The outlook for digital terrestrial television in Turkey

This post is a copy of my analyst friend Constantinos Papavassilopoulos from IHS Markit. The original copy of this article has been first publish on IHS website.


The outlook for digital terrestrial television in Turkey

Turkey broadcasts its TV signals via the four major platforms (cable, IPTV, satellite and terrestrial). The majority of these broadcasts are digital with the exception of broadcasts made via the terrestrial platform and a dwindling number of analogue cable broadcasts.  Turkey is well on track to fully digitize its cable infrastructure. Analogue cable broadcasts represent a quarter of total cable by the end of 2016 and the country is expected to complete the switchover to digital by the end of 2018, according to IHS Markit.

Turkey remains the only European country who has not officially launched a DTT service following Moldova’s launch of its first DTT service in November 2016. Turkey’s DTT delay puts the whole digital transition process in jeopardy, as the country is at risk of missing the final internationally-agreed deadline for switching-off its analogue TV signals, which is 17 June 2020. Missing the deadline may have serious implications for the whole TV industry in Turkey.

Our Analysis

Turkey has made preparations for the introduction of DTT: In 2011 the Turkish parliament passed a new legal framework (Law No 6112/2011), which sets the main legal requirements for DTT service providers. The Law stipulates DTT licence holders must complete the transition to digital two-years after launch. Media regulator RTUK issued the Digital Switchover Plan which outlined a timetable for switching-off analogue signals on a region-by-region basis. The Law foresaw the creation of a single DTT network operator, responsible for rolling-out the DTT network nationwide and managed as a joint company between the public service broadcaster TRT and the major national commercial broadcasters.

The Digital Switchover Plan foresaw the allocation of eight multiplexes to the DTT platform. Six were earmarked for existing national commercial broadcasters, one for public-service broadcaster TRT and one multiplex to carry the channels of regional and local broadcasters.

DTT channel licences were to be allocated via an auction held by RTUK. On April 2013, RTUK awarded 33 DTT national licences, 11 of them in HD and 22 in SD. The auction generated 872 million Turkish Lira ($436 million). However, a year after the auction, the Supreme Court of Turkey suspended the results of the auction and cancelled all DTT licences, citing irregularities with the licensing process.

The cancellation of the DTT licences created huge uncertainty and subsequently the national commercial TV broadcasters expressed reluctance to commit any funds for the DTT network. The reluctance, in a large part, came after the national commercial TV broadcasters signed carriage deals for the delivery of their channels via competing platforms (cable, IPTV and satellite). The commercial broadcasters claim they now have no real incentive to invest in the DTT platform. Furthermore, broadcasters argue Turkey is predominantly fit for satellite and DTT will not be a viable alternative. Satellite (free and pay) penetration of primary TV households reached 79% by the end of 2016, and IHS Markit forecast will remain the  dominant platform in Turkey in 2021 (77.2% penetration of primary TV HHs according to IHS Markit).

The IPTV platform is growing in Turkey, attracting half a million new subscribers between 2013 and 2016, which increased its subscriber base from 286,000 to 732,000 respectively. IHS Markit forecasts the IPTV platform will more than double its subscriber base by 2021, increasing to 1.63 million, largely due to the intense competition between Turk Telekom and Turkcell driving new products and promotions in a bid for new customers.

Can Turkey really afford not to develop a DTT platform? The majority of European countries have launched a viable DTT platform. Having said this, countries in the Middle East and North Africa (MENA) region such as Saudi Arabia, UAE and Qatar, have opted for a very limited development of their DTT platform. DTT represents less than 2% of primary TV HHs in many MENA countries.  Turkey shares several characteristics with the MENA countries, particularly the dominance of the satellite platform for TV broadcasts.

However,Turkey must auction the UHF frequencies currently occupied by analogue terrestrial broadcasting. The auction will provide the Turkish government with much need revenue.  Turkey auctioned the 800 MHz spectrum (the so-called Digital Dividend 1.0 that is the frequencies 790-862 MHz) in August 2015, generating $3.7 billion from the three successful bidders, namely telcos Turk Telekom, Turkcell and Vodafone. Internationally, the International Telecommunications Union (ITU) recommends the 700 MHz spectrum (the Digital Dividend 2.0 or frequencies 694-790 MHz) should be allocated to mobile broadband operators before 2022. For Turkey to successfully auction this spectrum it has to clear it from any analogue or digital terrestrial broadcasting. Therefore, some form of digital transition is needed.

IHS Markit continues to closely follow development of the DTT platform in Turkey via contact with broadcasters and the media regulator RTUK. Apart from some pilot projects in Ankara and Istanbul, the latest developments indicate the process has stalled and the future of the DTT platform in Turkey remains unclear.

