State of the Nation:
UK Digital Television Innovation 2020

DTG REPORT 2020

EXECUTIVE SUMMARY

The UK has a rich history of pioneering broadcast technology and digital television innovation, which continues to this day.

Companies originating in the UK such as BBC, Sky, BT Sport and Channel 4 and industry body DTG have created a number of world and regional ‘firsts’ over the last 25 years, from pioneering the digital terrestrial television specification to providing live programming in UHD, VR and the use of AI in broadcast.

A key reason for the UK industry’s ongoing success in innovation is the collaborative nature of the industry across the value chain. As global streaming players capture an increasing share of consumers viewing time, it is essential that this collaboration continues to be extended internationally.

Last year, UK consumers spent £3 billion on TV sets, Set-Top Boxes and Media Streamers, whilst a total of £12 billion was spent on Pay-TV and SVoD subscriptions, home video and the TV licence fee.

Globalisation is increasingly evident in streaming subscription video on demand (SVoD), which accounted for 15% of all UK video viewing at the end of 2019 – over 90% of all SVoD subscriptions in the UK are from US based services.

However, the broadcaster VoD (BVoD) services continue to thrive, with the UK one of the pioneers in this sector; Channel 4 was the first broadcaster in the word to launch a BVoD service in 2006.

71%

of UK online adults use BVoD services.

4.4 billion

requests were generated by BBC iPlayer alone in 2019, which is close to one request every two days for each TV licence in force.



This continued need for collaboration will be driven further by the fragmenting nature of the wider industry, as IP-based delivery increasingly drives fragmented viewing, services, platforms, devices and audiences. The coronavirus outbreak will further accelerate this trend, whilst also helping drive trust in public service broadcasting.

IP-delivered content accounted for over two-thirds of viewing time in 16-25 year-olds.

Fragmenting viewing habits are particularly evident amongst younger audiences, with social media video and SVoD in particular key sources of viewing.


Maintaining relevance amongst this audience is one of the key challenges worldwide for broadcasters, service providers and content holders.


Fragmentation provides further opportunity, but also brings challenges.

Super-aggregation  -

providing seamless search, navigation, billing and ultimately improved consumer experiences across multiple services and platforms - will be a major area of focus for many in the industry.



The UK benefits considerably from having a mature and reliable broadcast ecosystem. Public Service Broadcasters are reliant on spectrum not only to efficiently distribute programming, but also to guarantee universality and provision of services that are free at the point of use.


37,000 people work in the UK broadcast industry, 24% of whom are on the technical and engineering side.

Broadcast remains fundamental, however innovation here is slowing somewhat and the industry is shifting focus towards an IP-based world. This is not necessarily a threat: there is significant value in the UK television industry harnessing IP as a complementary technology, addressing increasingly fragmented audiences who are both time-shifting and place-shifting.

Superfast broadband in the UK is available to 98% of urban premises and 80% in rural areas.

Broadband has plenty of additional capacity for video; and this will only increase with capability being continually extended.


Data from Ofcom confirms that superfast broadband, with speeds above 30Mbps, is sufficient for reliable video streaming.

The introduction of 5G presents a clear opportunity to transform the television industry.

Broadcasters will use 5G camera wireless links for outdoor and remote television production, reducing the costs in filming live events.

5G creates significant opportunity to broaden TV’s reach across a range of mobile devices.

Furthermore, 5G HPHT broadcast enables distribution of television (and radio) over 5G at up to 60km in radius. Trials in the EU are demonstrating that it’s feasible to consider 5G broadcast to homes as a potential successor to existing terrestrial broadcast.

5G has promise to bring high-speed broadband to some rural areas where it may be uneconomic to provide fibre to the home.

There is clear appetite for UHD services from consumers.

90%

of UHD TV owners have viewed 4K content on their TV.

10.2 million

households had a 4K UHD television in the UK at the end of 2019, equivalent to 35% of total households.

8K UHD is becoming easier to produce, with sports production most likely to set the benchmark for 8K innovation. For 8K over broadband, internet speeds in excess of 70Mbps will be necessary for consumers to enjoy full advantage of 8K HDR programming.

Machine learning and AI is beginning to impact on the broadcast solutions market, unlocking a range of opportunities for the industry.

AI is being employed to search video for specific content, improve accessibility through automated subtitling, and improving video compression efficiency by analysing the content and selecting appropriate encoding parameters.

Significant current and upcoming investment in production facilities will further establish the UK as one of the leading destinations for premium TV and movie content production. With its thriving content sector, it is imperative to ensure the UK’s ongoing role as a leading broadcast technology and digital television innovator is supported.

TV production revenues exceed £3 billion, with export revenues totalling £1.4 billion .

SECTION 1

OVERVIEW OF UK LANDSCAPE

WHY A HOTBED FOR INNOVATION?

A Dynamic Landscape and Content Hungry Customers

The UK has one of the most dynamic, technologically advanced TV landscapes worldwide. A strong FTA and Pay-TV culture blend is supplemented by the proliferation of premium content streaming, with 50% household uptake of SVoD and 71% uptake of BVoD. This mix of competition and collaboration over the years has been set within a framework of industry-leading standards. This is driven by;

Infrastructure Advances

Connected consumer hardware adoption

Wide service and content availability

High local production standards

Content-hungry consumers

All underpinned by a history of collaboration and innovation.

This mix of competition and collaboration over the years has been set within a framework of industry-leading standards.

A Rich Track Record of Television Innovation

The UK has been a hotbed for technological innovation, dating back almost 100 years since John Logie Baird made the first television broadcast for the BBC. The UK provides a number of favourable conditions for this innovation over the years that continue to this day, including:

The scale and reputation of UK Television content production and the high quality and calibre of the community that surrounds it.

The popularity of English language content worldwide, meaning that revenue from international sales can be re-invested in the industry.

Strong government and state support, plus the licence fee funding enabling continuously strong R&D investment.

The above factors have helped create content and technology hungry consumers, resulting in higher consumer expectations in recent years, providing impetus for innovation.

