icable business model

MSc. in New Media

CHEN，Yanjuan

LIANG，Weishan

LUO，Meng

YE，Xuelin

ZHONG，Xingyu

i-CABLEi-CABLE

Outline

01 PROTEIN framework Analysis

02 Five Forces Analysis

03 Strategy

Introduction

Introduction

• i-Cable Communication Limited ---1999• integrated communications companies

•Residential fixed-line

•PayTV service (Free TV in the coming year)

•Dial-up internet access service

•Broadband internet access service

•Multimedia contents

1,089,000.00 1,074,000

201,000 199,000126,000 120,000

Dec-12 Jun-13

Customers

Television Broadband Telephony

Introduction

• Hong Kong Cable Television (HKCTV)---1993

• Owned and operated by i-Cable CommunicationLimited

• More than 100 channels and programmes over30,000 fresh programming a year, including10,000 hours of its own production

HKCTV

• News – Self produced professional news– Introduced in-depth reports, sharing unique perspective of the most

topical news & current affairs on the mainland China.

• Sports– Exclusive– Diversity– Official broadcaster of the 17th Asian Games Incheon 2014

• Entertainment– FAN Entertainment Channel奇妙娛樂台

– CABLE Drama Channel奇寶劇集台

HKCTV---Programming

• Viewing Share Among Pay TV Operators

50%

27%

15%

7%

0%

10%

20%

30%

40%

50%

60%

HKCTV NOWTV TVBNV bbTVSource: Nielsen HKTAMPay TV viewers aged 4+Jan – Jun 2013, All Day All Time* Excluded 8 TVBNV channels via Now TV platform^ Included 8 TVBNV channels via Now TV platform

HKCTV---Viewership

• CABLE HomeLine Service offers users unconventional fixed line telephone service, which allows customers to enjoy great convenience by providing value-added-services

• iFAX

• MobileLine

i-Cable Homeline (Fixed Line)

• Hong Kong's 2nd largest Broadband Internet access service provider

• Cover over 90% of the 2-million households in Hong Kong.

i-Cable Broadband

• All media rights with extensive live & archived coverage in multiple formats across media platforms

• Pay TV content based

• Portals on news, sports, horse racing, stocks, etc.

• Mobile Apps

Multimedia

Player

• Integrated communication company• Pacific Century Cyberworks Limited (PCCW)• Hong Kong Broadband Network Limited (HKBN)

• Other PayTV supplier• Television Broadcasts Limited Network Vision (TVBNV)

• Other fixed line & broadband suppliers• Hutchison Global Communication Limited (HGC)• New World Telecom (NWT)

PCCW• Formed in 2000, PCCW is the first

quadruple-play provider in Hong Kong and offers a range of innovative media content and services across four delivery platforms –fixed-line, broadband Internet access, TV and mobile.

Player--- PCCW

• Now TV • Launched in September 2003

• Currently NOWTV is the largest pay-TV station in Hong Kong.

• Offers more than 190channels,including 19 channels from TVB pay version. Now TV is not only Hong Kong but also worldwide pioneer in IPTV.

• a la carte pricing : allow subscribers to take on just those channels that they are really interested in.

PCCW---NOWTV

• PCCW's fixed-line service – eye Multimedia Service and PCCW eye2 – Hong Kong Telecommunications (HKT) Limited.

• NETVIGATOR is Hong Kong's premier broadband provider, reaching 97% of all households in Hong Kong and serving broadband users with a wide choice of Internet access speeds.

• Multimedia Platform: – Now.com.hk--- 5,000+ streaming video contents– --- Hong Kong's largest multi-platform digital music service

PCCW---Fixed Line, Broadband & Multimedia

Player--- HKBN

•PayTV----bbTV•IPTV• Net TV

• Internet access• Fixed line• Multimedia services

Revenue model

Subscription

Advertising

Content licensing

Televisions related service

Network maintenance

Revenue Model

Revenue Model---Subscription

PayTV---HKCTV

Broadband Service

Fixed Line

Bundling

Plan Package Service Price(Monthly)

Family Select

Basic Pack 74 channels $319HKD

News+EntertaionmentPack 47channels $158HKD

Entertainment +Movies Pack 47 channels $158HKD

Subscription---HKCTV

Package Service Price (Monthly)

CABLE TV Basic Pack+50M Broadband

75 channels+50M $419HKD

CABLE TV Basic Pack +HomeLine Service

75channels+homelineservice

$379HKD

CABLE TV Basic Pack +130M Broadband +HomeLine Service

75channels+130M+homeline service

$509 HKD

Subscription---Bundling

Subscription

Advertising

Content licensing


Network maintenance

Revenue Model

Revenue Model---Advertising

Portal banner ads

In-stream video ads

Mobile apps ads---pop-ups

TV commercial

Cable Guide ads

MTR Newsline Express ads

Subscription

Advertising

Content licensing


Network maintenance

Revenue Model

Operation

Technology

Company visit: How news are produced in HKCTV

• i-CABLE owns and operates one of two near universal coverage two-way interactive telecommunications networks in HK.

