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Television 3.0: New Impulses for a Saturated Market

This white paper explores the current situation of the German TV market, the analogy to the music industry, lack of advertising expenses, revenue forecasts, technology trends, customer trends, and implications for TV offerings. It proposes that diversification of revenues and a strong customer orientation are essential for success in the evolving media landscape.

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Television 3.0: New Impulses for a Saturated Market

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  1. White PaperTelevision 3.0New Impulses for a Saturated Market Ein schönes Photo mit Bezug zum Kunden, Projekt, Thema oder Angebot Keynote6th Transatlantic Dialogue Düsseldorf, March, 15th 2004

  2. 100% Revenue in bn € Audience Share Private 9 60% 75% Audience Share 6 40% 50% Advertising Revenues Public 3 20% 25% 0 0% 0 1983 1988 1993 1998 2003 1983 1988 1993 1998 2003 1. Current situation of German TV-Market Current situation of the German FreeTV Market is not only caused by advertising crises, but also by a long-term stagnation of media performance. Audience Share of Public and Private TV Comparation of Media Performance and Advertising Revenues Audience Share • Stagnation over approximately 10 years • Growth in niche markets • Need of new impulses • Advertising budgets following media performance • Decreasing revenues for three years • Dismal prospects of market Source: GfK, Nielsen, Detecon Research

  3. 2. Analogy of Music Industry Seven Poor Years: The music market will depreciate 40% of volume. Cost cutting strategies will not help to regain revenues. German Music Revenues 3 bn € historical estimated • 7 bearish years estimated • Appr. 40% less market volume • Fail of cost cutting strategies • Absence of online business 40 % Loss 2 bn € • File Sharing • Professional Piracy • CD Writer • Legal Downloads? • Offensive Pricing? • Opening up new Sales Channels? 1 bn € 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: PwC Global Media&Entertainment Outlook 2003-2007

  4. 3. Lack of Gross and Net Advertising Expenses Intensified competition of advertising sales has increased discounts. Regain of net revenues will be a challenge due to limitation by regulation and market. Advertising Revenues of German TV Market • Explosion of discounts over the past several years • Net share falls down to 55% • Limited expansion of volume by regulation of ad space • Regaining net revenues as a challenge for the sales forces • Reduction of discounts • Increase of gross pricing Revenue Net Share 9 bn € 65% 6 bn € 60% 3 bn € 55% 0 bn € 50% 1997 1998 1999 2000 2001 2002 Gross Revenue Net Revenue Net Share Source: GfK, Nielsen, Detecon Research

  5. 4. Detecon‘s Revenue Forecast of the German TV-Market Detecon estimates a moderate growth of revenues in total, but also in each market segment. Alternative revenues will emerge significantly. Prognosis of German TV-Revenues in 2006 Trends • Growth in all media segments • Strong expansion of Call-In and Teleshopping • Appr. 30% of FreeTV revenues in innovative business Revenues 2003 CAGR Revenues 2006 bn € 7 bn € Call-In6% 6 6 Call-In3% 25.7 % Shopping21 % 5 5 Shopping17% Conclusion 4 4 17.4 % 3 3 Advertising73% There is no TV crises. There are only wrong strategies. Advertising80% 2 2 3.1 % 1 1 0 0 2006 2003 Quelle: Detecon-Research

  6. 5. Technology Trends Main technological trends are digitization of broadcast transmission and privatization of cable networks. Shares of TV reception Trends • Digitization driven by cable providers and Premiere (German PayTV Provider) • Growing Program Offerings (10 times) • Gaining customers by low entry prices Terrestric 6% Satellite 38 % 56 % Cable Share of digital offerings by provider Conclusion Mid-term establishment of low-cost receivers without • MHP • Integrated interactivity Premiere (d-box) 55 % analog87 % digital13 % Others (DVB Receiver) 45 % Source: Detecon Research

  7. TV • Radio • Internet • Newspaper • Teletext • Magazine 70% 60% 50% 40% 30% 20% 10% 06:00 09:00 12:00 15:00 18:00 20:00 22:00 00:00 02:00 6. Customer Trends Media usage will converge, in future TV will not be a stand alone medium, but will be complemented by additional devices like PC and mobile. Daily Penetration of Target Groups Trends • Growing usage of internet • TV usage remains on high level • Parallel usage of audiovisual media • Mobile TV offering via DVB-t from 2005 Penetration Conclusion TV is not a stand alone medium, TV consumption on several devices. Successful media offerings build on cross-media usage. Time Slot Source: TimeBudget 6, SevenOne Media, forsa, Detecon Research

  8. 7. Implications for TV Offerings Diversification of revenues increases revenues and decreases risks of TV stations while a strong customer orientation is a must. Implications on TV Communication Challenges • Diversification of revenues • Sales Orientation of Advertising • Seamless Integration of Call-In- and Shopping-Elements into Format Concepts Format innovation: seamless crossmedia, intelligent, integrative Conclusion Customer contact management walk-in registrationpatronizing CRM becomes a critical success factor of media providers: • Defining customer value concept • Building a direct customer contact • Managing the customer process direct (call-in & shopping) Realization of Revenues Indirect (classic ad-vertising) Source: Detecon Research

  9. 8. Definition of „Television 3.0“ Special Gift for the Twentieth birthday of privatized German TV-Market: Entering a New Age – Customer Driven Television. Layer of Demand Television1.0 Television2.0 Television3.0 “civic” political driven Provider driven Customer driven • Interaction • Involvement • Individual-Interest • Fun • Sensation • Niche Interests • Information • Knowledge • Mass Entertainment 1950 1960 1970 1980 1990 2000 2010

  10. Detecon International GmbHMedia & Online PracticeContact: Cord Stukenbergcord.stukenberg@detecon.com Triebstr. 32D - 80993 MünchenGermanyPhone: +49 (0) 89 - 54 63 65 - 11Fax: +49 (0) 89 - 54 63 65 - 95http://www.detecon.com Television 3.0Please,order your personal copy at www.detecon.com Price 490 €220 Pages70 Charts

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