The UK benefits from the strength and diversity of its leading broadcasters. Whilst the competition between them has driven both content quality and innovation, it is collaboration amongst these and other companies across the value chain which sets the UK aside from many other countries. Such collaboration is evident in the robustness of television industry bodies, which have helped produce and maintain high quality standards, which are often subsequently adopted elsewhere in the world.

The UK is home to best-in-class companies driving innovation across the supply chain, including familiar household names BBC, Sky, Channel 4 , ITV and - latterly - BT Sport. Such companies’ technological innovation in providing seamless customer experiences has inspired broadcasters to replicate it far beyond the UK. Whilst it is the household names that typically provide innovation through consumer experiences, there are a significant number of UK companies across the value chain contributing to this vital innovation.

UK INNOVATORS: A HISTORY OF GLOBAL ‘FIRSTS’




UK companies have driven numerous ‘world firsts’ in digital television innovation.

This began with the first D-Book publication for DTT technical specification in 1996, setting the benchmark for quality over the next 25 years.

In the late 1990’s, Sky and BBC both pioneered new interactive TV solutions following the launch of digital television services.

The influence of OTT became increasingly evident in innovation from 2006, with Channel 4 launching the world’s first broadcaster VoD service in that year, ahead of BBC iPlayer and what is now ITV Hub in 2007 respectively.

There is a common theme throughout these ‘firsts’, the focus on providing added value and enhanced experiences for consumers.

This includes Sky launching Europe’s first 3D TV channel.

BT sport launching Europe's first dedicated UHD channel as well as broadcasting the UEFA Champions league final first in VR and providing the first HDR streaming service worldwide.

On the advertising side, Channel 4 was the first broadcaster in the world to provide VoD adverts with personalised audio and 360 degree video as well as the first AI driven advertising technology.

Meanwhile, the BBC’s R&D Department is of worldwide renown, one of the few remaining PSB R&D centres, employing 200 people. It currently has 85 ongoing R&D projects, of which 18 specifically relate to television. These include “harnessing real-time rendering and delivery technologies pioneered in the games and visual effects industries to offer broadcasters the opportunity to deliver completely personal experiences” to delivering immersive experiences on the mobile to using live IP in production systems. In 2019, BBC developed the world’s first interactive factual programme using object media technology – an area of growing interest in the broadcast sector.

Sky, with a global reputation for its innovative products and services, is doubling down on innovation by building a new £40m ,77,000 sq ft Innovation Centre at Osterley Park.

These are just some of the key players in a cast involving a multitude of technology partners that enable such consumer facing companies to deliver this innovation in the form of rich consumer experiences.

UK DIGITAL TELEVISION: KEY INNOVATIVE TIMELINE

  • 1996: D-Book published (DTT technical specification)
  • 1998: Kingston Communication launches UK's first VoD service
  • 1998: DTT launched
  • 1999: Cable & Wireless Communications launch UK's first digital cable service
  • See more  

INTEGRATION OF IP & BROADCAST HAS GREATEST INNOVATION POTENTIAL

% of respondents responding level 4 or 5 potential


Q. Please score these areas of potential focus for digital TV innovations in the UK
(1 = low potential, 5 = high potential)

% of respondents responding level 4 or 5 potential

GENERAL PERCEPTION THAT UK INNOVATION REMAINS HEALTHY

Do you believe the level of digital TV innovation being pioneered in the UK is Growing, Falling, or Stable?


Base: All respondents, DTG Industry Survey May 2020

INNOVATION IN NUMBERS

UK companies continue to file strong patents worldwide protecting a diverse segment of television innovation.

These range from improvements in video compression and advances in streaming media distribution, through to new formats including VR/360° video and enhancements in filmmaking and broadcast production.

The rate of patent filing hit a peak in 2012, ahead of the onset of UHD and coinciding with the hype in inventions surrounding 3D video capture, broadcast and display technologies. Since then, there has been a decline in filing as the digital television market matured somewhat, and this reflects our survey participants’ view in which 71% perceived that the rate of UK TV innovation was either stable or falling. There are early signs that this may improve as the rate of patent filing has steadied in recent years, with new technologies, such as machine learning and AI, providing fertile new ground for opportunity and invention. Conversely, there remains significant potential for patents to be filed by non-British competition as the global TV market homogenizes and moves to IP.

STRONG BELIEF IN FURTHER SCOPE FOR INNOVATION; FEAR IT MAY HAPPEN OUTSIDE UK

% of respondents saying they either agree or strongly agree


Please say to what level you agree with these statements about potential threats to the digital TV innovation sector in the UK
(1= Strongly disagree, 3= Neither agree or disagree, 5= Strongly agree).
Base All respondents, DTG Industry Survey May 2020

COLLABORATION CRUCIAL TO MAINTAIN UK INNOVATION

The diversification of the broadcast and television industry, along with the fragmentation of audiences, services, delivery and platforms mean that collaboration is as critical to maintaining high quality of service, and continual innovation of the consumer experience.

The most innovative broadcast consumer experiences have had collaboration at the heart of their practices, from BT Sport’s production and distribution, to Sky’s AdSmart and Sky Q initiatives. Major broadcast shifts in recent years such as Freeview, HbbTV, Youview and Freesat can only be achieved through extensive collaboration from broadcasters and industry partners.

This collaboration needs to be outward looking, especially given the increased role global players are taking in this evolution of viewing habits and technology evolution. Sky claims that over 400,000 jobs in Europe are supported by its activities, many of which will be technology and production partners.

Emerging technologies such as AI and voice technology are more widely used in other applications, but are also being applied to the broadcast technology sector to enhance consumer experiences. Many of these are being driven by international companies.

The aggregation of content onto a common platform has been the cornerstone of UK broadcast initiatives over history; providing a seamless access point for different channels and content. However, the surge of IP-delivered content has taken this to another level; The aggregation of content onto a common platform has been the cornerstone of UK broadcast initiatives over time.

The fragmentation of services, channels and content has provided a customer need for re-aggregation. This requires significant collaboration across the whole value chain, with considerable added complexity. The desire for standardised metadata and addressable advertising platforms are two sectors that need to be considered to enable seamless search and discovery across multiple different sources, as the ultimate super-aggregated service will include numerous free-to-air services and channels as well as paid-for services.

