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'Spotify for TV' Magine terrifies Euro players with smart TV deals

OTT player has just grabbed half-a-million Swedish subscribers

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Magine TV, the Swedish cloud-based OTT service that threatens to blow a hole through European TV, has signed up smart TV makers LG Electronics, Panasonic, and TP Vision (selling Philips TVs).

The service, described as “cable in the cloud” and sometimes as “Spotify for TV”, has gained well over 500,000 subscribers in Sweden in under a year since its launch in November 2012 and beta versions are now available in Germany and Spain just ahead of the full launch, with other countries following soon. To date, Magine TV is available as an app on Apple iOS devices and Samsung smart TVs, with Android promised soon, enabling direct live streaming from the cloud without a set top box.

We predicted great things for Magine TV last year because we felt it had got the business model just right. Admittedly this was because in Sweden broadcasters are open to third party OTT as a way of extending their reach, while say in the US they are paranoid about cannibalising existing revenues and disrupting their established relationships with the big pay TV operators.

On the one hand by eschewing the need for a box, Magine TV is adopting a low cost scalable model that others could readily emulate. But the key advantage for Magine TV is the consent from broadcasters and the acquisition of popular premium content in each of the markets it enters. This involved patient negotiation and good contacts within the broadcasting industry ahead of the launch and is to some extent a barrier to entry for rivals, although no doubt they will come.

As we pointed out at the launch it is the equivalent of an independent OTT provider offering Sky Sports in the UK or content from the likes of Viacom and NBC Universal in the US. The latter is unlikely to happen anytime soon and we might note that the closest equivalent of Magine there, the Aereo service currently confined to seven urban areas including New York, Dallas and Houston, is being contested by the broadcasters rather than endorsed, and as a result requires hardware in the form of antennae to receive transmissions over the air before retransmitting them over the Internet.

So like Aereo, Magine TV deals with live TV signals and linear broadcast, unlike other OTT providers like Netflix. But in order to secure the blessing of broadcasters and rights holders, Magine TV has had to invest a lot of its start up cash in developing a platform that is secure and seen to be so, according to its founder and CEO Mattias Hjelmsted.

In the UK it is unlikely that Sky would let Magine TV get its hands on its crown jewels either – this has not happened yet in Germany where Sky Deutschland now holds exclusive rights to Bundesliga football matches.

We said at the launch that Magine TV was like network PVR taken to its limits by recording every minute of every channel and storing all of the content for seven days, allowing subscribers to catch up over that period. Generally seven days is the period broadcasters have ne-gotiated with rights holders for content, so as not to impinge on the subsequent window for DVD revenues.

In one important sense Magine TV is not like network PVR at all, in that there are no issues over rights. These have already been negoti-ated and for that reason Magine TV itself has distanced itself from the network PVR analogy, which we fully understand.

In Sweden, where Magine TV is flying high, content deals are particularly strong. There it provides programming from public broadcaster SVT and private broadcaster TV4, as well as international channels CNN International, BBC, Eurosport, National Geographic, Nickelodeon and Cartoon Network. This is partly because they have not invested in separate services of their own, so it takes the place of systems like the iPlayer in the UK.

While Magine does not have live Bundesliga rights in Germany, it has secured a key deal with commercial broadcaster RTL, which gives its users access to RTL, VOX, RTL II, SUPER RTL, n-tv, RTL NITRO, ZDF, Eurosport 1, Eurosport 2, Nickelodeon, Comedy Central, VIVA and DMAX. Eurosport provides a lot of premium material, with live rights to three of the four tennis grand slams for example, as well some EUFA Champions League matches and some other major events like the Tour de France cycling championship. Magine TV is therefore well placed to compete in Germany at its subscription rate of around €11.50, especially now that it has most of the leading connected TV devices signed up. The company says it is negotiating with other content providers in Germany.

In Spain, where Magine launched in beta in July 2013, content deals have been secured with Chello Multicanal, Viacom Spain, Cosmopolitan and National Geographic Channel Spain, plus one or two others. The strategy is not to launch elsewhere until at least some significant rights for premium linear content have been secured, which Magine TV says will be the case in a few other European markets late this year or early 2014. It may well deem that it will be worth entering the UK if say it can gain rights to the major broadcasters such as the BBC and ITV, as well perhaps as Eurosport and a few other international channels like National Geographic, and we think there’s a good chance it can do this.

Magine TV was originally hailed as a service that would be confined to mobile, tablet and PC viewing and even then was considered an attractive proposition for people unwilling to pay $80 a month or more for premium channels. But with the addition of leading smart TVs to the portfolio it is now being seen as a direct competitor to pay TV rather than a cheaper, but inferior, alternative. As such it has even attracted some envy in the US where more savvy consumers would love to have an equivalent alternative, rather than say the combination of free-to-air and Netflix, although the latter is likely to become a significant player in linear OTT itself, having already established itself as a serious content producer capable of winning Emmy awards.

There will also be competition from other big players on the global stage, like Google of course. But Magine TV has every chance of establishing itself as a strong regional player in Europe on the back of its local content deals there, even if it is likely to be locked out of much of the most lucrative sporting material, like English premier league football, at least until it gets richer and bigger.

Magine raised $19m in funding from Swedish and international investors for its planned European expansion, on top of the $6.5m it started with. This highlights the ability of boxless OTT to enable a startup to launch a subscription linear service not just in its own country but also across a variety of major markets, for a modest outlay. And if one company can do it, then so can about 100 others, so watch out.

Magine TV will have been buoyed by recent surveys indicating accelerated take up of OTT viewing, both on secondary devices like tablets and also on big screen smart TVs. According to the Quarterly Multi-Screen Usage Study from NPD DisplaySearch in the US, 85 per cent of tablet owners and 65 per cent of smartphone owners in 15 countries surveyed now view online content on their mobile devices instead of on their TVs, at least some of the time.

NPD also found that three-quarters of the cherished 18- to 34-year-old demographic watch OTT video on their connected televisions. The most popular OTT content in order was Netflix and YouTube, Amazon Prime and Instant Video, Hulu Plus, Crackle.com, PlayStation Video and Xbox Video, but this last finding is largely irrelevant for Magine TV because the survey pertains to the US only. In Europe the order would be very different with wide variations between markets, with the BBC iPlayer way out on top in the UK for example.

Another survey from Digital TV Research has predicted sustained rapid growth for smart TV penetration over the next few years, which is a welcome fillip for the industry after some negative feedback from consumers over price, features and upgradeability.

The survey, taking in 40 leading countries, predicts that having increased from 115 million at the end of 2010 to 307 million around now, the number of connected TVs installed globally will reach 759 million by 2018.

This will represent 26.8 per cent of all TV sets, compared with 12.4 per cent now and 5.1 per cent at the end of 2010. The survey also indicated that the number of installed smart TV sets has overtaken games consoles connected to the web during 2013. A further point is that non-connected TVs are increasingly providing access to OTT content via hybrid set top boxes, such as Liberty Global with its Horizon box and its UK subsidiary Virgin Media with Tivo, which has around 1.5 million subscribers.

Copyright © 2013, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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