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Ott.and.operators
Ott.and.operators
Ott.and.operators
Ott.and.operators
Ott.and.operators
Ott.and.operators
Ott.and.operators
Ott.and.operators
Ott.and.operators
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Ott.and.operators

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  • 1. A Tangled Web… OTT Video Threatens ISP Business Models Aditya Kishore Principal Analyst ak@diametricanalysis.com www.diametricanalysis.com Copyright 2013 Diametric Analysis. All Rights Reserved.
  • 2. Copyright 2013 Diametric Analysis. All Rights Reserved. Definition: OTT Video is video content being delivered via the service provider’s network but without the provider’s permission, control or any revenue gain •In December 2010, TV sites in Germany reached 16.3 million viewers, up 14 %. France followed with 15.0 million viewers, up 22% and the UK with 11.0 million viewers up 19%. •Significant trend in 2010 for the European online video market : An increase in the average length of videos viewed, indicating a shifting preference to consuming longer videos. •A Heavy Reading study of US pay TV subscribers found that 40% of respondents watched more online video in 2009 vs. 2008, and 26% picked TV shows as their most viewed genre of Internet video Source: comScore, Heavy Reading US Pay TV Survey, 2009 OTT video usage is exploding
  • 3. Copyright 2013 Diametric Analysis. All Rights Reserved. 37% 41% 48% 55% 61% 66% 0% 20% 40% 60% 0 5 10 15 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 Number of subscribers streaming in millions Percentage of subscribers streaming •Netflix finds that 2/3rd of its subscribers have already shifted to a streaming model •1st day of availability in Canada, Netflix traffic exploded past YouTube •Driven by higher video quality and longer video duration •Users moving from 10-20 second UGC video at poor quality to 30, 60 & 90 minute videos at high quality •BBC’s iPlayer “HD” quality is streamed at 1.5 Mbps – higher than some Internet connections not so long ago It’s driving shifts from DVDs, but could it affect TV viewing as well? Source: Netflix Earnings, Sandvine Netflix Traffic In Canada on Launch Netflix Users
  • 4. Copyright 2013 Diametric Analysis. All Rights Reserved. Producer/Distributors Warner Bros. Television King World Columbia-Tristar Television Movie Studios Warner Bros., Universal, Disney, Twen tieth Century Fox Basic Cable Networks TNT, USA, A&E Premium Network HBO, Starz! Encore, Showtime Broadcast Networks ABC, CBS, NBC, FOX Internet Video Consumer Pay TV Provider Cable, DBS, Telco By providing content owners a direct channel to the consumer, Internet video weakens the negotiating position of the service provider Pay TV providers must also fear being disintermediated by OTT video
  • 5. Copyright 2013 Diametric Analysis. All Rights Reserved. InMinutes Source: Television Bureau of Advertising ; using data from The Nielsen Company, NTI Annual Averages, 1994-present estimates based on start of broadcast season September to September. Beginning in 2007, estimates include Live+7 HUT viewing. Prior to 9/87: Audimeter Sample; 9/87 to present: People Meter Sample. •Much of the research is tied to consumer surveys – a notoriously poor indicator of actual viewing behaviour •2010 CTAM study found 84% of those viewing Internet video on TVs watched the same or more scheduled TV as before •92% subscribed to pay TV with only 3% planning to give it up. •Heavy Reading’s US pay TV survey found that less than 3% of US pay TV subscribers had dropped their subscription •35% percent felt Internet video was “competitive in theory, but TV was much better for video,” while almost 22% felt OTT just wasn’t competitive with pay TV •However 17% felt they may cancel their premium packages But TV viewing does not appear to be declining, though opinion (and research findings) are mixed
  • 6. Copyright 2013 Diametric Analysis. All Rights Reserved. 8.97% 38.5% 56.4% 21.8% 48.7% 52.6% 0.00% 20.00% 40.00% 60.00% 80.00% 100.00% Other Reach Younger Demos Extend Brand In Case We Need In Future Experiment With New Revenue Models Incremental Revenue •32% were distributing a “substantial” number of titles today, with another 20% distributing some •Another 23% were about to launch online video services •Need to eliminate the middleman has been a cherished dream for some content owners but it’s not as easy – as they are finding out •Hulu went from ad-sponsored to subscription, Eric Schmidt admitted monetizing YouTube was a challenge, and anyone remember Movielink? •Even flavour-of-the-month Netflix is dependent on movies deal with Starz, which is set to change •Best evidence is the change in focus from YouTube to Hulu to Netflix over the past 3-4 years in OTT video discussions Source: Heavy Reading study of Video Content Rights Holders, 2008 Content owners are keen to exploit OTT, but there are challenges even for them
  • 7. Copyright 2013 Diametric Analysis. All Rights Reserved. And eliminating the middleman has its own consequences… Assume per subscriber per month carriage fee charged for network $0.95 Assume reach (as % of US Households) 80% Reach (in millions of US HH) 90 million Monthly revenue from carriage fees (in millions) $85.5 Annual revenue from carriage fees $1.03 billion Quite apart from viewer driven advertising revenues, there are billions of dollars tied to carriage revenues which will force consideration of traditional distribution channels
