FiOS IPTV Abraham Pinales and Krystal Muise Situational Analysis • Subscription Television Market Overview • 85 Million U.S. TV Subscribers • $86.3B Yearly Revenue • $26.6B Advertising Revenue • Market Trends • Increased HDTV and Video On Demand (VOD) • Decrease program viewership due to internet viewing (Hulu, YouTube, etc) • Competing Networks • Cable Networks (Comcast, Cox, Time Warner) • Satellite Networks (Dish Network, Direct TV) • Fiber to the Home (FTTH) Networks (AT&T, Verizon) Verizon FiOS IPTV •What is Internet Protocol Television (IPTV) • Television service delivered using Internet Protocal over the FTTH network • Two way digital broadcast signal • Allows for the integration of Television and other IP based services • Allows for more interactive programing • Increased VOD capabilities Cable TV Satellite TV FiOS TV IPTV (FTTH) Network Type Copper (Coax) Satellite Fiber Optic Fiber Optic Network Notes Shared Individual Individual Individual Market Share leaders ?Market Share FiOS IPTV Features Time Warner, Comcast 65 DirecTV, Dish Network 28 Verizon 2 Verizon, ATT 2 Max Marketed Bandwidth (MBPS) 25 10 50+ 50+ Bandwidth Notes Shared Network bandwidth is Increased HD Content has Individual fiber networks Individual fiber networks influence by # users on limited Satellite networks from provided the largest bandwidth provided the largest bandwidth network at a given time offering additional broadband capacity to individuals capacity to individuals speeds. Agreements w/ Telco’s # HD Channels 150+ 150+ 150+ 150+ VOD Titles Souce VOD + PPV VOD+ PPV VOD+PPV VOD, PPV, Internet DVR Capability Y Y Y Y Bundling Capability Triple Play (Voice, Data, Double Play (Data, Video) Quadruple Play (Voice, Data, Quadruple Play (Voice, Data, Video) Video, Wireless) Video, Wireless) Interactive Advertising Limited None Limited Y Interactive Channel Surfing N N N Y Integration of IP equipment N N N Y Interactive Widgets N N Y(limited) Y Opportunity Attractiveness Threat Threat Description Level Highly competitive market. Customers have various options to obtain TV content which include CATV, High Satellite, FiOS and Internet streaming. Most competitors in this market have invested billions of dollars Competition to deploy their networks to the individual customer and create attractive features/services to keep them. There are several barriers that prevent easy entrance into this market. The regulatory requirements for becoming a distributor of TV content is both costly and lengthy. The approval process can take years Low and the process for develop a network to reach individual consumers can be measured in the tens of New Entrance billions of dollars. There are many substitutes available. Some of the substitutes currently available are CATV, Satellite, Medium FiOS, and internet streaming. Each of these substitutes has features/ services that make them unique in Substitution the market. The internet and other advances in technology have allowed customers to be more knowledgeable. The Medium internet makes it easy for customers to compare services and features provided by competitors, as well as Buyer Power make price comparisons. Contracts for content, including shows and ads, are based on the number of subscribers. A high level of competition in the market makes it important to differentiate the product to provide features that are Medium useful to both the subscribers and the suppliers. The customizability of IPTV will allow suppliers to Supplier Power target specific segments of viewers. Concept Test • Test Platform using existing FiOS TV customers free 60 day trail period • 500 volunteer customer asked to participate • 250 participants will be given platform #1 • 250 participants will be given platform #2 • Data will be collected through out the trial • Preference and Satisfaction Data using Concept Testing Survey • Revenue data based on widget usage and content subscription Concept Test Sample Survey Very Much Disagree Agree Agree Tell us how you would rate the following statements regarding your experience withe FiOS IPTV 1 2 3 4 5 The Interactive Tutorial was helpful Program guide Menu was easy to use I was able to easily find the desired Video on Demand Content I was able to easily find the desired Internet Video Content Poor Fair Good Very Good Excellent FiOS IPTV improved my overall TV watching experience 1 2 3 4 5 Overall, how satisfied were you with the FiOS IPTV platform Not Likely Likely Very Likely How likely are you to subscribe to the FiOS IPTV Service at a monthly rate of $24.95 How Likely are you to subscribe to the recommend the FiOS IPTV Service to friends and family What other subscription TV Services have you used in the past? Cable TV (such as COX, Timewarner, Comcast) Satellite TV (such as Direct TV, Dish Networks) Personal DVR (such as Tivo) Other __________ Launch Strategy • Customer Acquisition: • Provide switching options to existing customer • Pull customers from other markets within the company • Acquire new customers from outside the company • Challenges: • There is a learning curve that customers must overcome. Pricing IPTV HDTV Content Price /FiOS Digital Cable /Satellite Basic Cable Analog Features Customer Loyalty • Bundling Strategy • Combined with other Verizon products • Customization • Widget, VOD, Internet and HDTV content • Marketing of VOD and Widgets based on past usage Trends Total FTTH Cost (per customer) Network Build Expense $2,200 Installation and Equipment $718 Marketing Cost of Acquisition $130 Interest and Other Cost $576 Customer Lifetime Value Total $3,624 per customer IPTV Cost R&D Cost 252.2 (M) Marketing Cost of Acquisition 130 per customer Total Number of Subscribers 1.8 million Estimated yearly growth 55% Estimated churn 35% Net Growth 20% IPTV Penetration Rate (Estimated) 30% Monthly Revenue $24.95 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Total FiOS TV Customer Volume(M) 1.8 2.2 2.6 3.1 3.7 4.5 5.4 6.4 IPTV Customer Volume 351,000 419,850 504,698 605,067 726,451 871,500 1,045,956 1,255,046 IPTV Revenue 105,089 125,703 151,106 181,157 217,499 260,927 313,159 375,761 FFixed Expense 252,215 0 0 0 0 0 0 0 Variable Expense 45,630 54,581 65,611 78,659 94,439 113,295 135,974 163,156 Total Expense 297,845 54,581 65,611 78,659 94,439 113,295 135,974 163,156 Net -192,755 -121,633 -36,137 66,361 189,422 337,054 514,239 726,844 Customer Life Time Value IPTV Customer Volume (initial) 351,000 228,150 148,298 96,393 62,656 40,726 26,472 17,207 IPTV Revenue (000) $105,089 $68,308 $44,400 $28,860 $18,759 $12,193 $7,926 $5,152 Cum Revenue (000) $173,398 $217,798 $246,658 $265,417 $277,610 $285,536 $290,688 CLV $828.17 Derivatives • Gaming: combination with X-box. • Widgets that will allow more customization • VoIP used for Teleconferencing Alternatives • HD and VOD content focus •Will not create enough differentiation •Competitive advantage not sustainable • Easily duplicated by competition Questions??