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TV Everywhere

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  • 1. TV   Everywhere:   Cableco's   response   to   Hulu/Netflix   led   Over   the   Top   problem   or   evolution  of  Internet  delivered  TV  model     Recently   Internet   delivered   premium   video   hit   the   tipping   point.   Netflix   and   Hulu   led   this   Internet   delivered   TV   revolution.   Netflix   not   only   lined   up   12k+   titles   for   delivering   it   over  the  internet  via  portal,  but  also  helped  its  employees  build  a  $100  "Over  The   Top"  set  top  box  Roku  (sold  180k  boxes  in  less  than  one  year).  Hulu,  A  NBC-­‐Fox  joint   venture,   came   out   from   nowhere   and   started   generating   more   ad   revenues   than   giants   like   YouTube.   Combination   of   Netflix   and   Hulu   was   offering   sufficient   enough   entertainment   for   the   consumers   to   cut   their   payTV   cord,   especially   during   the   financial   meltdown.   This   trend   is   set   to   accelerate   with   increased   proliferation   of   connected   video   gaming  consoles  and  connected  TVs.  TV  industry  is  on   a   slippery   slope   and   its   $300b   market   cap   is   under   serious   risk.   TV   everywhere   is   one   initiative   that   can   stabilize  this  slide  and  help  TV  industry  reinvent  new   business   model   for   new   platforms   like   Internet   and   Mobile.       Hulu's  birth  and  its  potential  impact  on  TV  industry       Hulu   was   created   to   alleviate   ratings   and   revenue  pains  of  broadcast  networks,  but  it  may  become  source  of  destruction  US   TV   industry.   In   2007,   Top   four   TV   giants   (CBS,   NBC,   New   Corp,   Disney)   generated   $22b  from  broadcast  TV  networks  and  approximately  $16b  from  cable  TV  networks   business.   Unlike   broadcast   TV   networks,  Cable   TV   networks   make   money   from   both   advertising   and   carriage   fees.   Broadcast   networks   make   money   only   from   advertising,  which  is  vanishing  fast.    It  is  expected  to  hit  $36b  in  2010  from  $43b  in   2008.   With   DVRs   expected   to   hit   50%+   penetration   by   2010,   whole   broadcast   business   has   been   under   serious   risk.   Availability   of   pirated   TV   shows   on   sites   like   YouTube   also   had   negative   impact   (e.g.   Before   Viacom   asked   YouTube   to   bring   down   Comedy   Centrals   Daily   show   with   Jon   Stewart,   it   was   consistently   ranking   in   top  viewed  videos).  Due  to  all  these  trends,  in  2008,  NBC  and  Fox  together  formed   Hulu.com   with   the   objective   of   recovering   lost   TV   ad   dollars   from   Internet   media,   in   hopes  that  one  day  pennies  of  Internet  will  match  the  Analog  TV  dollars  due  to  the   Page 1 of 6
  • 2. sheer  size  of  Internet.  Today,  Although  Hulu  CPMs  are  30-­‐50%  more  than  TV  CPMs,   advertising   minutes   are   only   one   quarter   for   online   version   vis-­‐a-­‐vis   same   episode   on  TV.  This  means  greater  than  60%  of  TV  ad  revenues  are  at  risk  when  show  moves   from  broadcast  to  Internet.       Recently   Disney   also   joined   Hulu   as   an   equal   partner   to   NBC   and   Fox.   From   usage   point   of   view   Hulu   with   CBS's   TV.com   can   provide   most   of   the   broadcast   programming   to   consumers   and   entertainment.   Although   cable   and   Satellite   penetration   is   90%,   but   no   cable   TV   network   generates   more   than   40%   average   weekly   cumes   (The   cume  is  the  percentage  of  homes  in  a   market   that   tune   to   a   particular   station  for  six  minutes  or  more  during   a   measurement   period)   and   in   contrast   ABC,   CBS,   Fox   and   NBC   consistently  clock  reach  over  70%.       Pay   TV   providers   charge   consumer   for   200+   channels,   but   in   reality   these   consumers   watch   about   8-­‐12  channels  and  if  most  of  them  are   broadcast   channels   (as   seem   by   Ave   weekly   cumes)   and   its   content   is   also   available   online   then   risk   of   cord   cutting   becomes   imminent,   which   eventually   put   the   whole   TV   industry   at  risk.     