Super Aggregation could become the sector that will require most collaboration, but also has the most potential reward and intense competitive.

SECTION 2

ECONOMIC IMPORTANCE OF THE UK TELEVISION & BROADCAST INDUSTRY

ECONOMIC IMPORTANCE OF UK TELEVISION & BROADCAST INDUSTRY

SECTION 3

EVOLUTION OF BROADCAST DISTRIBUTION & IP

BROADCAST REMAINS FUNDAMENTAL, BUT FOCUS SHIFTING TO IP

The UK benefits considerably from having a mature and reliable broadcast ecosystem.

And because of this, Public Service Broadcasters are reliant on spectrum not only to efficiently distribute programming, but also to deliver against their obligations of ensuring universality and providing television and radio services that are free at the point of use.

Through its many working groups, the DTG is fundamental in ensuring a standards-based implementation, with guaranteed interoperability and a clear proposition to consumers.

But whilst broadcast remains fundamental, the industry is shifting focus towards an IP-based world.

This should not be viewed as competitive; there is significant merit in the UK television industry harnessing IP as a complementary technology.

For example, standards such as DVB-I enable dynamic transition of television services between broadcast and IP, whilst preserving the EPG and TV channel listings already familiar to consumers. Broadcasters are afforded the opportunity to make more efficient use of existing spectrum by offloading channels with smaller audiences to IP, while maintaining flagship channels over-the-air.

Moreover, audiences are now accustomed to both place shifting and time shifting their viewing habits. This is often mistaken as being attributable to a younger demographic, however, delivery of services to devices beyond traditional television and set-top boxes is rapidly becoming universal across the wider population.

Platforms, such as YouView and HbbTV, aim to combine broadcast television with broadcasters’, often app-based, catch-up services. European alternatives, such as “Video Future” launched in France with broadcast, network PVR and timeshift services in addition to a full multi-screen offering. There is clearly an opportunity for tighter integration of broadcast and broadband IP, with innovation concentrating on an enhanced multi-screen experience, with features including a universal EPG and the option to start watching on one device, then continue on another.

In our survey amongst those working in the industry, almost one third of respondents felt that the essential innovations in broadcast were now in place, compared with only 10% who considered similarly for IP-based streaming services. The potential for innovation remains high, although 71% also believed that the shift to IP is forcing television innovation to happen outside of the UK.

IS THERE A LOSS OF IMPETUS BEHIND BROADCAST?

UHD TELEVISION SERVICES PRESENT FOCUS FOR INNOVATION

There is clear appetite for UHD services from consumers, Futuresource’s Living With Digital survey from December 2019 indicates that 90% of UHD TV owners have viewed 4K UHD content on their UHD TV. At the end of 2019, there were 10.2 million households with a 4K UHD television in the UK, equivalent to 35% of total households.

4K UHD is presently available from TV providers Sky, BT, FreeSat and Virgin Media in the UK as well as free online sources including YouTube, SVoD services such as Netflix, Amazon Prime.

The reallocation of television spectrum to 5G mobile means that UHD broadcast over digital terrestrial is challenging and therefore unlikely.

Beyond this, whilst 8K UHD is becoming easier to produce, with both consumer and professional camera technology now able to shoot 8K video streams, reliable distribution of 8K content requires further innovation.

The 8K Association, an industry body formed to oversee the development of the 8K ecosystem, has outlined specifications on what 8K TV should offer, including: 7,680 x 4,320 pixel resolution, input frame rates of 24p, 30p, 60p, greater than 600 nits peak brightness for HDR, HEVC codec support and HDMI 2.1.

Sports broadcasting is most likely to set the benchmark for 8K services and innovation. Tying all the different elements of 8K production and delivery together, BT Sport has already demonstrated the feasibility of live 8K sports broadcasts. 8K HDR will form part of BT's Ultimate package, and the service will automatically adjust the picture resolution according to the capabilities of your TV and internet bandwidth.

Broadcast 8K services are delivered via satellite in Japan.

NHK is now transmitting 12 hours a day of 8K content on its satellite service. It is also working to deliver the same content terrestrially by 2025, having successfully tested 8K terrestrial transmissions as far back as 2012 using a single UHF channel, with full transmission tests more recently in Tokyo and Nagoya.

For 8K over broadband, internet speeds of over 70Mbps will be necessary for consumers to gain full advantage of 8K HDR programming. VVC is the most favourable codec for 8K.

Virgin Media V6 STB for 4K UHD
[Image credit: Virgin Media]

SkyQ 4K UHD Receiver
[Image credit: Sky]

8K production and broadcast trials are underway, initially for sports content
[Image credit: BT Sport]

AI AND MACHINE LEARNING IN PRODUCTION & DISTRIBUTION

Machine learning is beginning to impact on the broadcast solutions market, unlocking a range of opportunities for the industry.

One of the most innovative, but perhaps lesser-known areas is the application of AI to video encoding technology. Machine learning techniques are employed during video encode to reduce file sizes and bit rates whilst maintaining visual quality. A reduction in bit rates leads to significant cost savings in network bandwidth and delivery. The technology allows encoders to optimise video encode parameters on a scene-by-scene basis, whilst feeding the results back into the system to enhance future encoding sessions. This can also speed up encoding times and deliver efficiencies in live broadcast. The feedback loop ensures that the AI applies better encode parameters in subsequent sessions, which over time approach the optimum compression for a given scene.

Another area where machine learning techniques are being applied is in improving accessibility through closed captioning and subtitles. Using algorithms that have been guided through massive language datasets, speech is translated into text in real time and automatically applied to broadcast assets. In addition, machine learning can now identify the context of the speech, and this information is used as metadata to help catalogue video assets. Future iterations may utilise intonation and inflexion to further improve accuracy rates.

Machine learning techniques are being employed to search video for specific content, both audio and visual. Once indexed, portions of the video can be stitched together to automatically produce highlights and show reels which are immediately made available to programme editors. For example, goals during a football game may be discovered by identifying video sequences where the goalmouth is present in the scene and the crowd are cheering.

