Opportunities in IPTV Carolyn WalesPresentation Transcript
Opportunities in IPTV Carolyn Wales Sukun Kim David Leuenberger William Watts Ori Weinroth
What is IPTV?
Definition: systems where television and/or video signals are distributed to viewers using a broadband connection over Internet Protocol
Viewing device is not a defining feature
We will focus on the home subscriber segment
Why is IPTV Important?
IPTV allows new players into video distribution:
Incumbent telecommunication companies
Original content providers
IPTV allows a new user experience:
convergence of video with other applications (voice, data) on one device and interface.
Channels of Video Distribution Cable/Satellite Distribution Telco Distribution Open Internet Distribution Use existing infrastructure VOD limited by network infrastructure Rollout of advanced services possible, but likely slow PVR upgrade easy, immediate Installing new FTTx networks Switched architecture makes VOD easier Incentive to plan-in advanced features Low barriers to entry – many many players Poorer quality than Cable or Telco distribution Ecosystem encourages experimentation Content producers can connect directly with customers Addition of services not foreseen at deployment likely to be slow
Telcos: Responding to Cable’s Voice Incursion
Using VoIP technology, MSOs start offering subscribers triple-play packages: voice, data, video.
Telcos face significant threat to voice revenues.
Telco reflex: offer video. NPV>0?
Telcos: IPTV Sample Initiatives
SBC’s “Project Lightspeed” is a $2B investment in IPTV.
Now TV (500.000 subscribers), operated by PCCW in Hong Kong, launched in Q3, 2003
Maligne TV (125.000 subscribers), operated by France Telecom in France, launched in Q4, 2003
Media on Demand (65.000 subscribers) operated by Chunghwa Telecom in China, launched in Q1, 2004
* All subscriber figures as of Q3 2005. Source: wikipedia.
New IPTV Distributors
Start-ups and internet heavyweights enter the video distribution market:
Sells customer a box, $10 monthly subscription service, and some pay-per-view
Sells some customers boxes, and offers wide range of payment options for content including subscription and pay-to-own
Offer content owners a platform for video distribution and monetization, including ad insertion, storage and servers, shopping cart
Receive a cut of cut of advertising revenue and fees from the videos
Start-up access to mainstream content
Opportunity to monetize “the tail”
Content Providers Go Direct
Owned by movie studios
Pay-per-view. Prices range from $2-$5 per movie. Launching pay-to-own
A lot of criticism of the current user experience
The South Korean experience
Studios go direct to consumer over public internet network
Pricing: $0.5-$1 depending on resolution (equivalent to $1.5-$3 in U.S.)
Studio’s return bigger than when partnering with cable
Result: popular TV series had 107K views per week (proportional to 650K views in US)
Result: studios gain better understanding about viewing habits
Channel conflict issues
Trends in Video
Users become “spoiled”
Content available on demand
Content available anywhere (devices include mobile)
Inexpensive production tools
Culture of participation
Available distribution/monetization – virtuous cycle
Convergence of Devices
IP network allows applications to run over multiple end-user devices, over a single service delivery network
Trends in Video (continued)
New players in video distribution
Akimbo, DaveTV, BrightCove, MovieLink
Two-way nature of IP network enables unprecedented interaction
Required in a DVR home
Required where consumer has on-demand ad-free choices
Typical # of channels offered subscribers: more than 200** in U.S., up to 500 in the U.K.
Monthly U.S. ARPU is $50*.
Typical VOD programming offer is: 65 movie titles
Source: *Comcast self-reported revenues. Actual monthly RPU ranges from $15 to $98, depending on services provided.
**Courier News (Comcast New Jersey)
Telco IPTV Costs
Customer Premises Cost (CPE) = Set-Top boxes (STB), CAT-5 wiring, ADSL plug/modem, and home installation labor cost ≈ $655-$800
Headend Equipments and VOD Servers: transcoders, rate shapers, video servers, core network ≈ $75-$200.
Middleware Cost: software needed on both the server as well as the client side, including user authentication, content management, interactive program guide, customer relationship management (CRM), digital right management (DRM), billing, browser, MPEG-4 player $75-$150
Access Network Cost: widely varying costs depending on network architecture and choice between fiber and DSL. Costs for fiber estimated at $672.
Cost of Sales: estimated at 41% of ARPU.
Selling, General and Administrative (SG&A): estimated at 21% of ARPU.
Telco IPTV Revenues
Video ARPU ≈ $45/subcriber/month
Advertising ≈ $6/subcriber/month
Equipment Rental ≈ $5/subcriber/month
As a general rule of thumb, adding a strategic product (voice, data or video) can reduce churn by approximately 25% or more*.
* Yankee Group: “Driving Toward the Triple Play: The Telco Video Opportunity”
Building a Telco IPTV Offering
Telco IPTV services operate over a private IP network, not the public Internet.
A private network is required to ensure quality of service (QoS).
Building a Telco IPTV Offering – cont. Source: IPTV Explained: A Broadband Services Forum White Paper Linear (e.g., broadcast TV) and on-demand (e.g., movies) content is captured and formatted for distribution over the IP network. Multicast/ Unicast Mix of well-engineered existing IP networks and purpose-built IP networks for video transport. Asymmetrical DSL (ADSL) and very-high-speed DSL (VDSL) or Fiber-to-the home to provide the required bandwidth. Set-top box (STB). Last mile
Telco IPTV Features
number of channels
integration with computer applications: photo, music, voice
How Open Internet Distributors Distribute?
When content is monetized appropriately, dedicated servers are not a prohibitively expensive method of delivering the video.
When content is not appropriately monetized, P2P technologies offer a lower cost solution:
P2P distribution startups:
Predominantly used to pilfer video and other digital content
No known means of DRM
DRM handled by other applications.
Red Swoosh network security only controls the content that flows to the user over their network
Technology enables secure distribution of digital content (DRM)
Used by AOL, BBC, Sky and other corporations to provide DVD quality digital content, including corporate sales and training content
DRM required to keep video from going the way of music.
Drivers for Open Internet Video Distribution
Ability to connect directly with consumers
No strong gatekeepers wanting rents
Advertisers: *Ability to use currently available targeting/profiling technology *Ability to track results *Increasing openness to new models
Increasingly used to video anywhere/anytime
Increasingly interested in creating and sharing their own video
See an opportunity to get into the distribution market