Fi, PuhuTV, BluTV and Originals content

One of the most popular local TV series of this season on Turkish TV industry was ‘Fi‘. It was simply a drama but also unique due to a number of reasons. First of all, it was a series available ONLY online as a OTT content but not broadcasted in the classical sense.  Even though this is quite common in US like examples of many Netflix Originals, it’s quite rare that a TV series with a remarkable budget level like ‘Fi’ is not broadcasted all over Turkey but only available through a OTT service.

At this point, I’d better give a quick background information about the service that owns ‘Fi’. The OTT service is called PuhuTV. It’s backed by a major broadcaster group in Turkey, Dogus Media. PuhuTV has been launched commercially early this year as a free-of-charge, ad-based catchup TV service hosting major TV series from a variety of channels. In order to create an awareness in the market and make some noise, they’ve made a sensational launch for their first and for the time being only ‘Originals‘ content Fi. As there is no Live TV channel offering on PuhuTV, the commercial launch event has been publicly available on YouTube TV. At launch night, the first 3 episodes of Fi has been released. As a matter of fact, producing original content like Netflix or Amazon Prime Video is doing in US is already done before by BluTV which is another OTT service. BluTV is owned by one of theTurkey’s major TV broadcaster Dogan Holding. As of today, there are 3 original, exclusive content on BluTV. On top of these, Netflix Turkey is also working on a brand-new local Originals nowadays specific for Turkish market.

Coming back to the popular TV series Fi, it was not made available all at once, but along a series of weeks unlike the Netflix /Amazon Originals. Typically all the episodes of a OTT type of TV series’ new season are made online on the commercial date which is announced earlier. Then, audiences are looking forward the launch date and watching many episodes in a row once they are available. (i.e. Game of Thrones of HBO, House of Cards of Netflix) Unlike the typical scenario, even though the first 3 episodes of Fi have been made available online in April at the launch event, Fi fans had to wait another few weeks in order to watch the remaining episodes. PuhuTV had relased remaining episodes one by one every week. Eventually, the last episode was online on 16th of June as the season final. I’ve thought about the reason whyPuhuTV management decided to release the episodes over the course of 2-3 months instead of making the complete set of episodes of Fi made online at once,

Even though BluTV and PuhuTV are similar OTT services there is a significant difference between them. While BluTV is a subscription based service, PuhuTV is a free-of-charge, ad-based service. That’s why PuhuTV had to wait the rating results of the first 3 episodes. The result was really impressive. According to the results that has been shared, the first 3 episodes have been watched a total of 3,5 million views within the first 50 hours. For the advertisement agencies, this is the most critical KPI that they care. That’s why PuhuTV management should have first waited to get these results in order to convince the advertisers more easily.  Following the fascinating results of the first 3 episodes which were basically missing ads, we’ve seen many ads as in the form of product placement (embedded into to the content in a relatively natural way). Actually, for a service that is free-of-charge the audiences are more tolerant to ads.

It remains to be seen if this ad-based model will be sustainable in Turkish market. By nature, Turkish TV sector is quite competetive and dominated by more than 500 FTA channels broadcasting  via satellite with a country-wide penetration of more than 70 percent.

 

Netflix cuts into Turkey with original

Reference: Digital TV Europe:

Streaming giant Netflix is getting into the original programming game in Turkey.

The Los Gatos-based SVOD service has been ramping up its activity in local markets across Europe, and has now ordered a ten-part, “hero-driven action story” based on Ottoman and Turkish legend and history.

Netflix’s drama comes from Istanbul-based O3 Medya, with company co-owner Onur Guvenata the executive producer.

It centres on a young man who discovers he has special powers before linking up with a group of misfit friends to fight dark forces that are threatening Istanbul.

Netflix VP of international original series Erik Barmack described the series as “young, fresh and exciting”, adding: “We believe that Netflix will be the perfect platform for this great Turkish production and we can’t wit to share more details later this year.”

With science fiction-themed drama rarely produced in Turkey, Guvenata said the series would create “a new genre” that would stand as “a milestone for our market”.

“It will not only resonate with the Turkish audience, but will also travel globally,” he added.

Turkey has become one of the world’s most vibrant TV markets, with its local telenovela and drama productions driving the territory to become a top three international distributor.

Companies such as Fox Networks Group, Endemol Shine and Eccho Rights, which this week sold Show TV dramaInsider to MBC in the Middle East and a number of other territories, are all active in the region.

Netflix’s new drama will sit alongside acquired Turkish series such as Magnificent Century, Ezel and Lovebird, and movies including Güneşi Gördüm (I Saw the Sun) and Kelebeğin Rüyası (The Butterfly’s Dream).

