Sie sind auf Seite 1von 16

MAGNA Global On-Demand Quarterly

First Quarter 2008 Review June 2008

Contact: Brian Wieser, CFA, Director of Industry Analysis Tel: 646-865-2260 Email: brian.wieser@magnaglobal.com

1

2008 Contact: Brian Wieser, CFA, Director of Industry Analysis Tel: 646-865-2260 Email: brian.wieser@magnaglobal.com 1

MAGNA Global On-Demand Quarterly: June 2008

Overview

From Canoe to Dragon Boat

DVR and VOD News

Appendix 1: DVR and VOD Forecast Data

Appendix 2: DVR Forecast Chart

Appendix 3: VOD Forecast Chart

Appendix 4: Internet Access Forecast Data

Appendix 5: Internet Access Forecast Chart

2

3: VOD Forecast Chart • Appendix 4: Internet Access Forecast Data • Appendix 5: Internet Access

Overview

We have updated our On-Demand models to account for the most recently completed quarter and modified our historical data to incorporate new information about the past

Our year-end 2012 forecast for DVR subscriber households is 43.5 million (37.0% of TV households), up from our estimate of 26.0 million (23.4% of TV households) as of the end of the first quarter of 2008

By 2012, we expect that true Video-on-Demand (distinct from the simulated VOD offered by DBS providers DirecTV and EchoStar) will reach 63.1 million households (approximately 53.7% of television households). This compares with 37.8 million VOD households (33.9% of total TV households) at the end of the first quarter of 2008

As of the end of March 2008, we estimate that 65.7 million households had broadband access out of 116.4 million total households. We estimate that internet access was enjoyed by approximately 72.7 million households by the end of the first quarter of 2008. We expect that total broadband access will rise to cover 86.7 million households by the end of 2012

3

quarter of 2008. We expect th at total broadband access will rise to cover 86.7 million

From Canoe to Dragon Boat (a)

With this week’s public announcement appointing David Verklin as CEO of Canoe Ventures (the U.S. cable industry’s collective effort to establish standards facilitating advanced TV advertising) it would seem an appropriate time to consider the sources of advertising dollars that will ultimately support the platform.

We have previously estimated that advanced advertising expenditures totaled approximately $140 million during 2007, and recent growth has been tepid at best. Canoe was established in part to address these waning levels of interest, nominally due to difficulties in implementing advanced TV campaigns across meaningfully-sized geographic footprints.

Today’s largest advertisers are commonly expected to become dominant sponsors of advertising powered by Canoe. However, systemic changes in methods of assessing media effectiveness – necessary to address emerging media vehicles’ fundamental differences in comparison to traditional media – are unlikely to become widespread in the near-term. Although experimental activity from today’s largest advertisers will continue in its present ad hoc form, the bulk of revenues supporting advanced TV applications may instead emerge from new large advertisers, along with the small enterprises who today drive the bulk of growth in online search.

Factors beyond implementation may yet reveal themselves as obstacles to widespread adoption. Early indications suggest that most programming viewed on VOD will not exceed single digit percentages of the viewership achieved when the same programming airs in a linear fashion. Lacking tonnage, historically large advertisers who already buy significant volumes of conventional television and who are cost-focused may find it difficult to regularly include VOD or other advanced applications on media plans. For better or worse, this is because reach and frequency – as proxies for broader branding/marketing objectives – are typically optimized against cost. As a result, problems will arise if higher CPM-equivalent pricing is expected for these sub-scale media, as long as incumbent alternatives continue to offer high levels of reach and frequency, which they will for many years to come.

and frequency, which they will for many years to come. 4 (a) Although both Canoes and

4 (a) Although both Canoes and Dragon Boats are paddle-craft, Dragon Boats are typically larger – involving a larger crew – and much faster moving

From Canoe to Dragon Boat (Cont’d)

But for a fundamentally good consumer-media idea such as advanced TV, there should be opportunities to create value for advertisers in a manner that is incremental to linear broadcasting. The challenge may be in finding which broad groups of advertisers the platform is uniquely well-suited for. Which groups of advertisers might turn an otherwise leisurely canoe into a racing dragon boat?

Two possible segments recently came to our attention while reviewing data on advertising expenditures from the Internal Revenue Service. The IRS provides historical data on US ad expenditures based on corporate tax filings. Although the only data available is for the period between 1994 and 2004, some key trends are clearly evident.

