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Evolution Of Hybrid TV Over The Top (Internet) TV and TV Everywhere Issue 2
 

Evolution Of Hybrid TV Over The Top (Internet) TV and TV Everywhere Issue 2

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A reference text in the evolution of TV delivery. OTT (Internet) TV cannot be viewed as a silo, it must be considered in the wider evolution of the industry, across payTV, Free to Air, hybrid TV, TV ...

A reference text in the evolution of TV delivery. OTT (Internet) TV cannot be viewed as a silo, it must be considered in the wider evolution of the industry, across payTV, Free to Air, hybrid TV, TV everywhere, broadband, regulation, consumer trends and the interplay of actors across the TV ecosystem. If you would like a copy just email me at 'info (at) alanquayle.com'

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    Evolution Of Hybrid TV Over The Top (Internet) TV and TV Everywhere Issue 2 Evolution Of Hybrid TV Over The Top (Internet) TV and TV Everywhere Issue 2 Document Transcript

    • ALAN QUAYLE BUSINESS AND SERVICE DEVELOPMENT TV D EL I V E RY E VO LU TI O N: H Y BR ID TV, OV E R TH E TO P ( I N TER N E T) T V,A N D TV E V ERY WH E R E ( M U LTI -S C R EE N TV) . S TATU S R E PO RT AN DPRO J E C TIO NS 2 0 1 2 -2 0 1 7© ALAN QUAYLE BUSINESS AND SERVICE DEVELOPMENT 2012
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012CONTENTSINTRODUCTION ....................................................................................................................... 13EXECUTIVE SUMMARY ......................................................................................................... 16SCOPE OF THIS REPORT .............................................................................................................. 16DEFINING HYBRID TV, TV EVERYWHERE (MULTI-SCREEN TV) AND INTERNET (OVER THETOP) TV ........................................................................................................................................ 17SIZING THE TV MARKET AND COUNTRY SPECIFIC ANALYSIS ................................................ 20TECHNOLOGIES AND STANDARDS ............................................................................................... 24STB MARKET IN TRANSITION TO A FOCUS ON SOFTWARE ...................................................... 26IMPACT OF TECHNOLOGY ACROSS THE TV ECOSYSTEM ......................................................... 28FUTURE SCENARIOS 2009 AND 2012 ........................................................................................... 29LEARNING FROM HYBRID TV DEPLOYMENT CASE STUDIES ................................................... 31LEARNING FROM TV EVERYWHERE DEPLOYMENT CASE STUDIES......................................... 33LEARNING FROM THE HYBRID TV SURVEY .............................................................................. 34LEARNING FROM TV EVERYWHERE SURVEY ............................................................................ 36MAPPING THE OTT LANDSCAPE ................................................................................................ 37BATTLE ACROSS THE TV LANDSCAPE ....................................................................................... 39PERSONAL EXPERIENCE OF CUTTING THE CORD: THE LAUNCH AND INITIAL EXPERIENCES....................................................................................................................................................... 41LOOKING INTO THE LONG TERM ON INTERNET TV ................................................................. 41KEY POINTS FROM THE VIEWER SURVEY ................................................................................. 44RECOMMENDATIONS ................................................................................................................... 45RECOMMENDATIONS FOR PAYTV PROVIDERS ............................................................................. 45RECOMMENDATIONS FOR SUPPLIERS............................................................................................ 47RECOMMENDATION FOR APPLICATION DEVELOPERS ................................................................... 48RECOMMENDATIONS FOR INVESTORS ........................................................................................... 48A FINAL NOTE .............................................................................................................................. 49DEFINITIONS AND TV MARKET SIZES AND PROJECTIONS ...................................... 51DEFINITIONS OF HYBRID TV, TV EVERYWHERE AND INTERNET TV ...................................... 51SIZING THE TV MARKET.............................................................................................................. 54COUNTRY SPECIFIC TV DELIVERY MARKET REVIEW ............................................................. 57US MARKET REVIEW: THE MOST PROFITABLE TV MARKET IN THE WORLD .............................. 57TURKEY: ARCHETYPE OF THE MIDDLE EAST ................................................................................ 61BRAZIL: SELECTING ITS OWN DTT TECHNOLOGY GIVES SATELLITE AND CABLE AN EDGE ....... 63CHINA: TOO BIG TO IGNORE BUT POLITICS DOMINATES ............................................................. 65INDIA: CABLE STAGNATION AND SATELLITE TV GROWTH .......................................................... 67AUSTRALIA: DTT DONE RIGHT..................................................................................................... 69SUMMARIZING THE GEOGRAPHIC DIVERSITY ........................................................................... 70 2 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012KEY TECHNOLOGIES AND STANDARDS .......................................................................... 72HYBRID TV STANDARDIZATION ACTIVITIES ............................................................................. 72HYBRID BROADCAST BROADBAND TV (HBBTV) OVERVIEW................................................... 72MHEG-IC, GEM/MHP, AND HBBTV ........................................................................................ 74HBBTV ORGANIZATION AND DEPLOYMENT STATUS IN 2012.................................................. 75HBBTV SPECIFICATION OVERVIEW .......................................................................................... 76EBIF AND TRU2WAY.................................................................................................................... 81EBIF: CANOE IS DEAD LONG LIVE INTERACTIVE TV ................................................................... 81TRU2WAY ...................................................................................................................................... 83DVB-MHP (MULTIMEDIA HOME PLATFORM) AND GEM........................................................ 83WTVML: GREAT IDEA, BUT THE WORLD PASSED IT BY ......................................................... 84CE-HTML .................................................................................................................................... 85APPLICATION ENVIRONMENT AND APPLICATION STORES ....................................................... 86STB: TRANSITION TO A FOCUS ON SOFTWARE ........................................................................ 86TABLETS AND OTHER CONNECTED DEVICES ............................................................................ 88CONDITIONAL ACCESS SYSTEMS ................................................................................................ 88VERIZON CASE STUDY ON INTERACTIVE SERVICES ................................................................. 91NETFLIX AND THE ROLE OF APIS .............................................................................................. 93STB APIS AND THE PAYTV SILO CHALLENGE FOR INTERACTIVE SERVICES ........................ 95UNDERSTANDING THE TV ECOSYSTEM .......................................................................... 98PRODUCERS / DISTRIBUTORS AND STUDIOS ............................................................................... 99BROADCASTERS.......................................................................................................................... 100CABLE NETWORKS..................................................................................................................... 101ADVERTISERS ............................................................................................................................. 103CANOE VENTURES ....................................................................................................................... 105ADVERTISERS AND THE NETWORK PVR AND DISH’S HOPPER.................................................. 106PAYTV PROVIDERS .................................................................................................................... 107DEAL STRUCTURES .................................................................................................................... 108IMPERFECT COMPETITION AND THE BATTLE BETWEEN NETWORKS AND PAYTV .............. 109TELCO CHALLENGES ................................................................................................................. 110IMPACT OF TECHNOLOGY ACROSS THE ECOSYSTEM.............................................................. 111FUTURE SCENARIOS 2009 AND 2012 ......................................................................................... 112HYBRID TV AND TV EVERYWHERECASE STUDIES: TELCO / SATELLITE /CABLE / TERRESTRIAL........................................................................................................ 115HYBRID TV DEPLOYMENT CASE STUDIES ............................................................................... 115AT&T HOMEZONE (DISCONTINUED SERVICE) ........................................................................... 115VERIZON FIOS ............................................................................................................................. 116Verizon Flex View: Multi-Screen TV ......................................................................................... 118Verizon FiOS Widgets ................................................................................................................ 119DIRECTV AND DISH ................................................................................................................... 120BT VISION ................................................................................................................................... 123Unclear Addressable Market ....................................................................................................... 124 3 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Confused Consumer Proposition ................................................................................................. 124Unclear Revenue ......................................................................................................................... 125Intense Competition Across All Viewer Categories.................................................................... 125No Apps No Ecosystem .............................................................................................................. 125SKY ANYTIME+ .......................................................................................................................... 125ORANGE TV................................................................................................................................. 128CANAL+ LE CUBE ........................................................................................................................ 130DETSCHE TELEKOM T-ENTERTAIN.............................................................................................. 132TELECOM PORTUGAL MEO .......................................................................................................... 133TELEFONICA O2 CZECH REPUBLIC O2TV................................................................................... 135HANSENET ALICETV (NOW TELEFONICA O2)............................................................................ 136TELECOM ITALIA CUBOVISION ................................................................................................... 137JAZZTEL AND TELEFONICA ......................................................................................................... 138COMHEM ..................................................................................................................................... 139TELECOM NEW ZEALAND AND TIVO.......................................................................................... 140LEARNING FROM HYBRID TV DEPLOYMENTS ......................................................................... 141TV EVERYWHERE CASE STUDIES ............................................................................................. 142AT&T, USA ................................................................................................................................ 143BELGACOM, BELGIUM ................................................................................................................. 144BELL, CANADA ............................................................................................................................ 145BHARTI AIRTEL ........................................................................................................................... 145CABLEVISION, USA .................................................................................................................... 146CHARTER, USA ........................................................................................................................... 147CHINA TELECOM, CHINA ............................................................................................................. 148COMCAST, USA ........................................................................................................................... 149COX COMMUNICATIONS .............................................................................................................. 150DIRECTV, USA............................................................................................................................ 151DISH NETWORKS, USA................................................................................................................ 152MEDIASET, ITALY ........................................................................................................................ 153ORANGE, FRANCE ........................................................................................................................ 153ROGERS, CANADA ....................................................................................................................... 154ROMTEL, ROMANIA ..................................................................................................................... 155SFR, FRANCE ............................................................................................................................... 155SHAW, CANADA ........................................................................................................................... 155SK TELECOM ............................................................................................................................... 155SKY, GERMANY ........................................................................................................................... 156SKY NEW ZEALAND..................................................................................................................... 156SKY, UK ...................................................................................................................................... 156SWISSCOM ................................................................................................................................... 157TELECOM ITALIA, ........................................................................................................................ 157TERRATV .................................................................................................................................... 157TIME WARNER CABLE ................................................................................................................. 157VERIZON ...................................................................................................................................... 158LEARNING FROM TV EVERYWHERE DEPLOYMENTS .............................................................. 159HYBRID TV, OTT TV, AND TV EVERYWHERE SURVEYS AND BUSINESS MODELS..................................................................................................................................................... 160 4 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012DRIVERS FOR HYBRID TV FOR IPTV PROVIDERS ................................................................... 160DRIVERS FOR HYBRIDTV FOR SATELLITE TV PROVIDERS .................................................... 161BROADCASTER PARTNERSHIP? ................................................................................................. 161BUSINESS MODEL HYRID TV: IPTV PROVIDERS .................................................................. 162PAYTV OPERATOR HYBRID TV SURVEY ................................................................................. 162KEY POINTS FROM PAYTV OPERATOR HYBRID TV SURVEY ................................................ 170TV EVERYWHERE SURVEY........................................................................................................ 172INTERVIEWEES ............................................................................................................................. 172KEY FINDINGS ............................................................................................................................. 172The are no longer TVE Content Rights Issues, Just Old Deals Playing Out ............................... 173TV Everywhere is NOT a well-defined solution category .......................................................... 174Incumbent Middleware Suppliers are Extending their Solutions into TVE ................................ 174TVE Packages and Services ........................................................................................................ 175Vendor Review ............................................................................................................................ 175KEY POINTS FROM THE TVE SURVEY ...................................................................................... 177OVER THE TOP PROVIDERS .............................................................................................. 178OVER THE TOP TV OPTIONS .................................................................................................... 178TRADITIONAL TV GOES ONLINE ............................................................................................... 181COMPARING UK OTT PROVIDERS ........................................................................................... 182BBC IPLAYER .............................................................................................................................. 182SKY GO (REPLACED SKY PLAYER) ............................................................................................. 184ITV PLAYER (WWW.ITV.COM/ITVPLAYER).................................................................................. 185Platform Availability ................................................................................................................... 1854OD (4 ON DEMAND, WWW.CHANNEL4.COM/PROGRAMMES/4OD) ............................................. 187Platform Availability ................................................................................................................... 187DEMAND FIVE.............................................................................................................................. 188Platform Availability ................................................................................................................... 188YOUVIEW (PREVIOSULY PROJECT CANVAS) .............................................................................. 189Unclear Addressable Market ....................................................................................................... 190Confused Customer Proposition .................................................................................................. 190Unclear Revenue ......................................................................................................................... 190Intense Competition Across All Customer Segments ................................................................. 190No Apps No Ecosystem .............................................................................................................. 191TV MANUFACTURERS ................................................................................................................ 191SHARP .......................................................................................................................................... 192TOSHIBA ...................................................................................................................................... 192PANASONIC .................................................................................................................................. 194LG................................................................................................................................................ 194PHILIPS ELECTRONICS ................................................................................................................. 195SAMSUNG..................................................................................................................................... 195SONY ............................................................................................................................................ 196INTERNET TV AND BRINGING IT BACK TO THE TV.................................................................. 196BOXEE.......................................................................................................................................... 197TIVO ............................................................................................................................................ 198ROKU.......................................................................................................................................... 199CRACKLE ..................................................................................................................................... 200 5 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012WALMART / VUDU ....................................................................................................................... 200APPLETV ..................................................................................................................................... 201AMAZON INSTANT VIDEO............................................................................................................ 202NETFLIX ....................................................................................................................................... 202GOOGLETV.................................................................................................................................. 203CUSTOMERS’ CRITICAL MATH ................................................................................................. 204MAPPING THE LANDSCAPE ........................................................................................................ 205SOCIAL NETWORKS AND TV ..................................................................................................... 206SOCIAL TV .................................................................................................................................. 207ONLINE TV NETWORKS............................................................................................................. 210HULU ........................................................................................................................................... 210ALSO RANS ................................................................................................................................. 211CONCLUSIONS ............................................................................................................................ 211PRACTICAL EXPERIENCES OF CUTTING THE PAYTV CORD ................................. 214INITIALLY: A FAILURE TO LAUNCH ......................................................................................... 214REVIEWING THE OPTIONS: SERVICES...................................................................................... 215AMAZON ON DEMAND: NETFLIX AND HULU COMBINED (WITH FREE SHIPPING) ....................... 215Pricing for content not included in Prime .................................................................................... 215Platform Availability ................................................................................................................... 216CRACKLE .................................................................................................................................. 217HBO GO ...................................................................................................................................... 217HULU: CATCH-UP TV .................................................................................................................. 218ITUNES AND APPLE TV................................................................................................................ 218LOVEFILM: EUROPE’S NETFLIX ................................................................................................ 218Pricing ......................................................................................................................................... 219NETFLIX: GOLD STATNDARD VOD ............................................................................................. 220SONY VIDEO STORE..................................................................................................................... 221VODDLER ..................................................................................................................................... 221WALMART / VUDU: HIGH QUALITY RENTAL SERVICE ............................................................... 222YOUTUBE / GOOGLE PLAY .......................................................................................................... 223COMPARING THE OPTIONS SIDE BY SIDE .................................................................................... 224REVIEWING THE OPTIONS: HARDWARE .................................................................................. 227APPLE TV: STEP TOO FAR INTO THE APPLE CHASM FOR ME ....................................................... 227BOXEE: ROLLS ROYCE SOLUTION, PERHAPS A LITTLE TOO GEEKY (AT THE MOMENT) .............. 227CONSOLES, SONY PS3 AND XBOX: BECAUSE THEY ARE THERE .................................................. 227GOOGLE TV: ONE TO WATCH ..................................................................................................... 