TVEveryWhere:  Cablecos  attempt  to  maintain  PayTV  bundling?   Like  in  many  other  countries,  TV  industry  in  US  also  generates  revenues  from   two  sources     1) pay  TV  subscribers     2) 2)  TV  advertisers.       Cablecos   generates   almost   $61b   from   basic,   premium   and   pay-­‐per-­‐view   programming  with  almost  60%  penetration.  TV  industry  as  a  whole  attracted  $69b  in   ad   revenues   in   2008,   out   of   which   $43b   (expected   to   decline   to   $36b   in   2010)   came   from   broadcast   networks   and   $26b   (expected   to   increase   to   $27b)   from   Cable   networks.  Broadcast  and  TV  networks  generate  almost  $50b  in  form  of  carriage  fee   Page 2 of 6
  • 3. from   all   the   pay   TV   subscriptions.   Carriage   is   fees   paid   by   TV   service   provider   like   Comcast   to   TV   networks   like   Disney   and   ESPN.   It   varies   from   32   cents   for   MTV,   45   cents   Nickelodeon,   86   cents   for   Disney  and  to  as  high  as  $4  per   subscriber   for   ESPN.   Out   of   100-­‐ 115$   triple   play   ARPUs   of   Cablecos,   average   $55   comes   from   pay   TV   and   due   to   bundling  and  carriage,  shares  of   all   the   content   and   service   providers   are   protected,   any   haphazard   attempt   to   unbundled   it   can   backfire   as   it   did   in   Music   (Offering   consumers  option  of  buying  hits  instead  of  albums  to  fight  against  Nepster  led  music   piracy   eventually   led   to   destruction   of   music   companies'   market   value)   and   News   paper  industry  (Undermined  value  of  news  paper  premium  content  by  offering  it  for   free  Online  and  also  craigslist's  free  classified  alternative).       TV   everywhere   is   non   exclusive   and   won't   stop   Content   providers   from   providing  content  to  Hulus  and   YouTubes.   However,   given   the   choice   between   Hulu   and   TV   Everywhere,   television   programmers  have  an  incentive   to   go   with   the   latter   due   to   dual   income   from   both   advertisers   and   consumers   in   form   or   carriage   fee.   This   makes   TVEveryWhere   delivers   yesterday's   business   model   on   today's   platform.   Due   to   this   very   reason,   NBC   and   Disney   executives   are   now   talking   about   subscription   based   section  in  Hulu  service.         Page 3 of 6
  • 4. TVEveryWhere  what  is  it?     TVEveryWhere   is   a   service   concept   built   around   authentication   and   entitlement,   which  offers  premium  TV  content  online  available  for  free  to  anyone  who  subscribe   to   multi   service   operator's   (MSO)   offer.   This   name   was   coined   by   Time   Warner.   Before   Comcast   adopted   this   name   for   its   initiatives,   it   was   using   OnDemand   Online   to   describe   its   initiatives.   As   of   today   TVEveryWhere   epitomize   technical   and   business   response   of   Cablecos   to   protect   content   bundling,   pricing   and   pay   TV   business   models   from   internet   TV   alternatives   like   Hulu,   without   devaluing   the   content.  Following  are  the  broad  principles  of  TV  everywhere  announced  jointly  by   Time  Warner  and  Comcast.     1. Bring  more  TV  content,  more  easily,  to  more  people  across  platforms.     2. Video   subscribers   can   watch   programming   from   their   favorite   TV   networks   online  for  no  additional  charge.   3. Video  subscribers  can  access  this  content  using  any  broadband  connection   4. Programmers   should   make   their   best   and   highest-­‐rated   programming   available  online     5. Both  networks  and  video  distributors  should  provide  high-­‐quality,  consumer-­‐ friendly  sites  for  viewing  broadband  content  with  easy  authentication   6. A  new  process  should  be  created  to  measure  ratings  for  online  viewing.  The   goal  should  be  to  extend  the  current  viewer  measurement  system  to  include   advertiser  ratings  for  TV  content  viewed  on  all  platforms.   