How will IPTV services fare in the recession?

Screen Digest has looked at how IPTV services in Europe are likely to fare in the credit crunch. With the entertainment and media sector a prime target for both consumer and advertiser cost-cutting, the revenue flow for media firms could start to dry up.

The backing of a major telco is essential. Across Europe IPTV services are typically priced at low levels, in many cases free with broadband. As a result, few will break-even in the short to mid-term. Without the financial security that having an incumbent telco as a parent brings, there is little chance that such services would have survived – at least not in their current form. Those services belonging to companies like BT, France Telecom, Deutsche Telekom, Telefonica are in an enviable financial position compared to the many smaller, privately owned IPTV firms currently operating across Europe.

On the other hand, the backing of a major telco isn't always a benefit. The recent closure of Tiscali's IPTV service in Italy was probably the result of essential cost-cutting measures the company enacted to improve the look of the profit/loss sheet to potential lenders and also to reduce short-term costs. Screen Digest Senior Analyst Richard Broughton comments: "Particularly in light of the failure to sell its UK operations, halting a newly launched TV service in order to improve the bottom line may well have been an unwelcome necessity for Tiscali."

Most IPTV services are in a strong position with regards to customer relationships. Services such as the UK's BT Vision, France's Orange TV, Italy's Alice TV and others are bundled free with broadband services. With broadband access seen as an essential commodity by many Europeans, cutting back doesn‚t mean dropping broadband access. Screen Digest forecasts that European IPTV households will grow by 26 per cent in 2009, and while this is a decline on 2008's 45 per cent, IPTV remains the pay-TV platform with the fastest growth rate in the region.

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