IPTV Business Models: Profit and loss in the telco TV space discusses the business models and strategies adopted by IPTV services across Europe. IPTV services are rapidly becoming commonplace across much of Europe, however many are struggling to generate subscriber revenues at sustainable levels. This report looks at some of the strategies adopted by European IPTV operators and also examines how the presence of IPTV has impacted the existing broadband business.

Key findings:

The end of 2007 saw IPTV reach a total of over 8m households across Europe. Growth from the platform is one of the highest in pay-TV, with 2007 net additions reaching 3.2m homes. By 2012, well in excess of 22m homes will be taking IPTV in Europe.

Many IPTV operators suffer from a restrictive consumer level bandwidth bottleneck. Roughly 80 per cent of European IPTV customers subscribe to a service that is not capable of delivering 720p HD video at standard frames per second to all subscribers.

IPTV service offers fall into three rough tranches: TV bundled free with broadband, basic pay (or Amenity IPTV) and premium IPTV, with a monthly ARPU scale going from just over þ3 to in excess of þ40.

Assessment of costs involved in IPTV set-up and operation suggest that offering free bundled IPTV solely for the sake of churn reduction cannot be justified from a financial perspective. IPTV must generate increased net additions to the broadband business segment or TV ARPUs must be boosted to compensate.

Only in some markets has IPTV been correlated in increases in broadband subscriber growths in excess of those of rival DSL players. In these cases, IPTV is a catch-up solution, with telcos running to keep pace with cable competitors – much like the way in Lewis Carroll's 'Through the Looking Glass' Alice is told by the Red Queen that she must run to stay in the same place.

Premium content is a double-edged sword for IPTV service providers. High-level content is important in attracting subscribers and differentiating from competition, however subscriber bases to the platforms are too low to allow short-mid term profitability from the move.

In the report:

• In depth discussion of business models and the roles of premium content, on-demand services and PVRs in IPTV player strategies
• Overview of technological issues impacting IPTV business models
• Hypothetical case studies examining the potential and time scale for profitability in the IPTV space
• The impact of IPTV on existing telco businesses
• Country level IPTV market data profiles