7. TV   Everywhere   is   open   and   non-­‐exclusive;   cable,   satellite   or   telco   video   distributors  can  enter  into  similar  agreements  with  other  programmers.     TVEveryWhere:  Technology   Although   there   is   a   broad   agreement   on   principles   of   TVEveryWhere,   but   key   implementation  details  can  differ  among  service  providers.  Comcast  TVEveryWhere   trials   will   be   built   using   MoveNetwork   and   Comcast's   thePlatform   technologies.   Time   Warner   may   adopt   combination   of   Adobe   and   thePlatform.   thePlatform   is   already   used   as   online   video   platform   for   Time   Warner's   roadrunner,   Cablevision   and   Cox.   thePlatform   is   also   expected   to   announce   a   big   deal   with   European   pay   TV   provider  sometime  in  September'09.       Comcast   TVEveryWhere   trial   will   allow   customers   to   log   into   Fancast   and   Comcast.net   to   view   their   cable   programming   online.   Comcast   will   use   desktop   player  built  using  Move  network  technology  to  stream  content  on  both  PC  and  Mac.   Although   Comcast   has   not   announced   any   details   on   bit   rate   of   the   online   cable   package,   but   it   has   said   that   content   will   be   available   in   both   SD   and   HD.   Viewers   wont   be   allowed   to   save   or   transfer   content   to   any   portable   device,   though   these   service  may  be  offered  by  service  provider  in  future.       Page 4 of 6
  • 5. TVEveryWhere:  Comcast's  TV  Everywhere  trial  and  content  partners     Comcast   is   launching   this   trial   with   5000   customers   next   month   and   it   expects   to   launch   this   service   to   all   of   its   customers   via   Fancast   and   Comcast.net   portal   by   Q4'09.       Who’s   In:   CBS;   Time   Warner   Inc.   (TNT,   TBS,   HBO,   Cinemax);   Starz   Entertainment;   Scripps   Networks   (Food   Network,   HGTV,   DIY   Network,   Fine   Living   Network);   Cablevision   Systems’   Rainbow   Media   (AMC,   IFC,   WE   TV,   Sundance   Channel);   A&E   Television  Networks  (A&E,  History  Channel);  Comcast  Networks  (E!,  Style  Network,   G4,  FearNet);  Hallmark  Channel;  MGM  Impact;  BBC  America       Who’s  Not:  Viacom’s  MTV  Networks;  NBC  Universal;  News  Corp.’s  Fox;  Disney/ABC   Television  Group;  Discovery  Communications;  Showtime  Networks     TVEveryWhere:  Consumer  reaction   About   73%   of   Comcast   and   Time   Warner   Cable   subscribers   surveyed   said   TVEveryWhere   services   -­‐-­‐   which   promise   access   to  a  wealth  of  video  online  for  no   extra   charge   -­‐-­‐   are   an   "excellent"   or   "good"   idea,   according   to   research   firm   Solutions   Research   Group.   87%   of   respondents   using   Hulu.com   or   Fancast.com   approved   of   the   TVEveryWhere   idea.   The   top   10   channels   respondents   said   they   wanted   to   access   in   full   over   the   Web   at   home  were  ABC  (also  available  via  Hulu.com),  CBS  (Also  available  via  TV.com),  NBC   (Also   available   via   Hulu.com)   and   Fox   (Also   available   via   Hulu.com)   —   followed   by   ESPN,  HBO,  CNN,  Discovery  Channel,  History  Channel  and  Syfy.       TVEveryWhere:   What   about   Telcos   and  Satellite  TV  providers   DirecTV,   Dish   Network,   Verizon   Communications   and   AT&T   are   aligned   with   the   concept   of   TVEveryWhere,   which   will   allow   subscribers   to   log   in   and   access   content   through   any   participating   Page 5 of 6
  • 6. "Web   service"   using   a   standardized   authentication   and   entitlement   mechanism.   Unlike  AT&T  and  DirecTV,  dish  network  and  Verizon  have  not  publicly  endorsed  the   idea.   AT&T   and   DirecTV   have   announced   its   development   plans   for   TVEveryWhere   services.   Comcast   is   bit   different   in   its   implementation   plans,   it   plans   to   distribute   TVEveryWhere  services  via  Fancast  and  Comcast  portals  only.  Comcast  is  known  for   its   aggressive   marketing   and   delivery   schedule   and   with   Comcast's   theplatform,   Plaxo,  Fancast  under  its  sleeves,  it  can  afford  to  lock  its  online  content  plans  under   its  portals.         Page 6 of 6