Communications report 2011–12 series Report 1—Online video content services in Australia
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- Executive summary 4 Introduction 8
- OVC services for portable devices in Australia 26
- Demand for OVC in Australia 30
- The future of online video services in Australia 40
- Table OVC services market, Australia—key indicators, 2011–12
- Online participation indicators—persons 18 years and over with: % of adult population
- Providers of catch-up viewing services Unique audience June 2012
- OVC service providers (subscriptions or pay per view) Service offerings
- Demand for OVC services—internet users 18 years and over % of adult home internet users
- Full-length online content use in the six months to June 2012 % of OVC users
- Future market indicators—internet users 18 years and over % of adult internet users
- Top barriers to take-up of OVC services % of those yet to access OVC
Executive summary 4 Introduction 8 Definitions/scope 9 Provision of online video content services 10 Growth in online participation and digital media usage 10 OVC market overview 10 General market observations 11 Revenue models in Australia 12 Internet service providers 13 Australia’s free-to-air broadcasters 16 Subscription television—FOXTEL 16 Content aggregators in Australia 19 Wholesale content aggregators—Fetch TV 19 Retail content aggregators—Quickflix 19 Super aggregators 20 Key device manufacturers 22 Internet-enabled televisions 22 Games consoles 24 IPTV set-top boxes 24 Streaming media devices 24
Mobile TV services in Australia 26 OVC service provision beyond Australia’s borders—the international context 28 A snapshot of OVC services in the UK 28 Accessing overseas content from Australia 29
Overview 30 Consumer awareness of online video services 30 Awareness of specific service brands 31 Accessing OVC 31 Type of OVC accessed 32 Free-to-air television catch-up services 33 Devices used to access OVC 34 Use of multiple access devices 35 Time-shifting access devices 36 Drivers and barriers to OVC access 37 Bundling, discounting and willingness to pay 38 Willingness to pay for OVC services 38 Main barriers to accessing OVC services 39 The future of online video services in Australia 40 NBN rollout 40 New OVC access devices 40 Increased wireless speeds 40 Regulatory considerations 41
Overview of research resources 42 Data analysis 42
Executive summaryChanging consumer and audience preferences are driving fundamental changes in how content is delivered by communications providers in Australia. The growth in online participation is disruptive, presenting both a challenge and opportunity to industry. This growth confirms that many Australians now access the internet and spend significant amounts of their time online—6.4 million Australian adults (36 per cent of those aged 18 years and over) spent more than 15 hours a week online at June 2012. The rise of affordable, higher speed internet has encouraged and enabled user demand for viewing content, buying products and having services delivered online, as a key part of marketing and business strategies. This greatly extends the usage of the internet beyond its historical driver as a provider of communications (mainly email) and information. The development of the professionally-produced online video content (OVC) service market in Australia is a key example that demonstrates how the internet is forcing the evolution of existing approaches to service delivery. This increased development of internet-distribution channels for meeting viewer demand is likely to continue, and this could pose challenges to existing content regulations, which were developed primarily for traditional broadcasting transmission. This report provides a timely overview of the commercial OVC market in Australia from two key perspectives: the supply of these services, their delivery models and internet-based video services and products available to consumers in 2012 the level of consumer demand for these services in 2012, including current levels of service use, and related drivers and barriers of take-up including willingness to pay for services.
