What do these stories tell us? One, that watching television via the internet is real – with just one single provider (Netflix) taking up as much as one fifth of all traffic. Two, that current business models for television might soon be outdated.

The move by the three networks comes as no surprise – local affiliates of the US networks have been complaining for some time that the networks make programmes available for free on the web, while they have to pay for the right to broadcast them. With connected TV sets such as Google TV it is just too easy to watch network TV series on demand – for free.

One response from the networks has been the introduction of Hulu Plus, a paid for service, a premium section of the Hulu video portal, a joint venture between News Corp, NBCU and Disney. One solution for the networks might be to start to offer TV series against payment via Hulu Plus to connected TV owners. And indeed, Hulu and Google TV confirmed that talks are going on the make material from Hulu Plus available on Google TV on a transactional basis.

Meanwhile in Europe

Now these examples apply to the US, but in Europe connected TV sets, as well as all kind of hybrid devices, are also making big inroads into the market. On the one side, there are the consumer electronics manufacturers who bring out TV sets and Blu-ray players with connected services such as Philips Net TV, Samsung@Interent and Sony Bravia Internet TV who offer access to a limited walled garden of video content – and, in theory, also access to selected video portals on the open internet.

Then there are the platforms such as Canal+ in France who combine their regular TV offer via DTH satellite, IPTV or DTT with online access to their own walled garden – in the case of Canal+ the Le Cube box, which offers direct access to their ‘Canal+ a la Demande’ VOD service. And in the UK, BSkyB has started the phased roll out of its Pull VOD service Anytime+ using the connected capabilities of its Sky+ HD service. Such services only offer content from the platform – or at least controlled by the platform.

The question is now – will customers accept these limitations? The answer will of course be ‘no’ – people have grown used to the open internet and will also demand that of video over the web services.

UPC – the Horizon project

Cable operator UPC has taken the concept one step further with the Horizon project. Liberty Global chief strategy officer Shane O’Neill gave attendees at the recent TIF conference at Dublin Castle the first glimpse of the Horizon Connected Home Gateway, scheduled for deployment across the UPC network during 2011.

“On the face of it Google TV looks like a threat, but in reality the cable industry will do what it has always done, and try to embrace innovation developed elsewhere and incorporate it into its own service. I think there’s a very strong likelihood that you’ll see the cable industry embed Google television and that functionality into its own set-tops, so that it’s not a threat but a cool new way to search for video”.

Explaining that the new box would bring a marriage of linear TV and the internet, O’Neill said that multiple screens had meant the social aspects of TV had disappeared, but that the social networking features included in the UPC Horizon box would go some way towards restoring this. “We won’t necessarily watch together, but we will discuss it on the television, through Facebook”.

Horizon will enable the consumer to do four key things; to access the internet, as well as the pay-TV offering; to enable to stream content downloaded on the PVR throughout the house; it will enable any content held on a PC or other devices to be viewed on the main TV. Navigation, which O’Neill said UPC was becoming increasingly obsessed with, comes through the NDS Snowflake UI.

We have not yet seen a Horizon box actually working and it will be interesting to see how access to web content will be handled. The easiest way would be using widgets or apps, which will give easy access to various web services. A keyboard on the remote, which is planned for Horizon, will also make sure that any website can be accessed – at least in theory.

Vodafone’s  hybrid TV in Italy and Spain

Vodafone Italy has deployed the Vodafone TV Connect service, involving a hybrid set-top box bringing together a DVB-T tuner, internet access via dedicated widgets and access to locally stored content. The company is now also launching a similar service called Vodafone Internet TV in Spain. The box, developed by French company WyPlay, receives DVB-T channels, both free-to-air and pay-TV, as well as a number of IPTV delivered services including VOD.

In Italy, the TV Connect widgets include Vodafone Calcio (football), the weather, horoscopes, information and more. The STB is available in retail under €200, with discounts available for Vodafone DSL customers.

In Spain, the new service is set to compete with Telefonica’s IPTV service Imagenio and Orange TV as well as with cable. However, in contrast to its competitors, Vodafone does not plan to invest in content itself, but rather rely on DTT services in a hybrid box. Vodafone also has no IPTV services in the two countries, but has chosen to rely on DTT broadcasts for its main TV offer.

A series of widgets will provide access to Spain’s catch-up TV services. Additional content will be available from National Geographic Channel, Canal de Historia and Canal Cocina (entertainment).

The hybrid box, developed by French company WyPlay, allows access to the internet on the TV, including on-demand and streaming sites, and gives access to locally stored content, such as videos, photos and music. The box is “PVR ready”, allowing recordings to be made to a USB device, and includes DNLA, Wi-Fi and Ethernet connectivity and is also ready for both HD and 3D content.

