REGIONAL FOCUS: Europe 2019 IABMBUSINESS INTELLIGENCE QUARTERLY DIGEST SEPTEMBER 2019 You can find more information regarding IABM Business Intelligence at www.theiabm.org/business-intelligence THE QUARTERLY DIGEST The IABM Business Report Contents and Structure CONTENTS Intelligence (BI) Quarterly The analysis is undertaken by our Head of Digest provides IABM Insight and Analysis, Lorenzo Zanni, Executive Summary 3 members with a varied range Principal Analyst, Riikka Koponen and of business information about Research Analyst, Chiara Raucci. We publish Global Business Environment 4 the broadcast and media the latest news and research findings across industry and the wider global a variety of topics, including: Overview 5 economy in a ‘digestible’ way. n Current Global Business Environment Exchange Rate Movements 7 The purpose of this report is to n The Media Business enable member companies to n Regional Focus on a Regional Market The Media Business 9 keep up with the latest developments in our industry This edition of the BI Digest will include a Media Business Highlights 10 by presenting otherwise Regional Focus on Europe. scattered information in an Going global – partnerships and growing orderly and relevant manner. pains of Canal+ 10 Dynamic Ad Insertion (DAI) gaining popularity among broadcasters 11 The importance of Big Data in Content Recommendation, Personalization and UX 13 Supply Trends 15 The global economy Media Technology Special: Immersive Experiences 18 is expected to grow What are UHD and VR? 18 3.2% in 2019 and UHD & VR Deployments 19 slightly pick up to Regional Focus: Europe 20 3.4% in 2020 Business Environment 21 The Broadcast & Media Industry 24 Overview 24 Media Technology Demand Drivers 26 Transition to Digital & HD Broadcasting 26 Transition to DVB-T2 27 Digest authors Transition to New Viewing Experiences 27 OTT and Multi-Platform Delivery 29 Lorenzo Zanni Riikka Koponen Chiara Raucci IABM, Head of IABM IABM Digital Single Market 30 Insight and Analysis Principal Analyst Research Analyst PAGE 1 IABM BUSINESS INTELLIGENCE QUARTERLY DIGEST – SEPTEMBER 2019 EXECUTIVE SUMMARY Q2 2019: Trade Tensions Continue to Dampen Global Supply Trends Outlook n H1 2019 registered a sales growth of 2.9%, which is up from n According to the latest forecast of the OECD, the global 2.5% in H2 2018 economy is expected to grow 3.2% in 2019 and slightly pick up n Starting from H2 2018, profits registered growth, even if still to 3.4% in 2020 negative, reaching -15.1%. In H1 2019, profits grew at -7.74% n Oil prices dropped from a four-year peak of US$81 per barrel n The IABM Confidence Ratio decreased from 9 to 8.6, as in October 2018 to US$60 in July 2019 companies which reported being ‘quite positive’ about the n In May 2019, the US raised tariffs on US$200bn of Chinese market outlook in the previous survey now felt more ‘neutral’ products from 10% to 25% and started the process for hitting in terms of confidence an additional US$300bn of Chinese goods with tariffs. However, at the G20 Summit in Japan in June 2019, president Trump Sales & Profits Growth in the Broadcast called that process off and said he would continue to negotiate & Media Technology Industry with Beijing ‘for the time being’ 5% n A hard Brexit remains one of the biggest and most incalculable external risks for the Euro area, even though its immediate 0% threat has temporarily decreased thanks to the EU agreeing to -5% postpone the Brexit deadline to late October 2019 -10% n According to the IMF, growth in the Euro area is set to moderate from 1.8% in 2018 to 1.3% in 2019 and 1.5% in 2020. -15% In the first quarter of 2019, GDP growth picked up slightly in -20% the EU and the Euro area. However, the European Commission H2 2018 H1 2019 is slightly less optimistic in its forecast; it expects the Euro Sales Profits area’s GDP to grow 1.2% this year and 1.4% in 2020 n In June 2019, the US re-imposed sanctions on Iran after Source: IABM several incidents around the Persian Gulf, including a series of Immersive Experiences attacks against oil tankers sailing through the Gulf n According to IABM data, UHD adoption has slowly grown in recent years, from the 14% reported at NAB Show 2018 to the WTI & Brent Crude Oil Prices 20% reported at NAB 2019. Deployments have risen although (US$ per barrel, January 2018 - June 2019) there is still a high percentage of companies unlikely to launch 100 any UHD offerings n Despite the slow roll out, UHD channels continued to grow in 2018 as major sporting events such as the Winter Games and 50 the FIFA World Cup prompted broadcasters