227PC: ............................................................................................................................................... 228ROKU: SWEET CHEAP LITTLE DEVICE ......................................................................................... 228SMART TVS ................................................................................................................................. 228LG................................................................................................................................................ 229Panasonic ..................................................................................................................................... 229Samsung ...................................................................................................................................... 229Yahoo TV .................................................................................................................................... 229TABLETS ...................................................................................................................................... 229Android Tablets: Some Good Some Bad .................................................................................... 229Apple iPad: The Gold Standard................................................................................................... 230 6 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Kindle Fire: Great Video Experience, Great Android App Recommendations .......................... 230Nook: Really for Books. .............................................................................................................. 230COMPARING THE OPTIONS ........................................................................................................ 230AND FINALLY THE LAUNCH AND INITIAL EXPERIENCES ....................................................... 231LOOKING INTO THE LONG TERM ON INTERNET TV ............................................................... 232VIEWER SURVEY ................................................................................................................... 235INTERVIEWEES ........................................................................................................................... 235RESULTS...................................................................................................................................... 236WHAT IS YOUR VIEW OF INTERNET TV SERVICES LIKE NETFLIX, HULU, LOVEFILM ? ............ 236ARE YOU CONSIDERING MOVING FROM YOUR CURRENT PAYTV PROVIDER TO INTERNETTV?.. 237WHAT IS YOUR VIEW OF YOUR CURRENT PAYTV BILL? .............................................................. 238HAVE YOU HEARD OF TV EVERYWHERE / MULTI-SCREEN TV / TV APP (E.G. PAYTV ON YOURPHONE / IPAD)? ............................................................................................................................ 239IF YOU HAVE USED TV EVERYWHERE / MULTI-SCREEN TV WHAT WAS YOUR EXPERIENCE?.... 239WHAT DO YOU EXPECT FROM A TV EVERYWHERE / MULTI-SCREEN TV SERVICE .................... 240WHAT IS YOUR VIEW OF YOUR PAYTV PROVIDERS ONDEMAND SERVICE? ................................ 241KEY POINTS FROM THE VIEWER SURVEY ............................................................................... 242RECOMMENDATIONS .......................................................................................................... 244RECOMMENDATIONS FOR PAYTV PROVIDERS ....................................................................... 244RECOMMENDATIONS FOR SUPPLIERS ...................................................................................... 246RECOMMENDATION FOR APPLICATION DEVELOPERS ............................................................ 246RECOMMENDATIONS FOR INVESTORS ...................................................................................... 247A FINAL NOTE ............................................................................................................................ 247APPENDIX 1. GEOGRAPHIC MARKET DATA ............................................................... 249AUSTRALIA: DTT DONE RIGHT ................................................................................................ 249BRAZIL ........................................................................................................................................ 252CANADA ...................................................................................................................................... 254CHINA.......................................................................................................................................... 256FRANCE ....................................................................................................................................... 258GERMANY ................................................................................................................................... 260INDIA ........................................................................................................................................... 263ITALY .......................................................................................................................................... 265JAPAN .......................................................................................................................................... 267MEXICO ...................................................................................................................................... 270RUSSIA ........................................................................................................................................ 272SINGAPORE ................................................................................................................................. 274SOUTH AFRICA ........................................................................................................................... 276SWEDEN ...................................................................................................................................... 281TURKEY ...................................................................................................................................... 283UNITED KINGDOM ...................................................................................................................... 285UNITED STATES OF AMERICA ................................................................................................... 288 7 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012APPENDIX 2: TV EVERYWHERE QUESTIONNAIRE .................................................... 293APPENDIX 3: SUMMARY OF THE ONLINE VIDEO SERVICES .................................. 295NORTH AMERICA ....................................................................................................................... 295AMAZON INSTANT VIDEO ......................................................................................................... 295APPLE TV .................................................................................................................................... 295BLOCKBUSTER ON DEMAND ....................................................................................................... 296BEST BUY, CINEMANOW ............................................................................................................. 296CRACKLE ..................................................................................................................................... 297HULU PLUS .................................................................................................................................. 297NETFLIX ....................................................................................................................................... 298WAL-MART VUDU ..................................................................................................................... 298HBO GO ...................................................................................................................................... 298REST OF THE WORLD................................................................................................................. 299ACETRAX (BOUGHT BY SKY) ...................................................................................................... 299BLINKBOX.................................................................................................................................... 299FILM2HOME................................................................................................................................. 299FILM4OD (FILMFLEX) ................................................................................................................. 299FILMISNOW ................................................................................................................................. 300LOVEFILM ................................................................................................................................. 300MAXDOME ................................................................................................................................... 302SF ANYTIME ................................................................................................................................ 302VIDEO FUTUR (GLOWRIA) ........................................................................................................... 302VIDEOLAND ................................................................................................................................. 302VODDLER .................................................................................................................................. 303APPENDIX 4: GLOSSARY OF TERMS ............................................................................... 304 8 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 TA BLE O F FI GU RE SFigure 1. Mapping the Hybrid TV Landscape ...............................................................................................19Figure 2. Total TV Market Size (also includes Free Sat, Free Cable and Free Terrestrial) (Millions ofHouseholds) source Alan Quayle Business and Service Development ..........................................................21Figure 3. Split between Pure and Hybrid TV Subscribers (Millions of Households) source Alan QuayleBusiness and Service Development ...............................................................................................................21Figure 4. Analog Versus Digital STB Across All TV Households (Millions) source Alan Quayle Businessand Service Development ..............................................................................................................................22Figure 5. STB Middleware Vendors and Their Key Accounts .......................................................................27Figure 6. Rating Technology Impact on TV Ecosystem Members .................................................................29Figure 7. Review of Future Scenarios, based on industry interviews 2009 ...................................................30Figure 8. Review of Future Scenarios, based on industry interviews 2012 ..................................................31Figure 9. TV Everywhere Market Structure ..................................................................................................37Figure 10. Mapping the Internet TV on the TV Landscape ...........................................................................39Figure 11. Battle Across the TV Landscape .................................................................................................41Figure 12. Mapping the Hybrid TV Landscape .............................................................................................53Figure 13. Total TV Market Size (also includes Free Sat, Free Cable and Free Terrestrial) (Millions)source Alan Quayle Business and Service Development ...............................................................................55Figure 14. Split between Pure and Hybrid TV Subscribers (Millions) source Alan Quayle Business andService Development .....................................................................................................................................55Figure 15. Source Data for Figure 13 and Figure 14 (Millions of Households) ..........................................56Figure 16. Analog Versus Digital STB Across All TV Households (Millions) source Alan Quayle Businessand Service Development ..............................................................................................................................56Figure 17. Source Data for Figure 16 (Millions of Households) ..................................................................56Figure 18. Breakdown of Netflix Subscribers (source Netflix) ......................................................................59Figure 19. USA TV Household Status and Projections (Millions of Households) source Alan QuayleBusiness and Service Development ...............................................................................................................61Figure 20. Data for Figure 19 (Millions of Households) ..............................................................................61Figure 21 Turkish TV Household Status and Projections (Millions of Households) source Alan QuayleBusiness and Service Development ...............................................................................................................63Figure 22. Data for Figure 21 (Millions of Households) ..............................................................................63Figure 23. Brazilian Market Status and Projection (Millions of Households) source Alan Quayle Businessand Service Development ..............................................................................................................................65Figure 24. Data for Figure 23 (Millions of Households) ..............................................................................65Figure 25. China Market Status and Projection (Millions of households) source Alan Quayle Business andService Development .....................................................................................................................................66Figure 26. Data for Figure 25 (Millions of Households) ..............................................................................67Figure 27. India TV Household Status and Projections (Millions of Households) source Alan QuayleBusiness and Service Development ...............................................................................................................68Figure 28. Data for Figure 27 (Millions of Households) ..............................................................................68Figure 29. Australian TV Households by Platform (Millions of Households) source Alan Quayle Businessand Service Development ..............................................................................................................................70Figure 30. Data for Figure 29 (Millions of Households) ..............................................................................70Figure 31. HbbTV Overview (source HbbTV) ...............................................................................................77Figure 32. TV Services, Broadcast Applications and Broadcast Independent Applications .........................79Figure 33. Simplified EBIF Architecture .......................................................................................................81Figure 34. STB Breakdown by Number Deployed .........................................................................................87Figure 35. Content Security Table ................................................................................................................91Figure 36. Verizon’s STB interactive Technologies ......................................................................................92Figure 37. Verizon Architecture ....................................................................................................................92Figure 38. Verizon Widget Bazaar and Twitter Widget (source Verizon) .....................................................93Figure 39. Role of APIs in Netflix Business .................................................................................................94 9 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Figure 40. STB Middleware Vendors and Their Key Accounts .....................................................................96Figure 41. TV Ecosystem ...............................................................................................................................99Figure 42. Measured Ad Spending in the US Q1 2012 compared to Q1 2011 (source Kantar Media) ......102Figure 43. TV Ad Spending in US (source Nielsen) ....................................................................................103Figure 44. Advertising Value Chain ............................................................................................................104Figure 45. Trend in PayTV Subscription and Advertising Revenues ..........................................................105Figure 46. Global Growth in PayTV (Millions of Households) source Alan Quayle Business and ServiceDevelopment ................................................................................................................................................108Figure 47. Examples of Deal Structures in the Value Chain .......................................................................109Figure 48. Rating Technology Impact on TV Ecosystem Members .............................................................112Figure 49. Review of Future Scenarios, based on industry interviews 2009 ...............................................113Figure 50. Review of Future Scenarios, based on industry interviews 2012 ..............................................114Figure 51. Verizon FiOS Architecture and Migration Plan (source Verizon) ............................................117Figure 52. Verizon FiOS Customer Numbers (source Verizon) ..................................................................118Figure 53. Verizon MY FIOS App (source Verizon) ....................................................................................119Figure 54. FiOS TV Widgets (source Verizon) ............................................................................................120Figure 55. DirecTV Hybrid Set Top Box (source Verizon) .........................................................................121Figure 56. DISH Hopper (source Dish Networks) ......................................................................................122Figure 57. DISH DVR and SlingMedia (source Dish Networks) ................................................................123Figure 58. Sky Anytime+ (source Sky) ........................................................................................................126Figure 59. Sky Go Pricing (source Sky) ......................................................................................................127Figure 60. Sky Go Experience (source Sky) ...............................................................................................127Figure 61. How OrangeTV Delivers on Service Ubiquity (source Orange)...............................................128Figure 62. Simplifying the Purchase decision – Regardless the customer will get OrangeTV (sourceOrange) .......................................................................................................................................................129Figure 63. Orange TV Subscribers (source France Telecom) ....................................................................130Figure 64. CanalSat Proposition (source CanalSat) ..................................................................................131Figure 65. O2TV Hybrid STB ADB-3800TW (source Telefonica) .............................................................136Figure 66. CuboVision WebTV Solution Topology (source Cisco) ............................................................138Figure 67. Belgacom’s TV Partout iPad Screen Shot (source Belgacom) ..................................................145Figure 68. CableVision’s TV To Go (source CableVision) .........................................................................147Figure 69. Xfinity Streampix (source Comcast) ..........................................................................................150Figure 70. DirecTV Anywhere (source DirecTV) ........................................................................................151Figure 71. DISH Remote Access Rating on Google Play (source Google Play) .........................................153Figure 72. SKT Hoppin Experience (source SKT) ......................................................................................155Figure 73. Sky Go Pricing (source Sky) ......................................................................................................156Figure 74. Sky Go Experience (source Sky) ...............................................................................................157Figure 75. Verizon MY FIOS App (source Verizon) ....................................................................................158Figure 76. Geographic Distribution of Respondents for 2012 Survey Source Alan Quayle Business andService Development (Number of Respondents in brackets) .......................................................................163Figure 77. What are your drivers for Hybrid TV (2012 Survey)? Source Alan Quayle Business and ServiceDevelopment ................................................................................................................................................165Figure 78. What are your drivers for Hybrid TV (2009 Survey)? Source Alan Quayle Business and ServiceDevelopment ................................................................................................................................................165Figure 79. What are the Barriers to hybrid TV (2009)? Source Alan Quayle Business and ServiceDevelopment ................................................................................................................................................167Figure 80. What are the Barriers to hybrid TV (2012)? Source Alan Quayle Business and ServiceDevelopment ................................................................................................................................................168Figure 81. Applicability of Hybrid TV (2009 and 2012) Source Alan Quayle Business and ServiceDevelopment ................................................................................................................................................169Figure 82. Hybrid STB Vendor Comparison Source Alan Quayle Business and Service Development ......170Figure 83. TV Everywhere Interviews by Companies Interviewed ..............................................................172Figure 84. TV Everywhere Market Structure Source Alan Quayle Business and Service Development .....173Figure 85. Scope of TV Everywhere Offers .................................................................................................174 10 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Figure 86. Example of how Existing Systems are Extended into TVE .........................................................175Figure 87. Vendor Perception Rating Source Alan Quayle Business and Service Development ................176Figure 88. Vendor Perception Rating and General Comments Source Alan Quayle Business and ServiceDevelopment ................................................................................................................................................176Figure 89. Plurality of OTT Options (Diagram is from 2009 to Highlight how Quickly Brands haveChanged in Dominance) ..............................................................................................................................179Figure 90. Trends in the Evolution of TV ....................................................................................................179Figure 91. TV Landscape ............................................................................................................................181Figure 92. BBC iPlayer Requests January through April 2012 (source BBC) ...........................................182Figure 93. BBC iPlayer Demographics January thru April 2012 (source BBC) ........................................183Figure 94. iPlayer Requests by Device Type (source BBC) .......................................................................183Figure 95. BBC iPlayer – use for TV by time of day, April 2012 (source BBC) ........................................184Figure 96. Sky Go Pricing (source Sky) ......................................................................................................184Figure 97. Sky Go Experience ....................................................................................................................185Figure 98. Major Internet Services on TVs (source CNET) .......................................................................191Figure 99. Sharp SmartCentral UI (source Sharp) ....................................................................................192Figure 100. Toshiba’s Places Platform User Interface ...............................................................................193Figure 101. Panasonic Veira Connect (2012) UK Version (source Panasonic) .......................................194Figure 102. LG Smart Hub Experience (UK Version) ................................................................................195Figure 103 Online Video Content Properties Ranked by Unique Video Viewers May 2012 (sourcecomScore) ....................................................................................................................................................196Figure 104. Mapping the Internet TV on the TV Landscape Source Alan Quayle Business and ServiceDevelopment ................................................................................................................................................206Figure 105. TNO Field Trial (Source TNO) ................................................................................................207Figure 106. TNO Results (source TNO) ......................................................................................................208Figure 107. Commercial Opportunities Enabled by Social TV (Source TNO)............................................208Figure 108. Battle Across the TV Landscape .............................................................................................213Figure 109. Amazon Prime Eligible TV Shows (1801 Results, 475 HD and 1326 SD) ...............................216Figure 110. Amazon Prime Instant Video Movies (3347 items) ..................................................................216Figure 111. Amazon Video Content, 62,000 Instant Videos, and surprisingly 300k VHS tapes! ................217Figure 112. Netflix Just For Kids Web Interface (source Netflix) ...............................................................221Figure 113. YouTube’s Renaissance in part from its Channel Investment (source ComScore) ..................223Figure 114. Google Play Review (Source Google