At an IBC lunch hosted by NDS, which is providing middleware and security for the German launch, Diego Massidda, director of video & connected, Vodafone Germany said the project could be replicated in other markets. However, the German initiative is a different beast, combining Vodafone’s own IPTV offer with additional channels from cable or satellite, while in Spain, viewers get access to all the DTT channels, both FTA and premium, with additional content from the open internet using dedicated widgets for easy access. In addition, the WyPlay box also acts as a media centre, giving people access to their own locally stored content.

What is up for SFR?

Wyplay has also been selected by French IPTV provider SFR, in which Vodafone owns a share, to collaborate with its technical team to develop the software for its next generation of HD IPTV set-top box. With over 4 million broadband subscribers in France, SFR has decided to shake up the existing solutions in the market by proposing a revolutionary HD IP-STB solution in 2010. “We want to bring a new user experience to our customers by facilitating access, exchange, and consumption of all media; TV, internet, mobile, PC, NAS,” said Pierre-Alain Allemand, general manager Networks SFR, in a statement.

More details on the set-top box are expected before the end of the year. We expect the new SFR box to offer some kind of web access using widgets (or apps), as well as to locally stored content. The French IPTV is the most competitive in the world and SFR will need a device that will beat those of its rivals, which include the Canal+ Le Cube and the Orange Livebox 2.

Belgian’s Mobistar TV offer

The Belgian mobile operator Mobistar has launched its new Mobistar TV ‘quintuple-play’ package offering mobile and fixed telephony, broadband access and IPTV, DVB-T and DVB-S television.

Mobistar says it has developed a complete television solution combining multiple available technologies. Its hybrid television receiver gives access to satellite (via DVB-S), digital terrestrial (DVB-T) and IPTV television signals. Satellite offers HD quality (Full HD 1080) and 3D television experience and brings over 500 television and radio channels. The internet gives customers access to interactive services (EPG), content on demand (VOD) and “thanks to Mobistar TV’s intelligent platform”, customers can watch, record and manage their favourite programmes both on their television or mobile devices.

The satellite portion of the offer, delivered from Astra at 19 degrees East, echoes a similar implementation by Vodafone Germany. Mobistar is working together with the two Belgian DTH platforms from the M7 Group, TV Vlaanderen and TéléSat. The telecom operator uses the Viaccess PC4.0 encryption.

Mobistar is part of the France Telecom group and will use their Livebox to connect to the internet and to offer TV and radio to the television set. The Livebox 2.0 has wifi, is DNLA enabled and contains a 320 GB hard disk.

FiberNet

Warburg Pincus-backed FiberNet is the fourth largest cable operator in Hungary after Liberty Global’s UPC, Magyar Telekom’s Kábel TV and RCS/RDS’s Digi. According to its CEO György Kerékgyártó, it has a presence in 200 locations throughout the country and currently has 155,000 video, over 90,000 broadband internet and 20,000 VoIP subscribers.

He adds that FiberNet launched a digital TV service last year offering basic and EBS packages. Both high and low end ones, with the latter consisting of around 25 channels and competing with services offered by DTH platforms, will also be made available on it from this month.

Kerékgyártó believes that “competition in Hungary has become very intense for all platforms, with DTH gaining share quickly compared to cable.”

This is a far cry from the situation that existed up until late 2006, when cable enjoyed a “quasi monopoly situation”, with the only DTH service then available – UPC Direct – “in balance with the rest of the market” and offered by UPC “as a complementary product”.

However, the Romanian owned DTH platform Digi (a sister service of cable operator of the same name) then entered the market, offering a product at almost half the “equilibrium price” of other services. This resulted in a “market share war” in which it has fared extremely well, securing over 400,000 subscribers in three years.

Kerékgyártó says that a further escalation in this “war” took place with the launch of Magyar Telekom’s DTH platform T-Home Sat, now known as Sat TV, in late 2008. Given that the incumbent telco provides services to 2.8 million of Hungary’s 3.8 million households, it has found itself perfectly placed to offer satellite TV as a bundled product to telephony and internet subscribers, in doing so even undercutting Digi in double and triple play offers.

Kerékgyártó adds that although Hungary is also now served by a fourth DTH platform, Hello HD is a high end product and has made no real impact on the marketplace. He believes its subscriber total to only be around 3,000.

Commenting on FiberNet’s plans for the future, he says that it will “definitely” introduce a PVR product this year and is in fact currently sourcing set-top boxes.

Although the operator will also “probably look at HD”, he believes it is “not a mass marketable product yet in Hungary.” Indeed, there are at present fewer than 10 HD channels available in the country at present.