  • 8. Copyright 2013 Diametric Analysis. All Rights Reserved. Source: Cisco VNI, 2009 But service providers are still staring down the barrel of a gun
  • 9. Copyright 2013 Diametric Analysis. All Rights Reserved. Source: Cisco VNI, 2009 And OTT video is the problem
  • 10. Copyright 2013 Diametric Analysis. All Rights Reserved. •P2P traffic could be shaped, at least outside the US but video poses greater challenges •Streaming video – as evidenced by Netflix – is preferred option •Can’t be shaped or delayed without affecting end user QoE •Frustrating experience affects customer satisfaction, may drive churn •Competitive BB market means SPs have their hands tied •Marketing on peak speeds is shooting themselves in the foot: Now users, online distributors (BBC) demand peak speed P2P is declining as a percentage of total traffic, but that’s only because video is growing faster Source: Arbor Networks
  • 11. Copyright 2013 Diametric Analysis. All Rights Reserved. 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 90 000 100 000 110 000 120 000 Average advertised broadband download speed, kbit/s* Source: OECD, October 2009 Note (*): Advertised speeds are typically the theoretical maximum for the employed technologies. Users commonly have lower actual speeds. Also, often only parts of the country have been upgraded to the fastest speeds. Note (***): New Zealand's download speeds are not typically advertised. Figures were imputed using technological maximum speeds for ADSL 2+. Operators have been increasing connectivity speeds but not fast enough to handle the volume of growing video
  • 12. Copyright 2013 Diametric Analysis. All Rights Reserved. Service providers must look to either monetize OTT video or find ways to manage it The Two Approaches Are Not Necessarily Opposed Cut Costs Grow Revenue OR • Costs of supporting delivery infrastructure is unsustainable • Competitive market restricts sustained price increases Operators Must Choose To MANAGE Or MONETIZE This Traffic Source: Juniper
  • 13. Copyright 2013 Diametric Analysis. All Rights Reserved. Delivery Aggregation Creation Online Aggregators Content/ Producers/UGC Pure-play CDNs ISP Devices Distribution Selection/Portal Content Distributors Devices Content/ Producers/UGC Carrier displaces online distributor NSP PortalsCDNISP Devices • 76% of service providers agreed that multiplatform video distribution would be critical for their business within five years • Of these 38% strongly agreed • 25% rated it their highest priority when asked what would make them prioritize multiplatform video deployment higher Option A: Service providers move up the value chain and become video distributors Source: Adapted from Juniper Mkt. Viewpoint
  • 14. Copyright 2013 Diametric Analysis. All Rights Reserved. 9.1% 34.0% 56.9% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% Very Interested Somewhat Interested Not Interested How interested would you be in a new service that allowed you to watch a large percentage of TV shows and channels, as well as shows recorded on your DVR, via the Internet or mobile device from anywhere in the world? Your pay TV provider would charge you $10 per month in addition to your existing pay TV charges for this capability. 2010 n=503 Subscribers are interested, even for a substantial incremental fee Source: 2010 Heavy Reading US Pay TV Survey
  • 15. Copyright 2013 Diametric Analysis. All Rights Reserved. No. Service Provider TV Mobile PC 1. AT&T Linear and on-demand channels, premium packages etc. Selected sports, events, specials etc. offered on 3-screens Media FLO offered on ATT Mobile Interactive features such as sports statistics, news and voting/polling apps on all platforms linked to video content Can program DVR remotely Yahoo partnership brings a range of content to broadband portal Selection also delivered to TV AT&T sports and specials offered on all 3 screens 2. Bell Canada Satellite partnership with BCE owned Express Vu offers full package of linear channels, DVR, HD etc. IPTV service in 2010 with full set of capabilities including VOD Plan to extend online TMN service to mobile Bell Mobile TV live TV, including NHL, CTV, TSN, Sportsnet, The Weather Network and other Canadian networks. Also offered nine feeds during Winter Olympics SlingGuide used to enable remote DVR scheduling 130 hours of video from TMN offered to TMN subscribers from Bell online portal Plans to add more content shortly Plans to enable Slingmedia-type placeshifting in future 5. Orange France Content division creates and aggregates content from Warner Bros, Gaumont, France Télévisions, The French Olympic Committee Football League, Universal Music and BMG Orange Sport and Orange Football Channels Highlights On Demand VOD chaptering interactive apps. including voting, stats etc. Advertising Catch Up TV Adding support for DVB-H Seamless switching from 3G to DVB-H for live TV feeds Can also pause TV while taking a call Orange Sport and Orange Football Channels Highlights On Demand VOD chaptering interactive apps. including voting, stats etc. Advertising Catch Up TV Placeshifting capability; no specialized player required 1,000+ music videos on PC and TV Orange Sport and Orange Football Channels Highlights On Demand VOD chaptering interactive apps. including voting, stats etc. Advertising Catch Up TV Many providers are offering video over the internet, and mobile screens Source: Company statements, financial reports, press reports, interviews etc.
