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All content in this area was uploaded by Gérard Pogorel on May 23, 2020
Content may be subject to copyright.
POLICY
PAPER
FONDATION ROBERT SCHUMAN / EUROPEAN ISSUES N°559 / 19TH MAY 2020
POLICY PAPER
European issues
n°559
19th May 2020
Convergence in Media and
Telecom in the face of COVID-19
Europe in a Transatlantic and International
Perspective
Gérard POGOREL
Augusto PRETA
The COVID-19 pandemic is tragically affecting our societies worldwide. As we are forced under
these extraordinary circumstances to spend more time indoors, severely limiting our movements
and journeys, telecommunications networks, communications services and the media are standing
in to play a major role in economic and social resilience. They are providing the required tools for a
transformed virtual workplace; making entertainment at home possible, at a time when theatres,
and sports venues are at a standstill. More than ever before, the transformative nature of digital
innovation in the media and telecommunications industries is moving along with the way we are
living and working today.
HOW COVID-19 IS IMPACTING THE AUDIO-
VISUAL INDUSTRY
Streaming services are meeting the additional demand
created by stay-at-home populations worldwide.
Whereas television channels are enhancing their
offer, combining linear programming and streaming,
specialized streaming services are offering TV series,
documentaries, and feature films across a wide
variety of genres. Leading the way on the media
scene, Netflix in 2020 now has 182 million paid
subscribers in over 190 countries, with programming
in ever increasing numbers of languages. Jointly with
Amazon Prime, YouTube, Apple, Disney+, and multiple
other streaming services offered by broadcasters
in Europe, RAI, France Televisions, BBC, ARTE, to
name just a few, it has become the main driver of
online broadband traffic. The massive increase of
online access to content makes good of operators’
investments in networks and is providing the right
incentive for the telecommunications industry to
continue investing in next generation networks (5G,
optical fibre).
In the crisis, the streaming platform model has changed
the nature of the audio-visual industry (cinema and
television). On the one hand, it is bypassing due to
circumstances and for the foreseeable future the time
window model which the oligopolistic film industry
had established for itself; more and more films, which
cannot be presented in cinemas are being played
directly online. On the other hand, as conventional
linear TV cannot rely on live TV shows anymore,
news, sports and events, broadband is encroaching
on broadcasting as it provides premium content.
To cope with the evolving landscape and the switch
from broadcast to broadband, traditional vertical
distribution deals between broadcasters and network
operators, mostly providing linear or pay TV, now seem
inadequate. New forms of consolidation are prevailing,
bringing vertical and horizontal integration on a global
scale. Mega mergers and acquisitions are leading to
large transborder conglomerates with interests in
telecom, cable, TV broatdcasting, video-on-demand,
as well as content production and provision. They are
directly competing with the streaming leaders Netflix
and Amazon, as well as cash-flow rich Apple and
Google. Netflix and other companies (Amazon, Apple)
that do not own a vast content library of pre-existing
premium programming, are becoming studios in their
own right, engaging in a vast program of content
production, as they entice big name producers and
talent. Conversely, the trend now for Hollywood’s
great studios is to build their own direct-to-consumer
platforms rather than cashing in licensing deals from
Netflix and Amazon, as they have done to date with
broadcasters. The jury is now out in terms of valuing
FONDATION ROBERT SCHUMAN / EUROPEAN ISSUES N°559 / 19TH MAY 2020
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Convergence in Media and Telecom in the face of COVID-19
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which “converged” service provider will best serve
their audience once the economy recovers. Production
is temporarily at a standstill, and media services are
offering what they already have in stock. But the future
of the industry will depend of the relative success of
the major initiatives, which took place in the months
before the crisis.
THE WORLD BEFORE COVID-19: CONVERGENCE
STRATEGIES AND TRANSATLANTIC INITIATIVES
Three major consolidations took place prior to the
current crisis: AT&T/Time Warner, 21st Century Fox/
Disney, and Comcast/Sky.
The US$ 85 billion acquisition by US telco AT&T of Time
Warner in 2018 opened a new era in the content access
and distribution market structure. AT&T is a fixed and
cellular network operator and video distributor (U-Verse
and DirectTV). Time Warner is a media, broadcasting
and video producer (CNN, TNT, and HBO) company.
Both have a long history of finding the right slot in the
internet age.