These were acquired last year as Netflix unveiled a “truly Turkish service”, and a wide-ranging deal with Vodafone’s local telecoms business.

Netflix has also localised its service in Poland, Thailand and Romania.

Pay-TV Landscape (Turkcell & Turk Telekom)

Folllowing up the earlier post regarding the 2016 year end TV results of Turk Telekom and Turkcell, herebelow you can find the latest market figures of Q1 of 2017.

It’s seen that both companies are growing their TV base constantly on the past few quarters. The figures of both companies are presented on 2 pillars.

  • IPTV (Turkcell) & Tivibu Home (TT)
  • OTT (Turkcell) & Tivibu Go (TT)

Due to nature of the user behavior and landscape, there are 2 main difference regarding these 2 verticals:

  1. Big TV Screen Experience via STBs: Watching habits on big TV screen experience is conventional. The relationship between the audience and TV screen is several decades old. People even the young generations are watching their favorite shows preferably on big TV screen. Operators are subsidizing STBs and providing them to their customers on a rental basis. Unless modeled otherwise, main TV subscriptions are signed based on 2 years contract hence allowing operators perform financial planning relatively in a more controlled environment. Additionally, average watching time per day is several hours (6-8 hours) and consecutively ad revenues are huge on TV business. On the other hand, STBs have limited resources such as processing power and memory. The average lifetime of STBs are around 7 hours which means that today a quite old devices are still installed on customer promises. That’s why the overall experience and fluidity of the UI on big TV screen is not in a best shape compared to superfast, quad-core mobile devices. ( i.e. iPhones, Samsung Galaxy series)
  2. OTT TV Experience via mobile clients & PC and other players: The superior mobile broadband LTE infrastructure coupled with the ever increasing processing power of the mobile devices has made the TV/video watching experience much move convenient on handheld devices. Nevertheless, watching TV on a mobile, tablet or even a PC screen is not able to offer the best TV watching experience. Likewise, providing very high quality video like 4K Ultra HD is also not feasible due to both hardware limitations and the lack of screen support on mobile devices. On the positive flip of the coin, operators don’t need to provide OTT devices to the subscribers as they are bought my the customers either via retails shops or any other means. One other difference on OTT space, compared to Big TV screen experience is that there is significant churn ratio as there is no contract signed by the customers and cancelling the subscription is possible at any given time. That’s why customer acquisition and retention is more challenging on OTT space.

All in all, both Turkcell and Turkl Telekom are main drivers of Pay-TV market in Turkey. The other players in the competition (Digiturk, D-Smart, KabloTV and Filbox) are more less steady at a level since several years. The growth of Turkcell TV+ is mainly driven by IPTV product and the power of Turkcell’s LTE technology while Turk Telekom is heavily investing to scale TV’s offer on satellite domain and DSL base.

 

In Turkey the average fixed broadband speed is 7,2 Mpbs

Based on the latest Akamai’s State of the internet  report ( go to the link for the report) covering Q1 of 2016, in Turkey, the average fixed (mobile is not included) connection speed is 7,2 Mbps.

This implies to a 15% year-on-year increase and 12% of QoQ change with a global rank of 64.

Personally, I am not fortunate enough to have a connection speed of above average. Typically I’m getting 5-6 Mpbs of broadband connectivity. I have a legacy DSL connection subscribed to up to 8 Mpbs broadband speed whereas my lucky friends living in a district with a fiber broadband infrastructure are benefitting 25+ Mbps interbet speed.

The average connection speed is a quite critical figure in terms of QoE of OTT TV service offerings in Turkey. As the video consumption through internet is constantly rising, the increase on the broadband speed is extremely crucial. The potential video quality that could be delivered via 7 Mbps bandwidth is quite satisfactory including 1080p Full HD. (Youtube’s live encoder speeds)

This is really a positive element for the growth story of OTT TV in Turkey coupled with the upcoming regulation to improve the fair usage policy.(AKK)

A few questions about TV industry in Turkey

Helen Jameson who is a  freelance journalist and writer (www.spacescript.co.uk) asked me some questions about the TV industry in Turkey for an article for the Global SatShow event. Herebelow you can see her questions and my answers.

– What are the main trends that are evident in the Turkish broadcast market at the moment? Are people watching on mobile devices?