The smallest advertisers – more than 5.5 million companies with less than $10 million in assets, and whose aggregated ad spending totaled $43 billion – are growing much faster than mid-sized and larger advertisers (see page 6)

Despite falling levels of spend per unique large advertiser, the massive growth in expenditures from this group – whose ad spending rose from $94 billion to $159 billion over the 10 year period – is due to a commensurate increase in the number of unique large corporations – new national advertisers, expanding their businesses and their markets (see page 7)

5

of unique large corporations – new national advertisers, expanding their businesses and their markets (see page

From Canoe to Dragon Boat (Cont’d)

Growth in Ad Expenditures per Corporation, By Size of Assets $10mm-$250mm 10.0% <$10mm in in
Growth in Ad Expenditures per Corporation, By Size of Assets
$10mm-$250mm
10.0%
<$10mm in
in Assets
Assets
Compounded Annual
Growth Rates
<$10mm: +1.0%
$10mm-$250mm: +0.2%
5.0%
>$250mm: -0.5%
0.0%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
-5.0%
>$250mm in
Assets
-10.0%
-15.0%

6 Source: MAGNA Global analysis of IRS data

2000 2001 2002 2003 2004 -5.0% >$250mm in Assets -10.0% -15.0% 6 Source: MAGNA Global analysis

From Canoe to Dragon Boat (Cont’d)

Number of Large Corporations 14,000 13,000 12,000 Average Ad Expenditure Per Large Corporation: CAGR: +5.9%
Number of Large Corporations
14,000
13,000
12,000
Average Ad
Expenditure Per Large
Corporation:
CAGR: +5.9%
~$13mm
11,000
10,000
9,000
8,000
7,000
6,000
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004

7 Source: MAGNA Global analysis of IRS data

6,000 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 7 Source: MAGNA Global

From Canoe to Dragon Boat (Cont’d)

Although this data says nothing about spending on emerging media (especially as no segment of emerging media beyond online display had any scale in 2004), both segments would seem to represent ideal classes of advertisers for advanced TV, as long as Canoe’s underlying advertising assets are appropriately designed and “productized”.

The sheer volume of new large corporations – almost doubling over 10 years – will inevitably produce some advertisers who will view the world in a manner that is consistent with what advanced TV offers, and these advertisers will clearly realize value from new platforms. Identifying these companies as they transition from mid-sized to large-sized organizations may be a broader challenge.

As for small corporations, their needs and capabilities are very different from large advertisers, and very fragmented. Online search took hold with this class of advertiser, because of self-service options and because any business could cheaply produce “creative” assets. Additionally, given the small size of these organizations, they may be well-positioned to identify causes and effects of advertising while focusing on the absolute dollar cost of a media execution (rather than a CPM) given their more tightly constrained budgets and smaller organization sizes.

Only time will tell how Canoe Ventures will develop, and which advertisers will benefit from it. But as long as the cable industry focuses on identifying its unique value proposition to distinct groups of advertisers – and sets an appropriate time horizon for meaningful success in order to manage internal expectations among cable operators and programmers alike – we expect to see evolutionary progress in the years ahead.

8

among cable operators and programmers alike – we expe ct to see evolutionary progress in the

DVR and VOD News

DBS providers DirecTV and EchoStar remain the leading suppliers of DVRs

We estimate that DirecTV added 350,000 DVR subscribers, as approximately 55% of new subscribers ordered advanced set-top boxes (HD and/or DVR). By our estimates, the company now has 5.6 million households with DVRs (32.6% of total subscribers)

On its earnings call, the company highlighted its simulated VOD service, scheduled for roll-out by the end of the second quarter. Content will be accessed via broadband connections into specially designed set-top boxes, and the company will secure exclusive rights to content, such as NBC’s Friday Night Lights (beginning in October of this year)

Management also stated a longer-term goal, where the company is aiming to achieve 70% penetration of advanced services (DVR or HD) by 2010. This figure likely includes cumulative figures for separate HD and DVR subscriptions

Despite a smaller overall subscriber base, similar dynamics are driving EchoStar’s DVR subscriber levels, which we estimate now total 6.0 million households (43.3% of total subs)

9

driving EchoStar’s DVR subscriber levels, which we estimate now total 6.0 mill ion households (43.3% of

DVR and VOD News (Cont’d)

Comcast remains the leading provider of DVRs and VOD among cable operators. We estimate that more than 4 million Comcast subscribers now have DVR services, equal to 16% of the company’s customer base. Concurrently, approximately 16 million of its 25 million subscribers, or 65% of total, have access to the company’s VOD service

Time Warner Cable added 242,000 DVR subscribers, accounting for 27.2% of its basic cable homes.