At a time when data suggested that “peak TV” is still
not over, the merger has been a pre-emptive strategy
to offer consolidated perspectives in the news and
entertainment industry.
AT&T and its now combined Warner Media Entertainment
branch, are in a position to leverage their strong media
assets, HBO, Turner and Warner Bros. AT&T intends to
have their streaming services prove a worthy competitor
to Netflix, Amazon, Disney and Apple and provide stronger
distribution channels for its robust width of content and
century old portfolio of films.
Telecommunications operators like AT&T are suffering from
the current crisis, but they are among the least affected
industries, as both residential customers and businesses
rely heavily on communications, videoconferencing, and
video streaming.
Disney in 2019 held a whopping 33% box office market
share in North America. It had already completed a massive
consolidation process with Pixar, Marvel, Lucasfilm (Star
Wars) and National Geographic. Its Fox acquisition was
What is at stake with the AT&T/Time Warner merger?
Source: Companies infographic, 2018
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finalised in March 2019. The Fox-Disney deal has created a
behemoth film and TV studio, cementing Disney’s position
as the world’s top entertainment company. The combined
Disney ABC Studios and 20th Century Fox Television
operations feeds content to its video streaming service
Disney+. Launched onto the US market in November
2019, together with the Netherlands and Canada, it then
expanded to Australia, New Zealand. It reached 10 million
subscribers within its first two days of operations in the
US. Set for global expansion, in 2020 it entered more
European countries (UK, Germany, France, Italy, Spain
and Ireland). In the spring of 2020, it totalled 55 million
subscribers.
Disney has suffered heavily in 2020 so far, from the closure
of cinemas in the USA and elsewhere across the world. Its
strong creative portfolio should allow it to recover, but its
expansion has been delayed by existing licensing deals in
many countries.
Disney atteint tous les publics des médias
Source : Wired.com, 2019
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Convergence in Media and Telecom in the face of COVID-19
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In an intense transatlantic battle Comcast and Fox went
head-to-head in an auction for UK-based Sky. Comcast
finally sealed an agreement in October 2018 to buy Sky
for a total value of US$ 40 billion.
Comcast seems to have been more cautious in following
Disney’s footsteps and shifting its content away
from Netflix and Amazon. Its entertainment division,
including NBC Universal and HBO, will continue to
license some shows to the major SVOD services.
This is having a specific impact in Europe, with newly
acquired Sky entity dominating the Pay TV sector in
the UK, Ireland, Germany, Austria and Italy. Special
agreements with Netflix have already been signed to
include its offer in the Sky Q proposition.
Network operator Comcast is proving to be relatively
resilient in the current economic turmoil, as is the case
in the AT&T-Warner merger.
A NEW GLOBAL ERA FOR VOD?
The year 2020 and the COVID crisis might be
remembered as a tipping point in the transformation
of the global audio-visual landscape. Alongside
conventional television channels, free or pay, often
specific to each country, we are witnessing the ascent
of a plurality in international direct to consumer
subscription services, with ample financial means
available for creation, production and marketing.
Comcast acquisition of European pay-TV giant Sky
Source: Ovum
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The effect of megamergers on content spending
Source: Ovum
The scene will now be increasingly global, as powerful
actors with global ambitions emerging on all continents.
While China's film industry has been severely hit by the
pandemic, the online entertainment market, including TV
and streaming platforms, have been booming as people
were confined to their homes. According to a report by
Maoyan Entertainment, a local firm, as of March 15th
2020, the releases of 44 Chinese films had been cancelled
or postponed, including 16 imported films.
The Chinese market is dominated by three big
streaming platforms: iQiyi, majority-owned by Baidu,
the Alibaba-owned Youku (Alibaba is the world's largest
retailer and e-commerce company, and one of the
largest Internet-investment corporations in the world),
and Tencent Video, owned by the Chinese multinational
conglomerate Tencent, whose subsidiaries specialize
in various Internet-related services and products,
entertainment, AI and technology both in China
and globally. Netflix has been ramping up Chinese
production, mostly through Taiwan but is not present in
the PRC. Tencent Video and iQiyi have already started
to take their first tentative steps outside the Chinese
market, in Thailand and Malaysia.
