UK researcher Screen Digest this week raised the question of just why so much IPTV is free in Europe, either bundled with broadband or with free VoD and free channels, designed to drag customers into the paid areas of a service.
The researcher makes the point that IPTV is being used as a tempter to get customers to buy other services, rapidly making it a commodity, bundled for no extra cost with a broadband or telephony package. The result is that 40% of European IPTV households are getting IPTV for free.
And it makes the argument that the new IPTV services have such large costs associated with them, network upgrades, expensive set tops, DSLAM upgrades, middleware and implementation contracts, that this cannot be justified in churn reduction, and instead can only be justified when operators add the reduction of churn to the acquisition of large amounts of new customers.
Screen Digest throws in more evidence in the form of IPTV operators reselling third party content packages for instance Viasat’s deal with Telia, announced in May, where Telia customers are offered Viasat’s Channels, which suggests they are not trying to make their own bouquet profitable, but want to make all their money on broadband.
The new report makes the point that France has the cheapest pay-TV in the world (actually it’s pretty much on a par with Hong Kong and Taiwan, but we see their point) with a lot of content free with a broadband subscription.
It is this that is driving French IPTV adoption, and this will clearly have an enormous impact on both cable and satellite suppliers.
All of this means that by 2012 the UK, France, Germany, Italy and Spain will contribute the majority of IPTV subscribers, but the Baltic countries will also have high penetration levels, with Estonia reaching 20% of homes by then and Scandinavia 10%.