European broadband providers hoping to increase their profitability with internet TV services will be sorely disappointed, according to a report from Analysys.
The business case for broadband entertainment is based on slim margins, the analyst found. Studios expect at least 50 per cent of the revenue from pay-per-view movies, while Sky demands about 80 per cent of the revenue for its premium sports and movie channels.
In the online music business margins are even slimmer, the analyst said, while gambling is the only profitable business model for mass-market online games.
"Broadband service providers have to decide whether TV is worth the risk involved in investing heavily to reach the scale necessary to make a profit," said Margaret Hopkins, the report's author, in a statement.
"It may be better to form a partnership with an existing aggregator or to create an open media platform to attract a number of third-party content providers."
Hopkins acknowledged that offering TV over broadband probably leaves an operator in a stronger long-term position if it works. But she warned that it brings smaller profits and is a bigger risk in the short term because it requires five times the investment.
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