Subsequent to the end of the quarter, the company announced that it delivered 131 million VOD streams during the month of March. This equates to approximately 15.6 streams per VOD subscriber for that month, slightly above figures reported through most of 2007

At Charter, the company stated that two-thirds of its VOD enabled customers use the service, approximately in- line with figures reported by other MSOs, and up by 20% over the prior year. As the number of households with access to VOD rose by approximately 20%, the reported 44% growth in VOD orders implies modest growth in VOD consumption per VOD household

Cox announced that DVR subscriptions grew by 30% year over year across its footprint, a slightly slower pace than the rest of the cable industry (where subscriptions rose by 36%). Separately, Cox announced that it would expand a trial launched last fall in Orange County with hit ABC network content. The service will offer free on- demand access to programming from ABC, NBC and Fox in four additional markets around the country

10

TiVo’s stand-alone DVR subscriber total declined slightly, totaling 1.7 million as of the end of that company’s first quarter

stand-alone DVR subscriber total declined slightly, totaling 1.7 million as of the end of that company’s

Appendix 1: DVR and VOD Forecast Data

Brian Wieser, CFA MAGNA Global Director of Industry Analysis (646) 865-2260

MAGNA Global On-Demand Deployment and Subscriber Estimates

 

2001A

2002A

2003A

2004A

2005A

2006A

2007A

1Q08A

2Q08E

3Q08E

4Q08E

2008E

2009E

2010E

2011E

2012E

 

Total US TV Households

102,200

105,500

106,700

108,400

109,600

110,200

111,400

111,447

111,860

111,952

112,800

112,800

113,928

115,067

116,218

117,380

YOY Growth

------

3.2%

1.1%

1.6%

1.1%

0.5%

1.1%

1.0%

0.8%

0.8%

1.3%

1.3%

1.0%

1.0%

1.0%

1.0%

Total Multichannel Subscribers

89,980

92,881

95,003

97,562

98,698

98,114

99,769

100,374

99,459

101,014

101,661

101,661

103,382

105,061

105,560

105,751

• YOY Growth

------

3.2%

2.3%

2.7%

1.2%

-0.6%

1.7%

2.4%

1.4%

1.6%

1.9%

1.9%

1.7%

1.6%

0.5%

0.2%

• % of TV Households With DBS, Cable or TelcoTV

88.0%

88.0%

89.0%

90.0%

90.1%

89.0%

89.6%

90.1%

88.9%

90.2%

90.1%

90.1%

90.7%

91.3%

90.8%

90.1%

Digital Multichannel Subscribers

33,747

41,025

46,462

52,485

58,178

63,972

71,205

72,999

73,949

76,549

78,820

78,820

86,754

93,552

98,690

102,149

Digital Penetration

37.5%

44.2%

48.9%

53.8%

58.9%

65.2%

71.4%

72.7%

74.4%

75.8%

77.5%

77.5%

83.9%

89.0%

93.5%

96.6%

VOD-Enabled Subscribers

3,243

7,660

12,910

19,278

24,160

29,902

36,030

37,750

38,668

40,643

42,500

42,500

49,680

55,423

59,749

63,083

• YOY Growth

------

------

68.6%

49.3%

25.3%

23.8%

20.5%

19.5%

16.4%

17.5%

18.0%

18.0%

16.9%

11.6%

7.8%

5.6%

• % of Cable Footprint Enabled With VOD

19.4%

35.3%

52.0%

69.7%

76.6%

85.6%

88.8%

89.6%

90.2%

90.0%

90.2%

90.2%

91.8%

91.5%

91.5%

92.1%

 

