Industry Report: Distribution and Exhibition
The Economic Model of Mobile Entertainment (2)
by CARTOON (European Association of Animation Film)
- Angel Blasco, head of Films Cooperate Content Unit at Telefónica group, talked about the company’s scope in content business at Cartoon Master (Finance) 2007. Providing VOD and SVOD (subscription video on demand) services, Telefónica focuses on branding and cross-platform as marketing strategies.
Angel Blasco is General Manager of Filmayer International and runs the Escuela de Artes Visuales, in Madrid. He has a strong background in Marketing and Distribution where he has worked for over twenty-six years (theatrical, Video/DVD, television and new technologies). He has also experience in Production, Writing and Film Directing. Currently he heads the Film Division at the Telefónica Group Content Unit, for all territories and all platforms.
How many users does Telefónica have in the television activity?
Until now we have 1.5 million users on multiple distribution technologies. Telefónica is one of the first IP television providers in the world. For next year Telefónica will try to reinforce functionality with private video recorder and personal television. As far as broadband is concerned, Telefónica has a strong position both in terms of penetration and in terms of content.
What is your position in the mobile industry?
Telefónica has a strong position in music and games. We have more than 300 millions in billings. As 3G increases and expands, we will be able to work with video and television in the mobile. We are working on personalisation issues, short formats and clips. We need some more expansion of the 3G technology and some more speed to be able to offer some valuable products.
Although we invest a lot in technology and in platforms, Telefónica is new in terms of contents. The question is: what are the best contents for all these different platforms? In some cases we will just adapt content that has been created for theatrical or video distribution. We are also thinking of new elements that could be specifically designed for our platforms. When we speak about mobile and television, we understand television in the mobile. We can speak of a second stage which is the television for the mobile. The third stage will be the personal television where the consumer will have access to its own content.
Which is your core business?
We are basically access providers, entering a world of content, which is a new environment for Telefónica. This is a strong debate we have internally in the company. Should the business focus on access or content? I personally think that a company like Telefónica should move into content. Access will have decreasing margins and content will give us a competitive advantage. As far as content is concerned, we propose two kinds of services: classical VOD and SVOD (unlimited downloading for a monthly fee). Our VOD service, Imagenio, has grown very rapidly in the last 3 years. Three years ago we started with 500 subscribers, in December 2006 we had 380,000 subscribers and in June 2007 there were 420,000 subscribers. The interesting phenomenon is that the increase of IP had a positive impact on the Pay TV. IPTV did not cannibalise the rest of the Pay TV.
Presently the strategy is to try to find some big titles and create a brand, promote the online services and attract audience. The competition is huge to get the content. The content can be differentiated in three different areas:
a) blockbusters, for which the telcos can pay a MG in exchange of exclusivity;
b) content which is not known, for which telcos will not pay a MG but will provide visibility;
c) content from the broadcaster, for which telcos will provide promotion and positioning together with the broadcaster.
The cross-platform promotion is very effective. Some TV channels are for example asking for catch up TV services or even the possibility to transmit one episode of the series before the TV programming to create awareness around the show.
Which will be the evolution of the market?
Technology will allow the transfer of the content from PC to the television very easily. This element will allow a more rapid penetration of VOD into the consumer habits. There will be an increase of the number of titles. There is a good opportunity to have a return, according to the long tail theory: micro incomes that have been produced in the past.
There are three kinds of digital platforms:
a) IPTV which is a growing business. Telcos are still learning, it is clear that they do not have the same knowledge broadcasters have. A lot of tests are done to understand how the business can work;
b) the VOD model, which is based on promotion and marketing. It is closer to cinema distribution and home video, you have to promote what you have to sell, there is no concept of prime time;
c) subscription and free VOD models which are what is working in the Us and will be probably the dominant model in the future in Europe too.
The free VOD is probably the more convenient model because it can bring money from the advertisers. All these VOD models need a strong marketing campaign to be visible in a crowded market. Digital platforms are becoming distribution and promotional platforms. The telcos’ approach on content distribution is the revenue share model. The minima guarantees paid by telcos are still very low.
It is important to work on a cross platform perspective and to promote the products in different ways: banners, SMS, MMS, television… for example we send a MMS with a message saying «it’s your daughter’s birthday in two days, offer her a film and you will have a 20% discount .»
Does VOD bring money to the producers?
At the moment the return for the producers is very limited. VOD does not allow the financing of a series or a film. In the future telcos will be able to invest in production. At the moment there is a lot of fear when it comes to content. The telcos managers are engineers and generally they do not know the value of the content. The investments made by the telcos companies in the last years are huge. The telcos are building enormous infrastructures, have difficulties in investing in content as they are building new brands and are spending billions of euros every year in technology.
What kind of programmes do you look for?
We are looking for our customers. We need inputs from producers and we need solutions for the problems we have. Our main goal is to take care of our customers. We are looking for content and for services. a film can be a service we offer to our clients. We want to maintain customers and create communities. We rely also on content aggregators. We keep a direct relationship with big providers.
Cartoon Master Freising, Germany, June 2007
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