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What Will It Take To Make “Over-The-Top” Video Successful?

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Competition is driving innovation and everyone is eager to become the company that defines the new TV landscape. But while there is vast potential, there are some major barriers to success. Kyte's …

Competition is driving innovation and everyone is eager to become the company that defines the new TV landscape. But while there is vast potential, there are some major barriers to success. Kyte's Gannon Hall discusses the market hurdles and explores what it will take for consumers to cut the cord.

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  • Hi there. I’m Gannon Hall and I’m the COO of Kyte.
  • For those of you who aren't familiar with Kyte, we’re a cloud-based publishing platform for live and on demand video. We power online and mobile video experiences for many of the world’s leading media companies and brands.

  • But recently we've been seeing increasing demand from customers to help them reach audiences in the living room, on their TVs, via the open Internet. This is over-the-top video and what I'm here to talk about.

    For reasons I’ll touch on, this trend is extremely disruptive to incumbent MSOs and represents a massive opportunity for those entering the space. 
  • OTT is quickly becoming the hottest thing since mobile, with players like Google, Apple, Amazon, Netflix, Wal-Mart and just about every Consumer Electronics manufacturer battling for the future of the living room.

    With this much activity and competition, it's no wonder that many are calling...
  • …2011 the year of the cable cut

    And there is some data that seems to indicate that Cable TV is in trouble. For instance...



  • Several media articles have referenced a gloomy SNL Kagan report which states that in Q2 alone, over 700K subscribers abandoned Cable, and 6 out of 8 operators suffered their worst quarterly subscriber losses ever.
  • But not so fast! While it's tempting to point to OTT as the key driver here, Kagan points to other factors instead:
    - Economic woes including low housing formation and high unemployment
    - Churn from paid TV promotional trials that expired
  • Other studies, such as this one from Nielsen shows that the % of US cord-cutting homes remains stable, as cable & broadband homes grow
  • However other studies, such as this one from Strategy Analytics shows that cord cutting is gaining serious traction, with 13% of Americans planning to cut their cable in the next 12 months.

    Interestingly according to this study these demographic pockets are young, educated and affluent, directly contradicting the claims of other analysts who say that cord cutters are poor and over 40.
     
  • So there is clearly a lot of industry disagreement over the breadth, severity and causes of cord cutting.
     
    I think we can all agree that Internet TV is the way of the future.

    Despite the resistance of broadcasters, the widespread, cross-category industry support and growing consumer demand for Internet video services, coupled with growing consumer dissatisfaction with traditional MSOs, means the future of Television is most certainly “over the top.“

    What's not clear is when this future will arrive and who will own it.

    This is a battle fought amongst the largest and most powerful category leaders on the planet, and will likely not be decided next year, or the year after - but rage on for several years. 

  • It’s a busy space with lots of companies looking to capture the market. The resulting competition creates a lot of choice for consumers, but also complexity as there doesn't seem to be any one, perfect solution.

    Lets briefly look at some of these categories.
  • Connected TVs have been around for some time.

    They have heavy industry support with Best Buy promising to only sell connected TVs in 2011 and Wal-Mart promising the same by 2012.
     
    A big challenge for Connected TVs is that most consumers are unaware of them, and good portion don’t understand the value

    But probably the biggest issue is the lack of processing power to offer compelling services and a snappy user experience

    If current trends continue, most connected TVs sold will probably never be used in connected mode
  • Connected STBs such as Apple TV, Boxee and Roku all have their own strengths.
     
    The big issue here is that consumers don't want to buy another box when cable provides one for free. (This has been and will continue to be TiVo's greatest challenge.)

    And, since none of these services provide the same level of content as Cable, most consumers aren't ready to cut the cord in favor of one or more of these solutions.
  • Google TV is a category by itself, and potentially the most promising player

    It offers a stepping stone to OTT - building on the existing TV experience consumers are used to, as opposed to providing an alternative, pure Internet TV play

    The big hurdles include lack of broadcaster cooperation, resulting in blocked content, as well as complexity, as it's not clear exactly what it does and how it augments or replaces my existing cable TV experience.
  • Console providers have perhaps the biggest opportunity to own the market.

    They have a huge existing install base

    But their big challenge is that only 6% of console owners are streaming video
  • Next are the Content & Software Services  that run on all the devices mentioned previously.

    Netflix is winning here. They play nice with content owners, are available on every Internet TV platform, and now account for 20% of the Internet's bandwidth usage during primetime. 

    None however are a complete solution. Consumers need to cobble together several services to come close to the breadth of content available on cable.
  • Make no mistake – The incumbents wont go down without a fight.

    Cable and Satellite Operators are most threatened by OTT. But they are fighting back with, among other things, TV Everywhere initiatives that allow pay TV subscribers to access content from any device.
     
    And, telecom operators are understandably worried that OTT providers will end up capturing all the value that video over IP promises, relegating them to the role of simply providing the proverbial dumb pipe.

  • As we’ve seen there are still major categorical and universal challenges yet to overcome.

    So, what will it take for mainstream OTT adoption and widespread cable cutting to happen:
  •  
    - Processors powerful enough to offer compelling services – If connected TVs want to compete with Google TV they need systems as responsive and powerful. CE manufacturers would be smart to follow Sony’s lead and adopt the Google platform as their won.
  • - Apps - can do for TV what they've done for mobile
  • Great ux including ease of use and content discoverability
  • Consumers are impatient. If they can’t get the content they want they’ll go elsewhere to get it, including illegal filesharing services.  
     
