types of offer, and interest the operators of paid television platforms as much as the Internet players.
One observes the appearance of offers that are rather innovative and interesting during 2007 and 2008. These are offers of over-the-top video and VoD. These are based on units that connect to the TV receiver and to the Internet, to permit access to an offer of video content, usually on demand, distributed via Internet. In this category are the Apple TV, X-box 360, and PS3, as well as independent offers, such as Roku now available in the United States, or with the launch of Fnac TV in France.
Offers of these types of equipment and services remain rather limited in Europe.
From January 2009, these offers do not necessarily require a connecting unit, but are available directly on TVs with Internet connectivity. This prospect will bring profound changes to the way contents are consumed on televisions: moving towards a world of widget on the TV receiver. The experience will be similar to iPhone, the TV viewer will be able to access «application stores» to download widgets of interest and have them available on the home TV.
This advance will also permit a better integration of guides to programmes and VoD services, which will be fully integrated with the linear services. Today these two spheres are completely separate, and also for this reason VoD services are a little less used.
In the same way, viewers will be able to access their social networks from their TV set, and receive recommendations from their friends.. television will be more personal. This means the appearance of new business models in which targeted publicity will also play a central role.
If these changes appear already irreversible, their impact will nevertheless be felt in the medium term, for the following reasons in particular:
Homes able to take advantage of these technological innovations are still limited in number. By 2012 they will be available to one third of European home TVs.
• Today, an active basis of equipment able to connect to the Internet and deliver Internet content to the TV set, is quasi non-existent. We are starting from zero. Televisions with this functionality will be launched in 2009, and this is a market of replacement.
• Cooperation between the different players is indispensable. Regulation must be established at this level, and this will take some time…

What are the implications for the audiovisual industry?
Three points are of interest in defining the position of producers over the medium term:
• Content must be adapted to the new television experience.
• Preparation must be made for an even greater audience fragmentation.
• The transition to immaterial supports for distribution must also be prepared.

Actors in the audiovisual sector will have to integrate the new modes and the digital distribution platforms into their strategy, and grant an important place to the promotion of contents on Internet, via a quite elaborate policy.
From the point of view of format, it is vital to bear in mind: interactivity, the viewer’s multiplicity of screens, and the digital derivative products.
Lastly concerning rights: changes must take place in the way rights are negotiated. The VoD service operators must be helped to define offers that attract the consumer.