Semiconductor vendors are developing the next generation of video decode chips that run neural networks to enhance picture quality, enabling machine learning techniques to be employed in the reconstruction of low-bit rate video streams or to enrich resolution upscaling algorithms on consumer products. In combination with machine learning for encoding, this delivers prospects for entirely new codecs and compression schemes that harness AI to both massively improve efficiency of distribution and also enhance video and audio quality during decode.

BROADBAND INFRASTRUCTURE

There has long been a debate over whether broadband infrastructure is capable of sustaining television services streamed over the internet.

Broadcast remains favourable for the transmission of live events, given the wide audience reach, however the arguments for broadband not being a feasible alternative, citing CDN costs or network bandwidth restrictions, have largely evaporated.

In 2019, BBC iPlayer received a record high of 4.4 billion requests; this was up 12% on the previous year. One in ten adults have used iPlayer for live viewing. BBC iPlayer’s busiest ever day was Sunday 10th May 2020, with 22.5 million requests.

ITV reported 6.6 million registered 16 to 24-year-olds on ITV Hub in 2018. ITV served 748 million hours of content in total on ITV Hub the same year.

Studies by Ofcom confirm that superfast broadband – offering speeds above 30Mbps – using FTTC is sufficient for reliable video streaming. As of May 2020, superfast broadband in the UK is available to 98% of urban premises and 80% in rural areas. Moreover, 69% of lines now have a 24-hour average download speed of 30Mbps or higher in 2019, up from 58% in 2018.

Leading streaming service providers quote a minimum of 5Mbps for HD, and between 15Mbps to 25Mbps for UHD (4K) video streaming.

Furthermore, average monthly broadband data usage is increasing across the UK, supported in part by uncapped data plans alongside migration to faster services.

In 2019, average household data consumption was 315 gigabytes, compared with 240 gigabytes in 2018, representing a 31% increase YoY.

The COVID-19 pandemic has demonstrated the resilience of broadband networks, and this potentially accelerates innovation in IP-based television services.

Network capacity remains well below peak traffic demands. BT reported a 45% increase in traffic to 7.5Tbps, but this was still 2.3x lower than the highest recorded peak usage of 17.5Tbps.

Overall, our study finds that broadband has plenty of additional capacity for video; and this will only increase with capability being continually extended.

5G DEPLOYMENT ACTIVITY

The roll out of 5G across Europe is progressing in line with EU objectives.

The process has accelerated as operators began commercial roll out of network infrastructure in 2018 alongside mobile handset vendors launching smartphones with 5G modems last year.

The European Commission’s 5G Action Plan set aggressive targets in 2016. This calls for 5G deployment in at least one major city in every member state by the end of 2020, plus uninterrupted coverage across all urban areas and major terrestrial transport corridors by 2025.

UK mobile spectrum auctions continue, with each of the four main operators competitively bidding for licensed frequencies. So far, spectrum with a reserve price of £70m has been acquired for a total consideration of £1.3bn.

Following the clearance of the 700 MHz spectrum previously utilised by digital terrestrial television, 80 MHz of this frequency band is scheduled for auction towards the end of 2020. This enables operators to expand the reach of mobile services.

Ofcom originally intended to impose a coverage obligation on the 700 MHz band, which would have required winning operators to extend outdoor data coverage (both 4G and 5G services) to at least 90% of the UK’s entire land area within four years of the award, in return for discounts.

The new £1bn Shared Rural Network (SRN) will replace the original proposal through the sharing of existing mobile towers, plus collaboration between operators on new towers erected to cover poorly served areas. The SRN should result in each individual operator achieving 92% geographic coverage by 2025, with licence obligations taking effect in 2026. The collective effect of this will deliver mobile services to 95% of the UK.

For the 5G coverage and capacity layer, 150 MHz of the mid-band (3.4 GHz to 3.6 GHz) spectrum was assigned to operators in April 2018. This delivers a 5G network with a balance between performance and wide area coverage.

Ofcom are expected to auction an additional 120MHz in the 3.6 GHz to 3.8 GHz frequency range in early 2021.

For the high-band, high capacity mmWave frequencies, local licences for 26 GHz spectrum are available on demand subject to coordination, with test licenses awarded in 2019.

Presently there is no clear market demand for mmWave in the UK, as operators’ initial focus is on expanding coverage for 5G services. The award of 26 GHz spectrum to operators is not expected to happen until at least 2021.

Densification of mobile networks remains a key challenge to guaranteeing 5G coverage.

5G RADIO FREQUENCIES AND COVERAGE

5G occupies three primary frequency bands. The Low-Band frequencies – including those previously allocated to UK DTT – are especially useful for 5G broadcast television due to their wide area coverage. High-band offers faster data rates but is highly localised.

UK 5G TIMELINE

5G OFFERS TREMENDOUS POTENTIAL FOR TELEVISION

The introduction of 5G will certainly transform how broadcasters operate in television production, especially in broadcasting live events.

Today those broadcasters increasingly utilise wireless networks for a diverse range of tasks, everything from uploading a single news story from the field to transmitting entire remote broadcasts. Much of this has been possible on 4G LTE networks to date, however the migration to 5G networks will significantly enhance the reliability of those wireless data transmissions while massively increasing bandwidth capabilities for more data-intensive applications, such as point-to-point links that are frequently carried via microwave, fibre or satellite connections.

According to BT Sport, only around 10% of all video captured at a live event (such as a football match) is made available for broadcast or distribution. The transition to IP and remote production architectures combined with connectivity over 5G will enable more of the in-game assets to be monetised, such as video streams from player cameras, or live footage from the team bus. 5G affords broadcasters the opportunity to relay live video directly to production studios, opening up a wider range of coverage possibilities and simultaneously reducing costs by minimising the number of technical staff required at each event.

For TV broadcasters and content providers, 5G creates significant opportunity to broaden their reach across a wide range of end devices; for mobile network operators, it expands their service portfolio by building upon existing networks and resources; and for consumers, it affords them access to even richer content on their smartphones, tablets and TVs. More importantly, mobile networking standards have evolved rapidly in recent years and now offer the potential to deliver much higher efficiencies than incumbent TV broadcast technologies.