FiberNet may also consider introducing catch-up TV, if not this year than in 2011.

Kerékgyártó feels that the main issue currently faced by not only the Hungarian cable industry but its entire telecom market is that of growth potential. Nobody can see it returning to double digits, at least in the short to medium term, for a number of reasons.

The main one is competition, not just within cable (FiberNet, for instance, faces it from an overbuilt competitor on a third of its network) but also from DTH and IPTV. “This creates a situation where prices and margins start to erode”, combining with “the relative saturation of the video and telephony market and slowdown in broadband growth.”

In Kerékgyártó’s view, the most realistic outcome is a speeding up of consolidation in the cable industry, leading to the emergence of two main players. FiberNet aims to be a “key player” in the process, which will see small and medium sized operators become the main take-over targets.

Antenna Hungária

The national transmission company Antenna Hungária has maintained a presence in Hungary’s pay-TV market for a number of years through the MMDS service Antenna Digital. Offering 100 channels, some of which are in HD, to under 40,000 subscribers in Budapest and environs, it is nevertheless not high on its list of priorities.

What is, however, is the company’s FTA DTT service MinDigTV, launched in December 2008 alongside a pre-pay offer named Terra+. Despite difficult beginnings, or more specifically a lack of content, it has in recent months begun to find its feet in what is a highly competitive marketplace.

Andreas Tóth, Antenna Hungária’s head of communications, identifies the major turning points as being securing carriage of the national commercial stations RTL Klub and TV2 last May and HD versions of the two main public channels M1 and M2 in July. Euronews followed shortly afterwards, and the company is currently in discussions to hopefully launch what would be a Hungarian version of the news channel.

Today Antenna Hungária, which is backed by France’s TDF, offers seven FTA channels and three radio stations on MinDigTV and two pre-pay channels (the news-based Hir TV and ATV) on Terra+, split between two multiplexes (A and C). It also operates a trial DVB-H service, offering four public TV channels, Hir TV and ATV to a potential 15% of Budapest’s population, employing a third multiplex (B).

According to Tóth, there is around 30% spare capacity on multiplexes A and C that would ideally be filled with more FTA channels or a pay-TV package. However, neither is likely to happen – at least in the near future – for a number of reasons.

Firstly, the general environment for new FTA channels is far from healthy, with TV ad spend having tumbled by 15-20% in Hungary in 2009 following several years of average annual growth of 5-7%.

Secondly, the launch of new FTA channels is being hampered by deficiencies in Hungary’s archaic Media Law, passed in 1997. Although the country is likely to have a new government later this year, new legislation will require a two-thirds majority in parliament, which is always difficult to achieve.

Thirdly, there is a huge obstacle to adding more existing FTA channels to MinDigTV as cable and DTH platforms on which they are already carried will refuse to pay royalty fees.

Yet despite these difficulties, Antenna Hungária’s CEO is on record as saying that the company would like to extend its FTA and pay offer this year.

Although Hungary has fixed December 31, 2011 as its ASO date, Tóth believes there is still “no great clarity” about the transition process.  RTL Klub and TV2, for instance, still have analogue licences that expire in mid-2012, and “if the government wants an earlier ASO it needs to discuss it with them.”

For Antenna Hungária, however, the road ahead seems somewhat clearer – at least in the case of its DTT platform. Figures due to be published by the company this week are expected to show that heavy promotion of its services since last autumn – it allocated HUF680 million (€2.5 million) for publicity in 2009 and expects to spend a similar amount this year – yielded very good results in the run-up to Christmas.

On the other hand, there are question marks hanging over the future of its trial DVB-H service. According to Tóth, “the problem is that we don’t want to deal with the distribution, marketing and service side (of a full DVB-H service). We just want to do technical operations (provide infrastructure)”.

Unfortunately, Hungary’s three mobile companies Vodafone, Pannon and T-Mobile have until now shown little interest in co-operating with Antenna Hungária on a DVB-H platform. Were they to change their mind, it would be on the basis of decisions made by their headquarters on an overall strategy for DVB-H, not just one affecting Hungary.

It is therefore perhaps not surprising that Antenna Hungária feels there is a “low chance” of launching a full DVB-H service in the near future.

Magyar Telekom

The incumbent telco Magyar Telekom has emerged as a key player in Hungary’s pay-TV industry since the launch of its DTH platform in Q4 2008. Having dropped the T-Home branding, its residential services are now known simply as Sat TV, IPTV and Kábel TV and have a combined subscriber total believed by New Television Insider to be in the region of 600,000.