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Increased digital media consumption after coronavirus outbreak in China 2020, by type
Source: Statista, 2020
Source: IHS Markit data processed by ITMedia Consulting
TV programming expenditure by Chinese online companies in 2018 (US$ Bln)
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Europe in a Transatlantic and International Perspective
In most South East Asian markets Netflix is a leader,
followed by Viu with its freemium service, while other
players, such as HBO, iQiyi and Tencent are well placed
to grow in the future, along with new entrants such
as Disney+. Today, consumer spending on online video
is almost 25% in aggregate of what customers spend
on linear Pay-TV services. Increasing consumption on
online video should encourage key local players and
Pay-TV re-balancing.
In total, despite the negative impact of COVID-19 and
the Chinese economic downturn, according to Digital
TV Research, Asia-Pacific will have 417 million SVOD
subscriptions by 2025, up from 269 million in 2019.
China will have 269 million SVOD subscriptions in
2025, or 65% of the region’s total. India will supply
a further 45 million, more than double its 2019 total.
The focus now is on how successfully SVOD platforms
will be able to retain newly acquired customers in the
second half of 2020 and to what extent AVOD platforms
can capitalize on the expanded reach.
Top Regional online video platforms, South-East Asia
Source: AMPD Research, 2020
In Latin America, Brazil and Mexico boast an ample pool
of creative talent and powerful home-grown actors.
They play significant roles as creative powerhouses on
the world scene.
Considering entire nations being shut indoors or with
limited movements, Strategy Analytics now estimates
that SVOD services will have 949 million paid users by
the end of 2020, an increase of 47 million compared to
pre-COVID-19 forecasts. China and the US currently
make up 65% of SVOD subscribers. As a result, the
market share of the two countries will dip to 55% in
2025. China will remain the largest market by 2025,
while US will take second place with 342 million
subscriptions, up from a 2019-end total of 125 million.
What these examples illustrate is that offensive media
strategies can work under two conditions. The first
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one is an open creative content industry; where local
talent has a card to play and can even hold the upper
hand. The second one is securing a close relationship
with telecom operators, as necessary distribution
channels, and potentially cash-flow providers to match
the considerable cash flow of big international OTTs.
These conditions being met, the two-way magic of
zero marginal cost networks operates, offering world
content to the local market and opening the world
market to local content in a way unheard of in cinemas
and linear television.
EUROPE IN THE FUTURE AUDIO-VISUAL
LANDSCAPE
The big question for telecommunications operators
and broadcasters in Europe will be how to confront
and make the most of the worldwide developments
to come. Telecommunications and broadcasting
industries in Europe have long been segregated in
silos, with companies reluctant to integrate across
different skill sets and assets. Network operators now
offer converged services comprising voice, data and
content, the latter being the major growth factor.
In Germany, Deutsche Telekom chose a conservative
strategy as a content aggregator rather than an
exclusive media rights-holder. It signed deals with
other companies, including Netflix and Amazon Prime
Video. German broadcasters have made significant
investments in high quality content, DT is possibly
wary of gaps in management cultures.
Conversely in the UK, BT has pursued a content
acquisition strategy. It grabbed the Champions League
from Sky, spending £4.8 billion (US$ 6.1 billion) for the
rights of the English Premier League, the Champions
League and Europa League. It currently spends more
than £700 million per year on top-tier international
and domestic football. Competition has increased,
with e-commerce giant Amazon winning a three-year
broadcast package for the Premier League, while Sky
would like to use the Champions League to boost
its NOW TV streaming service. British broadcasters
joint venture BritBox has been pitched as a cheaper
additional streaming service for consumers who
already subscribe to Netflix, with a focus on providing
thousands of hours of archive material and classic
box-sets by the two broadcasters. What was launched
in 2017 as a platform showcasing the best of British
content in the US and Canada, is now Britain’s new
weapon in the streaming wars.
Quality premium content prices therefore are up, as
illustrated by the increasing value of live sports events
and EU football in particular (see graph below).
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Sports rights revenues, 2018 – 2025 (US$ Bln)
Source: Rethink Technology Research data processed by ITMedia Consulting
Subscription of SVOD households in UK (Mln)
Source : BARB
In Italy, in 2018, Mediaset signed a commercial
agreement with Telecom Italia (TIM). From January
2019, TIMvision customers have been able to access
Mediaset’s free-to-air linear channels, leading TIM Vision
to extend its business and make it more attractive. It
has customers, it has a platform, therefore the goal is
to feed it with very popular mainstream content, giving
in return a better way to maximize the ad revenues
for Mediaset in a better targeted and profiled online
market.
