video: opportunities and growth drivers

VIDEO: OPPORTUNITIES AND GROWTH DRIVERS
Michel Azibert, Deputy CEO and Chief Commercial & Development Officer
Agenda
1
Eutelsat’s video business
2
Market trends
3
Eutelsat’s Video strategy
4
Conclusions
2
Eutelsat Video activity in a snapshot
REVENUES BY ACTIVITY IN FY 2015
► Total revenues of €913m
•
4%
13%
63% of Group total
► High visibility
•
83% of Group backlog
•
Long-term contracts
► ~ 5,800 channels
•
37% Free-to-Air (FTA)
•
63% Pay-TV
Broadcasting
€913m
Professional video
83%
Distribution
REVENUES BY REGION IN FY 2015
Western Europe
9%
5%
Central Europe
► HD penetration of 12%
•
19% on HOTBIRD
MENA
8%
€913m
SSA
RCA
46%
19%
LATAM & Others
13%
3
Ten years of growth
REVENUES
(€M)
BACKLOG
(€M)
+93%
+79%
913
5,150
4,463
742
2,668
511
FY 2005
FY 2010
CAGR: 6.0%
FY 2015
FY 2005
FY 2010
FY 2015
CAGR: 6.8%
4
Valuable assets: ten video hotspots…
EUTELSAT 7 WEST A
EUTELSAT 8 WEST B
EUTELSAT 113 WEST A
HOT BIRD 13B, 13C, 13D
EUTELSAT 10 A
EUTELSAT 115 WEST A **
EUTELSAT 115 WEST B
EUTELSAT 48A
EUTELSAT 48D
EUTELSAT 21B
EUTELSAT 12 WEST A
EUTELSAT 12 WEST B
EUTELSAT 25B
EUTELSAT 53A*
EUTELSAT 3B
EUTELSAT 28E*
EUTELSAT 28F*
EUTELSAT 28G*
EUTELSAT 117 WEST A
EUTELSAT AT1* (56° E)
EUTELSAT 70B
EXPRESS AT2* (140° E)
EUTELSAT 16A
EUTELSAT 16C
EUTELSAT 5 WEST A
TELSTAR 12*
15* W
EUTELSAT 36A
EUTELSAT 36B
EUTELSAT 172A
EUTELSAT 33C
EUTELSAT 33D
EUTELSAT 7A
EUTELSAT 7B
EUTELSAT 31A
EUTELSAT 9A
KA-SAT
EUTELSAT FLEET
NOVEMBER 2015
*
Inclined orbit
Stable orbit
Capacity on third-party satellites
Key Video Neighborhoods (>170 channels)
** being repositioned
5
…with a reach of ~275 million homes
AUDIENCE GROWTH (MILLION HOMES)
13° East
7/8° West
36° East
28° East
9° East
16° East
7° East
5° West
138
122
52
27
26
18
14
18
14
5
11
12
9
6
5
5
(1)
Europe
MENA
MENA
(1)
SSA
Russia
Western
Europe
2010
Europe
Central Europe
SSA(1)
MENA
Africa
EMEA
2014
Growth >30% since 2010
(1) Figures are not taking into account audience in SSA
Source: Eutelsat TV Observatory
6
… and a strong channel line-up
13° East
16° East
5-YEAR AUDIENCE GROWTH (MILLION HOMES)
36° East
7/8° West
7° East
9° East
5° West
28° East
1070
936
932
827
367
Channels
319
244
198
173
98
o/w HD
98
79
45
89
29
(1)
Europe
MENA
Central Europe
(1)
SSA
SSA(1)
Russia
MENA
MENA
Africa
Europe
EMEA
9
Western
Europe
~40 TV platforms on Eutelsat’s fleet, up 17% since 2010
(1) Figures are not taking into account audience in SSA
Source: Eutelsat TV Observatory
7
Western and Central Europe
VOLUME MARKET SHARE
(TRANSPONDERS USED FOR VIDEO)
► 59% of total video revenues
• Number one player in volume market share
15%
Eutelsat
6%
► HD penetration: ~17%
SES
► Main neighbourhoods:
• 13°East (HOTBIRD)
• 9°East
• 16°East
• 5°West
Hispasat
► Western Europe
• Mature market
• Premium pricing
► Central and Eastern Europe
• Moderate growth
• Lower pricing
39%
Intelsat
9%
Others
31%
TRANSPONDER DEMAND FOR VIDEO APPLICATIONS
807
804
806
805
804
804
224
230
236
241
248
