European Research Update
Variation in Adoption of Internet-Connected CE and Set-Top Boxes Creates Challenges for Pay-TV Markets
New European entertainment and Internet of Things research from Parks Associates shows the adoption of connected CE in Europe is trending upward. Among broadband households, 69% in Spain and 67% in the U.K. own at least one Internet-connected CE, compared to 64% in the U.S. For Germany, adoption lags at 54%, but upon examining specific devices, smart TVs are particularly popular here. More than 40% of broadband households in Germany and Spain own a smart TV, including 6-7% with more than one smart TV. U.K. adoption of smart TVs is 33%.
The changing landscape for connected CE, pay TV, and OTT services in Europe, as well as the differences between countries, continues to provide challenges to major players. For example, while pay-TV service adoption is higher in Germany than the U.K. (86% vs. 78%), DVR and set-top box adoption is substantially higher in the U.K. One-third of U.K pay-TV subscribers have a DVR as part of their service, compared to just 5% of German pay-TV subscribers.
The relatively high adoption rate of DVRs and STBs in the U.K. is an indicator of the popularity of video in that market. Close to one-half of all U.K. DVR households bought their device at retail, versus approximately 22% in the U.S. In other European markets, purchasing a DVR at retail is even more common, creating unique competitive pressures and service opportunities throughout the continent.
The adoption of connected CE does provide a path into the home for OTT content and services, and several existing players and new entrants are eager to take advantage. The challenge for service providers is to develop strategies for OTT that both reinforce their traditional business while allowing them to expand into this new realm. There are options emerging to integrate OTT features through pay-TV services, with both HBO and Netflix announcing plans to offer their services through cable set-top boxes. New strategies and different scenarios for the set-top are also emerging, including the potential for a full-featured gateway that would manage household user profiles and handle conditional access, security, data, and other functions.
Use of PC-to-TV connections is higher in all three European countries compared to the U.S., indicating that consumers are already actively watching online content on the TV. The impact of new OTT services on uptake of pay-TV subscriptions and premium pay-TV features is still unknown.
Spanish broadband households in particular show enthusiasm for online video, with 54% watching free online video at least once a month. They also show interest in online comments and social networking activities related to their video viewing, indicating a potential for second-screen options as another avenue for service providers to capture new customers and for broadcasters and cable networks to build new audiences. Developing these types of innovative service strategies will be important in allowing service providers to find new revenue opportunities and build loyalty among subscribers, especially in areas where percentages of pay-TV service subscriptions and adoption of set-top boxes are low.
While the market is changing, some factors remain the same. On average 50% of U.K., Spanish, and German broadband households with multiple connected CE select their preferred device based on ease-of-use, trumping content availability and device features. Translating this consumer demand for simplicity in combination with functionality into successful and profitable market strategies is critical for the major industry players to succeed in Europe.
All research © 2014 Parks Associates, from the research project Emerging Power of IoT in Europe. Contact Parks Associates at email@example.com, +1-972-490-1113, for more information. www.parksassociates.com/eu-iot
Senior Director of Research
As a director of research at Parks Associates, Brett Sappington leads Parks Associates services research team, including access and entertainment services, digital media, OTT, cloud media, video gaming, and technical support services. Brett is an expert in worldwide television and broadband services. His personal research focuses on the activities and trends among operators and the market forces affecting their businesses. Brett is a regular speaker and moderator at international industry events.
Brett has spent over eighteen years in the industry as an analyst, executive manager, and entrepreneur. Previously, he founded and served as vice president for Teligy, a software company specializing in software for wired and wireless communications systems. Brett established new divisions for networking and audio/multimedia software for Intelligraphics. He has also been involved in the development and marketing of early-market products for 802.11 wireless networking, VoIP, and other technologies.
Brett holds an MBA from the University of Texas at Austin with a concentration in high-tech marketing and a BA in physics from Baylor University.
Industry Expertise: International Digital Living Trends, Television Services (IPTV, cable, satellite/DTH, terrestrial/DTT), Broadband Services, Multiscreen Services, Value-added Services, Cloud-based Consumer Services, Set-top Boxes, Residential Gateways, Electronic Program Guides, Video Search and Recommendation, Video Metadata, Middleware, Technical Support Services