Let’s summarize the main trends in 4 pillars:

  • OTT consumption is on the rise in Turkey like the rest of the world. In Turkey, number of DSL subscribers is 7,5 million while there are 1,8 million fiber broadband users. (There are around 20 million housholds in Turkey.) On the other hand, mobile broadband penetration ratio is 62 percent. Generally speaking with its young and dynamic population Turkish people are quite engaged on OTT TV services. Also one other major shift in the industry is all the major Pay-TV operators are offering OTT extension to their legacy DTH or cable type of services. It’s fair to say that in Turkey OTT migration is more or less completed on Pay-TV operators side. OTT content watching on YouTube is increasing dramatically. Netflix is also launched last year with localization support but didn’t create much traction mostly due to the limited content depth.
  • On the other hand, the popularity of Turkish Drama series is continuing. Each season, a few tens of new series are introduced to the market while only a number of them continue till the end of the season. The export of Turkish dramas to foreign countries, especially to EMEA region is booming. Turkey is number 2 exporter of local content following the USA.
  • Digiturk, Turkey’s greatest Pay-TV operator with more than 3 million subscribers acquired digital rights of Turkish football league for another 4 years in the expense of 500 Million USD. Historically Digiturk owns the rights since 2000. Also Digiturk has been acquired by Qatar’s Bein Group.
  • Analog switch off is still not finalized and the plan for the Digital Switchover process is still unclear.

– How is linear TV in the living room faring? Is this still important to Turkish viewers?

 Absolutely! VOD consumption on big TV screen is still niche in Turkey. Turkey is clearly a satellite country with more than 70% of households are receiving TV broadcast via satellite. There are more than 10 million FTA satellite receivers installad and people are watching mostly Live TV. 

– What about content? Is content very regional or is it very much a mixture of content demand and which other countries want this content?

Similar to most of the other countries, local content is key in Turkey. Although millions of people are watching on-demand US series like “Game of Thrones” , “Westworld” etc. through illegal download or Netflix type of legal OTT services, the most watched Live TV content is either Turkish dramas or Survivor type of local shows.

– Will the Turkish broadcast industry need to make upgrades to technology and services to meet demand in the country? – Is satellite an important means of delivery of Pay TV services?

  • Yes, there are still SD decoders and the majority of the FTA channels broadcasted are in SD resolution. There are only a few 4K Ultra HD Live channels. In order to meet end user demand for OTT services fair usage policy is expected to be cancelled and broadband connectivity which is around 5 Mbps in average should be improved. On the other hand, 4K Ultra HD sets are deploying in massive numbers since a few years even if there is not much 4K services available.
  • Satellite is definetely an important medium. In Turksat satellite there are more than 500 FTA channels and satellite reception is very common. Digiturk, D-Smart, Tivibu and Filbox are DTH operators those number of customers is covering a big portion of Pay-TV market.

– Overall, how big would you say the Turkish market is?

 Turkish market is one of biggest TV market that has  a significant growth potential. Turkey has a very young and dynamic population and Turkish economy seems stable and robust in most fundemental terms although Turkish Lira is performing poor against US Dollar. Pay-TV market penetration is still around 25 percent that is much less than the European coutries. IPTV service of Turkcell (Turkcell TV+) and DTH service of TT group (Tivibu) is growing fast in the past quarters in terms of net adds. There is a strong competition in the market in terms of producing appealing content and advanced technologies like 4K Ultra HD resolution, cloud-timeshift and integration of OTT services.

– What growth do you expect to see in the market in the coming months and years?

  •  In the pay-TV space, I think Turkcell will be investing both in OTT domain and a big TV screen domain to increase the customer base and to address untapped markets. TT group on the other hand is also playing hard to monetize the digital rights of Champion League games that is still valid till the end of 2018 season. Regarding Digiturk, following the acquisition and the ownership issue is clarified now Digiturk is going through a transformation process including rebranding of the channels as well.The other players are more or less static in the past years so I’m not expecting much move.
  • On the broadcasting side, there  are a few major FTA broadcasters with nice rating figures and they are making good money thanks to the advertisement. The market size will be dependent to the ad revenue and in general other digital mediums are receiving interest that could lead to decrease in TV ad revenue. Hence, they are looking alternative ways like second screens apps in order to achieve targeted, personilized ads.

Tivibu continues its growth trend.

Turk Telekom Group announced 2016 year end financial results. You can see them at this link. Regarding the interest of this blog, let’s have a look to the Tivibu figures.

According to the regulatory body’s official figures, as of Q3 of 2016, Tivibu has a total of 589K subscribers. (428K IPTV customers and 161K DTH customers. )

TT announced a total of 677 subscribers at the end of Q4 2016. We don’t have yet the split of this number but most probably the majority of the net additions comes from satellite domain.

Tivibu customer base was kind of stucked before the launch of satelllite service at the Q3 of 2015. Since then Tivibu gained a momentum and has reached more than 2 million subs including the OTT customers. DTH service allowed TT to provide the DTH service to any household with a satellite dish. Satellite is the most common delivery method of Digital TV services in Turkey.