255
583
574
570
564
556
549
2014
2015
2016
2017
2018
2019
Western Europe
Central Europe
Source: Euroconsult
8
Key video hotspot: HOTBIRD at 13° East
HOTBIRD: MAIN MARKETS AND CUSTOMERS
(EUROPE ONLY)
► ~25% of total group revenues
► Three satellites:
• 102 operational physical transponders (95 TPE)
► Fill rate c.95%
► Main markets are Italy and Poland
► Reach of 100m households in Western
and Central Europe
•
•
Up 6 million vs. 2010
~30 million DTH
► 1,070 channels
• 63% Pay-TV
• 19% HD penetration
► Average revenue per 36 Mhz equivalent
transponder: €3.8m
9
Middle East and North Africa
VOLUME MARKET SHARE
(TRANSPONDERS USED FOR VIDEO)
► 19% of Video revenues
•
Number one by volume market share
► Main neighbourhoods:
Arabsat
34%
Turksat
•
7/8° West
Nilesat
•
7° East (Digitürk anchor customer)
Others
•
13° East (HOTBIRD)
► HD penetration: 13%
22%
Eutelsat
6%
17%
21%
TRANSPONDER DEMAND FOR VIDEO APPLICATIONS
► Main customers include Noorsat, Nilesat, Gulfsat,
TDA, OSN, MBC…
► MENA characteristics:
•
Free-to-Air (FTA) the most widespread reception mode
•
Growing satellite TV universe
CAGR: +2.6%
405
422
433
444
454
462
2014
2015
2016
2017
2018
2019
Source: Euroconsult
10
MENA growth momentum
RECEPTION MODES IN MENA
TV HOUSEHOLDS AT EUTELSAT’S 7/8° WEST NEIGHBORHOOD (M)
2%
6%
33%
39%
92%
67%
61%
2008
Satellite
52
2010
Analog terrestrial
2013
25
27
2008
2010
2013
DTT / IPTV
Satellite has dominant market share
Strong momentum consolidating leadership
Source: TV Observatory 2014
11
Sub-Saharan Africa (SSA)
VOLUME MARKET SHARE
(TRANSPONDERS USED FOR VIDEO)
► 8% of video revenues
•
Number one in volume market share
19%
Eutelsat
Intelsat
► Eutelsat is the leader with three Hotspots
•
36° East
•
16° East
•
7° East
► Market characteristics
•
Growing satellite market share
•
Ongoing DTT transition
•
Growing number of both African and international channels
35%
SES
15%
Others
31%
TRANSPONDER DEMAND FOR VIDEO APPLICATIONS
CAGR: +7.1%
► Main customers include Multichoice, Azam Media,
Canal + Overseas…
256
274
303
231
290
215
2014
2015
2016
2017
2018
2019
Source: Euroconsult
12
Russia and Central Asia
VOLUME MARKET SHARE
(TRANSPONDERS USED FOR VIDEO)
► 9% of video revenues
•
Market leader in volume market share
14%
Eutelsat
26%
9%
Gazprom
► Global coverage of Russia with three orbital
positions
•
36° East
•
56°East
•
140° East
RSCC
Intelsat
SES
15%
18%
Others
17%
TRANSPONDER DEMAND FOR VIDEO APPLICATIONS
► Reaching 26m households at 36°East
► >750 channels
•
CAGR: +4.6%
13% HD penetration
► Serving Russia’s main DTH platforms
•
Tricolor TV and NTV+
236
259
268
275
285
295
2014E
2015E
2016E
2017E
2018E
2019E
Source: Euroconsult
13
Latin America
VOLUME MARKET SHARE
(TRANSPONDERS USED FOR VIDEO)
► 3% of video revenues
•
Relatively new market for ETL
6%
Intelsat
36%
12%
SES
► DTH and cable distribution at 117° West
•
Capacity and performance will be strengthened
with the launch of ETL 117 WB
7%
Star One
Hispasat
Eutelsat
19%
Others
20%