• It delivers domestic pay television programs, Internet and VolP services mainly by hybrid fiber-coax (HFC) network, supplemented by MMDS and satellite transmission.

Source：Broadcasting Authority Annual Report 2010-2012

HFC (Hybrid Fiber-Coax )

• HFC architecture is an optimized combination of fiber in the trunk and coaxial cable in the feeder and drop.

encrypted

decrypted

• Retained to serve a small number of subscribers in remote areas of the territory.

• MMDS (Multi-channel Multipoint

• Distribution Service)：

Low frequency;

Less susceptible to interference.

Microwave trunk transmission system

Held, G.(2001)

Satellite:Transmits broadcast signals from satellites orbiting the Earth; Receive radio signals using satellite dishes.

Ecology

Content Origination

Content Production

Distribution & Syndication

Content Consumption

Music

Program, producer, ar

tist

i-CABLE

Syndicator

CASH

Cable

Satellite

Wireless Operator

Home User(STBTV,

Telephone, Internet)

Wireless Users

$

$

$

$

$

Intelligence

Property

License fees for exclusive prized contents E.g.: sports programme, appealing

channels/Royalties of music from CASH

illegal decoders

illegal online content Threat

TechnologyTaskforce

Conditional Access System (CAS)：Set-top box and smart card

Digital rights management (DRM)：Multi-terminal devicesContent keys or embedded watermarks

Over-the-top1.delivery of voice, video and data service straight

from the provider to the viewer via public Internet,

without going through the MSOs or telecoms.

2. Consumers can access OTT content any time,

any place to any terminal devices.

3. pay TV operators to partner with OTT providers

or run OTT service itself.

1、generate new ad revenue from its well-regarded content production 2、attract more customers to subscribe to its pay-TV service

need to produce massappealprogramme to compete with TVB ,such as soap drama,too expensive to produce too long to build critical audience

Free TV-Is it a good thing?

Outline

01 PROTEIN framework Analysis

02 Five Forces Analysis

03 Strategy

Rivalry among Existing Competitors

Service

HKCTV NOW TV TVB Network Vision

bbTV

Channels 112(HD 12)

216(HD 30)

74(HD 18)

94

Pricing Model

Pay-per-package à la carte pricing

Basic packagePay-per-channel

(for premium channels)

Movie channel package

Pay-per-channel

Source：A List of Licensed Broadcasting Services in Hong Kong (As at 15 November 2013)． Office of the Communication Authority

1

Content


bbTV

Channels 112 216 74 94

Self-producedchannels

21 32 17 3 (preview channel and

program guide)

Rate of Self-produced channels

18.8% 14.8% 23.0% 3.2%

Source: Official websites of NOW TV, i-Cable ,TVB Network Vision & bbTV

2

Penetration


bbTV

Subscribers in

2012(Households)

1,089,000 1,183,000 Nearly 170,000 195,000

Subsribers in 2011

(Households)

1,106,000 1,140,000 Nearly 200,000 181,000

changes -17,000 +43,000 -30,000 + 14,000

Source: Annual Report (2012) of i-Cable, PCCW, HKBN ; Annual Report (2011) of TVB, PCCW, i-Cable

3

Exclusive rights of sports channels

HKCTV NOW TV TVB Network Vision bbTV

Football 欧冠歐霸英超英格兰足總盃

意甲法甲

德甲日本J1 西甲西班牙国王杯

英冠美足聯

4

Financial review

HKCTV NOW TV

Turnover（million）

820(-4%)

1299(+3%)

EBITDA(earnings before interest,

tax, depreciation and amortization )

(million)

-6.9(2012: 20)

29(2012: 28)

EBITDA margin 0.2%(2012: 3%)

17%(2012: 17%)

(2013.1-2013.6 )Source: 2013 Interim Results of PCCW & i-Cable

5

Technology


bbTV

Transmission Mode

HFC, MMDS,satellite (Digital)

Broadband network (Digital)

Satellite , broadband

network (Digital)

Broadband network (Digital)