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European broadcasters’ main deals
Date Deal Strategic goal
02/2019 BBC Studios - ZDF
content partnership
BBC Studios and Germany’s ZDF struck a
strategic partnership to develop and co-pro-
duce a slate of new content, with a long-term
agreement that will see the two organizations
co-developing scripted and landmark factual
programming.
02/2019 ProSiebenSat.1 - Discovery
The new streaming platform will replace the
current joint venture 7TV and integrate the
previously independent services Maxdome
and Eurosport Player.
03/2019 RTVE - Telefónica
Spanish public broadcaster RTVE has
awarded Telefónica, through a public tender,
the distribution of its streaming signal via all
digital platforms.
04/2019 BBC - ITV
lancent Britbox
BBC and ITV are launching “BritBox” strea-
ming service. The rival British broadcasters
are banding together for a "strategic partner-
ship" on a Netflix-style platform in the UK,
full of "box sets and original series" available
on demand.
05/2019 Mediaset buys stake in German broadcaster
ProSiebenSat.1
Italian broadcaster Mediaset bought a 9.6%
stake in Germany’s ProSiebenSat.1, effecti-
vely securing a seat at the table in any future
discussions on creating a pan-European TV
company. Subsequently the stake has rea-
ched almost 25%, due to new shares acquisi-
tion by sister companies Mediaset owned like
Teleçinco Spain.
06/2019 M6 completes acquisition of Lagardère TV
business
French commercial TV group M6 acquired
Lagardère’s FTA and pay-TV Networks for
€215 million. The deal is said to involve the
full takeover of FTA DTT kids’ channel Gulli,
along with pay-tv, pre-school services Canal J
and TiJi, as well as entertainment and music
channels Elle Girl TV, MCM, RFM TV and MCM
Top .
06/2019 ProSiebenSat.1 and Discovery launch German
streaming service Joyn
ProSiebenSat.1 and Discovery launched
their joint German streaming platform, Joyn,
offering 55 TV channels as free live-streams.
Mediengruppe RTL Deutschland, Germany’s
second major commercial TV broadcaster,
however, is not part of the platform as it
follows its own streaming strategy with its TV
Now service.
Source: ITMedia Consulting
A few European-wide initiatives are under way. In 2017,
Mediaset agreed to set up a joint trading platform for
digital video advertising with European commercial
broadcasters TF1 (France) and ProSiebenSat.1
(Germany), establishing in equal shares the European
Broadcaster Exchange (EBX). The purpose was
to address at scale the demand for pan-European
by media agencies planning continent-wide video
campaigns. It was the start of a strategic collaboration
to drive forward the technological development of
online advertising. The joint venture should allow
reaching over 250 million people, a critical mass able
to face the giants of the global web. With a higher
ambition, in September 2019, Mediaset announced the
European broadcasters have struck a series of deals.
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establishment of an European wide media Group, MFE,
based in Netherlands, including the Italian and Spain
wholly owned TV companies and its stake in Germany
based ProsiebenSat1.
After the 2017 Vivendi/Telecom Italia/Mediaset project
of a “Netflix of Southern Europe” was put on the back
burner, the Vodafone/Liberty deal in May 2018 was a
significant catalyst for the sector in Europe, potentially
paving the way a consolidation across Europe along
this business model. Similar deals involve all European
operators, BT, DT, Orange, Altice, Free, Telefonica, etc.
Meanwhile, the European Public Service Broadcasters
have also been active, joining forces at national and
also European levels. RAI for example teamed up with
France Télévisions and German ZDF in an alliance for the
co-production of content for the three public television
services of Italy, France, and Germany. Franco-German
ARTE is asserting its European ambition by offering
programs in 6 languages, without copyright limitations
in Europe, unlike most other offers.