► >200 channels on EAS fleet
► Anchor customer: Millicom
TRANSPONDER DEMAND FOR VIDEO APPLICATIONS
► Launch of ETL 65WA to boost and complement
CAGR: +4.7%
video resources for Brazil
555
591
609
625
637
507
2014E
2015E
2016E
2017E
2018E
2019E
Source: Euroconsult
14
Agenda
1
Eutelsat’s video business
2
Market trends
3
Eutelsat’s Video strategy
4
Conclusions
15
Market trends
2.1
Evolving consumer behaviour
2.2
Improving image quality
2.3
Satellite to remain a key infrastructure in mature markets
2.4
Significant opportunity in fast-growing markets
2
16
2.1 Evolving consumer behaviour
Changing video landscape
NEW FORMATS AND CONTENT
NEW ENTRANTS
NEW VIEWING HABITS
► Series
► OTT
► Time-shifted
► Short formats for mobile reception
► On-demand
► User-generated content
► Multi-screen
► Social TV
17
2.1 Evolving consumer behaviour
Changes in viewing habits
US - AVERAGE TIME SPENT PER ADULT (18+) PER DAY (MINUTES)
CAGR
392
389
36
56
66
+35%
46
26
48
29
43
29
-3%
+6%
269
259
251
-3%
2013
2014
2015
377
► Linear viewing declining
but still predominant
Live TV
Time-shifted TV
Internet on a PC
Smartphone
► Growth of non-linear usages
Source: Nielsen Total Audience Report
18
2.1 Evolving consumer behaviour
Impact of OTT
ON VIDEO AUDIENCE DISTRIBUTION
► Satellite will maintain critical mass
as the only infrastructure able to reach
households with insufficient terrestrial
connectivity
OTT
ON NUMBER OF CHANNELS
ON LEGACY TV PLATFORMS
► OTT leading to cord-shaving of non-premium
channels in mature markets
► Western Europe markets differ from the US
• Over twice as many channels per M inhabitant
in North America
• Lower Pay-TV penetration in a number of countries
in Europe
• Lower price of Pay-TV bundles
(less incentive to cut the cord)
• OTT offer less diversified in Europe
► Eutelsat main markets, Poland and Italy, affected
later and less
► Fast-growing markets not significantly impacted
in foreseeable future
19
Market trends
2.1
Evolving consumer behaviour
2.2
Improving image quality
2.3
Satellite to remain a key infrastructure in mature markets
2.4
Significant opportunity in fast-growing markets
2
20
2.2 Improving image quality
Capacity requirement as a function of image quality and compression
NUMBER OF CHANNELS PER 36 MHZ TRANSPONDER
Ramp-up
Period
1990s-2000s
Broadcast Format
SD
Modulation
MPEG-2
compression
MPEG-4
compression
HEVC
Compression
DVB-S
12
20
-
DVB-S2
-
26
-
DVB-S
2 to 3
5
-
DVB-S2
3 to 4
6 to 8
12 to 15
1 to 2
3 to 4
2000s-2010s
2020s
DVB-S2 / DVB-S2X
Improved quality will require more capacity, better compression to facilitate transition
Source: Eutelsat
21
2.2 Improving image quality
HD adoption driving growth
EVOLUTION OF IMAGE QUALITY
10-Y HD CHANNEL PENETRATION
(NUMBER OF CHANNELS – EMEA + LATAM)
14%
76%
38%
25,000
67%
20,000
47%
38%
37%
15,000
32%
31%
21%
20%
15%
14%
12%
10%
5%
North
America
Western
Europe
2014
2024
LATAM
Central
Europe
MENA
10,000
Russia and
Central Asia
Scope for ramp-up in all regions...
