Digital TV Successes and Failures

Mapping the Hybrid Landscape Broadcast Network-Centric One way Cable Hybrid Telco DVB-T / DTT (DVB-T+IPTV) Hybrid Cable Telco IPTV DVB-S / DTH (DVB-C + IPTV) Hybrid Satellite (DVB-S+IPTV) DVB-T/S +OTT Telco/Cable +OTT Over The Top / Internet TV DVB-T / DTT: Digital Terrestrial TV DVB-C: Cable TV Network-Agnostic DVB-S / DTH: Direct to Home (Satellite)3 OTT: Over The Top (Internet) © 2011 Alan Quayle Business and Service Development

Verizon FiOS• Verizon FiOS is consider a HybridTV service because it uses the traditional cable TV digital multiplex for delivering broadcast services, and MoCA (Multimedia over Cable) for interactive services such as VoD and widgets• Verizon chose a hybrid approach purely to avoid technology risk, the plan is to move to full IP with all services delivered over MoCA by 2015 4 2011 Alan Quayle Business and Service Development

Learning from Verizon FiOS• FiOS TV customers are currently at 3.2M (2010), FiOS internet at 3.8M• STB are Motorola’s series of Hybrid QAM/IP SD/HD Set-Top (with optional DVR)• Hybrid TV is purely a technology decision to minimize risk o They were not prepare to risk deploying a full IPTV service o Instead used a traditional Cable TV solution o Completely transparent to the customer, and its possible for Verizon to transition to all IP, without changing the STBs or the customers experience • Though next generation MoCA may be required for some homes• Hybrid TV is an interim solution, VZ see the move to all IP by 2015 o However existing deployments are unlikely to be transitioned out, will run a heterogeneous network for the foreseeable future• Verizon’s solution addresses the simplicity issues o Simplicity with one STB connection, one purchase, and one customer support number o Interactive services are available at no charge, and premium movies can be rented at the same price as the cable providers • Easy for customers to understand and use 5 © 2011 Alan Quayle Business and Service Development

Verizon FiOS TV Subscriber Growth Verizon has achieved remarkable growth in a saturated market. It is likely to account forbetween 8-10% of the PayTV market in the US by 2015. Its HybridTV approach allows low 6 technology risk for the core service,Alan Quayle Business and 2011 while providing a future-proof growth strategy. Service Development

Orange TV History Part 1• France Telecoms IPTV service requires 5 Mbps of sustained bandwidth, which, according to the companys data, means that around half of all broadband subscribers in France cant receive IPTV.• Having invested in premium football and movie rights, France Telecom needed to increase the reach of its TV services, so, in July 2008, it launched a hybrid service combining satellite and broadband delivery to achieve 98% coverage, see below• This provides access to broadcast channels via satellite, and to VOD via the Internet. In fact, the STB contains direct-to-home (DTH) and DTT tuners, so if subscribers are in an area where they cant receive satellite service, they can still get access to a more-restricted range of broadcast channels via terrestrial TV. 7 © 2011 Alan Quayle Business and Service Development

Orange TV History Part 2• Eutelsat is supplying the capacity on its satellites, while France Telecom subsidiary Globecast deals with encoding, encryption, and channel transmission.• Although Samsung has been chosen as a set-top box supplier, the offer was launched with lower specification OpenTech set-top boxes (Korean supplier not Hybrid), due to several delays. However, Thomson is now the prime STB supplier.• Hybrid TV customers have grown to 2.75M (2010) o See next slide, but its not accelerating, challenge of a mature market where it’s a matter of stealing customers from competitors rather than a land-grab• The OTT VOD service provides downloads rather than streaming, and requires a minimum bandwidth of 500 Kbps. o With a 2 Mbps connection, subscribers have to wait about 10 minutes for a movie to start; alternatively, they can preorder the movie via PC, and then its downloaded in advance. o Clearly, this doesnt provide the same quality of experience as the full IPTV service, but it doubles the number of households that are able to receive the VOD component of the Orange TV service.• Orange and Canal+ (Orange’s competitor in France and Spain) signed a coop agreement so Canal+ and CanalSat channels are available over OrangeTV• In Spain Orange TV is only provided over DSL and DTT (not Satellite) 10 © 2011 Alan Quayle Business and Service Development

Orange TV Subscriber GrowthOrange TV is Europe’s most successful Telco TV service, and has been Hybrid since 2006 with 11 both HBB (DTT and© 2011 Alan Quayle Business and Service Development OTT TV services) IPTV) and HBI (Satellite and

Orange TV Learning• Control was critical to Orange for its Satellite service o No partnership, it owns the Satellite service – can not partner with Canalsat as they are the competition (10M subscribers) o Enables an integrated experience and avoids commercial risks o Only way to achieve near 100% penetration• France has a more competitive market than the UK, where Sky dominates o Currently there is a PayTV land grab against CanalSat and cable o FT is focused on achieving a dominant position as without scale it can not buy the necessary content hence IPTV will not be competitive• Satellite investment is significant and has impacted this year’s financial results o Dominating PayTV is one of the top 3 domestic consumer objectives• HD can be supported over Satellite, IPTV and DTT o Hybrid approach maximizes lifetime of their DSL investment, before fiber is required• Hybrid TV will remain FT’s core TV strategy o IPTV and DTT o Satellite and IPTV Orange TV clearly demonstrated the only way for a telco to be successful is with Hybrid TV (DTT and IPTV), 12 and that HBI (Satellite and OTT TV) 2011 Alan Quayle Business a Telco enabling near 100% coverage can also be success for and Service Development