33.9%

53.7%

MSO DVR Subscribers

620

1,018

2,212

5,495

10,610

16,719

22,791

24,252

25,621

27,012

28,485

28,485

32,800

36,651

39,523

41,981

• YOY Growth

------

------

117.3%

148.4%

93.1%

57.6%

36.3%

32.8%

30.9%

27.7%

25.0%

25.0%

15.2%

11.7%

7.8%

6.2%

• % of Basic Subscribers with DVRs

0.7%

1.1%

2.3%

5.6%

10.7%

17.0%

22.8%

24.2%

25.8%

26.7%

28.0%

28.0%

31.7%

34.9%

37.4%

39.7%

Stand-Alone DVR Subscribers

315

443

704

1,269

1,621

1,851

1,821

1,796

1,746

1,696

1,676

1,676

1,556

1,486

1,486

1,486

• YOY Growth

------

------

58.9%

80.3%

27.7%

14.2%

-1.6%

-2.4%

-4.1%

-5.8%

-8.0%

-8.0%

-7.2%

-4.5%

0.0%

0.0%

• Net Additions

------

128

261

565

352

230

(30)

(25)

(50)

(50)

(20)

(145)

(120)

(70)

0

0

Total DVR Subscribers

935

1,461

2,916

6,764

12,231

18,570

24,612

26,048

27,367

28,708

30,161

30,161

34,356

38,137

41,009

43,467

• YOY Growth

------

------

99.6%

132.0%

80.8%

51.8%

32.5%

29.6%

27.9%

25.1%

22.5%

22.5%

13.9%

11.0%

7.5%

6.0%

• DVR Subscribers as % of TV Households

0.9%

1.4%

2.7%

6.2%

11.2%

16.9%

22.1%

23.4%

24.5%

25.6%

26.7%

26.7%

30.2%

33.1%

35.3%

37.0%

• DVR Subscribers as % of Multichannel Households

1.0%

1.6%

3.1%

6.9%

12.4%

18.9%

24.7%

26.0%

27.5%

28.4%

29.7%

29.7%

33.2%

36.3%

38.8%

41.1%

11 Source: MAGNA Global, Company Reports

26.0% 27.5% 28.4% 29.7% 29.7% 33.2% 36.3% 38.8% 41.1% 11 Source: MAGNA Global, Company Reports

Appendix 2: DVR Forecast

Subscribers (000s)

US DVR Subscribers - Cable, DBS and Stand-Alone Units

120,000.0

DVR Subscribers - Cable, DBS and Stand-Alone Units 120,000.0 Total Multichannel Subscribers 43,467.0 Total DVR
DVR Subscribers - Cable, DBS and Stand-Alone Units 120,000.0 Total Multichannel Subscribers 43,467.0 Total DVR

Total Multichannel Subscribers

43,467.0

Units 120,000.0 Total Multichannel Subscribers 43,467.0 Total DVR Subscribers 34,356.5 38,136.9 41,008.6 12,231.0

Total DVR Subscribers

34,356.5

38,136.9

41,008.6

43,467.0 Total DVR Subscribers 34,356.5 38,136.9 41,008.6 12,231.0 18,570.1 6,763.8 2,915.7 30,161.0 24,612.4 9 3

12,231.0

18,570.1

6,763.8 2,915.7
6,763.8
2,915.7
30,161.0 24,612.4
30,161.0
24,612.4

935.0

1,460.6

100,000.0

80,000.0

60,000.0

40,000.0

20,000.0

-
-

2001A

2002A

2003A

2004A

2005A

2006A

2007A

2008E

2009E

2010E

2011E

2012E

12 Source: MAGNA Global, Company Reports

2003A 2004A 2005A 2006A 2007A 2008E 2009E 2010E 2011E 2012E 12 Source: MAGNA Global, Company Reports

Appendix 3: VOD Forecast

US Homes With VOD Access

70,000.0 63,082.7 59,748.7 60,000.0 55,422.5 49,679.9 50,000.0 42,499.7 36,029.8 40,000.0 29,902.4 24,160.4
70,000.0
63,082.7
59,748.7
60,000.0
55,422.5
49,679.9
50,000.0
42,499.7
36,029.8
40,000.0
29,902.4
24,160.4
30,000.0
19,277.5
20,000.0
12,910.2
10,000.0
7,659.6
3,243.2
-
2001A
2002A
2003A
2004A
2005A
2006A
2007A
2008E
2009E
2010E
2011E
2012E
Homes With Access (000s)