5,000
SSA
2012
2014
Standard Definition
2016
2018
2020
2022
2024
High Definition
… resulting in higher HD penetration
Source: Euroconsult 2015
22
2.2 Improving image quality
Conditions in place for UHD adoption
DEMAND
EQUIPMENT
STANDARDS
CONTENT
►
Once viewed, two out of three consumers would like an UHD screen
►
Ready to pay extra for UHD for both Free TV and Pay TV viewers
►
UHD screen entry price now less than €1,000
►
By 2020, 70% of all screens sold in Europe will be UHD
►
HEVC compression leading to greater cost-efficiency
►
Industry consensus on development of 4K standard
►
Film studios already massively producing UHD content
►
OTT players producing their own UHD content
►
First linear UHD channels on air - UHD live sports starting
Source: Gfk consulting, Eutelsat Focus Groups, Ericsson Consumer Lab
23
2.2 Improving image quality
Satellite to benefit from UHD take-up
UHD CHANNELS BROADCAST BY SATELLITE
900
800
700
600
500
► Estimated 800 UHD channels
400
worldwide by 2024
300
200
► Satellite to drive growth
100
0
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
For distribution, satellite offers the best mix of coverage,
image quality, availability and bandwidth
Source: Euroconsult
24
Market trends
2.1
Evolving consumer behaviour
2.2
Improving image quality
2.3
Satellite to remain a key infrastructure in mature markets
2.4
Significant opportunity in fast-growing markets
2
25
2.3 Satellite to remain a key infrastructure in mature markets
Satellite’s competitive advantage over OTT / IP
COST-EFFICIENCY
Cost
UNIVERSAL REACH
SERVICE QUALITY
BROADBAND COVERAGE (>30Mbps)
BANDWIDTH REQUIREMENT (Mbps)
OTT
20
1 UHD channel in HEVC
86%
8
1 HD channel in MPEG 4
Satellite
40%
27%
1 SD channel in MPEG 2
4
# viewers
UK
►
►
►
CDN costs rise in line with audience
growth
Italy
►
High cost of fibre roll-out
►
►
Terrestrial networks cannot reach
entire population
Higher quality of image leading
to increased bandwidth usage
►
Congestion of terrestrial netwoks
Satellite more cost efficient above 50k
viewers in Western Europe
Satellite a fraction of TV platforms
operating costs
France
•
•
►
Lower image quality
Or even no service
Satellite providing full coverage
of a market
•
►
Video will represent ~80% of consumer
internet traffic by 2019
Satellite and hybrid solutions allowing
unimpaired viewing experience
Source: Eutelsat analysis, European Commission - Broadband Coverage in Europe 2014, CISCO VNI 2015
26
2.3 Satellite to remain a key infrastructure in mature markets
Case study: development of hybrid offer in South Korea
KT MEDIA SUBSCRIBERS (M)
► South Korea is one of the countries
with the highest fiber penetration
8.44
► KT Telecom hybrid offer launched in August 2009
combining IPTV with DTH
•
Part of a triple play offer including broadband and Voice
over IP
4.14
► Differentiated services offering
•
•
Wide range of linear channels including HD channels
(from satellite TV)
Significant VOD contents (from IP offer)
► After adopting the hybrid platform
•
KT was perceived to be superior to cable TV
or competitor IPTV
•
Became leading IPTV player
4.55
Olleh TV
(IPTV)
1.55
Olleh TV Skylife
(hybrid)
0.84
Skylife TV
(satellite)
2.15
2.04
2011
2015
2.27
Satellite
Satellite prospering in the land of fiber
Source: Eutelsat analysis, company reports
27
Market trends
2.1
Evolving consumer behaviour
2.2
Improving image quality
2.3
Satellite to remain a key infrastructure in mature markets
2.4
Significant opportunity in fast-growing markets
2
28
2.4 Significant opportunity in fast-growing markets
Markets with structural growth drivers
ESTIMATED RISE IN MIDDLE-CLASS BY GEOGRAPHY1
CHANNELS PER M INHABITANT2
(MILLION OF POP)
313
251
234
181
165
31
107
105
57
32
6
8
8
LATAM
Russia
Central Asia
2
2009
LATAM