Source: broadcasting authority annual report 2010-2012

6

Bargaining power of customers

• 1. Differential advantage of industry products close substitute：

similar types of channels

• 2. Buyers’ scale

Source: key communication statistics. Office of the Communication Authority

Total number of subscribers of licensed domestic pay television services (September 2013)

2,445,000

Penetration of licensed domestic pay television services (September 2013)

101%


• 3. Buyer switching costsContract expiry: no actual cost

Service cancellation fee: 800 or remained monthly fee

• 4. Buyer information availabilityStalls set up in neighborhood

Hong Kong “Street Fighters”


Bargaining Power of Suppliers

Content Suppliers Unique selling point: News and current affairs; Entertainment

Dependence on content suppliers

Cable TV Content suppliers

e.g. TV series and sports programmes

Weaker financial background and business support system than NOW TV >>> less likely to bid a higher price

exclusive broadcasting rights

auctions and biddings (Intern ational channels and external organizations)

Technology Supplier Self-owned transmission network and service:

Hybrid Fiber Coaxial Cable (HFC) supplemented by

Microwave Multipoint Distribution System (MMDS) and

satellite transmission

By March 2012, HKCTV’s network covered around 2.3 million households, i.e. 97% of the total households in Hong Kong(Broadcasting Authority Annual Report, 2010-2012)



（medium)

Content Suppliers (high)

Technology Suppliers (low)


Threat of New Entrants

Market dominance of three domestic pay television program service licensees:

Hong Kong Cable Television Limited

PCCW Media Limited

TVB Network Vision Limited

High entry barriers in the pay TV market

Finance: high start-up and operation cost

Technology: high requirement of technical expertise

Operation License: government approval

Approval of free TV broadcast license to Fantastic Television by

HK government

Doubled free-to-air TV operators >>> Growing competition in the free TV

market

More support for the free TV channel

I-Cable: investment of HK$1 billion in the fist six years (Bloomberg, 2013)

Decreasing support for pay TV channels >>> competitiveness weakened

Threat of New Entrants

Low threat of new entrants

Threat of Substitute Products or Services

Substitutes regarding Transmission Modes Digital terrestrial television (DTT)—— Free-to-air TV

Free of charge;

More television channels;

High-definition television programmes

Broadband network (IPTV)

TVB Pay Vision could be accessed via the same set-top box of PCCW Media with aseparate electronic programming guide which is distinguishable from that of PCCWMedia’s “now Broadband TV” service.

Coverage of Different Television Transmission Modes in March 2012


(Broadcasting Authority Annual Report, 2010-2012)


Similar types of channels/ programmes

Fully digitized platforms of all the pay televisions

Zero switching cost after contract expiry

Other pay TV

services

Illegal decoder

retailers

Crack passwords to unlock pay TV decoders

Pirate viewing of Cable TV programmes

Loss of potential customers of Cable TV

OTT TV (Over-the-top)On-demand service

Multiple platforms access: tablets, smartphones, connected TVs, STBs and web

Delivery of video and audio over the Internet by third party content providers: Now TV, Netflix, Hulu

High threat of substitute products or services


Porter’s Five Forces Model

1

• Glenn Britt, CEO of Time Warner:

“Embrace all of the screens”;

“There is no such thing as a TV anymore.”

• Interview: Alan Cheung – Controller of

i-CABLE’s New Media Development Department.

• With movies, TV programs and videos more readily accessible on mobile devices thanks to the expansion of Wi-Fi network, quality and screen size become essential.

Tablet, game console …

Embrace all screens

2 Elevate program content

• HKCTV’s most prominent advantage over the others is its well-established news channels. • Bid for exclusive rights to broadcast sports tournaments rationally. More dollars into producing high-quality self-made programs.•Fantastic Television – New free TV license. Purchase high-quality TV dramas from independent producers; Develop creative entertainment programs (e.g., reality talent shows) to grasp young audience market.

3 Enrich subscription flexibility

• HKSAR Govt : 1/5 of HK population were below poverty line in 2012

Flexible, scaled-back & cheaper subscription packages

• Advanced set-top box and the gradual move to IP will increase cable TV’s flexibility.

• HKCTV: 16 fix-priced TV subscription packages (14 to 83 channels).

4 Think forward to Over-the-Top

In the future, i-CABLE may consider

an ”if-you-can’t beat ‘em-join-’em’” approach in face of

OTT challenges.E.g., COX: started to provide video service on the internet from Jul. 2013.

The future of cable television lies in on-demand services delivered over

multiple platforms.

OTT providers still have several hurdles to jump before displacing

traditional pay TV.– they must offer live events and sports (Arker, 2010).

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