13 Source: MAGNA Global, Company Reports

2005A 2006A 2007A 2008E 2009E 2010E 2011E 2012E Homes With Access (000s) 13 Source: MAGNA Global,

Appendix 4: Internet Access Forecast Data

Brian Wieser, CFA MAGNA Global Director of Industry Analysis (646) 865-2260

MAGNA Global Internet Access Forecast

 

2000A

2001A

2002A

2003A

2004A

2005A

2006A

2007A

2008E

2009E

2010E

2011E

2012E

 

Total Households (Census)

112,215.0

109,608.9

111,000.0

111,545.8

113,324.5

114,738.6

115,838.7

116,835.6

117,419.7

118,006.8

119,186.9

120,378.8

121,582.6

YOY Growth

3.3%

-2.3%

1.3%

0.5%

1.6%

1.2%

1.0%

0.9%

0.5%

0.5%

1.0%

1.0%

1.0%

Total Residential Broadband Access

5,067.9

10,810.5

17,099.9

25,635.0

34,843.7

43,432.4

54,772.4

63,505.5

71,566.0

74,769.1

78,615.7

82,579.8

86,664.1

% of Internet Access

10.6%

19.3%

29.1%

41.7%

54.1%

64.7%

78.5%

87.7%

95.7%

96.0%

97.0%

98.0%

99.0%

Total Narrowband Only (a)

42,623.4

45,189.5

41,619.1

35,854.7

29,553.0

23,718.3

14,991.5

8,932.5

3,230.3

3,115.4

2,431.4

1,685.3

875.4

% of Internet Access

89.4%

80.7%

70.9%

58.3%

45.9%

35.3%

21.5%

12.3%

4.3%

4.0%

3.0%

2.0%

1.0%

Total Residential Internet Access

47,691.4

56,000.0

58,719.0

61,489.6

64,396.7

67,150.8

69,763.9

72,438.0

74,796.4

77,884.5

81,047.1

84,265.1

87,539.4

• Internet Household Penetration

42.5%

51.0%

52.9%

55.1%

56.8%

58.5%

60.2%

62.0%

63.7%

66.0%

68.0%

70.0%

72.0%

• Net Adds

9,687.9

8,308.6

2,719.0

2,770.6

2,907.0

2,754.1

2,613.1

2,674.2

2,358.3

3,088.1

3,162.6

3,218.0

3,274.3

(a) Represents implied number of subscribers to dial-up services who do not also have broadband services

14 Source: MAGNA Global, US Census, FCC, Company Reports

to dial-up services who do not also have broadband services 14 Source: MAGNA Global, US Census,

Appendix 5: Internet Access Forecast

Subscribers (000s)

Internet Access - Broadband and Total

100,000

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

86,664.1

82,579.8 78,615.7 74,769.1 71,566.0 63,505.5 54,772.4
82,579.8
78,615.7
74,769.1
71,566.0
63,505.5
54,772.4
34,843.7 25,635.0 17,099.9 10,810.5 5,067.9
34,843.7
25,635.0
17,099.9
10,810.5
5,067.9

43,432.4

34,843.7 25,635.0 17,099.9 10,810.5 5,067.9 43,432.4 Broadband Total Internet Access 1,695.2 0 1999A 2000A 2001A

Broadband

25,635.0 17,099.9 10,810.5 5,067.9 43,432.4 Broadband Total Internet Access 1,695.2 0 1999A 2000A 2001A 2002A

Total Internet Access

1,695.2

0
0

1999A

2000A

2001A

2002A

2003A

2004A

2005A

2006A

2007A

2008E

2009E

2010E

2011E

2012E

15 Source: MAGNA Global, US Census, FCC, Company Reports

2005A 2006A 2007A 2008E 2009E 2010E 2011E 2012E 15 Source: MAGNA Global, US Census, FCC, Company

MAGNA Global On-Demand Quarterly

Contact: Brian Wieser, CFA, Director of Industry Analysis Tel: 646-865-2260 Email: brian.wieser@magnaglobal.com

16

Contact: Brian Wieser, CFA, Director of Industry Analysis Tel: 646-865-2260 Email: brian.wieser@magnaglobal.com 16