Play) .............................................................................224Figure 115. Comparison of Over The Top TV Services..............................................................................225Figure 116. Example OTT MLB.TV Offer (source MLB.tv) .......................................................................226Figure 117. MLB.TV Usage by Platform 2011 and 2012 ............................................................................226Figure 118. Google TV Remote (source LG) ...............................................................................................229Figure 119. Comparing Internet TV Service Coverage for Some of the Devices (Source The Verge) .......230Figure 120. Comparison Table of Internet TV Devices and Service Coverage (source The Verge) ...........231Figure 121. Geographic Distribution of Interviewees source Alan Quayle Business and ServiceDevelopment ................................................................................................................................................235Figure 122. Household Status on Interviewees ...........................................................................................236Figure 123. What is your view of internet TV services like Netflix, Hulu, LOVEFiLM? ............................237Figure 124. Are you considering moving from your current payTV provider to Internet TV? ..................238Figure 125. What is your view of your current payTV bill? source Alan Quayle Business and ServiceDevelopment ................................................................................................................................................238Figure 126. Have you heard of TV Everywhere / Multi-Screen TV (e.g. payTV on your phone / iPad)?Source Alan Quayle Business and Service Development ............................................................................239Figure 127. If you have used TV Everywhere / Multi-Screen TV what was your experience? Source AlanQuayle Business and Service Development .................................................................................................240Figure 128. What do you expect from a TV Everywhere / Multi-Screen TV service ..................................240Figure 129. What is your view of your PayTV provider’s on-demand service? (Used Internet TV) sourceAlan Quayle Business and Service Development ........................................................................................241 11 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Figure 130. What is your view of your PayTV providers on-demand service? (Not used Internet TV) sourceAlan Quayle Business and Service Development ........................................................................................242Figure 131. Australian TV Households by Platform (Millions of Households) source Alan Quayle Businessand Service Development ............................................................................................................................250Figure 132. Data for Figure 131 (Millions of Households) ........................................................................251Figure 133. Brazilian Market Status and Projection (Millions of Households) source Alan Quayle Businessand Service Development ............................................................................................................................253Figure 134. Data for Figure 133 (Millions of Households) ........................................................................253Figure 135. Canadian TV Household Status and Projection (Millions of Households) source Alan QuayleBusiness and Service Development .............................................................................................................255Figure 136. Data for Figure 135 (Millions of Households) .......................................................................255Figure 137. China Market Status and Projection (Millions of Households) source Alan Quayle Businessand Service Development ............................................................................................................................257Figure 138. Data for Figure 137 .................................................................................................................257Figure 139. France TV Household Status and Projection (Millions of Households) source Alan QuayleBusiness and Service Development .............................................................................................................258Figure 140. Data for Figure 139 (Millions of Households) ........................................................................259Figure 141. German TV Households Status and Projections (Millions of Households) source Alan QuayleBusiness and Service Development .............................................................................................................261Figure 142. Data for Figure 141 (Millions of Households) ........................................................................262Figure 143. India TV Household Status and Projections (Millions of Households) source Alan QuayleBusiness and Service Development .............................................................................................................264Figure 144. Data for Figure 143 .................................................................................................................264Figure 145. Italy TV Household Status and Projections (Millions of Households) source Alan QuayleBusiness and Service Development .............................................................................................................265Figure 146. Data for Figure 145 (Millions of Households) ........................................................................266Figure 147. Japan TV Households Status and Projections (Millions of Households) source Alan QuayleBusiness and Service Development .............................................................................................................268Figure 148. Data for Figure 147 (Millions of Households) ........................................................................269Figure 149. Mexico TV Household Status and Projections (Millions of Households) source Alan QuayleBusiness and Service Development .............................................................................................................271Figure 150. Data for Figure 149 (Millions of Households) ........................................................................271Figure 151. Russian TV Household Status and Projections (Millions of Households) source Alan QuayleBusiness and Service Development .............................................................................................................273Figure 152. Data for Figure 151 (Millions of Households) ........................................................................273Figure 153. Singapore TV Household Status and Projections (Thousands of Households) source AlanQuayle Business and Service Development .................................................................................................274Figure 154. Data for Figure 153 (Thousands of Households) ....................................................................275Figure 155. Republic of South Africa TV Households (millions) source Alan Quayle Business and ServiceDevelopment ................................................................................................................................................280Figure 156. Data for Figure 155 (Millions of Households) ........................................................................280Figure 157. Swedish TV Households Status and Projections (Thousands of Households) source AlanQuayle Business and Service Development .................................................................................................282Figure 158. Data for Figure 157 (Thousands of Households) ....................................................................282Figure 159 Turkish TV Household Status and Projections source Alan Quayle Business and ServiceDevelopment ................................................................................................................................................284Figure 160. Data for Figure 159 .................................................................................................................284Figure 161. UK TV Household Market Status and Projections (Millions of Households) source AlanQuayle Business and Service Development .................................................................................................287Figure 162. Data for Figure 161 .................................................................................................................287Figure 163. Breakdown of Netflix Subscribers (source Netflix) ..................................................................289Figure 164. USA TV Household Status and Projections (Millions of Households) source Alan QuayleBusiness and Service Development .............................................................................................................291Figure 165. Data for Figure 164 (Millions of Households) ........................................................................292 12 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 I N T ROD U C T I ON The TV industry is going through a period of change more significant than the conversion fromanalog to digital, as significant as the creation of the industry itself when on 2 November 1936 theBBC began transmitting the worlds first public regular broadcast TV service from the VictorianAlexandra Palace in north London. In the conversion from analog to digital customers generallyperceived little change in the core TV service or service providers, perhaps a few more channels andthe availability of additional services like internet access, fixed voice, video on demand, andeventually High Definition TV and 3DTV. It’s important to view the current change from theperspective of the decades long cycle taken for analog to digital conversion. From a technology perspective the current change is stimulated by the convergence of theinternet that can now support adequate quality video services lessening the barrier to entry of anational TV distribution infrastructure and consumer electronics making video consumptionpervasive and on the customers’ terms; it is impacting the whole of the TV ecosystem. Viewers have new consumption options and new video service providers, e.g. a library of tens ofthousands of movies and shows available over the internet for only $8 per month with noadvertising. Viewers can watch their payTV service and recorded shows anywhere they take theirlaptops, tablets and smartphones (they are all computing devices just of different sizes) as long asthey have an internet connection. Content owners have created their own internet-based catch-upTV / VoD (Video on Demand) services, e.g. Hulu, HBO Go and BBC iPlayer. PayTV providershave rushed out partially formed TV Everywhere (multi-screen TV) offers. And hybrid TV hasrapidly become pervasive since the last version of this report was written in 2009 / 2010, e.g. mostsatellite TV providers in developed markets have adopted hybrid TV to support on-demand andinteractive services. The later changes of content providers’ support of new TV delivery models and provenconsumer demand and acceptance of those new TV delivery models are critical to why the currentchanges are more significant than the move from analog to digital. The whole of the TV ecosystemis changing, not one component of the ecosystem. This will in time enable Google, Apple, Netflix,Amazon, Facebook to become payTV competitors, not directly at first, rather capping expansion ofpayTV revenues, but in time competing more directly as viewer habits evolve. We are only at the start of the beginning of the change that the internet and consumerelectronics convergence will have on the TV industry; it will be a multi-decade-long change, just likethe conversion from analog to digital that is still ongoing. Only in 2012 did the number of digital TVhouseholds exceed the analog TV households in the world. This report takes a global view, analyzingwhat is happening outside North America as much as what is happening in North America. As anindependent consultant I have the fortune of not having a pay-master with an agenda to set; whetherthat is to sell a product, maintain a service provider’s stock price, or keep a group of major clientsoverpaying for projects. I consult with payTV providers, internet companies, and technologysuppliers around the world. I live in the North American market and will share my direct objectiveexperiences from being a consumer of bleeding-edge TV services as well as consulting around theworld on TV projects. This report is purposefully broad in scope to provide a reference text in the evolution of TVdelivery. OTT (Internet) TV cannot be viewed as a silo, it must be considered in the wider evolutionof the industry, and today OTT TV is generally consumed as a complement to traditional payTVservices, not as a substitute, this makes internet TV a latent threat. 13 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 I have included the feedback provided by the over 17,000 readers of the old report written in2009/2010, and thank you all for the excellent feedback and guidance in creating this report. Theoverall structure of the report is divided into 4 sections: providing an understanding of the market;learning from real-world case studies and surveys of payTV providers’ views and plans;understanding what the end customer (viewer) is thinking; and then bringing it all together into aview on the future of TV delivery evolution and recommendations. The chapters are summarized here:  Understanding the TV Market: overall size, technologies, standards, and how the ecosystem works. o Definitions and TV Market sizing. Defining hybrid TV, TV everywhere (multi- screen TV) and Internet (Over The Top) TV. Providing the latest TV market data and projections from 2008 to 2017 across all TV platforms, i.e. terrestrial, satellite, cable, IPTV (DSL/fiber) and OTT. The market analysis is broken down to 17 specific countries, some of which are reviewed in the main body of the report as they exemplify particular regions or are simply interesting in their own right, while others are included in Appendix 1. o Key Technologies and Standards. Understanding the status of interactive services and Hybrid TV standardization, the role APIs (Application Program Interfaces) play for OTT TV providers, the role of conditional access systems in the multi-screen environment, and the challenge standards are causing in the traditional payTV industry in adequately reacting to the OTT threat. o Understanding the TV Ecosystem. Frank review across the producers, content owners, TV networks, payTV networks and advertisers. The TV ecosystem is complex and well-established; this is the dominant limiting factor on change. However, change will happen as the viewers are increasingly empowered by technology, but we change habits slowly as changing payTV provider is a household not individual decision.  Case Studies and Market Surveys o Hybrid TV, TV Everywhere, and OTT TV Case Studies. Reviewing the experiences of 16 Hybrid TV deployments including Orange TV, Verizon FiOS, BT Vision, JazzTel, and Telecom Italia CuboVision; and 25 TV Everywhere case studies including Bharti Airtel, China Telecom, DISH Networks, and TerraTV. o Results from 3 global surveys on Hybrid TV, OTT TV, TV Everywhere, and the future of the TV ecosystem. Sharing insights on business models, service plans, requirements, differences based on geographic region and operator type, and deployment experiences. o Detailed review of 44 Over the Top TV providers and enablers. 14 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  What the Viewers Think o My practical experiences in cutting the payTV cord, and personal review of OTT services. o Viewer Survey. What customers are really thinking in North America and Western Europe about what is happening to their TV service?  The Future of TV Delivery and recommendations. This report brings together work performed on TV everywhere, hybrid TV, OTT TV, andservice innovation in the payTV space through over 900 operator, regulator, viewer and supplierinterviews and online questionnaires, gathering information on deployment experiences, marketrequirements, competitive landscape, and technology trends. In particular the market sizing data isbased on actual regulator, operator and supplier figures / projections; not conjecture from out ofmarket analysts. 15 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 E X E C U T I V E S U M M A RY The current changes the TV industry is undergoing are more significant than the conversionfrom analog to digital, as significant as the creation of the industry. From a technology perspectivethe current change is stimulated by the convergence of the internet that can now support adequatequality video services lessening the entry barrier created by a national TV distribution network, andconsumer electronics that has made video consumption pervasive and empowered the viewers; thischange is impacting the whole of the TV ecosystem. Viewers have new TV consumption options and new service providers, e.g. a library of tens ofthousands of movies and shows available over the internet for only $8 per month with no advertisingfrom Netflix. Viewers can watch their payTV service and recorded shows anywhere they take theirlaptops, tablets and smartphones. Content owners have created their own internet-based catch-upTV / VoD (Video on Demand) services, e.g. Hulu, HBO Go and BBC iPlayer. PayTV providershave rushed out partially formed TV Everywhere (multi-screen TV) offers. Hybrid TV has rapidlybecome pervasive since the last version of this report was written in 2009 / 2010. However, we are only at the start of the beginning of the change that the convergence of theinternet and consumer electronics will have on the TV industry; it will be a multi-decade-longchange, just like the conversion from analog to digital that is still ongoing. The changes in contentprovider support of new delivery models and proven consumer demand / acceptance of those newdelivery models are critical to why the current change is more significant than the move from analogto digital; the whole TV ecosystem is changing, not just one component. This report takes a global view, analyzing what is happening outside North America as much aswhat is happening in North America. As an independent consultant I have the fortune of not havinga pay-master with an agenda to set; whether that is to sell a product, maintain a service provider’sstock price, or keep a group of major clients overpaying for projects. I consult with payTVproviders, internet companies, and technology suppliers around the world. I live in the NorthAmerican market and share my direct objective experiences from being a consumer of bleeding-edgeTV services as well as consulting around the world on TV projects. SCOPE OF THIS REPORT The overall structure of the report is divided into 4 sections: providing an understanding of theTV market’s recent history, current status and projections from 2008 to 2017; learning from real-world case studies and surveys; understanding what the viewer is thinking; and then bringing it alltogether into a view on the future of TV delivery and specific recommendations throughout thereport. The global TV market analysis examines the breakdown of households’ primary viewingplatforms: Terrestrial, Cable, Satellite, IPTV (IP Television), and OTT (Over The Top); across analogand digital; and hybrid and non-hybrid TV. The global analysis is then broken down into 17 countryspecific analyses providing a summary of TV households’ primary viewing platform trends from2008 to 2017 for interesting markets around the world. The 17 markets reviewed include: Australia,Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, Russia, Singapore, South Africa,Sweden, Turkey, United Kingdom and the USA. Hybrid TV case studies (16 in total) including: AT&T HomeZone (discontinued service),Verizon FiOS, DirecTV, DISH Networks, BT Vision, Sky UK, Orange TV, Canal+ Le Cube, 16 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Deustche Telekom T-Entertain, Telecom Portugal Meo, Telefonica O2 Czech Republic O2TV,Hansenet Alice TV (now Telefonica O2), Telecom Italia CuboVision, JazzTel and Telefonica (Spain),Comhem, and Telecom New Zealand and TiVo. TV everywhere case studies (25 in total) including: AT&T, Belgacom, Bell Canada, Bharti Airtel,Cablevision, Charter, China Telecom, Comcast, Cox Communications, DirecTV, DISH Networks,Mediaset, Orange, Rogers, Romtel, SFR, Shaw, SK Telecom, Sky Germany, Sky New Zealand, SkyUK, Swisscom, Telecom Italia, TerraTV, and Time Warner Cable. OTT market analysis (44 in total) across: 4OD, Amazon Instant Video, Apple TV, BBC iPlayer,Blockbuster on Demand, Best Buy CinemaNow, Consoles (PS3 and xbox), Crackle, Demand Five,Google TV, Hulu Plus, ITV Player, Netflix, Wal-Mart Vudu, HBO Go, Acetrax (bought by Sky),Blinkbox, Film2home, Film4OD, Filmisnow, LOVEFiLM, Maxdome, Roku, Smart TVs (LG,Panasonic, Philips, Samsung, Sharp, Sony, Toshiba), Sky Go, Sony Video Store on PS3, SF Anytime,Tablets (iPad, Android, Kindle Fire, Nook) Video Futur (Glowria), Videoland, Voddler, Yahoo TV,and YouView. Four surveys across the TV Ecosystem:  Hybrid TV survey: January to May 2012 a survey of 75 hybrid TV operators was undertaken across IPTV (DSL), Satellite, Cable / FTTH (Fiber To The Home) and Broadcast. The results of this survey are compared to that of a 2009 survey shown in the previous version of this report. The 2009 survey was conducted in September and October 2009 across 82 hybrid TV operators, generally IPTV (DSL) operators.  TV Everywhere Survey: A survey was conducted between April and June 2012 of PayTV providers around the world on their TV Everywhere plans. Interviewees included 75 operators and 11 content providers / studios, with a total of 97 people interviewed (multiple representatives from some operators). They were all responsible for TV Everywhere services, and generally VP level or above. Most either know me, or were introduced through a friend so most conversations were frank and open.  Future of TV Survey: Global survey across 81 members of the TV ecosystem during the summer of 2012, June-August. This is also compared to a similar survey undertaken in 2009.  Viewer Survey: 241 payTV viewers in North America and Western Europe, across a range of geo-demographic profiles. Viewers were interviewed over the phone, or completed an online survey during May 2012, with follow-up questions in June 2012. DEFINING HYBRID TV, TV EVERYWHERE (MULTI-SCREEN TV) AND INTERNET (OVER THE TOP) TV Hybrid TV is not new; it’s been within the industry’s lexicon for many years. Back in 2004hybrid TV was shown in many presentations as part of the payTV industry’s set top box (STB)roadmap. The transition should not be a surprise, however, for many executives the shift to hybridTV has been a quiet revolution. Especially given two of the telco industry’s most successful TVdeployments, Verizon FiOS (4.5M customers in Q2 2012) and Orange TV (4.7M customers in Q22012), are both hybrid TV, more specifically Hybrid Broadcast Broadband (HBB) TV. CurrentlyHybrid TV STBs account for about 13% of all TV households in 2012, and are expected to reach36% by all TV households 2017. 17 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Hybrid TV is the delivery of a TV service through both broadcast and IP, for example manyEuropean telcos payTV services use both the free to air digital terrestrial TV (DTT) for broadcastservices complemented by a network-centric IPTV services over a managed IP network (e.g. BTVision) or a network-agnostic service over the internet / unmanaged IP network (e.g. TelecomItalia’s CuboVision.) BT Vision and Telecom Italia’s CuboVision demonstrate the two main categories of hybrid TV:  HBB TV (Hybrid Broadcast Broadband) is defined by the presence of a hybrid STB that is part IPTV, using a managed IP network; and part broadcast, receiving the broadcast digital content from a non-IP service like Digital Terrestrial, Digital Cable, or Digital Satellite.  HBI TV (Hybrid Broadcast Internet) is defined by the presence of a hybrid STB that is part IPTV, using the internet (unmanaged IP network); and part broadcast, receiving the broadcast digital content from a non-IP service like Digital Terrestrial, Digital Cable, or Digital Satellite. This is also referred to as Telco OTT (Over The Top) TV. Related TV delivery categories include:  Telco TV or pure IPTV is defined by a STB that only receives and displays video over a ‘managed IP’ network, also called network-centric TV. AT&T U-verse is an example of such a pure IPTV deployment.  