Main broadcasters’ alliances in Europe
Source: ITMedia Consulting
Country Broadcasters involved Service Business model
UK • BBC
• ITV BritBox SVOD
France
• France Télévisions
• M6
• TF1
SA LTO SVOD
Germany
• ProSiebenSat.1 Media
• Discovery
• Axel Springer
• SPORT1
7TV AVOD now
SVOD later
Spain
• RTVE
• Mediaset España
• Atresmedia
LovesTV SVOD
Netherlands
• NPO
• RTL
• SBS
NLZiet SVOD
In France the three largest French broadcasters France
TV, M6 and TF1 will operate the joint online-video
platform Salto, planned to be launched in 2020. Public-
service broadcaster France Télévisions will stop selling
shows to Netflix so it can keep exclusivity for its own
home-grown equivalent, to keep strong French and
also European fiction.
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Evolution of VOD main platforms penetration in France (%)
Source: CNC - Harris Interactive - Vertigo
France has been a strong proponent of cultural diversity
policies, with tax breaks and quotas to incentivize local
players, contributing at the beginning to Netflix being a
slower burn than in the UK or the Nordics. In theory, not
working with Netflix might allow French broadcasters,
which back around 75% of audio-visual creation in
France, to maintain a strong foothold by having more
market leverage. But in the French TV industry, where
budgets and revenues have fallen flat, Netflix has been
welcomed by producers, and broadcasters for bringing
more money to the sector.
A CHALLENGE FOR EUROPE: STRATEGIES
TOWARDS CONVERGENCE
The current crisis highlights the technical know-how
and resilience of telecommunications operators. It
vindicates the economic and social importance of their
investments in broadband networks. Licensing existing
content was merely enough for telecommunications
operators to beef up a nascent catalogue (note a couple
hundred film catalogues just a few years ago). There
will now be a strong incentive for operators to counter
spiralling content procurement costs by leveraging
their size and financial strength and taking control of
content creation outfits, emulating vertical mergers like
AT&T and Time Warner. The imperative will be a new
diversified offer, attractive to a wider and ever more
culturally open customer base growing exponentially
around the world. This leap into huge multi-thousand
video catalogues, with increasing content creation and
production, is at the core of the 2018-2020 round of
deal making, and more will be around the corner.
The telecommunications and broadcasting worlds are
experiencing their day of reckoning with the linkage of
large media and giant distributors, through mergers,
acquisitions, deals and strategic alliances.
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Major partnerships in the European arena
Source: ITMedia Consulting
Date Accord Stratégie
11/2017 Deutsche Telekom - Netflix
Partnership
By giving customers seamless access to Net-
flix catalogue, DT took a step closer toward
its goal of becoming a one-stop provider for
a large variety of digital video services. A
sort of all-in-one bundle. Same agreements
with Netflix also involved Telefónica in Spain,
Orange in France and Vodafone in the UK.
03/2018 Sky - OpenFiber
Partnership
Leveraging OpenFiber FTTH network, Sky
became a telco service provider in Italy
as it is in the UK. So it could fully spread
its advanced solution, SkyQ, with further
enhancements to expand its customer base,
reaching customers not willing to deploy dish
antennas in a new multiplatform strategy.
03/2018 Sky - Netflix
Partnership
As well as for Telecommunications operators,
also for Sky this agreement with Netflix was
coherent with its one stop shop strategy,
while Netflix gained access to a huge Sky
customer base.
05/2018 Vodafone - Liberty Global
Assets deal
Vodafone settled for an asset deal as it
looked to advance its strategy of offering
converged mobile, fixed broadband and pay-
TV offerings, while Liberty Global boasted
the strength of owning both fixed and mobile
networks on the road towards 5G.
09/2018 TIM - Mediaset
Partnership
The deal allowed Mediaset to extend the
reach of its free channels to all platforms and
enabling TIM to enhance the TIMVision video
on demand offering.
Telecommunications operators have remained in
relatively good shape, as revenues are better than the
economy as a whole, free cash flow has remained high,
and regulatory constraints might be made lighter. For
the future, Telecommunications operators cannot but
feel that now is their moment to escape the “dumb pipe”
curse of undifferentiated competition, commoditization,
and pent down tariffs, and take advantage of relative
financial strength and the superior growth in video
content.
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European telecom groups’ sales
Telecoms and media services revenues network/media to 2022
Source: Barclays, 2017
Source : Ovum
Telecom operators can count on a broad customer base,
the quality of their networks and the shift in viewing to
phones and tablets away from TV. By combining these
assets with exclusive content, they can legitimately
aspire to the role of core enabler of content enjoyment.