  • 16. Copyright 2013 Diametric Analysis. All Rights Reserved. No. Service Provider TV Mobile PC 6. PCCW Linear and on-demand channels, premium packages etc. License permitting offered on 4 screens “now” Hong Kong local channel with local celebrities and content Also now sports, business news and news channels, Yellow Pages channel on all 4 screens Video clip sharing service “snaap” offered across all platforms Ads sold on 4 screens Mobile TV service over 3G network SD at 110 kbps and “HD” at 212 kbps Sports, movies and news, and repurposed channels now channels and snaap Advertising & Yellow Pages channel “Standard but optimized” UI across all platforms Bundled pricing offers discounts for multiplatform usage Sports, movies and news, and repurposed channels now channels and snaap Advertising & Yellow Pages channel 8. SingTel Mio TV IPTV service with linear TV, premium packages, 100s of on-demand titles, HDTV, DVR IDEAS portal with 12 channels streamed; offered in hours/month packages 11. Telstra Telstra FOXTEL offers satellite service with linear, premiums, DVR etc. Hybrid T-Box broadband connected STB links video content from Telstra online portal BigPond to TV, and delivers free- to-air broadcast channels. Also includes DVR. Mobile FOXTEL offers channel packages, VOD etc. as part of capped-cost plan Includes access to BigPond TV content, which is specially “chunked” for short, bursty mobile viewing FOXTEL Download: Shows from existing TV subscription package to PC Also download pay per view movies to PC BigPond TV: TV shows, movies on VOD plus streamed live channels and YouTube 13. Verizon 500+ linear channels, VOD, premium packages etc. FiOS One Channel VOD library of 15K+ titles Licensing permitting content offered on 3- screens Open access – allows content owners like NBC to create their own interactive apps for deployment Interactive Media Guide designed for multiplatform video navigation Can take video with you: Stop-and-transfer to mobile phone Media Flo and VCast mobile video services with content from CBS, NBC, MTV, ESPN and Comedy Central etc. Remote management of DVR Video feed to PC, then networked to TV in home with blip.tv, Dailymotion and Break Media content Enables placeshifting where licensing permits TV Everywhere service with Turner, EPIX and HBO Service providers & multiplatform video initiatives contd.. Source: Company statements, financial reports, press reports, interviews etc.