Revenues from traditional offline income sources such as advertising and voice communications are being challenged by the growth in use of the internet. For example, online advertising revenue is increasing dramatically—up 30 per cent in the six months to June 2012. As one example, OVC services are now being seen not only as meeting viewer demand, but also as a potential area for revenue growth by free-to-air (FTA) broadcasters and internet service providers seeking to increase online audiences and subscriber numbers. The provision of OVC services in Australia has generally taken two major forms: catch-up television offered by FTA television broadcasters on an over-the-top (OTT) basis—enabling viewers to access recently aired shows via the internet, usually free of access charges1 high-end internet protocol television (IPTV) services—providing users with access to video content in return for a subscription, or fee-per-view provided by internet service providers (ISPs). More recently, a third form is growing, where increases in broadband speed have given rise to a growth in paid-for, OTT content services that are offered direct from the content provider to the consumer, potentially challenging the role of ISP as intermediary. IPTV services The supply of IPTV services has continued to expand over the 2011–12 period, encouraged by increased competition between ISPs and higher available bandwidth. At June 2012, there were nine IPTV providers in the Australian market, the majority offering content from two aggregators, FOXTEL and Fetch TV. Telstra remains the major player in this market, leveraging its 50 per cent stake in FOXTEL by bundling other communications products with online video access services to attract customers. Along with a number of smaller ISPs, Optus and iiNet have invested in the Fetch TV model, offering consumers access to Fetch TV’s aggregated video content on a subscription basis. In late 2011, competition between Fetch TV service providers resulted in efforts to differentiate products and reduce prices by up to thirty per cent in some cases. Other initiatives to attract customers have included offering meter-free access to IPTV content, in addition to some catch-up television sites such as ABC iView. Catch-up services Traditional FTA broadcasters have recognised catch-up television’s capacity to augment viewing audiences and advertising revenue, placing increasing amounts of content online, including back-catalogues and previously unaired content. The ABC has perhaps been the most innovative in this area, both in terms of expanding the range of content accessible via its catch-up service to include television programs immediately after their broadcast in the UK, and agreements with 12 ISPs to provide subscribers with unmetered access to its iView service. Other FTA broadcasters, such as the Seven Network have also recognised the potential of catch-up television, and are investing in new formats and expanding their catalogue. Consumer devices In an effort to increase consumer take-up of online video services, both FTA broadcasters and IPTV service providers have directed considerable investment to making content available in a range of platforms, for both fixed and portable devices. The popularity of tablets and smartphones (used by 29 and 57 per cent of adult internet users respectively), together with lower wireless data costs and higher traffic speeds, are encouraging consumers to access OVC using a range of devices wherever they are.2 Broadcasters and service providers now offer content compatible with both iOS (Apple) and Android (Google) platforms, in addition to games consoles and internet-enabled televisions. Internet-connected games consoles are increasingly being used to access OVC, with device-specific content produced by both high level IPTV and OTT content providers. Apple and Google TV The ways in which consumers can access video content, including IPTV services, are expanding. With higher available internet speeds and improved software, services are increasingly being offered direct from the content provider to the consumer, without the ISP as service intermediary. For example, global ‘super aggregators’ such as Apple TV and more recently, Google TV, are now offering OTT services to Australian consumers that create a direct channel between their products and the purchaser, posing a challenge to the ISP role as intermediary in this market. The National Broadband Network and smart technology The rollout of the NBN and the development of new OVC access devices are likely to provide significant stimuli to the supply and take up of OVC services in the future. The provision of greatly-enhanced download speeds through the NBN will encourage service availability and the online video viewing experience, while the development of smart technology, where functionality is built into the device rather than the network, will allow consumers to access OVC services at the touch of a button. Take-up and awareness of OVC services in Australia Despite developments in the supply of IPTV services, take-up of these services (e.g. Fetch TV) is still relatively low at five per cent of internet-connected households. By comparison, Australians have adopted catch-up television in much greater numbers. During June 2012, an estimated 1.5 million adult internet users (11 per cent) accessed a catch-up service offered by an FTA broadcaster, compared to nearly one million (eight per cent) during June 2011. The differing adoption levels between IPTV and catch-up services may be a consequence of a number of factors, including service awareness, access and set-up cost and the fact that catch-up television is an extension of familiar existing television viewing preferences. Video-on-demand (VOD) and catch-up television has a higher awareness among Australian audiences than their IPTV counterparts. At June 2012, 68 per cent of the adult internet population were estimated to be aware of VOD services, 51 per cent, of the catch-up services offered by FTA broadcasters, and 38 per cent had heard of IPTV services. Australians find out about these services in a range of different ways, with television advertising being the most common source of information at 56 per cent of those aware, followed by word-of-mouth, at 51 per cent. While 49 per cent of those intending to access OVC in the next six months have indicated that they are willing to pay for OVC services, the degree to which this willingness is manifested into actual paying consumers will be heavily dependent on the arrival of additional incentives, such as new content service offerings over and above what is already available via existing catch-up channels and the increased take-up of easy-to-use online video access technology such as smart televisions. It is therefore likely that the OVC market in Australia will be dominated by catch-up viewing services for some time yet. International OVC market Developments in overseas markets such as the UK provide some parallels to the Australian market, with catch-up television dominating OVC audience figures and IPTV service take-up still comparatively low. However, in more mature OVC markets, such as France and the United States, consumer take-up of OVC is considerably higher than that seen in this country, despite similar levels of broadband penetration. Australian access to international catch-up and IPTV services such as Hulu and Netflix is largely restricted due to licensing and copyright restrictions. However, with a high degree of technical knowledge, it is possible for Australians to access content on these sites, though the number of internet users currently doing this is likely to be low.
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