Apple has upgraded its Apple TV device, dropping the price to $99, with the intention of developing a larger installed base. Apple's strategy is to take a share of video on demand (VoD) revenues. This contrasts with Google's TV aspiration, which is primarily aiming for the broadcast advertising market.
Unlike Apple's first-generation device, the new Apple TV has no internal hard drive, being purely a streaming media receiver for content from other computing devices on a home network, or from Apple's (and selected partners) own walled-garden service. Apple TV allows sharing of content from iDevices (iPods, iPhones, iPads) which Apple hopes will help drive demand for Apple TV. Apple has consequently moved to a rental model for content within the Apple TV store in conjunction with Netflix, a partner with existing content rights.
Google's approach to the market is to capture a greater share of total adverting revenues through indexing all the services vying for audience attention on the TV screen, providing a single unified UI and controlling the advertising. Google is already making progress expanding into the mobile market with Android, and this is the next step in its strategy to leverage its data analytics and advertising targeting across multi-screens.
The existing traditional TV broadcasters and IPTV players in the Asia-Pacific TV market need to watch Apple and Google very carefully. Two bellwether Asia-Pacific markets with very different local market structure and competitive dynamics are Hong Kong and Singapore.
Two models
PCCW in Hong Kong was a world pioneer in IPTV services, introducing the service in 2003 and transforming the traditional telco into a dynamic convergence player. Its IPTV service is posing a significant threat to the cable-TV service and surpassed them in terms of customer numbers mid-2009. A very competitive market, both in telecom and TV, Hong Kong has achieved a higher than 50% household penetration of IPTV.
PCCW built its early customer base with innovative packaging and pricing options, rather than restricting customers to pre-determined bundles. From its launch, PCCW focused on capturing the rights to key content, placing strong pressure on its rivals. PCCW has also been able to tie content and services across its quad-play bundles, reusing the same premium content with its mobile services.
Even Google and Apple will find it challenging to enter such a strongly competitive market with high existing IPTV take-up, with customers already having set-top boxes and tied into packages. They will need to focus on extending and working around the existing services rather than direct competition.
In Singapore, StarHub had dominated the pay-TV market until SingTel launched its IPTV service in mid-2007. SingTel's strategy was to use the IPTV service to strengthen its position as a converged player. Conversley, StarHub has expanded from its cable-based pay-TV service, into converged pay-TV and telecom services.
The IDA in Singapore has developed its NGN initiative to deliver an open access high-speed network due to reach 95% completion by 2012. This network will assist in accelerating bandwidth intensive services such as high-definition IPTV.
Additionally, IDA and MDA are consulting with industry to foster an open access video delivery platform, NIMS, including common standards and interoperability. The importance of this project is that it will improve competition in interactive and video services by both lowering the barriers to entry for a new player through access to the wholesale platform as well as removing customer lock-in.
This means that new players to the Singapore market, such as Google and Apple, will find it easier to enter, providing more competitive pressure to the existing IPTV players.
Craig Skinner is a senior consultant with Ovum
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