Internet TV or Over-The-Top (OTT) TV only uses the Internet to transport video over an unmanaged IP access network connection. Examples include Netflix, Hulu Plus and Amazon Instant Video on a Roku device; it is also termed network-agnostic TV. With the basic HBB and HBI definitions explained, let’s now go a little deeper, Figure 1 showsthe hybrid TV landscape, it sits at the intersections between Broadcast TV, Network-Centric TV andNetwork-Agnostic TV:  Broadcast is the traditional delivery mechanisms of Satellite, Cable and Terrestrial (over the air);  Network centric is Telco IPTV; and  Network agnostic is OTT or Internet TV. At the intersections of these delivery mechanisms resides hybrid TV. At the intersection of Broadcast and Network Centric (termed HBB, Hybrid BroadcastBroadband) lies:  Hybrid Telco is the combination of Digital Terrestrial TV and IPTV, e.g. BT Vision;  Hybrid Cable is the combination of Cable TV and IPTV, e.g. Verizon FiOS; and  Hybrid Satellite is the combination of Satellite and IPTV, e.g. Orange TV. 18 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 At the intersection between Broadcast and Network-Agnostic is the HBI TV category:Terrestrial / Satellite + OTT. Examples include Canal+ Le Cube, and TI’s CuboVision. The finalintersection is between network-centric and network-agnostic, which though technically feasible isnot yet a focus of any business model. Figure 1. Mapping the Hybrid TV Landscape Broadcast Network-Centric One way Cable Hybrid Telco Terrestrial TV (Terrestrial + IPTV) Telco IPTV Hybrid Cable Satellite TV (Cable + IPTV) Hybrid Satellite (Satellite + IPTV) Terrestrial / Satellite + Telco / Cable OTT + OTT Over The Top (OTT) TV (Internet TV) Network-Agnostic A focus of many payTV operators since the previous version of this report was written is TVEverywhere, enabling a subscriber to receive their service on a PC, tablet, smartphone, or gamesconsole, in addition to the STB connected to a TV. To devices other than the STB, the service isgenerally delivered over unmanaged IP, examples of such services include Sky Go and DISH TVEverywhere. A broadcast TV provider delivering a video service to the customer’s PC over theinternet is not considered hybrid TV. The hybrid TV definition focuses upon the STB, the corepayTV service customers buy and view on their TVs in the home via a STB, not ancillary servicessuch as TV Everywhere. The difference between TV Everywhere and Internet TV is not a technology difference, rather abusiness model difference. For TV Everywhere, a payTV provider is supplying a traditionalbroadcast payTV service via a STB to a TV and offers those existing subscribers a TV Everywhereservice to receive generally a subset of their subscribed TV service via other devices like PCs, tablets,smartphones and games consoles, generally through an application or client downloaded to thedevice. The payTV provider can also offer a pure internet TV service to customers that do not 19 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012subscribe to its broadcast payTV service, like Sky Go, and will charge those subscribers for just theinternet TV service. Then there are the purely internet based providers like Netflix / Hulu /Amazon Instant Video that offer their service only over the internet, and do not operate a nationalbroadcast TV network, their service is termed Internet TV or Over The Top TV. The term TV Everywhere has been a cause of frustration for customers as device coverage,channel availability, and physical restrictions, e.g. only available in the home, have resulted in theterm TV Everywhere to be considered a joke. The term multi-screen TV is also used to avoidcreating customer expectations that cannot be met, or simply offering the payTV provider’s Apps fordevices, and not attaching a particular name to the service, as it can cover EPG (Electronic ProgramGuide), DVR (Digital Video Recorder) controls, account management as well as a streaming TVservice. Though as we will see in the case studies, providers like DISH Networks are delivering a fullTV Everywhere service to their customers. SIZING THE TV MARKET AND COUNTRY SPECIFIC ANALYSIS The Telco TV (IPTV) market, though growing, remains less than 8% of the total TV market bynumber of households through to 2017, as shown in Figure 2, data based on Alan Quayle Businessand Service Development estimates from a bottom-up build from each country to the global figures.However, as cable, terrestrial and satellite providers are increasingly going hybrid, as predicted in theearlier version of this report, a hybrid TV solution opens up a far broader market opportunity, seeFigure 3. There are about 110M hybrid TV households today (2012), growing to 530M sub by 2017. The TV market is predicted to reach 1.57B households in 2017, compared to telco IPTV of110M subs in 2017. The addressable market for hybrid TV is potentially vast, we estimate 530Msubscribers in 2017. My point here is simply to highlight that the hybrid TV market is much biggerthan just Telco TV, and we’ve seen it become a core component of most payTV strategies in the past3 years. However, as we’ll discuss in this report, TV delivery evolution is moving fast, and TVEverywhere / Internet TV have become equally as important to payTV providers. We must also not forget that there is an important trend underlying the move to Hybrid TV,which is the migration from analog to digital TV. Western markets take for granted that globally itwas in 2012 we finally had more digital TV than analog TV households, shown in Figure 4. Asmentioned in the Introduction section the analog to digital transition has been a multi-decade longchange, it is still ongoing, and we similarly cannot expect the change stimulated by the convergenceof internet and consumer electronics to impact the well-established TV ecosystem any faster,critically people’s habits change slowly especially when is it a household (group) decision, henceexisting infrastructure and ecosystems are resistant to disruptive change. 20 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Figure 2. Total TV Market Size (also includes Free Sat, Free Cable and Free Terrestrial) (Millions of Households) source Alan Quayle Business and Service Development Figure 3. Split between Pure and Hybrid TV Subscribers (Millions of Households) source Alan Quayle Business and Service Development 21 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 4. Analog Versus Digital STB Across All TV Households (Millions) source Alan Quayle Business and Service Development At the request of many readers of the previous version of this report I have in Appendix 1provided analysis of some of the markets that make up these aggregate figures shown in the globalmarket analysis, based on my experience in those markets. The aim is to provide a deeper dive intothe regional numbers and understand the different trajectories of TV delivery evolution. The 17markets reviewed in Appendix 1 include: Australia, Brazil, Canada, China, France, Germany, India,Italy, Japan, Mexico, Russia, Singapore, South Africa, Sweden, Turkey, United Kingdom and theUSA. These countries are shown as they presented good regional case studies and I have completedprojects focused on those countries so have gathered detailed and verified market data. The data was collected from interviews with the main TV providers in those markets, gatheringtheir opinions on the trends impacting their market and their subscriber projections. As you wouldimagine, aggregating the household projections across all service providers in a country often resultsin more households than exist in that country. So regulator and supplier interviews were essential tonormalize the numbers both for 2011/2012 as well as the projections through to 2017. OTT remains a secondary viewing option through the period of the projections to 2017, thoughas a secondary viewing option it will become dominant, exceeding FTA (Free To Air) in manymarkets, reaching perhaps 67% of payTV households in the US, and likely 50% of WesternEuropean households by 2017. Other markets will vary principally on penetration and capacity ofbroadband in that country. The markets discussed in Appendix 1 vary significantly; the US model will not be adoptedwholesale, rather adapted to specific country situations. For example payTV domination is not theend state for many countries, and internet TV will take over one decade to make an entrance intosome markets as a primary viewing option. 22 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 The UK often seen as a close follower to the US market is taking a different course to the USA.The broadcasters are not combining forces into a “Hulu-like” entity, rather delivering their contentdirect across multiple platforms. FTA (Free To Air) will remain as equally adopted as payTV fromSatellite and Cable in the UK market, through Netflix and Amazon (LOVEFiLM) will likely emulatetheir US success in the UK and cap on-demand and other interactive TV service revenues for thepayTV providers. China will remain Chinese TV, a relatively closed market to many suppliers and serviceproviders, though increasingly a key market for content owners (the studios) to sell their “approved”content through Chinese online stores and Apple iTunes which has done well in navigating thehurdles of operating in China, unlike say Google. In many markets the conversion from analog to digital FTA has prompted customers to move topayTV as we’ve seen in Brazil, Turkey and India. Viewers needed to do something because of thetransition, so they evaluated their options and generally selected the broader offer of payTV, and inmany emerging markets the dominant choice is Satellite TV, hence the dominance of HBI in thehybrid TV projections shown in Figure 3. Analog TV will remain with us in 2017; the TV world will not be completely digitized. The lackof broadband infrastructure in many emerging markets will also limit the adoption of hybrid TV andOTT TV. As stated in the introduction, the impact of the convergence of internet and consumerelectronics on TV will be a multi-decade transition, the US model will not be simply copied aroundthe world as was generally the case with the internet. TV is highly regulated which makes it highly political. And as is often the case in such politicalsituations, delays in regulations often have the reverse impact of the regulation’s intention as natureabhors a vacuum, so delays or self-focused technology choices that result in higher STB costs meanFTA adoption is falling in the transition to digital as seen in most markets around the world, or insome cases failing to take off with the growing prosperity of a nation. However, there are exceptionssuch as Australia which have managed the transition to digital terrestrial TV well. Cable, IPTV, Satellite will remain with us, though will see significant shifts in some markets, forexample the growth of advertising supported satellite TV in emerging markets. Simplicity and easeof use are critical; a payTV bundle makes it easy. OTT TV in emulating the existing TVconsumption experience is not simple, nor easy; OTT TV requires viewers to adopt a differentconsumption model. The growth of DVRs in STBs (70% penetration for Sky UK subscribers) iseducating customers that they can watch what they want when they want, which is the first steptoward a self-selected consumption model, think of it as a stepping stone towards OTT TV. Butsuch changes in TV viewing habits are slow, both for individuals, households and the overall market. Given the diversity of TV markets around the world, it’s difficult to provide an adequate overallsummary. However, for suppliers and content owners alike this diversity makes their strategies morecomplex and critically dependent on local market factors. The biggest mistake to make is to assumethat because a product or content in one market works well, it will work in other markets equally aswell. The countries studied in this report provide a solid framework upon which a global plan can bebuilt. 23 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 TECHNOLOGIES AND STANDARDS Hybrid Broadcast Broadband TV (HbbTV) is both an industry standard and promotionalinitiative for hybrid digital TV to harmonize the broadcast, IPTV, and broadband delivery ofentertainment to the end consumer through connected TVs (Smart TVs) and set-top boxes. TheHbbTV consortium, regrouping digital broadcasting and Internet industry companies, is establishinga standard for the delivery of broadcast TV and broadband TV to the home, through a single userinterface, creating an open platform as an alternative to proprietary technologies. Products andservices using the HbbTV standard can operate over different broadcasting technologies, such assatellite, cable, or terrestrial networks. The HbbTV specification is based on existing standards and web technologies including OIPF(Open IPTV Forum), CEA, DVB and W3C. The standard provides the features and functionalityrequired to deliver feature rich broadcast and internet services. Utilizing standard Internet technologyit enables rapid application development. It defines minimum requirements simplifying theimplementation in devices and leaving room for differentiation, this limits the investment required byCE manufacturers to build compliant devices. Over the past 2 years HbbTV has caught the interestof most markets. So even though MHP (Multimedia Home Platform) has a greater number of STBsdeployed with over 10 million, the momentum appears to be favoring HbbTV. The overlapping standards and the variety of legacy interactive systems deployed (e.g. EBIF(Enhanced TV Binary Interchange Forum), Tru2way, LUA, Mediaroom, etc.) create a significantproblem that yet more standards will not address. In my work with developers of 2nd screenexperiences, that is iOS/Android apps that complement shows during airing, when the show is beingtime-shift viewed and even without the show being played. All three states require differentexperiences to be presented on the 2nd screen. Developers consider the TV widgets on offer bysome payTV providers to look like something from the stone-age compared to iOS /Androidexperience. Developers today are web-centric and consider customers to similarly expect interactiveservices to look and feel like web services. On the business model behind interactive services, the assumption is there is already a businessmodel in place the, APIs to enable STB-based interactive services are simply a channel tocomplement an existing business model. Pay TV providers need to find ways of enabling richer morepersonalized and fulfilling customer viewing experiences through their platform, enabling suchcapabilities is important for customer retention of the hours viewers use their service every day. Focusing on North America, we have a mess across STBs covering industry-specific capabilitiessuch as EBIF, Tru2way, LUA, Mediaroom, and now HBB/CE-HTML. To break through theimpasse to create an interactive service ecosystem the payTV industry needs to consider:  Abstracting all the industry noise away from the content industry so they can use webkit (which they understand) to create content and experiences for the TV. That is adequate tools.  Abstract all the content standards and random requirements specified by individual payTV providers to make is simple for developers. That is, use industry-wide APIs.  Abstract all the business model barriers, it’s about keeping the payTV network relevant to customers and the content industry, rather than letting Apple and Google dominate when their ecosystems are extended into the TV. 24 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  Use a start-up approach (not a payTV operator ordained political entity, see this weblog article for a deeper discussion on the failure of Canoe Ventures http://www.alanquayle.com/blog/2012/03/what-the-mobile-industry-can-l.html).  Dont try to grab advertising revenue through the endeavor; it is simply an enabler to keep the payTV industry relevant.  Work with companies that enable the 5 top use cases and focus on making them happen, rather than a generic platform.  Be prepared to alter the business model as things come together, we cannot predict the future, only react to the present based on quantified data and thoughtful analysis.  The exactly structure of the endeavor is not clear, however, I discussed in this article some of the approaches: http://www.alanquayle.com/blog/2012/03/what-the-mobile- industry-can-l.html. Bottom-line: if the interactive TV party doesnt get started soon, the revenue and marginrestructuring in the payTV is going to be more painful than we currently think. TV movingcompletely to the internet is not inevitable as we discuss in this report, but the changes internet TVwill cause in viewer, advertiser and content producer behavior need not be as painful for the payTVindustry if they simply get their act together. For the application environment, Android is likely to achieve a significant market share as itextends the Android developer ecosystem to STBs. Apple TV applications will benefit from theleading iOS developer ecosystem. There are rumors Apple may offer an Apple STB to the cableoperators; this would not be the first time as back in 1994-1995 they did work with several operatorson an IPTV STB, this would extend the penetration of iOS based applications. From interviews on the future of the TV ecosystem, the consensus view is the application modelwill be similar to that of the Smartphone, with Android, Apple, Microsoft (thanks to Mediaroom andxbox) and HTML5 being the top four platforms, with likely a number of other long-tail platforms.The view on the breakdown across those four application environments: Android is seen as thewinner by volume, followed by HTML5 in the longer-term, with Microsoft and Apple in a tie forthird position. Existing app stores will likely be extended into the STB domain as service providerscontinue to struggle with or close down their app stores. A question mark exists on the role the Comcast Reference Design Kit will play as an applicationenvironment. Licensees include as of August 2012: Motorola, itaas, Entropic, Broadcom, and S3Group. The RDK’s goal is to cut down the development cycle down for new set-top boxes fromtwo years to one year, or even under one year. The Comcast RDK was developed internally usingopen-source components and by working with various vendors. The RDK is a community-basedproject that allows developers, vendors and cable operators to use a defined stack of software on onelayer in order to provision set-top boxes and gateways. This would potentially be a competitor toAndroid, Apple etc. It is unlikely to become a significant player as it will not attract developerattention given operators’ struggles with open innovation, the small addressable market, anddeveloper attention squarely focused on Android, Apple and with Microsoft struggling to againdeveloper attention against them. 25 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 STB MARKET IN TRANSITION TO A FOCUS ON SOFTWARE The key component of a payTV deployment is a STB. Worldwide spending on IP set-top boxes(STBs) has grown quickly even given the economic environment, from $2.4B in 2009 to roughly$3.4B in 2012, and expected to grow to $4.8B by 2017. These figures take into consideration thegrowth of over-the-top TV and the integration of virtual STBs directly into TV sets. Though STBswill remain the de facto device for video presentation in the home, and for most IPTV deploymentsthe STB accounts for between 50-60% of network capex (capital expenditure) There are currently about 5-7 manufacturers with a worldwide presence, with another 10-15manufacturers strong in their respective regions and/or among domestic customers. Across allpayTV STBs, Motorola and Cisco are the leaders in the market, with Thomson in third place.Specifically for IPTV STBs the top four suppliers are Motorola, Cisco, Huawei, and Amino. Motorola (currently a division of Google, but it is for sale) has historically been the leader insupplying STBs to the cable industry and has been able to transfer this experience in developing STBto the telco IPTV market. Motorola acquired Swedish STB developer Kreatel back in 2006. Kreatel,like Amino, was an early developer of IPTV STBs for the telco market and has customersthroughout Western Europe. Motorola took the Linux-based Kreatel software and ported it onto itsown hardware, allowing Motorola STBs to interact with a wide range of IPTV middleware offerings.Motorola’s main IPTV customers include AT&T, Verizon, TeliaSonera, and KPN. Following Motorola are Huawei, Cisco, and Amino. Huaweis STB deployments are in China,with significant volumes in China Telecom and China Unicom. Cisco, like Motorola, is consistentlyone of the worlds leading STB suppliers to cable operators (thanks to the acquisition of ScientificAtlanta). Cisco’s customers include Belgacom, TELUS, Deutsche Telekom, Croatias T-Com, andSES Americom. In March 2012 Cisco paid $5B for NDS, which is a good complement to Cisco’s Videoscapestrategy, being the premiere creator of set-top box software solutions. The combined companywould provide security for an estimated 30% of all active set-top boxes that support encryption. However, with the exception of Cisco and Motorola, conditional access (CA) businessesgenerally operate separately from set-top box businesses. The reason is that operators want to havemultiple set-top box vendors but are resigned to having single security vendors and softwarevendors. North American cable is the only major exception to this rule. Therefore, it may now makesense for Cisco to sell its set-top box and broadband gateway manufacturing unit while retaining itsPowerKEY conditional access system and a few other pieces of Scientific Atlanta that are integral tothe Videoscape strategy. To take any other path might threaten the value of the existing NDSbusiness. Multiple DRM (Digital Rights Management) schemes are likely to be supported across deviceplatforms, so owning a DRM or CAS (Conditional Access System) is not necessary for a player inthis space. Standard solutions, such as Marlin and the Digital Entertainment Content Ecosystem(DECE), will likely reduce the power of any individual DRM vendor. Control of subscriberauthorization/key management systems, where subscriber entitlements are managed and integrationis required with the subscriber management system (SMS) and billing systems, is emerging as the keyarea for control and influence. 26 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 The middleware of the STB defines the APIs applications use. For broadcasters they have arange of options including: MHEG5, DVB-MHP, ATSC-DASE, CE-HTML and ARIB-BML. TelcoTV middleware suppliers have tended to build their own APIs / SDKs middleware suppliers include:Microsoft, Thomson, DreamPark, Minerva, Orca (acquired by France Tel), NDS, OpenTV,UIEvolution, Ant, Access, NSN, Huawei, Ericsson, UTStarcom, Seachange, and Cisco. Though inmany cases TelcoTV middleware supports standards, e.g. Espial supports DVB MHP and CE-HTML. Figure 5 shows the main STB middleware suppliers and their key accounts. The bottom line is the mess will not go away, operators must either provide tools to manage themess, or remain stifled until Android and Apple bring their ecosystems to bear on the TV ecosystemwhich includes media company engagement. STB middleware is a strategic decision; fortunately there is still some competition. MicrosoftMediaroom through a default choice for many Tier 1 operators continues to frustrate them onroadmap changes and slow roll-out of functionality, for example is it see as a laggard on TVEverywhere as reviewed in the later TV Everywhere survey. Opening up room for smaller, morenimble players to fill the gaps and responding to trends such as Hybrid TV and the growth of CE-HTML. A point of discussion around Hybrid TV is whether STB-less hybrid TV solutions will emerge,that is using the processing power of either the smart TV or other connected devices to provide thesame functionality as a dedicated STB. The STB middleware is the enabler of such a capability. Atpresent the race to add functionality into the STB, the variety of platforms and capabilities, theshifting-sand that is smart TV platforms means such software-only based solutions are consideredbeyond the time-frame of this report. Figure 5. STB Middleware Vendors and Their Key Accounts Supplier Reference Customer Microsoft AT&T, DT, BT Espial ComHem Thomson France Telecom Google (Motorola Mobility bought DreamPark) Canal Digital Minerva TDS, SureWest France Telecom (ViaAccess / Chungwah, JazzTel, France Orca) Telecom Across cable and satellite Cisco (NDS) operators Across cable and satellite NagraVision (OpenTV) operators UIEvolution NTT OnDemand Ant CGT, France Telecom NSN (up for sale?) Belgacom, KPN Huawei China Telecom Ericsson OTENet, Sonaecom Seachange TurkTel 27 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 IMPACT OF TECHNOLOGY ACROSS THE TV ECOSYSTEM There are a number of technologies impacting the TV ecosystem, as shown in Figure 6.Examining each in turn:  Internet video allows direct customer access; studios are actively exploring this, e.g. Hulu, HBO Go and BBC iPlayer which will be discussed in the Over The Top Providers chapter of this report. This allows the content owners to have a direct relationship with the customer; note Disney has done this for many decades. But at present the main US content owners appear to be pulling back from efforts to build a direct customer relationship online, reinforcing the traditional ecosystem, as discussed in the Hybrid TV, OTT TV, and TV Everywhere Surveys and Business Models chapter.  The DVR (Digital Video Recorder) is increasingly popular; it reduces ad effectiveness. As discussed in the nPVR section of this report it can empower the payTV provider to take over some of the advertising revenue, though this appears to have failed, and instead putting the DVR into the customers’ hands appears to principally empower the customer, and begin the conversion to an on-demand / self-selection viewing habit than the traditional channel zapping, a necessary step in the evolution of the customers’ viewing habits to finding an OTT TV proposition attractive. For the producers is reduces report fees and allows customers to ‘own’ content rather than buy. For Networks is reduces effectiveness of ad revenue which is a core component of their revenue.  Consumer electronics such as TVs, DVRs, Apple TV, TiVo, PS3, Wii, and Xbox enable consumption of video outside existing value chain direct from the Producers, e.g. Sony Store through the PS3. The on-device stores promote direct consumption of content (e.g. Amazon instant video or iTunes). These stores understand the scale game and provide an efficient channel for content owners to deliver directly to the consumer. Though customers increasingly expect a subscription based model for older content, than purchasing it, a comment frequently made by Apple iTunes customers.  TV Everywhere / Place shifting has rapidly evolved over the past 3 years. The main beneficiary is the payTV operator which can offer it combined with premium packages to help add value around premium bundles, as well as simply a standalone service. Increasingly we’re seeing operators offer Slingmedia type functionality, putting the subscriber in control of their content. The Content Owners have to date been frustrated by the lack of innovation on TV Everywhere in promoting new business models such as an eBay model in TV content, i.e. bringing content buyers and sellers together and taking a cut of the transaction.  IPTV: Weakens payTV providers bargaining position, as there are more competitors negotiating over content. Overall content owners (Studios) are strengthening their position thanks to Technology, and indoing so taking more revenue out of the ecosystem. PayTV operators continue to focus on makingDVRs and place shifting more attractive to maximize their position in the value chain. In 2012 SkyUK has achieved over 70% penetration of Sky+ DVR service, DISH has 65%, and in the US market 28 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012it is approaching 46%. The Sky+ DVR user experience is excellent, press record once for theprogram, twice for the season pass. Season pass records all showings of a program. So there areways for payTV providers to focus on their core strength in the value chain, which are the hourstheir customers spend watching TV. Figure 6. Rating Technology Impact on TV Ecosystem Members FUTURE SCENARIOS 2009 AND 2012 During a series of industry interviews completed from Dec ’09 through Feb ’10 a number offuture scenarios were discussed with operators where they were asked to rate the probability, likelytimeline and discuss the reasons for their prediction. The results of which are shown in Figure 7. There was general consistency in the responses across payTV operators and geographies.Fragmentation is the most likely scenario in the near term with multiple channels weakening thepayTV providers’ positions; content owners will use all available channels to explore theireffectiveness and financial return. PayTV margins will continue to erode as TV Networks continueto raise carriage fees and customers remain unwilling to accept subscription fee increased on thebasic packages, as well as bundling with data and voice services further discounting the TV service.Verizon is currently raising its payTV rates and initial indications are it is raising churn, though it willtake more than one year for the impact to be quantifying as most customers are locking into 1 and 2year contracts. The scenarios considered of medium probability include internet video going mainstream, butthis was seen as a long term trend and not winning out-right, rather becoming a preferred deliverymechanism for some customers and a dominant ‘secondary platform’; especially those that preferprogrammatic selection than channel selection. Consumer Electronics becomes a service platformwas considered medium probability but remaining niche, e.g. Sony Store on PS3 will be used by PS3gamers, but will not be a consumption model for the masses. The web retailers were seen as themost significant uncertainty, some viewed them as the most significant threat, and others saw it onlyfor VoD for those customers with a ‘service platform’ in their home, e.g. PS3, TiVo, Roku, Boxee,Apple TV, DVR, Internet capable TV. Business as usual and telecom operators dominating wereseen as unlikely scenarios. 