to launch offerings – sports remain the major application area for UHD n In the production sector, UHD has also become an established Price per barrel (US$) 0 I I I I I I I I I I format as major OTT players such as Netflix and Amazon now demand content only in UHD Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 n In 2019, we expect UHD adoption to continue to grow although WTI Brent (Europe) this is not a priority for most broadcasters n According to IABM data, VR adoption has not significantly Source: Federal Reserve Economic Data increased in recent years n Low consumer adoption coupled with high complexity and cost Highlights: Canal+ partnerships, Dynamic Ad Insertion have all contributed to stifling VR adoption by broadcasters and & Big Data other end-users n n In May 2019, the French Pay-TV giant, Canal+ announced that it The main VR deployments have been in sports had acquired the Luxembourg-based Pay-TV operator, M7 Group, from a private equity firm Astorg Partners for €1bn n At the start of 2019, Germany’s major broadcaster RTL Group announced that it would acquire Yospace, a UK-based digital video technology company, in a deal worth €29 million n Netflix is the precursor of personalization in the media industry and it is the biggest example of how media companies are using data, AI and ML to personalize content for the viewer Source: Shutterstock IABM BUSINESS INTELLIGENCE QUARTERLY DIGEST – SEPTEM BER 2019 PAGE 2 GLOBAL BUSINESS ENVIRONMENT IABM – September 2019 GLOBAL BUSINESS ENVIRONMENT Overview Global economic growth is forecast to slow to after surging in 2018. According to the World Bank, crude oil weaker-than-expected 2.6% in 2019 before slightly prices are expected to average US$66 per barrel in 2019 and improving to 2.7% on 2020, according to the World US$65 in 2020 affected by greater-than-anticipated US Bank’s latest estimate published in June 2019. production and a weak economic outlook for the global economy. Overall, energy prices – including also natural gas and coal – are These figures are significantly lower than those revised by the expected to average 5.4% lower in 2019 than in 2018, according OECD in May 2019, which expects the global economy to grow to the World Bank’s estimates. 3.2% in 2019 and slightly pick up to 3.4% in 2020. The slow Economic growth in the US was 2.9% in 2018, up from 2.2% economic growth stems from high uncertainty caused by trade in 2017, mostly reflecting stronger-than-expected domestic tensions between the US and China. After strong growth peaking demand, according to the World Bank. Economic activity in at close to 4% in 2017 and at 3.8% in early 2018, global economic the US was boosted by procyclical fiscal stimulus as well as growth slowed notably to 3.2% in the second half of 2018, accommodative monetary policy in 2018. In the first quarter of reflecting a confluence of factors affecting major economies. 2019, GDP growth in the US was 3.1%, according to Bloomberg. China’s economic growth declined as a result of regulatory The unemployment rate fell to a near 50-year low in 2018 tightening to rein in shadow banking as well as a new round of equating on average to 3.9%, while labor productivity has shown tariffs imposed by the US administration in the course of 2018 signs of picking up. Hence, the labor market is expected to and early 2019. In the Euro area, consumer and business remain robust, also bolstering consumption in 2019. confidence weakened and external demand – particularly from In 2018, the US administration raised tariffs on about US$300bn emerging Asia – decreased. The largest economies in the Euro of goods, mostly affecting imports from China.In total, new area witnessed weakened growth; in Germany, car production tariffs have been raised on about 12% of US goods imports. was disrupted by the introduction of new emission standards, China responded with retaliatory tariffs of 5-25% on US$110 while investment dropped in Italy as sovereign spreads widened. billion worth of US goods – nearly 70% of total imports Moreover, the continuing uncertainty around Brexit negatively from the US. affected financial sentiment in the EU. WTI & Brent Crude Oil Prices (US$ per barrel, January 2018 - June 2019) 100 50 Price per barrel (US$) 0 I I I I I I I I I I Jan-18 Jul-18 Jan-19 Jul-19 Mar-18 May-18 Sep-18 Nov-18 Mar-19 May-19 Source: CNN WTI Brent (Europe) After months of hostilities, both countries agreed to suspend new trade tariffs in December 2018 to allow for talks, which Source: Federal Reserve Economic Data created temporary optimism about a prospective deal.