MENA
2020
2030
SSA
MENA
North America
SSA
Rise of middle-class with increased
spending power
Underpenetration of television
in fast-growing markets
(1) Source: OECD working paper - the emerging middle-class in developping countries
(2) Source: Euroconsult 2015, Eutelsat analysis
29
2.4 Significant opportunity in fast-growing markets
Pay-TV subs and advertising driving growth
GROWTH OF SATELLITE PAY-TV SUBSCRIPTIONS
GROWING ADVERTISING REVENUES
(M SUBSCRIBERS)
($BN)
26.9
87
CAGR: 4.8%
CAGR: 5.7%
19
20.4
66
16
42
32
10
8
16
10
2014
SSA
MENA
2020
LATAM
Russia
Source: Global Satellite TV forecast, Digital TV research, May 2015
Strong growth potential in both Pay-TV…
2014
SSA
MENA
2019
LATAM
Russia
Source: Global entertainment and media outlook, 2015-2019, PWC
…and Free-to-Air
30
2.4 Significant opportunity in fast-growing markets
Sustained rise in channels
CHANNELS BROADCAST BY SATELLITE
CAGR: 4.0%
~18,500
~16,200
+4%
~12,500
+6%
+3%
+4%
HD
penetration
Russia
MENA
SSA
2014
2019
11%
20%
2024
32%
LATAM
Source: Euroconsult 2015
31
2.4 Significant opportunity in fast-growing markets
Limited availability of TV via broadband in fast-growing markets
FIXED BROADBAND
PENETRATION
USA
Russia
Brazil
Mexico
Turkey
Egypt
Tanzania
70%
44%
32%
39%
39%
10%
3%
43%
33%
2%
6%
7%
<3%
N/A
% OF HOUSEHOLDS
BROADBAND
SPEED
% OF HOUSEHOLDS
WITH >10Mbps
In many markets, satellite remains the most viable infrastructure for video distribution
Source: Akamai's State of the Internet – Q2 2015 report; McKinsey – Offline and falling behind: Barriers to Internet adoption – October 2014
32
2.4 Significant opportunity in fast-growing markets
Satellite gaining market share worldwide
MILLION TV HOMES BY DISTRIBUTION MODE - GLOBAL
► Total
number of TV homes to increase by 140
million to 1.7 bn by 2020
1800
1600
1400
1200
► Satellite reception to grow by 80 million homes
to 440 million by 2020
393
407
420
442
378
431
362
102
118
134
150
165
177
188
563
561
565
575
583
591
599
528
520
507
490
478
470
465
2014
2015
2016
2017
2018
2019
2020
1000
800
600
400
► Satellite
market share to rise from 23% to 26%
200
0
Growth of satellite in fast-growing markets,
resilience in mature markets
Terrestrial
Cable
IP
Satellite
Source: Euroconsult, Digital TV Research
33
Agenda
1
Eutelsat’s video business
2
Market trends
3
Eutelsat’s Video strategy
4
Conclusions
34
Eutelsat’s Video strategy
3
3.1
Strengthen resources in fast-growing markets
3.2
Encourage HD and UHD adoption
3.3
Innovate to maximise satellite value proposition
35
3.1 Strengthen resources in fast-growing markets
New capacity focused on fast-growing markets
SATELLITE
LAUNCH
CAPACITY1
COVERAGE
E 8 WB
ENTRY INTO
SERVICE
OCT. 2015
+26 TPE
MENA
► Ku-band fully presold
E 36 C
Q4 2015
+19 TPE
SSA
RCA
► 11 expansion transponders presold
E 117 WB
Q1 2016
+48 TPE
LATAM
► Anchor customer: Millicom
E 65 WA
Q1 2016
+39 TPE
LATAM
1
Regular capacity only
to Multichoice (Africa)
► ‘Piggy-backing’ on dynamic Brazil video
neigbourhoods
TPE: 36-Mhz equivalent transponders
36
Eutelsat’s Video strategy
3
3.1
Strengthen resources in fast-growing markets
3.2
Encourage HD and UHD adoption
3.3
Innovate to maximise satellite value proposition
37
3.2 Encourage HD and UHD adoption
Support HD ramp-up
► Many Eutelsat Pay-TV customers accelerating migration
from SD/HD line-up to full-HD
► Several Free-to-Air broadcasters are also extending HD
offer on Eutelsat satellites
► Eutelsat main actions
• providing additional capacity where needed
• facilitating migration
• providing support and commercial incentives to switch to HD
► HD development on Hotbird a priority for both pay TV
and Free-to-Air
► Migration well underway now in MENA for premium
content
Ensure satellite remains
first in class in terms
of quality.