29 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 The same survey was conducted over the summer of 2012, June-August, see Figure 8.Comparing the 2 surveys makes interesting reading. Fragmentation is clearly increasing, but the roleof consumer electronics in the ecosystem is seen to have lessened and likely be niche. The impact ofInternet TV is now seen as a medium to long term issue and limited to a minority of viewers. BAU (Business and Usual) is seen as more likely given OTT is not perceived as such as threatand the content owners seem happy to keep the current business model in place and extract morerevenue. Telcos remain niche, only if they buy a Satellite provider in their market can they become asignificant player. Figure 7. Review of Future Scenarios, based on industry interviews 2009 Scenarios Description Probability Reason Content owners will act as arms suppliers - use all Multiple channels, channels and use the bargaining weakness of so many Fragmentation content owners channels to increase its margins as well as bypass them dominate, confusion High over the web. Sony is in a unique situation with the PS3, it can deliver Consumer Customers move to VoD and download to own from its extensive content Electronics consumption of video library. Devices are more likely to be co-opted by the Dominates from their PS3, Wii, Medium - content owners, e.g. BBC iPlayer on the Wii, or by web- TiVo and Apple TV niche retailers. Deals cut are at the sufferance of the content owners - if Likes of Amazon on current deals impacted their other revenue lines, they Web Retailers Demand become Medium - would react. But as Amazon understands web retailing Dominate customers preferred medium they can not ignore and if customers express a preference site. term they will follow the money. Internet gets to the TV, Internet Video and consumers Peoples habits change very slowly, internet video will be a Dominates change their viewing Medium - part of customers viewing habit. For some it will replace habits long term MSO / DBS, >10 years before early majority are impacted.Business as Usual Existing ecosystem Value chain is already changing, MSOs and Broadcasters continues Low are working on adapting their business models Telcos are in a weak position, and it will be weakened Telcos Dominate Customers adopt the even as their customer numbers grow due to bundle Low strengthening of the content owners position. 30 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 8. Review of Future Scenarios, based on industry interviews 2012 LEARNING FROM HYBRID TV DEPLOYMENT CASE STUDIES Virtually all IPTV operators have either deployed or are planning / evaluating hybrid TV.Hybrid TV has become the dominant delivery mechanism for TelcoTV. Only those operators withfiber to the home or VDSL (Very High speed Digital Subscriber Line) can consider a pure IPTVsolution, e.g. NTT or AT&T U-Verse. Verizon chose a hybrid approach for its FTTH (Fiber ToThe Home) solution, to avoid technology risk, meet customers’ base expectations, and enable asmooth migration to all-IP when customer demand and economics dictate. Operators are not partnering with broadcasters to deliver hybrid TV, because of the difficulty inpartnering with a payTV competitor (Satellite / Cable / Terrestrial provider), AT&T’s HomeZoneservice demonstrated the problems of such a partnership. 31 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Cable operators in Europe are adding IPTV via MoCA; its remains unclear US cable operatorswill follow such an approach, though many Cable operators are experimenting with such technologyover their networks. Satellite TV operators in Europe and the US are adding OTT video serviceswith progressive download (HBI) as they do not control the access networks. A few Telcos (e.g. Orange TV, Deustche Telekom and Portugal Telecom) have acquired Satellitecapacity to deliver a comprehensive TV service across their country. However, most Telcosdelivering IPTV over DSL have taken advantage of the free to air DTT service to complement theirIPTV offer. Telecom New Zealand provided an example of a hybrid service where they have partnered withTiVo. TiVo provides the STB and interactive services, while broadcast TV is provided by DTT.However, a series of missteps meant the service never got off-the-ground, and has been quietlymoth-balled. However, such TiVo partnering is becoming more common with Virgin Media,Charter, ComHem and RCN following this route. It will be interesting to see if other smalloperators follow this strategy to market, rather than making the investment in a managed IP networkand the difficulty in making the necessary content deals with a small customer base. Most operators remain disappointed in the lack of customer take-up for interactive services, i.e.VoD (Video on Demand). Penetration remains in the 10% - 15% penetration for most operators,the rise is in part from offering a richer on demand library with a free component. Most operatorsare examining ways to improve consumption. Key is a broad relevant library, a great user experiencefor a low entry price ideally subscription based. That is, Netflix has set customer expectations inmany markets, and even in markets Netflix has not entered viewers are aware of the offer. Operators in the strongest position with respect to Hybrid TV are telcos with a Satellite andIPTV solution (e.g. Orange/Telecom Portugal); and Hybrid Cable operators (e.g. Verizon, ComHem). As they address the key issues of simplicity in:  purchase, one click  installation, one box  customer service, one number They do not disappoint customers with limited geographic availability. They do not have anypartnership risks. They can deliver the full package of SD/HD channels customers expect withcontrol over the access to avoid potential additional charges and maintain quality of service overtransport and hence quality of experience. Verizon and Orange have achieved consistent growth in mature payTV markets. There focushas moved on from Hybrid TV to multi-screen TV. Second tier hybrid solutions are:  Satellite and OTT (e.g. Canal+) has no control over the broadband connection, hence requires progressive download and could incur additional charges for broadband data use. Content delivery network dimensioning is key for service quality with OTT services. Increasingly important to Satellite providers. 32 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  IPTV and DTT (e.g. BT Vision) has limited channel line-up compared to Cable and Satellite, requires customers to ‘purchase’ shows (this requires a change in behavior), limited HD capability, and limited geographic coverage due to DSL limitations. Third tier hybrid solution:  DTT and OTT partnership (e.g. Telecom New Zealand.) TNZ is simply a pipe provider. Content delivery network dimensioning is key for service quality with OTT services. Increasingly their tier 3 solutions are being closed down as a payTV service requires focus and commitment; it is not a simple service add-on like voicemail to a voice service. It is a complex multi-faceted service that critically requires national scale to be commercially viable. A challenge with tier 2/3 operators is scale in TV businesses. Content is king, on demand isnice, but core offer is critical across sports, movies and national content. Tier 2/3 providers havestruggled, the middle market between premium PayTV and FTA is small in many countries, key hasbeen low pricing like BT Vision or going pure-OTT with a focused proposition like Telecom ItaliaCuboVision. All operators interviewed plan to continue their hybrid TV strategy into the medium term (next 5years) at least. All have deployed or are experimenting with TV Everywhere. Note payTV providershave been constrained by the limitations imposed by the content owners on how their content isdistributed, but this restriction is being removed as discussed in the TV Everywhere survey. Hulu and BBC iPlayer have much greater freedom of operation as they are run by the contentowners. However, we’ll discuss some of the challenges Hulu faces in the Over The Top Providerschapter of the report. This limits the payTV provider’s ability to delivery OTT TV to any internetconnected customer. However, CuboVision from Telecom Italia and the JazzBox from JazzTelprovide examples of operators exploring this model. Underlying all the unmanaged IP TV services isa content delivery network (CDN), who’s dimensioning is critical to service performance. LEARNING FROM TV EVERYWHERE DEPLOYMENT CASE STUDIES TV Everywhere activity has been intense since the previous version of this report written in2009. However, most TV Everywhere offers have been reactive, delivering a partial offer, and henceresulting in low customer engagement; and critically not stopping customers adopting OTT as asecondary viewing experience. For most customers OTT is not a reason to cut the cord, rather acomplement, which caps payTV on demand and critically puts a service platform in the home thatcan cap other revenues including advertising and interactive services. Dish (US Satellite TV provider) has delivered the most complete TVE offer from a technologyperspective, but the on-demand service from a content perspective has frustrated customers with itslimited selection. Content is king even in on-demand. So TVE engagement remains low. Dish haseven stated that usage of its autohop technology is low, to which it is being sued by Fox, CBS andNBC Universal for this technology. Dish should not be taken as indicative that TVE does notmatter to customers, Netflix’ 24 million subscribers in the US shows it matters, as they’re paying$7.99 per month for the service, but customer expectations have been set, and payTV operators needto find the correct recipe to contain the latent threat posed. 33 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 TVE awareness remains low in most markets, in a May 2012 survey by Parks Associates, AT&TU-verse customers are at the high end of the TV Everywhere awareness spectrum, but only about aquarter of its 4 million subscribers know about AT&T’s TV Everywhere services. CharterCommunications is last among the major pay TV operators, only about 5 percent of its 4.3 millionsubscribers know about TV Everywhere. Generally marketing efforts are targeted towards earlyadopters of OTT TV services, to demonstrate the value of paying for a multi-channel offer, ratherthan cutting the payTV cord. With the learning through 2011 and into 2012 that customers are notcutting the cord as rapidly as they feared in 2010, the push on TVE has lessened. However, it’s critical in surveys with viewers not to use words like TVE, rather ask if vieweraware that cable operator has an app to let them watch TV on their smartphone or tablet. And nottalk about Internet TV or OTT TV and rather name Netflix and Hulu. As we’ll see in the ViewerSurvey chapter awareness is higher near 50% in North America and 40% in Western Europe fromthat survey. We’re entering a second phase of TVE deployments as offers become more complete and closerto customers’ expectations on both content and features. Customers’ expectations have been set andhalf measures do not cut it, as discussed in the Viewer Survey chapter. LEARNING FROM THE HYBRID TV SURVEY There are clearly differences in motivation between IPTV and Cable/Fiber and Satelliteoperators for Hybrid TV. Satellite TV’s motivation is to match the on-demand offer from itscompetitors (this is also true for the Terrestrial Broadcast TV operators), which has become a baseservice requirement for payTV, even though usage remains low at about 15% of households butgrowing. Secondly to experiment with OTT TV, which is definitely the case in Satellite as they donot control the access network, hence their systems need to adapt to varying congestionrequirements. Expanding revenues (though not significantly), enhanced EPG and Applications were mentionedas motivation for Hybrid TV. Generally on-demand services were used to encourage customers toadopt a premium service package with a tier of free movies and TV shows, with top titles being paid-for. One point mentioned in the North American market is a vocal (social media and the web)minority of subscribers that are being educated by services such as Netflix and Hulu Plus on what toexpect for an on-demand service in terms of price and variety of content. Customers are increasinglyunwilling to pay $4.99 for a movie that is not a recent movie release, rather expecting it to see itbundled in their payTV subscription. Given the increasing costs of content, this simply is not viablefor most payTV providers, likely they need to find a way of offer a discounted offer compared toNetflix for their existing payTV providers. For the fiber and cable providers the use of Hybrid TV had a broader range of drivers, includinggetting to market faster, and overcoming network constraints. The rest of their responses were quitesimilar to the Satellite TV providers in delivering on demand services, expanding revenues andexperimenting with OTT and applications. The fiber / cable providers did not raise the issue ofmeeting base-level service expectations as their systems inherently support on demand. 34 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 The DSL IPTV providers had the broadest set of drivers for Hybrid TV. Some of thedifferences between the 2009 and 2012 survey include the avoid negotiating with broadcasters, asIPTV operators have found that even including the FTA service has included some negotiations forexample for on-demand and EPG content. Also the drivers have expanded to include experimentingwith OTT and STB applications; expanding revenues; and delivering an enhanced EPG. The EPG remains a critical tool, and a source of much frustration for payTV providers. Theelegantly simple UI of Netflix and Amazon Instant Video on Roku enable 50k+ items to bepresented in an intuitive, easy to use, and pleasant to view experience. Most payTV provider EPGsremain grids of dense information for the hundreds channels they offer. Simply, things like groupingthe channels based on the customers viewing preferences which could be learned throughmonitoring their viewing preferences could go some of the way to making the experience morerelevant. PayTV operators are becoming increasingly concerned about their user experience. The cost of the Hybrid STB has risen in importance. Given the typical learning curve forconsumer electronics it would be anticipated that this issue would diminish over time. However,competition and customer expectations are driving up the functionality and performance of theboxes. For example in the US, Dish’s Hopper DVR includes 2TB of storage, ability to record up to6 live HD channels during primetime, and custom features like PrimeTime Anytime instant access toprimetime shows from ABC, CBS, FOX, and NBC in HD (stored up to 8 days – catch-up TVservice). Across all payTV operators STB cost remains a critical issue. As discussed previously from the 2009 DSL focused survey, customer confusion and ease of useremain issues. While the next common issue across all operators is customers’ willingness to pay forthe additional services provided. We’ll discuss this in more detail in the Viewer Survey chapter, butthere appears to be a mismatch in expectations between viewers and payTV providers on the breadthof content and charging method of subscription versus pay per view, which means on-demandremains an under-performing service. Satellite TV providers also highlight the challenges inintegration of the hybrid system as it encompasses many vendors and they attempt to keep aconsistent user experience, and expand their backend systems to support real-time transactionalservices. On the applicability of Hybrid TV, Satellite has shown an overall increase in relevance to HybridTV across all regions. The reasons given for that are the increased confidence in using HBI in 2012compared to 2009, coupled with the overall improvement in broadband connectivity rates in mostdeveloped countries. In Europe its relevance has increased across all operator types, while in North America the useof VDSL and FTTH means increasingly Telcos can deliver all services over IP, while for Cableoperators there was a perception of a traditional digital broadcast in combination with IPTV could bea migration strategy that some Cable Operators may adopt, hence the increase in relevance of HybridTV. While in LATAM the results are generally the same, and in APAC the importance of Hybrid TVto Satellite operators is the main increase. Most STB vendors fall between average and good with respect to vendor perception. STBsuppliers are a rapidly changing and consolidating market. Generally the platforms as consolidatingaround supporting all access networks (IPTV, Satellite, Cable, and Terrestrial), PVRs, OTT, HBB,and gateways. In the limit it’s about global volume for a common STB platform. That is thehardware is increasingly commoditized, while software retains the value. 35 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 It remains unclear if we will see a split in the industry between STB hardware and STB softwaresuppliers like the PC industry. Rather it appears to be following the consumer electronics industry oflead integrators that adopt strategies such as user experience excellent (Amino), featuredifferentiation (Echostar) or value (Entone); and have a range of hardware and software suppliersthey use to deliver on their STB strategy. LEARNING FROM TV EVERYWHERE SURVEY PayTV providers in 2012 are less worried about cord-cutters and OTT competition supported bythe Studios than in 2009/2010. This is in part from the overall growth in PayTV revenues in manymarkets and the Studios apparently moving away from trying to build direct customer relationshipsand instead focusing on expanding revenues within the existing ecosystem. So the PayTV ecosystemproves resilient and will continue to be supported by its existing members, this was discussed in the2009 version of this report as the likely situation. The content owners (Studios) see Pay TV as thecash cow, but the content owners are frustrated by what they see as a lack of progress on the TVEopportunity in exploring new business models to expand revenues (squeeze more cash out of specificcustomer segments.) Hybrid viewing is essentially expanding the TV revenue pie, i.e. payTV customers that also payfor OTT TV. In the Studio’s view TVE enables new innovative business models to be explored suchas providing a distribution and payment platform for content and innovative advertising andsponsored content models. They remain frustrated on the lack of experimentation with TVE, this isin part linked to the diversity of interactive platforms and the lack of payTV provider co-ordination,as discussed in the Standards and Technologies Chapter. TVE is seen principally as a defensive move, rather than for customer acquisition. Only a nicheof cord cutters is expected <10% in the US market in the medium to long term, see Figure 9.Content rights are no longer an issue for TVE according to both payTV operators and contentowners. It has moved to an “online rights” model that enables the delivery of TV Everywhere towherever the payTV customer wants to consume their content. However, TV Everywhere is not a well-defined solution category, a number of approaches havebeen taken and we are entering a second phase in the market focused on consolidation where we areseeing incumbent middleware suppliers extending their solutions into TVE. Most PayTV operators plan to have the full package available anywhere their customer wants toconsumer their content. The capabilities of TVE will likely reflect the subscriber’s current bundle,the base TV package likely not offer TVE unless the customer subscribes to a triple or double playbundle. There is a plan to include targeted advertising, but at present the content providers appear towant to own that space around their content. Innovative tariffing options such as trial to buy andfreemium continued to be market tested by many operators with generally positive results onstimulating adoption. So this will likely be extended as the TVE offer becomes more complete, towin-back customers put off by the initial limited TVE offers. From the studio’s perspective they are willing to support the payTV operator in whatever waythey want to promote their content, and share in the incremental revenue. We’re clearly at a positionwhere studios are willing to work with payTV operators to continue to grow revenues within theexisting ecosystem. There challenge as we’ll see in the Viewer Survey chapter is it’s unclear if there ismuch room left for revenues to grow from subscribers even with much better segmentation. 36 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 We’re entering a second phase of TVE investment as siloed solutions become integrated into theoperators’ content management and back office systems, this is favoring middleware suppliers andmore traditional integrated suppliers, with the exception being Echostar which has taken a moreviewer centric approach. Figure 9. TV Everywhere Market Structure MAPPING THE OTT LANDSCAPE Figure 10 shows one slice of the Internet TV landscape. It is divided into 2 groups, contentaggregators and devices. The Aggregators are divided into 2 groups, subscription VoD services likeNetflix, Hulu and Amazon Prime Instant Video. Then the stores, which include YouTube as it nowsells content like Amazon Instant Video and iTunes. And of course there is the broader world wideweb of content that can be brought to the TV. Hulu suffers from “dancing with elephants,” that is the studios are investors in Hulu and havedifferent objectives for Hulu. The Studios are set to buy out their co-owner Providence EquityPartners in September 2012. This will highlight a critical difference of opinion between Fox andDisney. Fox wants to focus on authentication. Fox shows started showing up with an eight day delay onHulu a year ago. Only viewers that either subscribe to Hulu Plus or authenticate themselves as payTV subscribers have next-day access to shows like Glee or Family Guy. So far, Hulu is providingauthentication for subscribers of DISH, Verizon and CableOne. Fox wants to extend this to otherpay TV operators, and essentially make Hulu a TV Everywhere service for payTV. Disney, on the other hand, does not want to constrain Hulu. The popular speculation remainsHulu will eventually transform to a TV Everywhere service that will only give pay TV subscribersaccess to its content. It is possible the Studios could do their own thing, as we see in the UK whereBBC, ITV, Channel Four and Five run their independent OTT services. 37 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 For the devices, I show them in order from challenging the aggregators / content owners tocomplementing. Roku has the broadest coverage of the main internet TV services. TiVo and SmartTVs are also supporting internet TV, Smart TVs are following a Roku like model, TiVo isimplementing a direct to consumer (though its market size continues to decline as PayTV operatorDVR services are cheaper and easier to configure) and service provider channel (where is it growingits business). Apple TV best supports Apple’s silo, but does support internet TV services such as Netflix andrecently Hulu. While Google TV and Boxee have focused on challenging the content aggregatorsand owners so have less coverage, e.g. missing Hulu or Amazon Instant Video. Internet TV is a market in transition, the diagram here is very different in its focus compared to2009, where the focus was more on the role payTV providers would play. Clearly they are notrelevant in this landscape in 2012, a complete internet TV ecosystem has emerged, thoughuncertainty and partial offers abound which will continue to keep Internet TV a secondary viewingplatform for the bulk of viewers. For payTV providers the marriage with TiVo is not as surprising as some have found. The mainprinciples of greater consumption are shown below, and it’s clear across recommendations, relatedcontent, search and TV Everywhere TiVo has a well-patented lead.  Recommendations  From sophisticated algorithms, to simple things such as top rated, “last night’s TV,” or “what’s new”  Package up-sell, essential its related to viewing habits  Related Content  Follow a theme, e.g. episodic programming, same Director, same subject  Community  The ability to communicate and share with friends on STB, PC or mobile (TV Everywhere) – both real-time and off-line  See who’s watching what, and what they are thinking of the show (canned messages for STB)  See friends ratings and recommendations  Search integrated into the EPG and available across PC, mobile, tablet and STB  PC / tablet are the best search tool for programmatic content, discover on the PC / tablet and view on the TV – Apple TV has created a slick experience for this use case. However, devices like Roku move fast their user experience has set the standard. And coupledwith the power of Netflix’s recommendation engine and large content library, they have set astandard beyond that of TiVo and most operator TV Everywhere services. 38 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 10. Mapping the Internet TV on the TV Landscape BATTLE ACROSS THE TV LANDSCAPE In the battle across the TV landscape, see Figure 11, its clear content power is critical and willremain critical for the foreseeable future. Essentially online TV networks can only be successfullyrun by the content owners. The wildcard in this landscape is the customer, will they change their TVconsumption behavior, and if so how fast? It’s clear some customers are moving towardsprogrammatic consumption thanks to DVRs, but will it remain anything more than a niche for thosecustomers capable and prepared to cut the payTV cord? For most content owners the currentlucrative business model is likely to be tough to move away from, as witnessed by the excessivesalaries earned by ‘stars and sports players’ compared to the average wage. Can the other Consumer Electronics manufacturers copy Apple in getting the user experienceright and building a store? Or will they focus on being a service platform for other web-basedservices, e.g. Google, Amazon, Netflix and Hulu. It’s likely Apple will remain the exception ratherthan the rule, hence Device Power and Computing Power may join forces to put payTV providersunder increased competitive pressure, by capping their ability to win on-demand and TV everywhererevenues. And in time dominating interactive service revenues and advertising as the Apple andAndroid ecosystems start to focus on the TV experience. This is the consensus developer view atpresent. 39 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 PayTV providers’ strength today comes from their network, the hours customers spend watchingTV over their networks, and an established and sophisticated business model. So the skill comes inensuring they remain the content owner’s best path to cash from the customer. Hence ensuringcontinued high levels of consumption (viewing times), and leveraging their network-related assetsand services to maintain an edge. Average TV viewing times increased across all of the big five European territories in 2011, withthe exception of the UK where the number remained the same.