  • 17. Copyright 2013 Diametric Analysis. All Rights Reserved. Aggregation Site Ownership Content Offered Multiplatform Strategy Outlook Hulu.com ABC, FOX, NBC- Universal joint venture Popular TV shows from its owners as well as various other cable networks TV: New initiative to use Xbox 360 and iPad to get beyond PC. Also planning to add PS3 Mobile: New pay service Hulu Plus to support iPhone, iTouch and iPads. THE online distribution site for high quality content in the US. Even so, struggling to break even, with new launch of fee-based service. But this might affect audience attracted to ad supported model YouTube.com Google (Not a content owner as such, but we included it given YouTube’s massive user base). Mainly known for user- generated content but eventually partnered with various major TV networks and studios for video distribution incl. CBS, HBO, Showtime, Sony Television and Lionsgate TV: Available via connected TVs & other CE products from Sony, Samsung, HP, Panasonic and others Mobile: Pre-installed app on Android and iPhone, can be downloaded on Windows and some Nokia phones. Allows uploading, downloading, access to playlists, search, browsing and sharing from phone Trying to build on massive user base for UGC, wooing TV content owners to drive revenue opportunities with some success. YouTube usage will remain high, but we don’t see it being the primary online option for TV networks or studios EPIX.com Studio 3 Partners (Lionsgate, Paramount, Fox) 15,000 movies from owners, with pre-DVD releases and now developing own TV shows TV: Partnered with broadband providers for integration on their online portals, cable/IPTV providers for VOD services and offers premium linear channel for pay TV providers. Mobile: Also offers mobile video service with Adobe OpenScreen EPIX has taken a unique partnership route to multiplatform distribution from the ground up. However several major pay TV providers including Comcast and DIRECTV have passed on it, leaving its long- term impact somewhat unclear BBC iPlayer BBC Previous seven days BBC programming on TV and radio TV: Partnered with BT and Virgin for delivery over their VOD service. Also available via major gaming consoles Mobile: Can stream & download iPlayer video over Wi-Fi to approved phones incl. iPhones, and on 3 and Vodafone networks using 3G. Can also sideload on to certain Nokia phones only Dominant TV programmer in the UK and well-recognized in the English speaking world. iPlayer is very popular in the UK and BBC is driving the new “Canvas” standard for hybrid broadband / broadcast devices in UK. Very well positioned But online distributors are also getting into the act Source: Company statements, financial reports, press reports, interviews etc.
  • 18. Copyright 2013 Diametric Analysis. All Rights Reserved. Encoding Transcoding Home Gateway User Interface PC User Interface TV Content Management System Device Registry Content ProtectionVideo Delivery User Interface Mobile Investment in a new technology eco-system is required for a high quality experience across platforms No clear business model identified for multiplatform video to date
  • 19. Copyright 2013 Diametric Analysis. All Rights Reserved. Delivery Aggregation Creation Online Aggregators Content/ Producers/UGC Pure-play CDNs ISP Devices Distribution Selection/Portal Content Distributors Devices Content/ Producers/UGC Devices • By taking over CDN role, operators at least get some revenue • Operators can also leverage ownership of the access network and proximity to the consumer to improve QoS • Could charge content owners or even subscribers depending on the plans they choose • Less conflict likely with net neutrality regulations than traffic shaping • AT&T, Verizon, Deutsche Telekom, France Telecom & British Telecom all doing it today Another option is to move just one step up: To become the content delivery network Carrier displaces CDN provider Online Aggregators Content Distributors Source: Adapted from Juniper Mkt. Viewpoint
  • 20. Copyright 2013 Diametric Analysis. All Rights Reserved. •By statistically caching the content inside their network, an operator can save up to 30-40% bandwidth •Can also off-load from upstream links, saving on transit and linking costs •Caching helps speed delivery of streaming video and other rich media, potentially increasing subscriber satisfaction, cutting churn, and driving upgrades •Operators can also match with policy tools for intelligent network management and routing •Can also create business rules to develop advanced services, such as boost buttons and HD video tiers Offloading Traffic Cache delivery vs. Internet Delivery Operators are closer and own the network Source: PeerApp
  • 21. Copyright 2013 Diametric Analysis. All Rights Reserved. 3rd option: Operators can also create a smarter network -- But first they need to ID the specific problems-- • Not consistently a problem across the network: Specific areas/parts of the network particularly challenged • Need to accurately identify and resolve issues in these key areas Part of the network: •Access, Aggregation, IP Transit, peering points/Intl. links Peak Traffic Times: •~ 6pm to midnight Peak Users: •5% of Spanish mobile operator Yoigo used 95% capacity •In general, top 1% use 20-25% & top 10% use >50% Problematic Applications: •Streamed video •P2P Public-Interest Events: •Obama inauguration, Usain Bolt Olympic 100 meters, MSFT upgrades Source: Sandvine Peak Usage Times