The new challenge will increasingly be played according
to a content portfolio and user experience capable
of satisfying the needs of every single user in a
personalized and simple way.
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Against this backdrop, the critical strategic alternative
for telecommunications operators concerns the links
to be established with content providers to secure the
video traffic they crave to fill in their ever-expanding
conduits. Relationships between network operators,
broadcasting channels and video programming have
long been fraught with recurring difficulties and conflicts.
Both sides cannot help considering they must have
the upper hand in the deals. Network operators boast
the large customer base they have on offer, whereas
content producers and media companies are proud of
their unique ability to provide the enviable programming
the viewers want. Both sides hold some of the truth. The
balance of power in content production, provision and
delivery today is complex, as we can observe parallel
reinforcement trends on both sides.
For telecommunications operators, the shift from
technology know-how and cost consciousness, to
managing the creative talent has a mixed success
record. The compatibility of competences is an issue,
but the convergence trend is hardly escapable. How to
define the activity mix, how to manage profitably not
just portfolio-like, but by combining engineering know-
how and art creation talents will be key.
A cultural aspect will become increasingly important for
Europe in the future: the European creative industries
already produce work that is very popular in each
country of origin, with an audience significantly higher
than the American ones. That can be extended outside
their borders. Thanks to the Internet and to the new VOD
services potential demand is growing. The challenge for
“diversity” creations is to reach wider audiences. The
breadth of the catalogue of national film and television
productions and the marketing means limiting the
possibilities of a direct relationship between national
operators and international audiences. This raises the
crucial question of the relationship of work of cultural
diversity with international networks and platforms,
most often of American origin.
We find, particularly in countries of “diversity”, a tangle
of rules created over time in a defensive spirit for
local work, quotas, financial aid, various obligations
concerning exclusive content or events said to be
“of major importance”, restrictions on mergers and
acquisitions. These means, whose raison d'être must
not be lost, are however to be carefully re-examined
in the light of the new realities of the digital world.
The recent controversy surrounding the definition of
“cinema”, initiated by Martin Scorsese, in the wake
of the debate over the Netflix production Rosa at the
Oscars, illustrates the potential contribution of platforms
to creation.
We can see, particularly during this dark period, how the
platforms, anxious to attract local customers for their
international expansion, have brought welcome financial
means to original cultural productions. International
openness and the range of possible agreements between
network operators and producers of creative work,
managed with foresight, presents a historic chance for
flourishing cultural diversity at international level, for
increased opening of markets to different horizons.
Finally, the platforms are a privileged vector for financing
and international expansion. The regulatory distrust of
horizontal or vertical integration, as of exclusivity, which
might have been justified when the range of work and
events offered for audio-visual purposes was limited,
is much less so today, while the offer, as well as the
expectations of the public have widened and diversified.
To succeed in the synergy of creations of cultural
diversity and large international networks, in Europe, as
well as in Asia and in Latin America, we should carefully
re-examine the constraints weighing on the digital
economy, in particular those affecting cross-border
flows of data, capital and work.
The economic damage caused by the COVID-19
pandemic is dramatic and is affecting industries heavily.
COVID-19 is having a marked impact on media
supply, consumption, and advertising around the
world. Cultures, attitudes and politics have changed,
technologies have advanced, and certain aspects of
society had even regressed. Traditional broadcasters
dependent on advertising are suffering.
Many broadcasters today are staring down the barrel of
much bigger losses, with many contractual arrangements
between rights holders, broadcasters, sponsors and
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advertisers unravelling, even given good will on all fronts.
Demand for all forms of media, TV programs (broadcast
and on-demand), short-form video, music streaming
and online gaming, particularly in geographies currently
under stay-at-home instructions, has surged. In some
instances, VOD content has been offered for free or at a
discount. It is clear COVID-19 is driving record levels of
free trials, which should lead to extra sampling and thus
give many services a shot they would never have had.
It also means the cost of customer acquisition, which
has skyrocketed in the streaming war, has plummeted,
thereby increasing lifetime values.
As more viewers have stayed home, watching
screens throughout the day, the primetime peak
has shifted with viewing spread more evenly
across more hours of the day. Demand for content
(streamed or live) is constantly increasing. New
content creation, from live sports to sitcoms to
films, has been largely turned off.