  • Content creators need to take advantage of interactive capabilities - create apps that extend the TV viewing experience
     
     
  • OTT enablers need to provide viable biz models for content owners so they dont block content
    - Netflix pays for the right to stream content. Google shouldn't be surprised that content owners are blocking content. 

     
  • Advertisers need to recognize the brand value of sponsoring interactive TV experiences

     
  • Consumer education & marketing
    as stated previously, most consumers who own a connected TV don’t use the internet features

     
     
  • Broadcast networks need to get on board  
    they have the content people want  
    - they need to embrace and leverage these new delivery channels rather than block them.
    Learn from the music industry!
      
     
     
  • Single platforms that have it all: ad supported, subscription content and paid VoD from 1 provider.

    - According to a recent Forrester report, the thing that consumers want most from their connected TVs is more video.  

    - Google, Apple and Roku are getting there but each have holes to fill that require the cooperation of content owners to fill.
      
     
     
  • Transcript

    • 1. What Will it Take to Make OTT Successful? Gannon Hall, COO, Kyte
    • 2. The 360° Video Platform
    • 3. Over-the-top (OTT, Over-the-top Video) - n. - def.- Premium video services delivered over the Internet to televisions and other connected devices.
    • 4. CATEGORY PLAYERS Connected TVs Connected STBs Connected TV Platforms Gaming Consoles Content & SW Services
    • 5. 2011 – The Year of the Cable Cut
    • 6. • In Q2, 711,000 subscribers cut cable TV • 6 of 8 operators suffered worst quarterly losses
    • 7. SNL Kagan points to these factors: • Economic woes • Promotional churn Not so fast!
    • 8. % of U.S. cord-cutting homes remains stable as cable & broadband homes grow Jan 2008 Jan 2009 Jan 2010 70 60 50 40 30 20 10 0 Percent(%)ofPopulation Source: Nielsen National People Meter Sample (Jan 2008 to April 2010) GROWTH OF MEDIA PLATFORMS 54.8 61.6 66.3 3.2 3.9 3.9 Cable & Broadband Cable - No & Broadband -Yes
    • 9. • 13% of American’s surveyed plan to cut the cord • Cord cutters are young, educated & affluent Young: 54% of likely cord cutters are under 40. Educated: 97% have graduated high school; 69% pursued or are pursuing post secondary education Employed: 90% are employed, full-time students, or retired Not Poor: 57% make more than $50,000 / year Source: Gigaom / Strategy Analytics, Multiplay Market Dynamics Service
    • 10. Who? When?
    • 11. OTTPlayers and their Hurdles
    • 12. *Source: Forrester Study 2010 Connected TVs • Heavy industry support: o Best Buy to sell only connected TVs by 2011 o Wal-Mart promises the same by 2012 • 43 M+ Connected TVs in US homes by 2015* • Consumers: 61% are unaware, and 40% question the value* • Not enough processing power to offer compelling services and UE  Most Connected TVs sold will never be used in connected mode PROS : HURDLES :
    • 13. • Apple TV – Good UE and Apple’s muscle • Boxee – Innovative platform / market buzz • Roku – Great content and low price point • TiVo - Great brand clearly now focused on apps and connected features • Consumers don't want to buy another box when cable provides one for free • None of these services provide the same level of content as cable • Most consumers won’t cut the cord for one of these services Connected STBs PROS : HURDLES :
    • 14. • Potentially the most promising player • Offers a stepping stone to OTT : builds on existing TV experience • Provides an app marketplace • Lack of broadcaster cooperation • Complexity • Expensive • No app marketplace at launch Connected TV Platforms PROS : HURDLES :
    • 15. Gaming Consoles • Massive install base • Easy to use and install • 60% of Netflix streaming • Only 6% of Console owners watch streaming video • Lack of content - too little too late PROS : HURDLES :
    • 16. Content & SW Services • Netflix is winning here o Play nice with content owners o Available on every Internet TV platform o Account for 20% of the Internet’s bandwidth usage during primetime • Vudu - Massive library, high quality streaming and the muscle of Walmart • None are a complete solution PROS : HURDLES :
    • 17. Incumbent Cable and Satellite Operators • Most threatened by OTT • Fighting back with TV Everywhere • Adding OTT services of their own • Deep content relationships getting even deeper (Comcast/NBC Universal merger) Incumbent Telcos • OTT providers will capture the value of their IPTV investments • Adding OTT capabilities to their IPTV offerings • Creating their own pure OTT offerings
    • 18. What will it take?
    • 19. Key Success Factors:1. Powerful processors
    • 20. 2. Apps marketplace (like mobile, only bigger) o Support for 3rd party apps o Complete SDKs o Social discovery o Apps will become the new channels
    • 21. 3. Great User Experience including set-up and ease-of-use
    • 22. 4. Premium, timely content live and on-demand
    • 23. 5. Interactivity to extend the TV viewing experience
    • 24. 6. OTT business models for content owners
    • 25. 7. Advertisers sponsoring interactive experiences
    • 26. 7. Consumer education and marketing
    • 27. 8. Broadcast networks need to get on board
    • 28. 9. Single platforms that have it all o Ad supported free content o Subscription content o Paid VoD
    • 29. Thanks! Gannon Hall Email: gannon.hall@kyte.com Twitter: @gannonh

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