According to Informa the averageviewing time was highest in Italy at 253 minutes, which compared with 246 minutes in 2010 and 238in 2009. Viewers in the UK watched the second highest number of minutes per day of TV at 242minutes, the same level as in 2010 but significantly ahead of the 2009 total of 225 minutes. Spanishviewers watched an average of 239 minutes of TV a day last year, compared with 234 minutes a yearearlier and 226 minutes a year before that. In France the daily average viewing times were 227, 212and 205 minutes for 2011, 2010 and 2009 respectively. In Germany the daily totals across the sametimescale were 225 minutes, 223 minutes and 212 minutes. In reviewing the principles of greater consumption and how the payTV providers candifferentiate:  Recommendations  From sophisticated algorithms, to simple things such as top rated, “last night’s TV,” or “what’s new” – given the bounded problem payTV operators should be able to match Amazon’s engine.  Package up-sell, essential it’s related to viewing habits. Local content matters, payTV operators have the edge of their subscription-based business model (e.g. Sky UK winning the Premier League rights.)  Community (Social TV)  The ability to communicate and share with friends on STB, PC or mobile (TV Everywhere) both real-time and off-line. Social communications is key, deliver in a user friendly way across multiple platforms. Telcos should be solving this as a general communications problem, so should be well placed to leverage their solutions.  Search integrated into the EPG and available across PC, tablet, mobile and STB  PC / tablet remains the best search tool for programmatic content, discover on the PC / tablet and view wherever (TV Everywhere.) Telcos have potentially an edge in the PayTV business as they understand all three channels and how to create a good experience. For the payTV provider focusing upon the user is going to be critical to remain relevant in theemerging TV landscape, as in the limit it’s the customer that’s going to decide the payTV providersfuture. 40 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 11. Battle Across the TV Landscape Content Power Studios Broadcast / YouTube, Cable Networks Facebook Hulu Google, Network Telcos & Amazon, Computing Power MSOs Customers Power Microsoft TiVo Consumer Electronics Manufacturers Device Power PERSONAL EXPERIENCE OF CUTTING THE CORD: THE LAUNCH AND INITIAL EXPERIENCES When we made the decision to cut the payTV cord Verizon was charging $171 per month. Wemoved to Comcast for an internet-only access price of $50 per month with no contract. The nearestVerizon would come was $85 at a similar downstream rate, but higher upstream rate. The Comcastservice includes two one-time fees a $35 set-up and the cost of a DOCSIS 3 modem $50. So overthe next 6 months the total Comcast cost will be $385 + Netflix +Amazon, while to stay with theVerizon bundle we would be playing $1026. This gives a total annual saving of $545 in the first 6months, being on no contract we will likely look again at what offers are available. We have experimented with Amazon Prime Instant Video ($6.58 per month), Netflix ($7.99 permonth), Hulu Plus ($7.99 per month), Wal-Mart / Vudu, iTunes, and the Sony Store. Overall theexperience is one where there is always something to watch. The Netflix Instant Queue continues tohave a long list of interesting movies and shows. The quality of our TV viewing time in the eveningis much higher. The children are not exposed to TV adverts while watching their programs. It is tobe seen if we tire of Netflix, but at present it has become our primary viewing service. We watchroughly 180 shows per month (kiddies shows make up a big % of that number) across the family for$14.57, 8c per show. LOOKING INTO THE LONG TERM ON INTERNET TV The primary challenge is it’s just not that easy to adopt Internet TV. There are complexoverlapping services. There are lots of devices, some of which still feel as if they are targeting geeksnot the mass market. Every viewing household is different, this is a critical point, it’s a household’sdecision, so with any group decision, indecision remains the likely outcome. 41 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 There is also the risk of your ISP (Internet Service Provider) may introduce a cap. Comcast hasa 250GB monthly cap which it is not currently enforcing, but what will happen when it does? Willthe end of the month become no-video days? Will another month’s charge be taken, and then theregular monthly charge applied a few days later; as AT&T does on its mobile data plans. Thisuncertainty limits viewers’ willingness to adopt internet TV. The Free To Air service is not available for all households in the US, my personal experience iswe are only 25 miles away from the digital terrestrial transmitter in New York City and cannot receivethe service. Cutting the payTV cord for some means going to just internet TV; though payTVproviders do offer a package with just the broadcast channels for $20 to $25 per month, includingdigital STB rental. People’s viewing habits vary widely, the convergence of the internet and consumer electronicsenables these diverse habits to be well served. So payTV providers need only adapt their bundles tobetter support a greater diversity of consumption models to limit the attractiveness of cutting thepayTV cord. No internet TV offer is complete, Netflix and Hulu combined are the closest, but as discussed inthe OTT chapter the future of Hulu remains unclear. For the time being it provides a catch-up TVservice for those wishing to cut the cord. But it could revert to TV Everywhere service for existingpayTV customers. Or the Studios could go their own ways, with each studio offering their content,as it the case in the UK and many other countries. OTT will remain niche as a primary viewing option. The multi-channel offer is simple for sportsfans, for lean-back viewers, and for high volume viewers (couch potatoes). It’s priced so that it’s atthe upper end of what most viewers are prepared to pay, but not so much as to motivate action. TheStudios realize this and want payTV operators to get smarter with the packaging and bundles tosqueeze additional cash out of those prepared to pay, and offer innovative sponsorship options towin additional advertising and sponsorship dollars. Our experience of cutting the cord to date is it has improved the quality of our life; a couple ofanalogies Id use are:  Its like when you finally realize that eating a little less and exercising a little more (watching only what you want when you want) makes you feel a whole lot better (gives you more time in the day and leaves you feeling better entertained).  PayTV makes us pay for the buffet before we can get to the choice cuts, e.g. HBO. OTT enables us to go straight to the choice cuts, though from the previous sitting (here the analogy breaks down a little as the entertainment value of a show does not go off, and gorging through a whole season of a TV show is just so much better an entertainment experience than the weekly drip feed). One aspect my wife is guilty of is with old shows it’s easy to see the synopsis of the series online,essentially jumping to reading the last page of a book once you’ve gone a few chapters into the bookto see what happens. This can potentially degrade the entertainment value, but all it takes is a littleself-discipline. 42 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Most of the cord cutters I know tend to be time poor with more a philosophical dispute at beingasked to pay for the buffet and extra for the choice cuts, when all they want is the choice cuts. Iobject to paying for ESPN, comparing to taxes is incorrect, that’s the government and we live in amature democratic society, so we have no choice it’s the law. But in the free market we have achoice on where we spend our money, and payTV providers will need to respond to this to limit theimpact and risk internet TV poses to their business. The TV ecosystem is a unique market; it’s hard to draw analogies to other industries in history.But the dual forces of technology development and customer empowerment will continue to changethe industry. Some future scenarios, which I can guarantee with all predictions, are wrong:  Google buys Hulu and becomes a network for catch-up and original content allowing artists, creators and producers to sell direct and make good business, not wait for a studio to sign them. Or Google buys Netflix, adopts their recommendation engine and becomes the dominant source of video on demand globally across paid for and free content.  The Studio system moves to a more open web-model, less conglomerates, richer more dynamic content, and production companies become like start-ups where anyone can fund them, not just the established conglomerates. Current content slips from their control, so they hike up prices on the back-catalog they own. Social networks, recommendation engines, etc. flatten the barriers that existed between production and consumption, weakening the distribution companies of the content owners.  Gone are the days where good shows are cancelled because they were scheduled against a competing channel’s blockbuster, or a good show gets its slot shifted through a season and never builds an audience, e.g. Firefly and American Gothic. Good can be measured over a more considered period of time and targeted to the right consumers.  The TV experience focuses on the individual consumer, rather than broadcast. For example, I detest reality TV shows, they are formulaic and as a result incredible boring. I will never be subjected to a recommendation or advertisement for such a show once the trusted broker knows of my dislike for such shows.  Sports leagues focus on D2C (Direct to Consumer) for their premium service as it delivers a global customer base and can be structured to squeeze out the maximum revenue possible from each customer.  Stores add levels of subscription pricing in reaction to customer demand, e.g. iTunes adds subscription options, and the more you pay the closer to shows’ broadcast dates you can watch.  Content prices rise dramatically as content producers demand ever higher compensation; advertising dwindles as customers prefer uninterrupted content over interrupted content driving up TV network fees. PayTV reaches a breaking-point where self-selection becomes the only way to manage the cost spiral and keep customers, so Netflix-like service becomes a base tier in the self-selection world of payTV. 43 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  The window between theatrical and VoD release shortens to the point of maximizing margin, which for some films will be simultaneously as we see with the OTT provider Film4oD.  Product placement goes everywhere and interactive on the second screen of the tablet. Opening up new sponsorship and advertising revenues, which bypass payTV operators has they cannot deliver a coordinated interactive service to the content owners unlike Apple, Roku, and in time Google TV/Android.  HBO Go becomes a stick to beat the PayTV providers on rates and a way to maintain keep people buying HBO through their payTV provider. No payTV provider can afford not to have HBO in their offer.  We pass Peak TV, investment in shows drops, quality drops, viral campaigns and marketing spin dominate, advertising increases and becomes more intrusive, TV viewership (audience and hours) drops as people go elsewhere to games, social networks, reading, hobbies, shopping, exercise, talking, enjoying life rather than passively sitting there watching yet another reality TV show.  The Social TV fad fades, it becomes part of their recommendation engine, people just want to watch a show or movie and not get interrupted by someone’s opinion on what they are watching, but they do care about those opinions in making the selection. Video within social networks continues to grow, but it remains snack-size. The list of future scenarios goes on; it will be an exciting time for the TV ecosystem. Othercountries are going to be very different to the US depending on penetration of adequate broadband,regulation, availability of national content rights, availability of FTA, penetration of payTV, contentconsumption patterns, and the role of national content champions like the BBC. Examining the UKit will likely be a head-to-head fight between Netflix and Amazon (LOVEFiLM) for OTT, with Skyalso offering a compelling TV Everywhere offer for its existing customers and a niche of pureinternet customers, the BBC and other broadcasters will continue to deliver catch-up TV and theircontent library over the Internet, and the Smart TV or internet TV device will manage itspresentation. US generated content remains important in most open markets. Netflix and Amazon have ahome advantage they can take into other markets through scale, technology, recommendation engine,and UI (User Interface). Telecom Italia’s CuboVision demonstrates people do want access topopular US content. Most other markets are unlikely to see the obsession on payTV cord cuttingdiscussed in the North American market. Rather a multi-platform consumption model will existacross payTV and internet TV as a secondary platform to enable the studios to maximizeinternational revenues which have generally underperformed compared to North American market. KEY POINTS FROM THE VIEWER SURVEY From the Viewers’ perspective OTT is only of interest to a niche of the market in the short tomedium term; it is generally considered complementary to existing payTV services, with only 17% /15% (NAR / WE) of viewers considering it as a replacement to existing payTV. And this falls to 7%/ 5% (NAR / WE) when viewers are asked if they are considering moving from their current payTVservice to Internet TV. 44 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Some of the reasons given for the resistance to cutting the payTV cord are:  Sports content, especially live sports content;  Internet TV content is old for subscription services, and expensive for new content (bought / rented through an online store);  Difficulty in getting the whole family onboard with the idea;  DSL broadband barely supports BBC iPlayer, so viewers are not convinced it can support a replacement for payTV; and  Complexity, confusion, general suspicion on the readiness of Internet TV. However Internet TV is setting viewers’ expectations on what on-demand and catch-up TVservices should include and how they should be priced. A challenge is customers are expecting ondemand to be available as part of the payTV package. This requires careful balance, there needs tobe a free tier, and then perhaps a subscription level similar to Netflix but at a discount, and then thePPV (Pay Per View of recent blockbuster movies or TV series). DISH is doing somethinginteresting in storing the last 8 days of prime-time TV shows, Hulu like service for ‘free.’ User interface was criticized especially those that have Roku or Apple TV experiences. There isthe challenge of the internet data plan, hence why we’ve seen Sky in UK offer triple play includingbroadband to get around this issue. On Viewers feelings about their current PayTV bill roughly 50%/ 40% (NAR / WE) consider the payTV bill high or too much and are considering action. On awareness of TV Everywhere / Multi-Screen TV, NAR has higher awareness (65%), while inWE it’s roughly equal between those that have heard of TV Everywhere and those that have not(44% / 46% Yes / No). For those customers that had used TV Everywhere, just over one quarterenjoyed their experience. The rest had problems with the service, were confused by the service orfound it incomplete, e.g. only worked in the home though they thought it was TV Everywhere, or therange of content / channels was small compared to their subscribed package, or the tablet app didnot allow streaming. There is a long list of sources of frustration from customers in their initialexperiences with TV Everywhere. In the second phase of TVE, we need to get it right, else payTVoperators continue to leave the door open to the OTT providers to dominate secondary viewingmaking the step to cutting the cord very rapid and painful for the operator, as well as capping newrevenues. RECOMMENDATIONSRECOMMENDATIONS FOR PAYTV PROVIDERS Regardless of access technology hybrid TV has become a core part of most payTV providers’strategy, as predicted in the previous version of this report. For Satellite and Cable TV providers thefocus is in supporting on demand, interactive services, and even TV everywhere for STB recordedcontent. However, as discussed earlier, the interactive services are increasingly going to the 2ndscreen (PC, tablet or smartphone) given the fragmented mess across payTV STB and failed industryinitiatives such as Canoe Ventures. 45 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 For IPTV (DSL) providers the drive for Hybrid TV is much broader in meet a range of networklimitations and customer expectations on the base payTV experience. VDSL and more recent FTTHpayTV networks have focused generally focused on pure IPTV STB. Though hybrid TV hasbecome main-stream, it must now be viewed as part of an integrated solution in delivering anenhanced viewer experience. PayTV providers’ strength today comes from their network and customer relationship. Both areunder attack from the internet removing the barrier of the TV network and consumer electronicsbuilding new relationships in TV viewing. However, the hours customers spend watching TV overtheir networks and an established and sophisticated business model will prove resilient in themedium term. The skill comes in ensuring they remain the content owner’s best path to cash fromthe customer. Hence ensuring continued high levels of consumption (viewing times), and leveragingtheir network-related assets and services to maintain an edge. It will increasingly involveunderstanding the customer and delivering a more personalized experience, than operating thenetwork. Examining Netflix, its large content library and strong value proposition are important, butit’s the recommendation engine that ensures the customer always has a quality experience wheneverthey sit down to watch TV that’s the clincher in acquiring customers. Initial TV Everywhere offerings were a misstep, payTV operators must listen to viewers’expectations on content and features, if they cannot match them then consider partnering with aprovider that can, rather than deliver offers that frustrate and degrade the viewers’ opinion of thepayTV providers’ ability to offer internet TV services. Studios are keen to work with payTV providers in exploring new business models such as:  Get smarter with the packaging and bundles to squeeze additional cash out of those customer segments prepared to pay; and  Offering innovative interactive services to win additional advertising and sponsorship dollars. The latent threat is by 2017 67% US and 50% WE (Western European) viewers could be usingOTT TV for secondary viewing. This caps on-demand and potential TVE revenues for payTVoperators; as well as deploying platforms that could deliver interactive experiences, and newsponsorship and advertising opportunities that payTV providers will struggle to match because oftheir fragmented networks and legacy STBs. An issue highlighted in both the hybrid TV deployment examples and the country specificanalysis is scale is becoming critical to payTV operators. They need scale, ideally global scale, fornegotiating content rights by having a large audience; scale for efficient operations, e.g. networkoperations centers that cover multiple countries, and negotiating with vendors; scale for adequatemarketing; and scale to simply compete with the global scale of the OTT TV providers. PayTVproviders will need to consolidate both within country (e.g. cable operators) and multi-nationally(across all payTV operators) to compete. Like the telecoms industry, payTV standards are both a strength and a weakness to the industry.Given the rate of innovation today, standards are increasingly becoming an impediment tocompetitive performance as they delay payTV operator action and focus the industry on technicalissues not core business and user experience issues. PayTV operators have implemented a plethoraof interactive standards over the years. Also in exposing those capabilities they have done so as asilo, e.g. AT&T U-verse offers APIs that only work for its customers. 46 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Interactive services and advertising revenues are at risk from the Android / Apple ecosystemmigrating onto the TV. Developers of 2nd screen experiences are focused on delivering slickexperiences on these platforms 2nd screens (tablets and smartphones). The payTV network is a riskof being bypassed for interactive services as Internet TV devices (Roku, Apple TV, Google TV,Boxee, etc.) offer easy to use APIs focused on simply making the experience better for their users.The failure of Canoe Ventures demonstrates as an industry we need to look at alternative ways toremain relevant, there is no clear answer; rather the industry should experiment with a number ofoptions as discussed in this weblog article, http://www.alanquayle.com/blog/2012/03/what-the-mobile-industry-can-l.html. The user interface is critical. Customers can spend $50 on a Roku device and experience a muchslicker and engaging experience than current STB provided by the payTV provider and generallyrented at $5 to $10 per month, which over a 2 year contact costs them 2.4 to 4.8 times the price.PayTV providers must focus on delivering leading experiences, not continue the traditional densegrid of information. In reviewing the principles of greater consumption and how the PayTV providers candifferentiate:  Recommendations  From sophisticated algorithms, to simple things such as top rated, “last night’s TV,” or “what’s new” given the bounded problem PayTV operators should be able to match Amazon’s engine.  Package up-sell, essential it’s related to viewing habits. Local content matters, payTV operators have the edge of their subscription-based business model (e.g. Sky UK winning the Premier League rights.)  Search integrated into the EPG and available across PC, tablet, mobile and STB  PC and tablet are the best search tool for programmatic content, discover on the PC and view wherever (TV Everywhere.)  Integrated security and content protection across the network and devices to keep customers safe as their service becomes interactive. For the payTV provider focusing upon the user is going to be critical to remain relevant in theemerging TV landscape, as in the limit it’s the customer that’s going to decide.RECOMMENDATIONS FOR SUPPLIERS Hybrid support should be a core capability of all TV solutions, across the backend systems, STBsand middleware. Solution providers should look to the broadcast industry as potential customers especiallySatellite TV and Terrestrial TV providers. The traditionally siloed payTV industry can no longerafford such fragmentation, scale it critical to survival and integrating innovation. 47 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Standardization is a tough issue, HbbTV will dominate, but it’s unclear such a global standardwill be enough. Speed of action and learning what matters to the customer are more important todaythan some specification decided by engineers in a room. What this means is suppliers need to bemore flexible, adopt web-principles, use open source, match and better web experiences, elseviewers’ attention will increasingly move to Internet TV and its consumer electronics suppliers.Netflix on average already has 1 hour per day viewing from its customers, which has been taken frompayTV viewing time. Integrated security and content protection across the network and devices to protect customersas their devices come online. Though not a significant threat today, it will increase, as we seeAndroid devices being increasingly affected by security issues. Suppliers must aim to be the strategic partners of the payTV providers, supporting them withnew services and user experience innovations with a far leaner model, enabling them to remainrelevant to their customers. Else there is a long-term risk of the consumer electronics suppliers andthe “build-it-yourself” model of internet service providers replacing traditional vendors. Overall suppliers need to respond to the following three themes from payTV operators:  Hardware independent solutions to avoid the same vendor for STB and middleware, with the objective of lowering cost and accelerating innovation, e.g. Comcast’s RDK (Reference Design Kit).  