Increase in streaming viewing hours, by Region
Source: Conviva, 2020
17
FONDATION ROBERT SCHUMAN / EUROPEAN ISSUES N°559 / 19TH MAY 2020
Convergence in Media and Telecom in the face of COVID-19
Europe in a Transatlantic and International Perspective
The accelerated decline of both Pay-TV subscribers
and Pay-TV advertising revenues will strongly harm all
traditional media players in a time in which they find
themselves most exposed. Telco operators, meanwhile,
will focus on infrastructure upgrades to meet the increase
in demand for broadband services but they might face
setbacks with technicians making house calls. Operators
are already asking households not to use all the bandwidth
to stream video and play games during working hours,
when that bandwidth will be needed. Speed upgrades
will see an uptick as more users at home require more
bandwidth and unlimited data usage.
Streaming is among the (few) winning businesses in the
global lockdown. Since 2010, the Pay-TV ecosystem has
seen nearly a 30% reduction in overall viewing hours
and as much as a 60% decline among 12-35-years-
old. Pay-TV is the largest recurring discretionary
entertainment expense for the average household. This
makes it one of the first places families will look when
struggling with bills, unemployment, or other financial
pressures, especially when they already have Netflix,
Amazon Prime, Disney+, and significant free streaming
offerings from national broadcasters.
Consumers are examining their personal finances as
never before to determine what they can afford to
buy and weigh what products and services provide the
most value to their household. Household prioritization
of paid entertainment services against other household
services and product needs will determine if a free
trial, promotional offer, or an exclusive piece of content
converts to a paid subscription.
POLICY STRATEGY AND REGULATION IN THE
DIGITAL MARKET IN EUROPE
In 2018 and 2019, the EU completed the review process
of three important pieces of legislation: Electronic
Communications Code, Audiovisual Media Service
Directive and Copyright Directive. The first two in
particular are still subject to a sector specific framework,
which is 20+ years old, dating from the age of analogue
television and narrowband fixed copper networks.
The subsequent revisions leading to the new Directives
now to be implemented at the national level keep the
clear distinction between the two sectors, including the
new services in the consolidated regulatory framework.
Source: ITMedia Consulting
The changing playing fields
FONDATION ROBERT SCHUMAN / EUROPEAN ISSUES N°559 / 19TH MAY 2020
18
Convergence in Media and Telecom in the face of COVID-19
Europe in a Transatlantic and International Perspective
Publishing Director : Pascale JOANNIN
THE FONDATION ROBERT SCHUMAN , created in 1991 and acknowledged by State decree in 1992, is the main
French research centre on Europe. It develops research on the European Union and its policies and promotes the content
of these in France , Europe and abroad. It encourages, enriches and stimulates European debate thanks to its research,
publications and the organisation of conferences. The Foundation is presided over by Mr. Jean-Dominique Giuliani.
You can read all of our publications on our site :
www.robert-schuman.eu
In our view, while this represents a valued attempt
to adapt the old legislation to the new reality in
an evolutionary perspective, it does not give due
consideration to the disruptive innovations that will
reshape the communications industry in the next few
years. In this perspective the new Commission and
the appointment of an executive vice president for
digital, opens the way to a new scenario in which the
development of technological policy, the Digital Single
Market, and a re-defined competition policy can now
combine in an EU policy strategy for the next 5-year
mandate.
In this framework the “Digital Services Act” to be
proposed, requires a radical shift in the rationale of
regulation of the relations between content providers
and telecoms operators. A decade ago, for example,
the emphasis was on monitoring access to exclusive
content, in order to preserve a competitive landscape.
Exclusive content was seen as potentially detrimental
to competition. Content today is abundant, highly
competitive, but it requires more and more financial
resources and readily accessible distribution channels.
It should encourage competition and pluralism, within
the framework of the now broader, European definition
of geographical markets. In addition, a solution will have
to be found to end the fragmentation of the European
rights market, a major obstacle to the promotion of a
European offer.
Gérard POGOREL
Professor of Economics and Management-Emeritus Telecom Paris
CNRS Interdisciplinary Innovation Institute I3
Augusto PRETA
Founder and CEO ITMedia Consulting, Rome
Director, IIC – International Institute of Communications
The authors thank Paolo Nardelli, analyst at ITMedia Consulting, for its
valuable contribution to this paper.