While it is safe to say that LTE broadcast (also known as evolved Multimedia Broadcast Multicast Service, or eMBMS) proved unsuccessful commercially, analysis shows that operating costs should be broadly similar to digital terrestrial transmission. The key advantage of eMBMS is in enabling the same content to be broadcast to a large number of mobile users simultaneously using multicast, rather than individual streams over unicast, thereby optimising network bandwidth usage, minimising distribution costs and ultimately delivering a better quality of service for consumers.

INNOVATION IN 5G BROADCAST

eMBMS was first introduced into 3GPP mobile standards back in 2010. Release 14 of the 3GPP specification added Further evolved Multimedia Broadcast Multicast Service (FeMBMS) to enhance broadcast operating modes, thereby ensuring that broadcast capability became an integral part of the 5G standards. This enables high power high tower (HPHT) applications in LTE broadcast to distribute television (and radio) services up to 60km in radius and further making it possible to allocate 100% of the bandwidth to broadcasting, whereas previous generations of the standard limited this to only 60%. Furthermore, new codecs and media formats were added to more closely align with broadcast TV industry requirements.

FeMBMS over 5G is especially interesting for Europe, as there is an immediate deployment potential using the 700MHz spectrum band previously occupied by terrestrial television services. The 3GPP Release 14 specifications already meet all EU digital TV broadcast requirements; technical studies conclude this is approximately twice as efficient than DVB-T which would open up spare capacity in the spectrum for alternative use cases. In this instance, the remaining terrestrial television frequencies would be reallocated to 5G, with TV broadcasts migrating from DVB to FeMBMS (5G broadcast).

Further enhancements to the 3GPP specification enable receive-only devices, such as televisions, that do not require a SIM card or service subscription. Additionally, there is a transport-only mode that enables content providers to deliver media in native format without a requirement to transcode, and shared broadcast that allows multiple operators to utilize a common broadcast carrier.

The potential for 5G to efficiently carry television services has called for regulators and actors within the broadcast and mobile industries to agree on baseline FeMBMS requirements using 5G networks. The opportunity to utilise 5G services reignites the debate over whether FeMBMS and its derivatives could, or indeed should, replace digital TV broadcasting standards such as DVB-T2 or ATSC 3.0, especially now that broadcast is becoming challenging over diminished terrestrial spectrum. Additionally, C-band spectrum, presently used by satellite operators in the US, is also being reallocated to mid-band 5G services, further increasing the pressure on broadcast TV services.

Further innovation may also investigate 5G for digital radio, allowing television, radio and mobile data to share a common infrastructure.

However, DTT, DAB and DSAT services still successfully serve millions of people across the UK and Europe with public service and other content, raising questions over the merit of building out a new 5G network to replace them when they already have a huge base of supporting devices. Currently there are no 5G networks and no 5G user devices that support 5G broadcast. Additionally, delivering public service media includes many requirements such as universal coverage, free-to-air access, and prominence, which would need to be maintained if delivered on a mobile network. This highlights that although delivering these services over 5G would be technically possible, commercial and regulatory challenges would also need to be considered.

5G MOBILE COMPARISON: HANDSET PENETRATION IN THE UK

5G by Numbers

In 2020, 2.9 million 5G handsets will be shipped in the UK, extending the installed base to a modest 3.3 million units.

By 2030, Futuresource estimates there will be around 59.7 million 5G handsets in active usage across the UK.

This equates to just under 86% of the UK population, up from only 5% in 2020.

Network Development

5G networks will mature significantly across the forecast period, enabling faster speed, lower latency and ubiquitous access.

UK mobile operators are concentrating on building network coverage initially, before enabling faster, up to 10Gbps, speeds through network densification.

A full suite of media and entertainment services will be delivered to 5G mobile and fixed wireless devices.

Media streaming services, including television and radio, are likely to become prolific, as 5G network availability improves and data costs continue to fall.

TV AUDIO UNDER CONSTANT DEVELOPMENT

TV audio remains an area of continued innovation.

TV sound was compromised by the shift to thinner sets and the industry responded initially with Home Theatre in-a-Box systems, then with Soundbars. Soundbars are now predominant, with the demand for HTiB (Home Theatre in a box) undermined by the falling requirement for disc playback and a growing reluctance amongst consumers to accommodate multi-speaker set-ups and the relevant wiring.

Of the 37m TV sets in use in the UK which are sized 32” or above – which is the threshold size at which owners consider adding a soundbar - around 19% are complemented by a soundbar.

Demand for soundbars, however, is only just keeping pace to maintain this ratio and more sophisticated models are emerging to boost demand in the category.

Meanwhile new audio solutions are being developed, including both external solutions (for example wireless speakers) and boosted sound options within the sets.

Brands have attempted to bring innovation in a variety of solutions, ranging from incorporating a soundbar into the set to deploying upwards firing speakers to capitalise on the property of OLED which enables sound to emanate from the screen itself.

It is commonly recognised that better sound creates a more immersive and rewarding experience – especially for movies and sport - and platforms are introducing immersive sound solutions, such as Fraunhofer MPEG-H, Dolby Atmos and Xperi DTS:X. These systems can also deliver object-oriented sound bringing a wide range of additional audio options to the viewer. Many of these can address issues faced by the hearing impaired, who have a right to expect to be able to enjoy the TV service they pay for (whether by subscription or licence fee).

24%* say they use headphones with TV most of the time or regularly

UNPRECEDENTED CONTENT PRODUCTION ENHANCING UK TV REPUTATION

Unprecedented Investment in Television Production Propels UK as an International Content Powerhouse

The UK has long been an attractive destination for content production, its reputation continues to rise amongst a backdrop of globalisation of content and services. Netflix sees the UK as its most important international production hub, spending $500m on 50 British made TV shows and films in 2019. It has also entered a ten year agreement for exclusive use of Shepperton Studios to help fulfil this commitment to UK production.

Sky’s new 14 sound stage development due 2022

The current investment in building UK production facilities is unprecedented

Sky is to build a new 32 acre studio complex at Elstree in Hertfordshire, scheduled for 2022, driving its international production output to the next level. Sky claims the initiative will create 2,000 new jobs and £3 billion in production investment into the UK economy within the first five years of operation.