Software (middleware) independent user interfaces based on HTML 5  Software independent applications innovation, i.e. STB applications are not middleware dependent.RECOMMENDATION FOR APPLICATION DEVELOPERS CE-HTML appears to be the one to focus on as a developer, BUT it’s a fragmented mess withoperators and equipment providers creating their own platforms with differing APIs, content rules,little understanding of developers, and little customer education to build an engaged customer base. PayTV Operators need to solve the above problems. Until that is done, focus on the 600M+engaged customers in the iOS and Android ecosystems with second screen experiences, as there arelots of content owners wanting to develop applications for current and legacy content.RECOMMENDATIONS FOR INVESTORS There will be further STB consolidation as scale becomes critical in supporting all TV deliveryplatforms, creating opportunities for M&A. This is true across both tradition and internet focusedSTB suppliers, e.g. Boxee could complement several traditional STB suppliers’ portfolios both from aplatform and technology component perspective. The middleware on the STB and in the network will be a critical battle ground as morefunctionality is added such as on-demand, recommendations, TV Everywhere, UI innovations, tabletand smartphone application support and integration, etc. There are many small middlewarecompanies, e.g. Espial, creating M&A opportunities. 48 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 2nd screen applications, on tablets and smartphones, will dominate interactive TV in the shortand medium term. Companies focused on this space will also become acquisition targets for theintegrated payTV solution providers. OTT TV will be the dominant secondary platform for viewing TV creating opportunities forinnovative interactive service, technology innovations, and business models. Innovations will bemore readily supported in the more open internet TV ecosystem than in the traditional payTVecosystem. The TV ecosystem is well-established with significant regulatory involvement. Innovations thatrock that ecosystem are high risk and likely to suffer from the traditional anti-bodies that stifleinnovation in established businesses. Rather companies focused within the Internet TV ecosystemwill have more room to grow and innovate without the dependence of payTV operator / supplier co-operation. A FINAL NOTE The challenge the payTV industry faces is its strength is also its greatest weakness, a profitablewell-established ecosystem that is resistance to change and hence innovation; the InnovatorsDilemma. The threat from the web-based service providers is latent; over the study period of thisreport OTT TV will become the dominant secondary viewing platform in many markets; 67% ofpayTV households in the US, and likely 50% of Western European households by 2017. It will onlybecome a primary viewing platform for a niche of viewers, with subscription revenues dominating;the situation will financially appear OK. The main threat for the period of study is capping ofinteractive TV revenues, new advertising revenues and losing control of the emergent TVapplications business; which will remain relatively small, perhaps reaching 8-14% of existingsubscription and advertising revenues by 2017. But by 2017 payTV providers in North America and Western Europe will find themselves in aprecarious situation. OTT TV will be capturing the hearts and minds not only of viewers, but ofadvertisers, and in time content owners. So that without adequate response from the payTVindustry, the constant well-funded innovation from the OTT TV providers could finally find theright recipe to attract the bulk of the ecosystem so that core subscription revenues could be halvedwithin a little as 5 years of that recipe being found. But this tipping point is difficult to predict, andmay not happen if payTV operators take adequate action. There is much to learn from the struggles both the mobile and fixed telecom industries havefaced over the past two decades in competing with web-based service providers. They tried andfailed to create application ecosystems, proving unable to open their networks and business modelson terms that make sense for all ecosystem members, they were too self-focused. They have let theuser experience become dominated by over the top providers that are substituting revenues, e.g.Apple’s iMessage is substituting highly profitable SMS revenues. Android phones make is as easy touse OTT services as operators’ services for voice and messaging. PayTV providers and their suppliers must:  Innovate with other ecosystems. TVE must be more than simply delivering TV to other screens. TVE must explore other business models in co-operation with the content providers, advertisers and other ecosystems. Getting smarter with the packaging and bundles to squeeze additional cash out of those customer segments prepared to pay; offering innovative interactive services to win additional advertising and sponsorship dollars; and an 49 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 eBay model in TV content, i.e. bringing content buyers and sellers together and taking a cut of the transaction.  Focus on customer experience. That’s so much more than the TV interface; it’s across every touch-point with the customer. Do not repeat the mistakes of partial service launches that plagued TV Everywhere, it makes payTV operators appear out of touch and incapable of matching the performance of Netflix, Amazon, Apple, Google, etc. Dish Network is doing some great service innovation, but its basic customer service is letting it down, it’s across the whole customer experience. Segmentation is critical, different customers have difference needs, and operators must understand their customers to survive in the long term.  Find a way of acting together with agility. There needs to be some down-side to selfish service provider behavior that invariably kills industry initiatives such as Canoe Ventures and WAC (Wholesale Application Community). Put simply financial markets need to penalize operators for failing to act together in competing with the latent threat from OTT TV.  Consolidate both nationally (cable franchises) and multi-nationally (across all payTV operators) as the OTT TV will bring its global scale to achieve advantages in content rights, cost of operations, vendor negotiations, and marketing power. The current fragmented mess of payTV operators must in the long term either consolidate else wither and die. From the timings discussed in this report, e.g. payTV remaining a niche phenomenon, it wouldappear we have time; but 5 years is but a blink of an eye for payTV providers and their suppliers tofundamentally change their business to focusing on the diversity of customers rather than operatingtheir single network. 50 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 D E F I N I T I O N S A N D T V M A R K E T S I Z E S A N D P R OJ E C T I O N S The purpose of this chapter is to provide definitions on Hybrid TV, TV Everywhere (multi-screen TV) and Internet (OTT) TV to help the reader understand the growing complexity in the TVindustry. Then the rest of the chapter is then devoted to presenting market sizes and projectionsacross the TV industry, as well as country specific analysis. The country analysis was added at therequest of many readers of the previous report that wanted a deeper dive into specific countries giventhe global analysis. We’ll see that the North American model for TV delivery will not be universallyadopted, TV delivery evolution will by diverse with many regional variations. DEFINITIONS OF HYBRID TV, TV EVERYWHERE AND INTERNET TV Hybrid TV is not new; it’s been within the industry’s lexicon for many years. Back in 2004hybrid TV was shown in many presentations as part of the payTV industry’s set top box (STB)roadmap. The transition should not be a surprise, however, for many executives the shift to hybridTV has been a quiet revolution. Especially given two of the telco industry’s most successful TVdeployments, Verizon FiOS (4.5M customers in Q2 2012) and Orange TV (4.7M customers in Q22012), are both hybrid TV, more specifically Hybrid Broadcast Broadband (HBB) TV. CurrentlyHybrid TV STBs account for about 13% of all TV households in 2012, and are expected to reach36% by 2017. At first sight there would appear to be little cause for confusion on what hybrid TV means, it’ssimply the combination of broadcast TV and IPTV for the delivery of a TV service. However, thereare many mis-understandings given the variety of broadcast technologies and the variety of ways TVcan be supported over IP. My objective in this section is to make clear the terms used in this report,to help the reader segment the quite fragmented hybrid TV landscape. Hybrid TV is the delivery of a TV service through both broadcast and IP, for example manyEuropean telcos payTV services use both the free to air digital terrestrial TV (DTT) for broadcastservices complemented by a network-centric IPTV services over a managed IP network (e.g. BTVision) or a network-agnostic service over the internet / unmanaged IP network (e.g. TelecomItalia’s Cubovision.) BT Vision and Telecom Italia’s CuboVision demonstrate the two main categories of hybrid TV:  HBB TV (Hybrid Broadcast Broadband) is defined by the presence of a hybrid STB that is part IPTV, using a managed IP network; and part broadcast, receiving the broadcast digital content from a non-IP service like Digital Terrestrial, Digital Cable, or Digital Satellite.  HBI TV (Hybrid Broadcast Internet) is defined by the presence of a hybrid STB that is part IPTV, using the internet (unmanaged IP network); and part broadcast, receiving the broadcast digital content from a non-IP service like Digital Terrestrial, Digital Cable, or Digital Satellite. This is also referred to as Telco OTT (Over The Top) TV, though the rest of this report I will use the term HBI TV for consistency. 51 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Related TV delivery categories include:  Telco TV or pure IPTV is defined by a STB that only receives and displays video over a ‘managed IP’ network, also called network-centric TV. AT&T U-verse is an example of such a pure IPTV deployment.  Internet TV or Over-The-Top (OTT) TV only uses the Internet to transport video over an unmanaged IP access network connection. Examples include Netflix, Hulu Plus and Amazon Instant Video on a Roku device, it is also termed network-agnostic TV. With the basic HBB and HBI definitions explained, let’s now go a little deeper, Figure 12 showsthe hybrid TV landscape, it sits at the intersections between Broadcast TV, Network-Centric TV andNetwork-Agnostic TV:  Broadcast is the traditional delivery mechanisms of Satellite, Cable and Terrestrial (over the air);  Network centric is Telco IPTV; and  Network agnostic is OTT or Internet TV. At the intersections of these delivery mechanisms resides hybrid TV. At the intersection of Broadcast and Network Centric (termed HBB, Hybrid BroadcastBroadband) lies:  Hybrid Telco is the combination of Digital Terrestrial TV and IPTV, e.g. BT Vision;  Hybrid Cable is the combination of Cable TV and IPTV, e.g. Verizon FiOS; and  Hybrid Satellite is the combination of Satellite and IPTV, e.g. Orange TV. At the intersection between Broadcast and Network-Agnostic is the HBI TV category:Terrestrial / Satellite + OTT. Examples include Canal+ Le Cube, INUK, and TI’s CuboVision. Thefinal intersection is between network-centric and network-agnostic, which though technically feasibleis not yet a focus of any business model. 52 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 12. Mapping the Hybrid TV Landscape Broadcast Network-Centric One way Cable Hybrid Telco Terrestrial TV (Terrestrial + IPTV) Telco IPTV Hybrid Cable Satellite TV (Cable + IPTV) Hybrid Satellite (Satellite + IPTV) Terrestrial / Satellite + Telco / Cable OTT + OTT Over The Top (OTT) TV (Internet TV) Network-Agnostic A focus of many payTV operators since the previous version of this report was written is TVEverywhere, enabling a subscriber to receive their service on a PC, tablet or smartphone, in additionto the STB connected to a TV. To devices other than the STB, the service is generally delivered overunmanaged IP; examples of such services include Sky Go and DISH TV Everywhere. A broadcastTV provider can deliver a video service to the customer’s PC over the internet; this is not consideredhybrid TV. The hybrid TV definition focuses upon the core TV service the customers buy and viewon their TVs in the home via a STB, not ancillary services such as TV Everywhere. The difference between TV Everywhere and Internet TV is not a technology difference, rather abusiness model difference. For TV Everywhere, a payTV provider is supplying a traditionalbroadcast payTV service via a STB to a TV and offers those existing subscribers a TV Everywhereservice to receive generally a subset of the TV service via other devices like PCs, tablets andsmartphones generally through an application or client downloaded to the device. The payTVprovider can also offer a pure internet TV service to customers that do not subscribe to its broadcastpayTV service, like Sky Go, and will charge those subscribers for just the internet TV service. Thenthere are the purely internet based providers like Netflix / Hulu / Amazon that offer their serviceonly over the internet. The term TV Everywhere has been a cause of frustration for customers as device coverage,channel availability, and physical restrictions, e.g. only in the home, have made the term TVEverywhere to be considered a joke. The term multi-screen TV is also used to avoid creatingcustomer expectations that cannot be met, or simply offering the payTV provider’s TV apps for 53 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012devices, and not attaching a particular name to the service. Though as we will see in the case studies,providers like DISH are delivering a full TV Everywhere service to their customers. Today, the market remains confused on the available channels, whether the data counts in thebroadband plan, and what content is available within their subscription and what content must bepaid for. Licensing issues are partly to blame, but these are being resolved as we’ll discuss in the TVEverywhere Survey section of this report. There is also an increasingly unclear need for managed IP for TV delivery because of: broadbandcapacities increasing; compression technologies allow HD quality video to less than 4 Mbit/s; andcontent delivery innovations enabling rate adaptive delivery of streaming TV over unmanaged IP.These innovations explain the growth in the use of HBI TV from satellite providers, and why sometelcos are also adopting this OTT approach, e.g. Telecom Italia’s CuboVision. SIZING THE TV MARKET The Telco TV (IPTV) market, though growing, remains at less than 8% of the total TV marketby number of subscribers through to 2017, as shown in Figure 13. Data is based a bottom-up buildfrom country data to global data. However, as cable, terrestrial and satellite providers are increasinglygoing hybrid, as predicted in the earlier version of this report, a hybrid TV solution opens up a farbroader market opportunity, see Figure 14. There are about 110M hybrid TV subs today (2012),growing to 530M sub by 2017. Such predicted growth explains in part why we’ve seen theconsolidation of Ericsson and Tandberg, and then Ericsson acquiring the broadcast services divisionof Technicolor (2012), and similarly Cisco acquiring Scientific Atlanta (leader in Cable TV networks)followed by NDS (makes software that allows cable and satellite TV companies to deliver encryptedcontent through televisions and other devices). The trajectory is a consolidation of traditionalbroadcast suppliers with IPTV suppliers and increasingly internet TV suppliers. The TV market is predicted to reach 1.57B viewers in 2017, compared to telco IPTV of 110Msubs in 2017. The addressable market for hybrid TV is potentially vast, we estimate 530Msubscribers in 2017. My point here is simply to highlight that the hybrid TV market is much biggerthan just Telco TV, and we’ve seen it become a core component of most payTV strategies in the past2 years. However, as we’ll discuss in this report, TV delivery evolution is moving fast, and TVEverywhere / Internet TV have become equally as important to payTV providers. We must also not forget that there is an important trend underlying the move to Hybrid TV,which is the migration from analog to digital TV. Western markets take for granted that globally itwas in 2012 that we finally had more digital TV than analog TV viewers, shown in Figure 16 andFigure 17. As mentioned in the Introduction section the analog to digital transition has been a multi-decade long change, it is still ongoing, and we similarly cannot expect the convergence of internetand consumer electronics to change the well-established TV ecosystem any faster, people’s habitschange slowly, and existing infrastructure and ecosystems are equally resistant to change. 54 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Figure 13. Total TV Market Size (also includes Free Sat, Free Cable and Free Terrestrial) (Millions) source Alan Quayle Business and Service Development Figure 14. Split between Pure and Hybrid TV Subscribers (Millions) source Alan Quayle Business and Service Development 55 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 15. Source Data for Figure 13 and Figure 14 (Millions of Households) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017IPTV 8 11 12 13 13 14 20 25 27 28Cable 426 442 453 459 470 472 455 435 400 359Terrestrial 530 537 543 550 540 525 505 475 445 408Satellite 131 138 146 150 155 150 153 152 152 155HybridIPTV 10 14 18 22 30 37 45 55 68 82Hybrid Cable 2 3 7 14 25 38 55 75 100 131Hybrid DTT 0 1 2 5 10 25 50 80 115 152HybridSatellite 4 7 15 28 45 70 90 115 140 165Total Hybrid 16 25 42 69 110 170 240 325 423 530Total Market 1111 1153 1196 1241 1288 1331 1373 1412 1447 1480 Figure 16. Analog Versus Digital STB Across All TV Households (Millions) source Alan Quayle Business and Service Development Figure 17. Source Data for Figure 16 (Millions of Households) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Analog Cable 323 299 275 250 223 188 155 131 105 85Analog Terrestrial 455 447 437 425 402 376 350 318 300 265IPTV (Digital) 18 25 30 35 43 51 65 80 95 110Digital Cable 105 146 185 223 272 322 355 379 395 405Digital Terrestrial 75 91 108 130 148 174 205 237 260 295Satellite (Digital) 135 145 161 178 200 220 243 267 292 320Total 1111 1153 1196 1241 1288 1331 1373 1412 1447 1480 56 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 At the request of many readers of the previous version of this report I have in Appendix 1provided analysis of some of the markets that make up these aggregate figures shown in the globalmarket analysis of the previous figures. The aim is to provide a deeper dive into the regionalnumbers and understand the different trajectories of TV delivery evolution. The markets reviewed inAppendix 1 include: Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico,Russia, Singapore, South Africa, Sweden, Turkey, United Kingdom and the USA. These countriesare shown as they presented good regional case studies and I have completed projects focused onthose countries so have gathered detailed and verified market data. The data was collected from interviews with the main TV providers in those markets, gatheringtheir opinions on the trends impacting their market and their subscriber projections. As you wouldimagine, aggregating the household number projections across all service providers in a country oftenresults in more households than exist in that country. So regulator and supplier interviews wereessential to normalize the numbers both for 2011/2012 as well as the projections through to 2017. Data was gathered for more countries than is presented in this section, see Appendix 1, therational for presenting these countries in the main section of the report is they either present a goodregional case study, e.g. Turkey for the Middle East, or there is good confidence on the country’sdata and analysis e.g. USA and China. In the previous version of this report most of the Chinese and Indian market data was missedfrom the analysis. This has now been corrected, in part from several projects I have completed inthose regions has enabled me to gather more accurate data. Though China remains a tough marketto measure accurately as each province behaves as an independent entity and protects its informationwith mis-information, so in gathering market data it needed to be checked and correlated with otherdata sources, which I have tried to the best of my ability. COUNTRY SPECIFIC TV DELIVERY MARKET REVIEWUS MARKET REVIEW: THE MOST PROFITABLE TV MARKET IN THE WORLD The US is the world’s largest TV market and the most profitable with a well-establishedecosystem that squeezes the most money out of its customers compared to any other market. TheUS also has a major influence on the wider global TV sector, for example rights ownership ofpopular US content has proven important in the UK market, as we are witnessing in the battlebetween Netflix, LOVEFiLM (Amazon) and Sky Movies. Telecom Italia is able to create an OTTTV proposition focused on offering Italian customers popular US TV series within 24 hours of beingshown in the US. TV series such as Lost, 24, The Simpsons, True Blood, Big Bang Theory, DirtyJobs, Game of Thrones, Dexter, and Mad Men to name just a few influence global customers’ payTVprovider selection. The US market is made up of 116 million TV homes in 2011 (source FCC) in a highly developedmarket, with extensive cable penetration, well-established digital Satellite services, and an emergingIPTV sector from incumbent operators Verizon and AT&T. The emergence of OTT TV servicesand devices from Hulu, Netflix, Amazon, Roku, Boxee, Apple TV and Google TV, has created anexpanded consumption model with a niche of cord cutters to date as sports content proves 57 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012important to keep viewers buying the payTV bundle, and more practically consumers viewing habitschange slowly so the move to exclusively OTT viewing will take many years, and will likely only applyto a niche of so-called cord-cutters. Today OTT is more a complement to existing review habitsthan a direct replacement. Between 2009 and 2010 Netflix subscriptions doubled from 10 million to 20 million subscribers,through 2011 and 2012 that growth slowed significantly as Netflix was forced to change its chargingmodel by the studios which control the TV ecosystem in the US, this upset many subscribers and italso lost popular content deals such as 1000 shows and movie titles from Starz (owned by LibertyMedia) the original deal signed in 2008 was for $30M per year, it was rumored the annual paymentwas to be increased to near $100M. Starz also wanted Netflix to implement a premium tier ofNetflix subscription to get access to their content. Netflix refused, and the content was removed atthe end of Feb 2012. In June 2012 Netflix subscribers watched over 1 billion hours of video, that’s on average 1 hourper day. As of June 30th 2012 the breakdown of Netflixs subscribers is shown in Figure 18. NoteNetflix makes an introductory offer to new subscribers of one month’s free service, hence thedifference between paid and total subscriptions. Verizon’s FiOS TV and AT&T’s U-Verse served 4.5 million and 4.25 million subscribersrespectively at the June 2012; and are projected to reach 4.8 million and 4.7 million subscribers at theend of 2012, with AT&T U-Verse set to pass Verizon FiOS as it has a larger number of homespassed. Verizon FiOS is a hybrid TV deployment and we will review its numbers in more details in aHybrid TV and TV Everywhere Case Studies: Telco / Satellite / Cable chapter of this report. The controversy over Verizons spectrum holdings started last year (2011) when Comcast, TimeWarner and Bright House agreed to sell Verizon 122 AWS spectrum licenses that covered 259million points of presence for $3.6 billion. Verizon subsequently worked out a similar deal with CoxCommunications involving $315 million in licenses for 20MHz of AWS spectrum. In comments to the FCC, according to the Communications Workers of America, whichopposes the deal, groups and elected officials in Albany, Buffalo and Syracuse, N.Y., as well asBoston and Baltimore criticized the deal and agreements to cross market, saying it would foreclosethe possibility of video/broadband competition via FiOS in their cities. Though Verizon can likelyshow the cost of deployment is uneconomic, especially if underground cabling is required. DirecTV is the top Satellite TV player and second largest pay TV operator, continues to addsubscribers, albeit slowly, while rival DISH lost 1.3% of its subscribers in 2011, ending the year withjust below 14 million users. In 2011, DISH paid US$320 million to acquire movie rental companyBlockbuster, with the objective of building a TV Everywhere proposition. There remains in themarket speculation on whether AT&T or Verizon would buy a Satellite TV operator to enable it todeliver a full national TV service, as we have seen the incumbent operator do in France. Partnershipsattempts have generally not been successful, as was discussed in the Hybrid TV and TV EverywhereCase Studies: Telco / Satellite / Cable chapter of this report. 