Cable Operators Fight Google, Apple Threat in Europe's Television Market
TiVo Inc. Chief Executive Officer Tom Rogers
Jonathan Alcorn/Bloomberg
TiVo Inc. Chief Executive Officer Tom Rogers said, “Cable has to look over its shoulder in a big way.”
TiVo Inc. Chief Executive Officer Tom Rogers said, “Cable has to look over its shoulder in a big way.” Photographer: Jonathan Alcorn/Bloomberg
Cable Operators in Europe Eye IPOs, M&A, Digital Homes Boom
Kabel Deutschland via Bloomberg
A worker adjusts cable equipment in front of a Kabel Deutschland van.
A worker adjusts cable equipment in front of a Kabel Deutschland van. Source: Kabel Deutschland via Bloomberg
Europe’s cable television operators, faced with a threat from video content aggregators such as Google Inc. and Apple Inc., say they’ll fight to keep customers.
While the continent’s increasingly digitized homes are ringing in higher revenue for the operators, they are also seeing TV customers deserting them for Internet TV, or IPTV, and other so-called over-the-top providers that bypass cable packages and provide content directly through Web browsers.
“With companies like Apple, Google and Amazon entering our markets, the stakes are rising and we need to step up to the challenge,” Adrian von Hammerstein, chief executive officer of Germany’s largest cable operator, Kabel Deutschland Holding AG, said yesterday at the Cable Congress in Lucerne, Switzerland. “The TV market is ours to lose.”
In 2010, Europe’s cable operators’ TV revenue rose more than 10 percent to 10.1 billion euros ($13.6 billion), and is expected to grow to 13.2 billion euros in 2014, according to data provided by IHS Screen Digest analyst Guy Bisson. The number of TVs with cable feed, however, slid by 0.4 percent in 2010 and is projected to fall another 0.5 percent by 2014.
“It is not about Google,” said Andrew Barron, Chief Operating Officer of Virgin Media Inc. “There are hundreds of over-the-top platforms and there will be more. As customers are faced with a vast amount of choice in a fragmented market, the question is how do we become their guide?”
To be sure, a drop in cable TV customers has coincided with an increase in other services people demand from their cable operators -- Internet and telephony, for example.
Larger Battle
“Yes, IPTV is growing and we have seen it as a logical consequence of a large group of customers converting to digital TV: some of them will chose other digital alternatives,” said Manuel Kohnstamm, president of the industry association Cable Europe. “That’s fine, we’re okay with that.”
Still, the battle for eyeballs is also a larger fight for control over more interactive media -- from the Internet and telephony to games and social networking.
“Cable has to look over its shoulder in a big way,” said Tom Rogers, the CEO of digital-video recording pioneer TiVo Inc., which is making deals with European and U.S. cable operators to provide set-top boxes that will not only organize content from the traditional TV channels, but that will also integrate social networking features such as Facebook.
“People love the choice that cable operators provide,” he said. “Cable operators are the largest providers of content and choice, but it wouldn’t take a whole lot for the consumer to go elsewhere if the amount of that choice or the presentation of it would excel somewhere else.”
Framing the Experience
He said cable operators should be the ones that provide the framing of the viewing experience.
“How it is packaged is going to be critical,” he said in an interview. “They have to be worried that if they don’t develop that role sufficiently, they will be overcome by Google, Apple and others who want that customer relationship that the cable operators have built up over the last couple of decades.”
Rogers said that two years ago he would have been concerned that the cable industry was going to get “eaten alive” because of the trend toward more over-the-top consumption. “I’m heartened by the last year of activity,” he said.
TiVo recently struck a content-system deal with Spain’s Grupo Corporativo Ono SA, and its CEO Rosalia Portela said in an interview that she’s not too concerned about losing customers to over-the-top providers. Rather than fight the trend, Ono is joining it, she said.
“We are trying to achieve that through the Ono connection you could have access to anything,” Portela said. We’re talking to everybody. We are less concerned than other traditional operators. Having Hulu or Netflix or Google is an advantage because we have the access that some other companies don’t.”
One Box
Liberty Global Inc.’s is planning a box that includes standard video-on-demand and recording features with Internet video viewing. It “remains to be decided” exactly how open the system will be to the likes of Google, said CEO Mike Fries. The company’s Chief Technology Officer Balan Nair said that the system, dubbed “Project Horizon,” won’t block Google.
“There’s no reason to do that,” Nair said. “As far as embracing it, there’s one particular element that I like personally: it’s the search function.”
Kabel Deutschland’s von Hammerstein said the trick is to integrate over-the-top, video-on-demand and linear TV into one user interface. He said he is open to partnerships with over- the-top providers such as an Internet platform that Germany’s ProSiebenSat.1 AG and Bertelsmann AG’s RTL are planning, and the German public broadcasters’ Mediathek.
“Everybody is talking to everybody,” he said. “The question is what makes sense for the customer. To me it’s more of a content-centric view: what do customers want and then it’s about what’s the best way to get it.”
To contact the reporter on this story: Ragnhild Kjetland in Frankfurt at rkjetland@bloomberg.net
To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net
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