Hybrid TV Market Dynamics: Shift to TV Everywhere and Over The Top• In May 2011 Sky Deutschland launched its Sky Go service. Sky Go allows Sky programming to be viewed in a second room, on the iPad, iPhone, or iPod Touch, or over the internet on a PC or laptop.• Six years ago that BSkyB in the UK first experimented with what most cable companies call TV Everywhere, the strategy of letting its existing users have a password to view content on multiple devices, mostly in the home. Sky Player was only for the benefit of its multi-room customers• Sky has taken its PC targeted service and its mobile TV cellular streaming service and merged it into one - targeting phones and tablets - and says that from July 6th all ten million of its customers can watch Sky TV channels and programs on PCs, laptops, mobiles and tablets at no extra charge. Each Sky home will be entitled to register up to two devices, and view live linear channels and some of the sky on-demand content.• Sky plans in August to launch Sky Go as a full Over The Top service to non-Sky customers with subscriptions priced from £15 to £40 a month.• Telecom Italia moved from IPTV to a CuboVision STB OTT service, to a CuboVision OTT app available directly on the TV Traditional Broadcasters are now delivering over the top services

Using its open API Netflix is embedded in 100s of devices at little or no cost to Netflix. Achieving the N-Screen Vision UNIFIED LIST/TITLE RESPONSE WITH PARTIAL RESPONSE BUILT IN AUTO-RENTAL SEARCH SIMILARS TITLE COMPLET QUEUEHISTORY ETC… LIST LIST LIST E LIST LIST LIST TITLE INFORMATION TITLE RECOMMEND TITLE DETAILS RATING STATE ATION

APIs enable Netflix to manage device fragmentation, and has created a positive feedback cycle transforming how people consume video across N-Screens Extend Customer ReachCustomer Insight API Sell More Great Experience

API Usage and Business Model• 10B requests in Nov 2010• Latest figure now at 28B, >20k requests per second• There is no ‘standardized’ agreement, from free to a one-off fee for sign-up ($24) o The platform providers motivation is simply around delivering customer value on their platform, e.g. Apple’s core motivation on its App Store• Increasingly Netflix is going direct onto platforms using Webkit (keep all its money)

Nielsen Data for the US 2009 In 2009 viewing video on theinternet represents a small % of peoples time compared to TV viewing (3 hours versus 153 hours). Nearly half the TVviewers have watch video in the 21 internet. © 2011 Alan Quayle Business and Service Development

Nielsen Data for the US in 2011Top Online Video Brands by Time per Viewer (January 2011, U.S.) / 250K Unique ViewerVideo Brand Time per Viewer (hh:mm) MOM % Change in TimeNetflix 11:08 22.9%Tudou.com 6:30 17.4%Hulu 5:35 13.9%Megavideo 3:39 15.6%StageVU 2:52 -65.9%Justin.tv 2:33 55.5%YouTube 2:23 -3.0%Veoh 2:16 99.7%Nickelodeon Family & Parents 2:06 11.5%Cwtv.com 1:44 -38.3%Source: The Nielsen CompanyRead as: During January 2011, the average U.S. video viewers spent 11 hours, 8 minutes watchingvideo content on Netflix In just 2 years the time spent watching online video has nearly 22 quadrupled – at this rate by 2016 Business and 2011 Alan Quayle online could reach broadcast Service Development

Nielsen Data for the US in 2011Top Online Video Brands by Unique Viewers (January 2011, U.S.)Video Brand Unique Viewers (000) MOM % Change in ViewersYouTube 112,764 -0.8%Facebook 32,328 2.0%VEVO 32,230 N/AYahoo! 25,511 2.5%MSN/WindowsLive/Bing 17,285 26.1%Hulu 11,924 -4.9%The CollegeHumor Network 10,020 -2.4%AOL Media Network 9,236 -4.5%Fox Interactive Media 7,597 1.6%Netflix 7,394 15.6%Source: The Nielsen CompanyRead as: During January 2011, 112.8 million unique U.S. viewers watched video content on YouTubeusing PC/Mac/laptops/tablets/mobile from home and work locations From a transactional perspective YouTube is still in the lead, but 23 continues to struggle with profitability 2011 Alan Quayle Business and Service Development

The Future• The two most successful IPTV deployments (Orange and Verizon) are Hybrid TV, representing 6M subscribers as of the H2 2010. Exceptional growth achieved in mature PayTV markets• OTT TV is proving highly successful >28M Netflix customers and >24B requests per month, 141M BBC iPlayer requests in April, 11 hours per week of Netflix viewing in the US• Content owners remain the puppet masters in this emerging ecosystem, their objective is a direct customer relationship to maximize $$$$ The market has clearly demonstrated Hybrid TV is the only solution for operators to be successful in TV services – but its slow linear growth… and 24 2011 Alan Quayle Business Service Development While OTT is doubling every year

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Digital TV Successes and Failures

by Alan Quayle

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