In a similar timeframe, a £250 million complex is also due to be completed in Kent, whilst other significant investments in brand new studio complexes will provide much needed capacity for the UK’s thriving content production scene, with other projects across the UK also set to be built in the coming 2-3 years.

Whilst the globalisation of services brings both significant opportunities as well as challenges, it has further established the UK as one of the leading international TV content producers. It therefore remains equally important that support is continued to be provided across the rest of the television value chain, to ensure that the UK remains at the forefront of international television innovation.

SECTION 4

THE UK TV & VIDEO LANDSCAPE: VIEWING FRAGMENTATION & INDUSTRY EVOLUTION

UK TELEVISION & VIDEO SERVICE LANDSCAPE

KEY TV PLATFORMS

BROADCASTER VOD

LEADING SVOD

GENERAL INTEREST SVOD

NEW US PLAYERS

2021?

SOCIAL MEDIA

AVoD

OTHER SPECIALIST SVoD

SPORTS

VIEWING FRAGMENTATION & INDUSTRY EVOLUTION

Evolution of Viewing and Content Delivery

The average UK adult watches on average four hours of video and television content per day (Source: BARB) across all sources. This has not shifted significantly over the years, however during the COVID-19 lockdown period, this has understandably increased significantly notably.

The key viewing shifts have not been in the total time spent viewing, but in the diversity of content, genres, delivery methods, business models, devices, platforms and services that have emerged to create a vastly different television and video landscape to that of a decade ago.

This diversity is as evident in the UK as is it in many other leading international television markets, with the proliferation of streaming video services key to this rich variety. It is this unique mix of quality free and paid-for content that has driven streamed video content consumption in the UK; 90% of online adults 16+ access such content at least once a month.

Fragmenting services, platforms & viewing

Fragmentation can provide significant opportunity for the industry by providing an increasingly personalised and relevant viewing experience, but it also poses challenges for existing platforms. Fragmentation is evident across multiple areas:

Platforms & types of viewing

Six different types of viewing platforms accounted for 10% or more of total video viewing time at the end of 2019: Live FTA traditional TV, Live Pay-TV, SVoD, BVoD, recorded programmes and YouTube (and similar services).

Services

Dynamic global players are complementing a highly entrepreneurial local broadcast landscape. There are now comfortably over 100 different services offering scripted and unscripted television content with direct customer relationships in the UK .

Delivery

Streamed video via IP now accounts for 44% of total viewing hours, compared to 51% on traditional broadcast. However, Hybrid IP delivery is making it increasingly difficult for consumers to notice the difference, with Pay-TV platforms in particular delivering video in the most seamless way possible.

Demographics

The differences is viewing time on different platforms by age are stark: viewing by under 45’s is much more fragmented than by over 45’s, with less reliance on broadcaster sourced platform.

Audiences

Fragmented services are cannibalising audiences on traditional channels. 700 TV programmes in UK attracted audiences of 8m+ in 2012, in contrast to just 200 in 2017

Devices

IP connectivity has driven viewing on range of different devices. There are a total of 187m devices in use in the UK that allow for video viewing – 63% of these are mobile, tablet or computer based.

Continued growth in consumer choice combined with ease of access means that the viewing landscape will continue to fragment, across multiple business models, driving fragmented audiences. The COVID-19 lockdown will further accelerate this fragmentation of viewing

FRAGMENTATION OF UK VIDEO VIEWING

VIEWING HABITS VARY BY AGE

VIEWING FRAGMENTATION & INDUSTRY EVOLUTION

Addressing the Youth Audience

The rich array of features and experiences that IP delivery enables has driven major fragmentation in viewing habits amongst younger audiences. Social media video and SVoD in particular have emerged as key sources of viewing, with total IP delivered content accounting for over two-thirds of viewing time in these age groups.

The challenge for the UK broadcast industry is how to maintain relevance in the longer term amongst this demographic. Less than 40% of viewing in 16-25 year olds is ‘broadcaster sourced’, i.e. viewing through either linear TV (FTA or Pay), through DVR recording or BVoD services. This compares to approximately 80% in over 55’s. It is also recognised that engaging this group with more traditional advertising can be more challenging, therefore, advancements in addressable TV will be seen as key. Channel 4, which has a youth-skewed audience, has long realised this, being the first broadcaster worldwide to offer BVoD in 2006 and joined Sky’s AdSmart platform in 2019.

In addition, device viewing is also more fragmented amongst a younger audience. 45% of Netflix users aged 16-25 prefer to view Netflix on a smartphone, tablet or directly PC/laptop, compared to 26% across all respondents.

Contrary to this, encouraging usage of broadcaster technology amongst older demographics has also been a challenge for the industry. However, uptake of BVoD is comparatively robust in this sector and is likely to have been further boosted the lockdown as a result of coronavirus.

Given this increasingly fragmented audience, several innovations are focused upon a multi-screen strategy to maximise the reach of television. But this is not easy to achieve.

Conspicuously, smartphone, tablet and smart speaker vendors will never include DVB reception, so services and broadcasters have developed IP-based apps to address uptake in these devices and made live simulcast and live restart an increased focus.

In addition, people are actively engaged when using mobile devices, yet this contrasts markedly with the passive experience of traditional television viewing where the very same people wish to sit back, relax and be entertained.

Standards must be further refined, enabling television services to follow audiences who are now increasingly consuming media via mobile devices. The industry is seeing opportunity for innovation in creating content that works across both TV and mobile. Producers are now automatically re-framing content for 9:16 screens using AI to create vertical video appropriate for smartphone usage.

Furthermore, there is potential to utilise user-generated content, harnessing the capabilities of mobile video, and increasing viewer engagement through tighter integration of mobile experiences with live broadcasts. Indeed, UK broadcasters are already experimenting with these aspects.

VIEWING FRAGMENTATION & INDUSTRY EVOLUTION

Linear Viewing Will Maintain Relevance, But On Demand Becoming the Norm for Many

Viewing over IP has also driven On-Demand Viewing, which is displacing linear viewing, but ‘live’ will continue to remain relevant as hybrid solutions prevail and key content types and event television maintain their live relevance.