38
3.2 Encourage HD and UHD adoption
Accompany UHD ramp-up
► Eutelsat dedicated capacity on Hotbird to launch UHD channels
for the European market
► Demo channel in place on HotBird, encoded in HEVC at 50 frames
per second with 10-bit colour depth.
•
Europe’s first UHD channel in this new standard.
► Several initiatives:
• France: Fransat Ultra HD demo channel
• Germany: public broadcasters
• Russia: Tricolor TV going UHD with 2 channels
► Content partners preparing commercial launch of UHD linear channels
• SPI International 4K FunBox
► Recent contracts with pay-TV customers incoporate roadmap for progressive introduction of
UHD
39
Eutelsat’s Video strategy
3
3.1
Strengthen resources in fast-growing markets
3.2
Encourage HD and UHD adoption
3.3
Innovate to maximise satellite value proposition
40
3.3 Innovate to maximise satellite value proposition
Satellite replicating experience available through terrestrial networks
EXPERIENCE
SOLUTION
INTERACTIVITY
ON-DEMAND
MOBILITY
MULTI-DEVICE
ERGONOMIC
NAVIGATION
STATUS
Already in
production
Native IP Multiscreen
Late stage
development
Smart EPG1
Work in
progress
1Electronic
program guides
41
3.3 Innovate to maximise satellite value proposition
Smart LNB: enabling interactivity for end-users
► Low-cost home device, compatible with existing
satellite equipment
► Providing narrow band return on top of regular
DTH reception
► Enables TV platforms to deploy connected TV
services via satellite:
•
Push VOD
•
Pay-per-view
•
Social TV
•
Live show participation
'Smart LNB'
► Viewer intelligence and remote CPE management
► Mass market production to begin soon
IP
IDU
TS Video
► Interest notably in fast-growing markets
Video
TV reception
LAN connectivity
42
3.3 Innovate to maximise satellite value proposition
Multi-screen delivery solution via satellite
► Eutelsat the first enabler for multiscreen delivery via satellite
to portable devices
► Combination of native IP multicast with local WiFi distribution
► Compatible with all mobile devices
► No increase in distribution costs as the number of users
increases
► Benefits for broadcasters
•
OTT via satellite in markets underserved by terrestrial networks
•
Increased channel reach with detailed audience measurement
•
Nomadic TV reception in public spaces
•
Formats tailored for smartphones and tablets enabling up to 100 channels
per transponder and richness of channel line-up
•
Universal coverage
43
3.3 Innovate to maximise satellite value proposition
Multi-screen delivery solution via satellite: how it works
END-USER PREMISES INSTALLATION
EASY INSTALLATION
USE CASES
► At home
•
Typically 4-5 simultaneous
users
•
Consumer-grade WiFi
access point
► In public spaces
•
Typically 40-50 simultaneous
users
•
High-end WiFi access point
is required
•
Commercial benefits
for hotels, cafés…
44
Agenda
1
Eutelsat’s video business
2
Market trends
3
Eutelsat’s Video strategy
4
Conclusions
45
To sum up
Track record of consistent growth in revenues, channels and audience
Attractive video assets both in mature and developing markets
4.3 has a competitive advantage in the evolving video ecosystem
Satellite
Strategy focused on harnessing growth in fast-growing markets
4.4
and leveraging the innovation opportunity
Video one of the pillars of Eutelsat’s growth
46
Q&A
VIDEO: OPPORTUNITIES AND GROWTH DRIVERS