  • 22. Copyright 2013 Diametric Analysis. All Rights Reserved. Policy & DPI tools allow for better targeted & more flexible pricing No Type of Metering Action Impact 1. Usage Based •Implement monthly usage caps •Limits traffic overall but not necessarily at peak times •Strong consumer backlash in US 2. Application Based •Traffic shape or limit bandwidth by application, i.e., P2P •Could affect user experience for real time apps like video •Against FCC regulations in the US 3. Time Based •Allow certain number of hours of access/day/sub. •High usage at peak times still possible since there’s no limit on usage •May need usage caps as well 4. User based •Limit bandwidth for peak users during peak hours •Can affect user experience •Could create consumer backlash 5. Traffic Adaptation •Shape or transcode traffic so that bit rate is lower through bottlenecks •Video quality may be degraded •Bandwidth savings may not be substantial without significant quality loss •Content owners may claim this is illegal without their permission 6. Dynamic Tarriffing •Provide real time billing rates that vary based on time of day, location etc. due to network congestion •May reduce overall revenue •Usually works only in areas of extreme price sensitivity
  • 23. Copyright 2013 Diametric Analysis. All Rights Reserved. Other policy enabled/enhanced options… "Boost" Buttons: Consumers boost download speeds dynamically. Service providers can set the duration of the "boost" and charge the user for it. User-Selected Trade-Offs: Subscribers pay more to gain a selection of specific benefits around speed and peak time usage experience. This would involve some fairly complex trade-offs across speed, time of day, overall monthly download caps etc. Revenue Share With Content Owner: The content partner's content would be white-listed for a high QoE service by the service provider, and the content owner would pay the provider or share resultant advertising /subscription revenue with the service provider. Advertising: Opens up a revenue stream without adding to the already burdened consumer wallet. Advertisers are interested in the geo-location and demographic information that service providers have available to them, as well as more detailed information they can collect by analyzing network traffic. 89% of Service providers felt they would need ad revenue in the next five years. Billing/Transaction Enabling: The service provider provides a credit card-like function, allowing subscribers to consume pay content and billing them at the end of the month. Could also enable a micropayment model for online content., with very small payments (of a few cents typically) could be tracked and aggregated by the service provider, and then shared with the content partners.
  • 24. Copyright 2013 Diametric Analysis. All Rights Reserved. No. Solution Opportunities Challenges Key Vendors 1. Pricing •Charge per bit: Direct relationship between usage and spend •Low incremental investment •Competitive challenge •Consumer resistance •May lose revenue •No new service revenue N/A 2. Multiplatform Video •Compete directly with OTT •Cut churn, increase satisfaction •Generate new revenue •New infrastructure needed •Content licensing •OTT competition •No revenue model ALU, Ericsson, NSN, MSFT, Harmonic, Envivio, SeaChange, Concurrent, Edgeware 3. Caching/ Content Delivery •Closer to SP service model •Own network: major asset •Closer to end-user •Policy, DPI can top CDN QoE •Margins very tight •Significant evolution reqd. to catch CDNs •Net neutrality Cisco, ALU, PeerApp, BlueCoat, Juniper, Ericsson-Akamai, Oversi 4. DPI & Policy •Efficient network management •Target problem areas, users •New pricing/packaging tiers •Targeted services •Net neutrality •Privacy •Consumer backlash Tekelec, Allot, Arbor, Sandvine, Broadhop, Juniper, NSN, ALU 5. Advertising •Non consumer wallet revenue •Advertisers interested, esp. in 3-screen •Targeting very valuable •Complex, slow moving value chain •Scale issues •Fragmented media buying •Reporting requirements SeaChange, Concurrent, ARRIS, Donovan, Harris, OpenTV, BlackArrow Summary: Options for service providers
  • 25. Copyright 2013 Diametric Analysis. All Rights Reserved. DOS DON'TS • Focus on managing your network and controlling traffic in the short term. Tools such as edge- caching, DPI, and policy can help right away, without input from other members of the value chain. • Don't expect significant ad revenue in the next one to three years. Developing revenue- generating models and getting buy-in from all members of the value chain will take time, even though there is interest in granular user data for advertising and personalization. • Identify bottlenecks on your network and address solutions for those bottlenecks, rather than looking at bandwidth expansion overall. • Don't take any action to track usage or manage traffic without clearly communicating it to the consumer. Ideally, use opt-in approaches for data collection. • Focus on managing peak demand rather than overall traffic. If you can manage 6pm-midnight, you do not need to over-engineer your network. • Don't lose any more PR battles. Invest in clearly communicating your position and challenges to consumers and regulators. • Enable flexibility in bandwidth management. There may be tradeoffs you can make with consumers, if your policy architecture is flexible enough. Integrate with billing and subscriber management for the same reasons. • Don't try to do it alone. Look for partnerships and arrangements, both for video services on your own portals and integrating Web content into IPTV. Final thoughts...
  • 26. Aditya Kishore Principal Analyst ak@diametricanalysis.com www.diametricanalysis.com Copyright 2013 Diametric Analysis. All Rights Reserved. Questions? March 2011

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