Linear viewing and simulcast on IP-delivered platforms will continue to show strong growth, as pioneering features such as live restart blurs the boundaries between live and catch-up and leading platforms such as BT TV and Sky delivery deliver content using hybrid IP solutions.

Traditional linear viewing behaviour is dominant amongst older demographics, but this group’s change towards on-demand viewing is accelerating, as this demographic diversifies their viewing habits. The COVID-19 lockdown has helped further accelerate this behaviour.

In addition, on-demand scheduling has returned to significance across a range of different video streaming services, particularly for key series, providing weekly appointment viewing.

VIEWING FRAGMENTATION & INDUSTRY EVOLUTION

IP Delivery Driving Continued Globalisation

As discussed, the major underlying trend in UK television currently is the shift to IP-based delivery. This shift has brought with it both significant opportunities and challenges for existing companies the UK digital television landscape and manifests itself across the value chain; from how content is produced and for whom it is produced, to the means by which content is delivered and which services and devices consumers are using . This key trend has driven notable shifts in the competitive landscape for wider TV and viewing, providing a huge increase in consumer choice. One major area of change has been the growth in viewing content on global services. Netflix has spearheaded this from a paid-for, premium content perspective, whilst YouTube and other social media platforms have driven largely free, short form content viewing.

Global services such as Netflix drive global hits whilst many other services are supporting significant niches.

Leading services such as Netflix and Amazon Prime are also supporting local UK production and fuelling significant investment in local production facilities

This globalisation is also providing an increased opportunity for international exploitation of UK-produced content.

Futuresource estimates that 90% of all SVoD subscriptions are from US based services. SVoD accounted for 15% of total UK viewing at the end of 2019, which is expected to continue to grow in 2020 and beyond, meaning that US based services are set to take an increasing proportion of all UK video viewing moving forwards, diluting UK broadcaster’s share of viewing.

SVoD accounted for 22% of all Video Viewing in USA in Dec 2019, up from 18% one year prior. This points to over 20% of all viewing in UK to be SVoD by the end of 2021

A new era of global Direct-to-Consumer (D2C) services from Disney, Apple, NBC Universal etc also complements existing local broadcaster led D2C services. This growing fragmentation is driving the increased requirement for Super Aggregators, providing seamless search, navigation and potentially billing across multiple services

Existing Pay-TV services & telcos can fill the role, but are now confronted by global giants such as Apple, Amazon, Google, and Facebook.

These global D2C services also give rise to a new Pay-TV paradigm, whereby traditional content and channel carriage arrangements are being superseded by app carriage and integration, heralding a new commercial era.

Growth in such services has also driven a steadily shifting mix across all viewing towards platforms, amongst all demographics.

National broadcaster audiences will continue to be challenged by global services, particularly D2C services, which has seen them diversify their offerings and in the case of commercial broadcasters, revenue streams. Increased investment in addressable TV, D2C services, production and domestic and international licensing of their content is already evident. This investment will be partly be impacted by COVID-19, but is required to offset a decline in traditional broadcast advertising revenue for these broadcasters.

UK BVoD Services Continue to Impress

Whilst global services take an increased share of overall viewing time, UK based broadcaster VoD services continue to show impressive growth, with BBC iPlayer request growing by 12% in 2019 to 4.4 billion and ITV Hub reaching 32 million in Q1 2020, a year-on-year increase of 13%.

The UK is one of the pioneers in broadcaster VoD (BVoD) worldwide, with Channel 4 launching the first ever BVoD service worldwide in 2006. Despite services being well established, features, experiences, user bases and engagement continue to evolve and improve. Share of viewing will steadily increase in coming years as existing features become more established and new features emerge, encouraging new user uptake and increased engagement. BBC iPlayer added new features such as live restart and significantly increased the length of time most content is available on the platform, to typically one year after original broadcast.

2019 saw further emphasis on ad-free, subscription based BVoD services as broadcasters look to diversify their revenue streamers, with ITV driving this sector. ITV saw good growth in the ITV Hub+ ad-free SVoD service in 2019, which now has over 400k subscribers, whilst Channel 4 also launched a similar service.

ITV also spearheaded the launch of Britbox (which it has a 90% controlling stake, with BBC also a shareholder) in November 2019, which is designed to complement both the free and paid-for BVoD offerings.

Sports Broadcast a Hotbed for UK Innovation, as Global Players Arrive

The sports viewing evolution is also set continue as globalisation starts to influence the sector, with IP delivery driving increased availability of live sports programming and both enhanced and personalised viewing experiences. Sports broadcast has been a particular hotbed of innovation in recent years in the UK, driven by the rights competition amongst leading players. Sky Sports and BT Sport in particular have been influential in driving this innovation and impressive customer experiences.

The sports broadcast landscape has begun to change, with the availability of a wider range of sports programming across multiple services, including some D2C services. Globalisation of sports services is at a much less advanced stage than traditional programming, largely due to local rights fragmentation, but the recent successes of Amazon are illustrative of further expected moves by global players. DAZN was set to launch in the UK although this has been postponed due to the COVID-19 pandemic.

ITV: A KEY CASE STUDY FOR BROADCASTER DIVERSIFICATION

NEW ADVERTISING PARADIGM POSES OPPORTUNITIES & CHALLENGES

Advertising Dynamics Changing

The steady increase in IP-based viewing has also signalled the arrival of a new advertising paradigm. Firstly, it has enabled addressable TV, which allows targeted and personalised advertising on both traditional broadcast platforms and BVoD services and across multiple devices, helping maximise advertiser and broadcaster revenues. This has helped broadcasters and advertisers compensate for traditional advertising revenue and increased viewing of ad-free platform viewings (e.g Netflix), which have threatened broadcaster audiences.

The UK has a well-established addressable TV landscape, driven to date by Sky AdSmart (which has also been adopted by non-Sky platforms, such as Virgin Media). Sky AdSmart has an addressable reach of 40% of UK households and is seeking to reach 60% by 2024. However, the remainder of the sector is fragmented and will require further collaboration to ensure more universal uptake.