Ida Sztahura, head of department, Consumer Marketing Directorate, T-Home Marketing Branch, says that the company operates three types of networks. Copper offers customers ADSL, VoIP, PSTN and IPTV; fibre IPTV, VoIP and fibre internet; and cable voice over cable, cable internet and analogue and digital TV.

However, this is something the customer does not need to understand, their interest being in the service on offer, along with the price.

She adds that, “the Hungarian market is interested in double and triple play services”. In the case of Magyar Telekom, its most popular triple play package currently costs HUF6,640 a month.

However, satellite packages are cheaper than analogue/digital cable or IPTV ones.

Although all three platforms offer HD channels, IPTV and cable (six each) currently provide more that DTH (three). The HD portfolio consists of Eurosport HD, Filmbox HD, National Geographic HD and History HD, along with M1 HD and M2 HD, though the latter two offer only a limited amount of HD content.

Although the company’s cable operation is well established and DTH platform surprisingly successful, Sztahura says “we believe in IPTV very much. (We) focus on IPTV because it offers so many new features.”

Despite being slow to get off the ground, the IPTV service now has over 60,000 subscribers. However, it can be received by a potential 700-800,000.

The only real competition it faces is from Invitel, though some 2-3 ISPs now also take Magyar Telekom’s wholesale offer and distribute it using their own brand names.

Commenting on the company’s DTH platform, Sztahura says that many of its customers have come from the rival services UPC and Digi, as well as from small cable operators.

Magyar Telekom’s cable operation has meanwhile deployed DOCSIS 3.0 to offer its subscribers broadband internet access at speeds of up to 80 Mbps.

Sztahura adds that TV remains the main driver in the industry and that customer retention in what is a very price sensitive market is a challenge for all players.

Chello Central Europe

Chello Central Europe is a business unit of Chellomedia, Liberty Global’s Europe-based content division. Headquartered in Budapest and with offices in six other CEE capitals, it has through a series of acquisitions since 2006 built up a portfolio of thematic channels that are distributed throughout the region.

Sport 1, for instance, is offered in Hungary, Romania, the Czech Republic and Slovakia, while Minimax is present in the same four countries, as well as in Serbia, Macedonia, Montenegro, Bosnia & Herzegovina and Moldova.

Commenting on the Hungarian market, Levente B. Málnay the general manager of Chello Central Europe, says that it is currently served by 86 local language channels, over 60 of which are researched by AGB. Those belonging to Chello “are fully localised, with video feeds created for the Hungarian market, and in the case of most of our products, local content is a very important feature.”

Sports 1, for instance, features the local premier football league, while Spektrum, the long established channel bought from HBO in 2008, “has some documentary series produced by us in Hungary.”

Málnay adds that, “in general, we believe that in the thematic market tailor-made products do have a future.”  He is also of the view that the presence of other content companies – such as IKO Media, some of whose products compete with Chello Central Europe’s – “helps the thematic concept”, growing the audiences of such channels at the expense of classic channels.

What is more, although thematic channels find themselves competing for a relatively small portion of the TV ad pie – RTL Klub and TV2, Hungary’s leading TV stations, account for around 80% of the total – this is seen as an opportunity rather than obstacle by Chello Central Europe.

Málnay says that, following initial cuts that were brought about the economic crisis, he believes it to be “a fair and realistic assumption that budgets will be spent differently” and that by 2011 a “safe bet that thematic TV channels will be beneficiaries” of this change.

Commenting on Chello Central Europe’s plans for the future, he adds: “we now have 10 brands and we believe our next step is to make sure as many as possible are present in as many markets as possible.”  He also says the company is “definitely examining” the possibility of adding HD channels to its portfolio.

Sport already features strongly in the portfolio through the complementary Sport 1 and Sport 2. It has since December also included Sport M, a channel specifically offering Hungarian sport and targeting Hungarian language speakers. It is already available in Hungary and will by the end of March also be offered to viewers outside the country, with interest in it having been expressed as far afield as the US and Canada.

There is at present only one other channel in Chello Central Europe’s portfolio – the movie-based Filmmúzeum – that is aimed at a Hungarian language audience.

Significantly, Chello Central Europe also represents The History Channel, Bloomberg, Hallmark Channel, BBC and movies 24 and other thematic channels. Its other interests include the ad sales representation agency At Media, which lists Viacom, Canal+ and Disney among its major clients; and Mojo Production, a film production company that has made content for both the proprietary TV Paprika, Filmmúzeum and Deko and for third parties.

Table

Chello Central Europe – Sports channel penetration

Channel                                    Subscribers

Sport 1 Hungary                        2.3m

Sport 2 Hungary                        2.1m

Sport 1 Czech/Slovak            1.3m

Sport 1 Romania                        2.1m

Total: 7.8m in four countries

Source: Chello Central Europe