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A more dynamic market than ever thanks to new devices (I)

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Bruno Zambardino • Professor of Economics and Organisation of Media and Entertainment


- Cineuropa caught up with Bruno Zambardino, professor of Economics and Organisation of the Media and Entertainment at the Sapienza University of Rome

Bruno Zambardino  • Professor of Economics and Organisation of Media and Entertainment

The transmedial revolution currently underway is leading to a use of audiovisual products that is reshaping consumption models. We talked about it with Bruno Zambardino, who has taught Economics and Organisation of the Media and Entertainment at the Sapienza University in Rome for 10, and published his book Dal possesso all’accesso - L’industria audiovisiva ai tempi dello streaming (lit. From possession to access – the audiovisual industry in the age of streaming) a few months ago.

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Cineuropa: Is this fragmentation in content, platforms and devices causing an increase in consumption and opportunities on the ground?
Bruno Zambardino: The phenomenon of the use of digital content on multiple Internet-enabled devices is on the rise and starting to become the norm. Suppliers of content go along with and fuel this trend. Netflix, for example, although it is certainly not the only one, has managed to build a solid digital brand around its own offering with the option of watching its content on various devices. The vast range of online devices is contributing to the modification of the online video sector. Taking personal devices like smartphones into account, most markets already have many more online devices than just computers and televisions. Media companies have to develop services that can be used on these devices; otherwise they risk losing ground on their competitors.

In practice, it is precisely this use of multiple screens that is on the rise: the public has gotten used to watching content, or snippets of content, in different places over the course of the day. So the television in the lounge at home is no longer enough. Irrespective of the type of content, it needs to be available on any device, to suit the habits of users. The consumption of content has become a more personal and personalised experience than it was in the past. Today, consumers find time to watch video clips, and even entire films, in a variety of places and circumstances and on a wide range of devices.

British regulator Ofcom discovered that in 2013, 39% of Internet users used the Internet to watch television programmes online, or downloaded them directly from the broadcasters websites, compared to 35% in 2012. The frequency with which users watched videos on the Internet also rose: out of all the British consumers that said they watched TV/films or videos online, 57% stated that they did so more than once a week, with a high of 69% in the 16-34 age bracket.

In 2013, European consumers spent €520 million on SVOD services (up 147.5% on the previous year), plus €400 on EST (Electronic Sell Through) services and €300 million on the online rental of films and TV series. Although the total exceeds €1 billion and is expected to rise to €1.5 billion by the end of 2015, it still represents a small portion of the audiovisual market, and most importantly, a sector that is still characterised by strong fragmentation between European markets.

In terms of overall revenue, too, the trend over the last five years confirms high levels of fragmentation between four key markets: the United Kingdom, Germany, France and Italy. Italy in particular ended 2014 with an on-demand turnover of just €25 million, equal to 4% of the UK’s revenue.

Staying in Italy, over the last six years the home entertainment sector has more than halved its turnover (-55.2%): all the traditional areas of the business are suffering badly, starting with sales of DVDs and Blu-rays discs.

High hopes for revitalising the sector rest on increasing income from the use of on-demand audiovisual content, an expanding and increasingly dynamic phenomenon (+38.5% between 2012 and 2013), even if online consumption is still relatively marginal in Italy, representing just 5% of the entire market with just €18 million derived from online VOD and EST services.

Over the years to come, the growth of the digital market and the related spending linked to the consumption of online audiovisual content will be driven by the rapid dissemination of millions of Internet-enabled devices and, in particular, smart TVs: by 2017 there will be more than 10 million in Italy. In just four months, the number of TVs connected to the Internet will increase by 500%, more than 6 million additional units. In addition, the dissemination of other devices connected to the Internet (computers, tablets, games consoles, smartphones) will lead to a potential market of some 130 million devices.

The phenomenon of smart TVs will lead to rapid growth in the demand for VOD services, also driven by the conversion from illegal platforms to legal services, on the condition that we move more quickly on investments in broadband. Indeed, access to broadband plays a crucial role in the distribution of online audiovisual content.

The growth in on-demand content has been driven, in particular, by new OTT (Over the Top Television) operators, or rather, services that distribute – on televisions and other Internet-enabled devices – web-based audio and visual content on open access broadband networks.

As we can see, the audiovisual services market is still more dynamic than ever thanks to new devices, evolutions in technology and the arrival of new operators to every sector of the industry.

Read the second part of the interview here.

(Translated from Italian)



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