SkyAdsmart is being utilised by major US network NBC Universal. (Sky and NBC Universal are both owned by Comcast).

Addressable TV is a key area identified for innovation moving forwards. With traditional broadcast set to remain significant for many years, developments in dynamic ad insertion can help drive this to another level. In addition, innovation can drive increasingly personalised and creative ad experiences, increasing end-user engagement and driving value.

In addition, new AVoD services and platforms have become established in the USA in recent years, such as PlutoTV and Tubi. In Futuresource’s ‘Living With Digital’ survey from December 2019, 32% of US adults claim to have used such as service in the last month. IP has enabled such services to reach scale but with highly targeted advertising.

Although USA is structurally very different and content/channel availability typically much higher than the UK, the infrastructure is already in place, and there has been increased activity in this space in 2019 and 2020, with significant corporate investments expected to help fuel this international development.

SERVING TV THROUGH A POTENTIAL 214 MILLION DEVICES

Total TV Access Devices in Use
(M Units)

OTT VIDEO DEVICE OWNERSHIP STILL GROWING

Total IP connected TV Access Devices in Use
(M Units)

DEVICE LANDSCAPE CONTINUES SHIFT TO IP-CAPABLE

By the end of 2019, UK consumers owned 214m devices which could be used to access TV services – equating to over three devices per person.

Of these, 187m (87%) can be connected for IP services. Whilst some are core to the TV device landscape, such as TV sets, set-top boxes and media streamers, the industry ensures compatibility and quality of service across a range of others such as smartphones and tablets. However, the number of TV sets in use has fallen in recent years, largely the result of the broader range of options now available for TV viewing meaning that consumers no longer need a dedicated TV set for their more casual viewing.

Set-Top Box use is falling as Pay-TV subscriptions have peaked and retail FTA boxes have become increasingly redundant in the wake of adoption of digital TV sets with integrated tuners. Meanwhile, the growth areas in ownership all centre around connected devices.

The deployment of IP-connected boxes by Pay-TV operators has been largely responsible for a 32% ownership growth since 2015. Connected boxes were rolled out in order to enable access to both Pay-TV providers own VoD services and additional channels as well as to bring third party VoD services such as Netflix and BBC iPlayer into their service offering.

The number of smart TVs in use has doubled since 2015 to exceed 24m sets.

Futuresource consumer research shows that these are now the most popular means by which Netflix users access the service, overtaking media streamers and laptops. This indicates not just increasing ownership, but also use of the IP interface, which has improved in this timeframe, driving a significantly better consumer experience.

Media streamer uptake has been the fastest growth area in the past four years, with the installed base nearly trebling to 13.4m by the end of 2019. Consumers are responding enthusiastically to the growth in on-demand services and media streamers have fulfilled the role of a cheap and simple means of access. Games consoles such as the PS4 and Xbox One provide additional access points to OTT services, which will pick up further with the release of next gen consoles in 2020 and beyond.

Whilst smartphone ownership is now approaching saturation, with 89% of the UK entire population owning at least one, the increase in screen size in recent years has led to a fall in demand for tablets, with phones now more attractive for TV viewing. The move from desktop to laptop computing brings with it a greater number of devices per household, ensuring that over 40m PC/laptops are in use, a figure which excludes business devices. Laptops provide the largest screen option for TV viewing for many, beyond an actual TV set.

PREFERENCE SHIFTING TO LARGER SCREENS

In recent years, there has been a notable shift towards larger screen TV sets. 45”+ sets have rapidly grown their share of the TV market, driven by a number of factors including:

Reduced desire for small screen TVs due to a shift in viewing to alternative small screens such as tablets, laptops and phones. In a total market that declined by 18% over the period, sub-45” set sales fell by 35%.

The availability of thinner sets, with narrow/non-existent bezels.

Price declines in larger screen sizes.

HD and UHD services are better enjoyed on larger sets.

APPENDICES

COLLABORATION BETWEEN CREATIVE & TECH SECTORS VIEWED BY MANY AS KEY

ECONOMIC IMPORTANCE OF UK TELEVISION & BROADCAST INDUSTRY

Data Sources Used

  • 37,000 people work in the broadcast industry, 24% of whom are on the technical and engineering side
    Source: OFCOM, Diversity and equal opportunities in television – UK broadcasting industry report, 2018.
  • 37,000 people work in the broadcast industry, 24% of whom are on the technical and engineering side
    Source: OFCOM, Diversity and equal opportunities in television – UK broadcasting industry report, 2018.
  • In addition to this, 114k people work in motion picture, video and television programme production, including activities related to sound recording and music publishing.
    Source: Office for National Statistics: Employees in the UK by industry 2018, (2019).
  • 13k companies are involved in the television business, ranging from Sky, with revenue last year of £15.2bn ($19.2bn) to numerous small companies and sole traders such as aerial installers and camera hire firms
    Source: Futuresource Consulting analysis, May 2020
  • TV production revenues exceed £3.0bn, with export revenues totalling £1.4bn.
    Source: PACT, UK Television Production Survey 2019
  • Commercial broadcaster revenues exceed £11.0bn.
    Source: OFCOM Media Nations: UK, 2019
  • Revenue totalling £4.8bn is raised from TV net and online video advertising.
    Source:: OFCOM Media Nations: UK, 2019
  • £7.7bn is spent on network TV programmes.
    Source: OFCOM Media Nations: UK, 2019
  • BBC TV Licence revenues totalled £3.7bn in 2019.
    Source: House of Commons Licence Fee Statistics
  • Consumers spent £3.0bn on TV sets, Set-Top Boxes and Media Streamers last year
    Source: Futuresource Consulting analysis, May 2020
  • £12.0bn was spent by consumers on Pay-TV and SVoD subscriptions, Home Video, and the TV licence fee in 2019, with a further £4.93bn raised by TV advertising.
    Source: Futuresource Consulting analysis; The Advertising Association/WARC Expenditure Report April 2020
  • Innovation in technology as well as content underpins this activity: 157 UK companies were responsible for the filing of 99 TV-related patents at a worldwide level last year.
    Source: Futuresource analysis of patents filed on ESPACENET.

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