58 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 18. Breakdown of Netflix Subscribers (source Netflix) Cable penetration peaked at 69% of TV households in 2001 and with subscriber numbers fallingslowly, penetration is forecast to reach 46.7% of homes by 2017, with 56 million cable households.At the end of 2010, 75% of cable subscribers took digital signals, which is 39% of TV households.By end-2017 digital penetration will rise to 46.7% of TV households, as all cable subscribers will bereceiving digital signals by then, with some of the smaller cable franchises being the last hold-outs inthe conversion to digital. A major reason driving the cable operators to upgrade to digital is the threat posed to theirsubscriber base from satellite TV and IPTV, which have both been taking their market share. About29% of US TV households have digital satellite subscriptions in 2011, 34 million homes. Satellite isexpected to slowly decline, though will likely remain flat for 2012 as DirecTV lowered the overall listprices of a key sports package, NFL Sunday Ticket, down to $200-$300 per season from $335-$385last year. Sports remains a critical package for payTV, and part of the reason migration to OTT willbe limited. Current customers will pay only $199.95 for the NFL offering, more than 40 percent lessthan the 2011 price. The higher price point is for NFL Sunday Ticket Max, the premium service that 59 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012gives subscribers access to online/mobile, highlights on demand, and the popular Red ZoneChannel. Despite the maturity of cable and Satellite, there is still a market for IP-based video services,thanks in part to the power of the triple and quad-play bundles (voice (fixed/mobile), broadbandinternet and PayTV). AT&T is set to dominate the IPTV market and by 2017, 14.5 million homesare forecast to take IPTV services as their primary TV service, a penetration of 12%, up from 2011penetration of 7% (8 million subscribers). The principal drivers for this growth are customer savingsfrom the bundled offer and subscriber dissatisfaction with Cable and Satellite customer service. North American telcos, led by Verizon and AT&T, have succeeded in selling IPTV service toalmost 40 percent of their broadband subscriber base. That is not to say telco TV now reaches 40percent of all homes. That statistic means the tier one telcos are selling video entertainment to 40percent of their customers who buy broadband access. Since telcos have almost half of all broadband customers, and since broadband is purchased byabout 80 percent of U.S. households, we can roughly estimate that telcos now sell video services toperhaps 20 percent of U.S. households. There are some important implications. We could argue that40 percent video penetration of a service provider’s own customer base is “about as good as it isgoing to be,” when strong cable TV and satellite TV competitors own the rest of the customers, andwhen taking a customer therefore is tough and expensive. In any market with three dominant and well-heeled contestants, you might expect an ultimatemarket share distribution that could easily be split three ways, with any single contestant getting 20percent to 40 percent share. If telcos have 20 percent share, could that share double? In principle,yes. If telcos get 30 percent share, could share then double again? Probably not, if the other twocontestants (satellite and cable) continue to perform. But there is one big change in potential market share structure that long has been speculated,namely a purchase of both U.S. satellite companies by one of the tier-one U.S. telcos. That, inprinciple, could mean telcos then would have as much as 60 percent share of video servicecustomers. Even if such an event took place the overall TV household numbers are unlike to changesignificantly. For the moment, telcos are doing about as well as they can, using only their fixednetworks. As content prices continue to rise, scale will be critical and a Satellite TV purchase wouldenable a Telco to achieve dominant scale. As we have seen in France, where Orange TV is availableover its broadband network as well as Satellite. Digital terrestrial TV (DTT) has little impact on the US market, given the high take up of payTVservices. For many US TV households it proves challenging to even receive DTT signals, my ownexperience being only 25 miles away from the transmitter in NYC (New York City) and being unableto receive the signal is common. People in NYC (New York City) also complain about not beingable to receive the DTT service where the mast is located. By 2017 about 12.6% of TV householdswill receive only DTT while roughly double that number will receive DTT as a secondary service. And finally OTT, today OTT is primarily a secondary service (10.6M household in August 2012)with a small niche of subscribers using it as their primary viewing platform, roughly 200k in 2011.But that is set to grow as payTV prices continue to grow and the continued economic uncertaintyforces families to make a decision to move to just broadband internet rather than paying $600+ peryear for a payTV bundle. Note most of those families are considered to be DTT viewers, with onlythose unable or unwilling to receive DTT being counted as OTT primary viewers. 60 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 In 2012 the number of OTT subscribers is expected to jump to 400k. And by 2017 the numberincrease to 1.4 million as a niche of subscribers change habits to become primarily on demandviewers. However, by 2017 roughly 67% of PayTV households are estimated to use some form ofOTT service, whether it’s Amazon Instant Video on Roku, or their payTV provider’s TVEverywhere service. Viewing habits will have modified significantly on how and where TV is viewed,but cord-cutting is likely to remain niche as the PayTV ecosystem does its best to maximize revenues. Figure 19. USA TV Household Status and Projections (Millions of Households) source Alan Quayle Business and Service Development Figure 20. Data for Figure 19 (Millions of Households) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Digital Terrestrial 16 15.8 15.6 15.4 15.2 15.1 15.1 15.1 15.1 15.1IPTV 3.4 4.7 6.2 8 9.7 11.3 12.7 13.4 14 14.5Analog Cable 23 18.8 15.4 11.8 9.7 6.8 5 3 1 0Digital Cable 41 43.2 45 46.8 47.9 50 51 53 55 56Digital Satellite 31 32.5 33.3 34 33.9 33.6 33.4 33.1 32.9 32.8OTT 0 0 0.1 0.2 0.4 0.6 0.8 1 1.2 1.4Total Households 114.4 115.0 115.6 116.2 116.8 117.4 118.0 118.6 119.2 119.8TURKEY: ARCHETYPE OF THE MIDDLE EAST The Turkish TV market is one of the largest in Europe with over 9 million television householdsin 2012. Analog terrestrial and digital satellite services are the dominant platforms with 50% ofhomes using satellite TV service, of these 15% were payTV services. Free satellite is a commonfeature of many Middle Eastern markets and provides a significant barrier to entry for payTVservices in this region. Three services dominate the payTV market: the satellite platforms Digitürk(Çukurova group) and D-Smart (Doğan Group) and the cable TV service Türksat (nationaloperator). 61 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Data from the RTÜK (Turkish Radio and Television Supreme Council) state there were a totalof 1.2M analog cable subscribers and 200k digital cable households in 2011. There are 3 mobile TVservices from the main mobile networks operated by Avea, Türkcell and Türk Telekom. IPTVsubscribers are at roughly 550k in 2011. The Turkish Law on the Establishment of Radio and Television Enterprises and their Broadcastshas been repealed by a new law that was adopted by the Turkish Parliament on 15 February 2011 andentered into force on 3 March 2011. The new law was prepared with the intention of solving someof the problems the Turkish media sector. The key changes are:1. The Turkish Media Sector has been regulated in accordance with EU standards. For example, the Audiovisual Media Services Directive 2010/13/EU has been taken into consideration in terms of the responsibilities of cross-border media service providers. The scope of Art. 3, titled “Definitions”, is enlarged to include the new concepts mentioned in the Directive. Namely, new items such as European works, media service provider, editorial responsibility and commercial communication have been added.2. The articles relating to advertising have been revised and broadened. The time allowed for commercial breaks is limited to 20%per hour while the media service provider decides on the frequency of the breaks. Product placement is permitted in cinema and TV films, TV series, sports and entertainment programs, provided that it does not infringe the editorial independence and responsibilities of the respective media service providers.3. The period and date of the transition to digital terrestrial broadcasting have been clarified. The procedures relating to the frequency planning are regulated in detail in Art. 26. A provisional article declares that the transition to digital terrestrial broadcasting has to be completed in 2015. The term of the broadcasting license is extended from five years to ten.4. The partnership structure of radio and television enterprises has been revised. One of the most important changes concerns the structure of media companies. However, with the new law, the ratio for the share of foreign capital has been raised to 50%. DTT progress has been slow; there were trials in 2006 but little progress towards a full launch,perhaps starting in 2013, though opinions vary significant on this date. The delay in getting a DTTservice up and running has given free-to-air satellite a significant lead, likely insurmountable. Theanticipated analog switch off date has been 2016 for several years, while the DTT launch date ispushed back year on year. Free-to-air satellite offers hundreds of channels, supplemented by 25domestic channels available on analog terrestrial. By 2017 DTT will reach about 3.5 millionhouseholds, analog is anticipated to still have the larger share at 3.8 million households, whileSatellite will be at 10.8 million, the majority being free Satellite, see Figure 21 and Figure 22. The cable operator Turksat started digital upgrades in 2010, though it proceeds slowly. TurkTelecom delivers IPTV as part of a triple-play bundle that targets affluent demographics with itsfiber-based service is gaining market share, with 550k IPTV subscribers in end of 2011. By 2017 thenumber of IPTV households is anticipated to reach 1.1M subscribers, while cable will have grown to1.7 million households. OTT TV experiments have been undertaken by a number of serviceproviders, and will likely enter the market in 2013 and appeal to a niche audience, reaching perhaps340k by 2017. 62 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 21 Turkish TV Household Status and Projections (Millions of Households) source Alan Quayle Business and Service Development Figure 22. Data for Figure 21 (Millions of Households) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Analog Terrestrial 8.4 8.2 8 7.8 7.6 7.2 6.6 5.8 4.8 3.8Digital Terrestrial 0 0 0 0 0 0.3 0.8 1.5 2.5 3.5IPTV 0 0 0 0.1 0.2 0.4 0.6 0.8 1 1.1Analog Cable 1.2 1.2 1.2 1.2 1.3 1.3 1.2 1.2 1.1 1.1Digital Cable 0 0 0.1 0.2 0.3 0.3 0.4 0.5 0.5 0.6Digital Satellite 7.9 8.6 9.2 9.6 10 10.2 10.4 10.4 10.6 10.8OTT 0 0 0 0 0 0.1 0.1 0.2 0.3 0.3Total Households 17.5 18.0 18.5 18.9 19.4 19.8 20.1 20.4 20.8 21.2BRAZIL: SELECTING ITS OWN DTT TECHNOLOGY GIVES SATELLITE AND CABLE AN EDGE Since the regulator, called Anatel, removed restrictions preventing new entrants from accessingthe cable market in 2010 the payTV market has grown rapidly reaching more than 12 million in 2012.With Digital Cable services growing rapidly; providing a richer choice in content, HD, and on-demand services. Legislation (Bill 29/116) approved by the Senate in 2011 allows telcos to launchIPTV services, the bill enables the entrance of telephone companies in the IPTV market, and iteliminates restrictions on foreign capital in cable TV, it also set a quota policy for national contentbroadcasting. The Satellite market has also become quite competitive with 6 operators, whichensures none will dominate the market unlike say the UK, which enables Sky to buy the sports rightsand hence dominate the market. Most (69%) of the 43 million TV households, see Figure 23 and Figure 24, continue to useanalog terrestrial TV in 2011. Though lagging many LATAM countries, Brazil’s payTV market isfinally growing rapidly, with the number of primary analog terrestrial TV households dropping to 63 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 201260% in 2012. Telco’s IPTV services are planned to target more affluent areas, with Satellite beingtargeted as a mass market service. Brazil Telecom’s Videon VOD service was the first IP-based TVservice to go live, in late 2007. But like many other markets a VoD-only service struggles unless itadopts the model of Netflix of a low fixed subscription and access to tens of thousands of shows andmovies. Net Servicos (Net) accounts for 80% of cable households after a period of consolidation in themarket, it acquired operators Vivax, Big TV and ESC 90 Telecomunicacoes. Second-place MSOTevecap (TVA) was acquired by Telefonica in 2007. Telefonica then expanded its payTV service bylaunching a Satellite TV services and carrying the dominant content owner Globosat. NoteTelefonica owns 11% of Telecom Italia so if Telefonic bought TI outright there could be furtherconsolidation in the Brazilian market. But this is unlikely at this time given the economic struggles ofthe Southern European countries. DTT was launched in December 2007. DTT STB sales remain slow because of high set top boxcosts given the Brazilian regulators choice of the ISDB-Tb standard. Analog switch-off remainstargeted for 2016, though it is possible this could be delayed, the model shown in Figure 23 assumesit is closed down on schedule, but recently reports indicate this is likely to slip. ISDB-Tb stands for International System for Digital Broadcast, Terrestrial, Brazilian version. Itis a Digital TV system based on Japanese ISDB-T (Integrated System for Digital Broadcast,Terrestrial). The ISDB-Tb system is also known as SBTVD (Sistema Brasileiro de Televisão Digital,Brazilian System for Digital Television in English) and is used in Brazil, Argentina, Chile, Peru,Venezuela, Bolivia, Ecuador, Costa Rica and Uruguay. Hopefully this greater addressable market willhelp drop the price. ISDB-Tb was developed by a Work Group composed by members of Brazilian Ministry ofCommunications, National Agency for Telecommunications (ANATEL), Brazilian Institute forInformation Technology (ITI), Technology Development and Research Center (CPqD), severalBrazilian Universities, R&D institutes, Organizations related to the matter (broadcast professionalsassociation, broadcast companies association, etc.) and electro-electronics manufacturers. ISDB-Tb differs from original Japanese ISDB-T by using MPEG-4 (H.264) as videocompression system and a middleware called Ginga composed by procedural (Ginga-J — Javaportion) and declarative (Ginga-NCL — NCL/Lua portion) modules that allow more complexinteractive TV programs. Implementation of ISDB-Tb (SBTVD) on the network side has progressed according to planwith over 65% of the Brazilian territory covered. But in most locations the transmission is stilllimited to one or two channels and most of the broadcasting is not yet in High Definition, except forsome soccer matches and locally produced soap operas. Globo is the dominant TV player in Brazil, owning the top terrestrial network. The companyalso controls leading cable operator Net and thematic channel provider Globosat. It also owns partof DTH platform Sky. Behind Globo, the other four national broadcast networks: Sistema Brasileirode Televisao (SBT), TV Record, TV Bandeirantes and Rede TV all struggle for a small portion of themarket. Globo are likely to remain the dominant content provider, and in control of the criticalsporting rights, at least for the next 3 to 6 years. 64 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 23. Brazilian Market Status and Projection (Millions of Households) source Alan Quayle Business and Service Development Figure 24. Data for Figure 23 (Millions of Households) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Analog Terrestrial 35.3 34.5 32.7 29.6 25.4 21.2 14.3 7.3 3.5 0Digital Terrestrial 0 0 0.6 2.1 4.7 7.5 11 15 17 19IPTV (Digital) 0 0 0.1 0.3 0.6 1.1 1.8 3.2 4.5 5.5Analog Cable 3.2 3.2 2.5 2.1 1.7 1.2 0.9 0.5 0 0Digital Cable 1.1 1.5 2.7 3.4 4.1 5 6 7 8 8.5Satellite (Digital) 2 2.9 4.3 5.5 6.5 8 10 11 12 12Total Households 42 42 43 43 43 44 44 44 45 45CHINA: TOO BIG TO IGNORE BUT POLITICS DOMINATES In the previous version of this report most of the Chinese market was missed from the analysis.This has now been corrected, in part from several projects I have completed in the region which hasenabled me to gather more accurate data, though China remains a tough market to measureaccurately as each province behaves as an independent entity and protects its information withmisinformation, so in gathering market data it needs to be checked and cross-correlated. With over 540 million TV sets to target, China is considered an interesting market by manyequipment suppliers and content owners. But regulation from State Administration of Radio, Filmand Television (SARFT) and the competing agency the Ministry of Industry and InformationTechnology (MIIT) ensures like the Chinese Internet, Chinese TV will remain dominantly Chinese.There are rumors of the creation of a super-agency across SARFT and MIIT, this is unlikely giventhe people and institutions involved. 65 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 OTT / online TV is rapidly growing and likely to play an important role in China. CCTVlaunched an online TV network called China Network Television (CNTV) in 2009 to address someof its loss of viewership to internet-based TV services as well as more popular terrestrial channels.Search engine, Baidu launch its online TV service under the brand Qiyi, in 2010. The Qiyi site offersfilms and TV series in SD and HD. Other internet online video providers include Youku and Tudou(Chinese versions of YouTube), which have recently agreed to merge as they struggled withprofitability. Android tablets are popular in China as people buy them rather than PCs, so the inprojections we make, see Figure 25 and Figure 26, is an assumption that OTT will play an importantrole in the Chinese TV market. DTT began broadcasting in 2008, when the government selected the home-grown DMB-T/Hstandard. By 2010 standard-definition services were rolled out to all 333 cities targeted for coverage.DTT was also extended to 716,600 villages with 20 households or more during 2010 and into early2011. CCTV’s (the main broadcaster in China) coverage extends to 95% of the country, giving it apotential audience of more than 1 billion viewers. Its output exceeds 200 hours a day and aroundtwo-thirds of programs are produced in-house, it the dominant local champion, similar to the BBC inthe UK. Its TV library runs to 200,000 hours, plus another 22,000 hours of films. Of CCTV’s 15analog and digital channels, three are aimed at audiences abroad. CCTV also operates several pay TVchannels through China Digital Media. China is a unique market; no firm date has been given for analog switch off, in part because thegovernment does not want to cause unrest in the poorer central regions which are the predominantFTA analog terrestrial viewers. The black market for Satellite TV is large with black market receiverseasily available, and dish mounting is rarely hidden. China is the largest cable TV market in the world, with 187 million subscribers. Completeswitchover to digital cable is officially scheduled for 2015, but from interviews the model predicts2017 as the more likely date. The most difficult areas to convert will be in developing rural regions,where many operators are unable to fund the necessary upgrades, and again politically thegovernment does not want to frustrate the population. Figure 25. China Market Status and Projection (Millions of households) source Alan Quayle Business and Service Development 66 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 26. Data for Figure 25 (Millions of Households) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Analog Terrestrial 200 195 190 180 170 160 150 140 130 120Digital Terrestrial 1 5 10 22 35 44 55 66 77 88IPTV (Digital) 0.5 1 2 5 10 18 25 33 39 45Analog Cable 120 110 100 80 62 40 30 20 10 0Digital Cable 50 65 83 107 125 148 159 168 176 182Satellite 28.5 34 35 36 38 39.5 40 40 40 40OTT 0 0 0 0 0 0.5 1 3 8 15Total Households 400.0 410.0 420.0 430.0 440.0 450.0 460.0 470.0 480.0 490.0INDIA: CABLE STAGNATION AND SATELLITE TV GROWTH In the previous version of this report the Indian market was under estimated, projects in theregion have enabled much more information to be gathered. India is an enormous, fast-growing,market which, with China, offers significant opportunities. India has 227 million households, ofwhich only 77 million are in cities; there are 68 million TV households in these urban areas, an 88%penetration. However, there are only 75 million TV homes in the remaining 150 million ruralhouseholds, a penetration rate of 50%. Figure 27 and Figure 28 show the projections for the Indianmarket. Two main factors are driving Indian TV: advertising is surging thanks to rapid economic growthand it has experiencing significant success in pay TV (Satellite TV) uptake. Pay TV penetration hassurged from 47% in 2005 to over 76% in mid-2012, way above average for the region. In January2011 the regulator required all digital pay TV operators offer their subscribers a full a la carte optionso they can choose only the channels they wish to pay for, driving take-up even further. This is aninteresting model to follow as developed markets may similarly need to consider such a la carteoptions in the future. Mobile operators Reliance and Bharti have launched multi-platform payTV strategies usingSatellite TV and IPTV (broadband penetration remains low in India, generally in affluent areas only).They have also taken advantage of a law preventing content providers from striking exclusive dealswith platform operators, again a unique market factor, making India an interesting market to watchfrom a regulatory perspective. The long-term dominance of thousands of local cable networks is under threat from massmarket Satellite TV services. Satellite TV is predicted to reach 95 million households by 2017 whileCable will stagnate at around 68 million through the study period, even given the digital transitionand bundled service offers. Cable loses out to the greater marketing muscle of national Satellite TVoperators; this is similar to the situation of markets like Japan. There has been little progress made towards a full-scale DTT launch. In 2002 Doordarshan(Indian public service broadcaster, a division of Prasar Bharati) rolled out a five-channel DTT trial inDelhi, Mumbai, Chennai and Kolkata. Just 200 set top boxes were in use within six months and theservice subsequently failed to take off. The DTT project was put on hold in 2004 and the relativesuccess of the Satellite TV stifled further investment, as well as continued political wrangling. Doordarshan claimed in 2009 HDTV is a potential way to create interest in DTT. It issued acontract tender inviting bids from technology companies to upgrade its existing DTT infrastructure 67 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012in Delhi, Mumbai, Chennai and Kolkata to HDTV-capability. In August 2010 a formal tender noticewas published announcing plans to introduce DVB-T2 services at 19 locations, where both HD andSD services will be launched. Delhi, Mumbai, Chennai and Kolkata will also have one HD-onlyservice. It has not given a time-frame for when it anticipates an HD-focused DTT re-launch and itscurrent status is unclear. A target of 2017 has been given for digital switchover, but a big questionmark remains on DTT in India, in the model shown in Figure 27, a government led initiative isassumed to start but fails to attract many customers given the popularity and scale of Satellite TV inIndia. Given the low broadband penetration and the full a la carte option available from most SatelliteTV providers the likelihood is OTT will not make significant impact on the Indian market for theperiod of the analysis. Figure 27. India TV Household Status and Projections (Millions of Households) source Alan Quayle Business and Service Development Figure 28. Data for Figure 27 (Millions of Households) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Analog Terrestrial 46 40 35 30 25 20 15 10 5 0Digital Terrestrial 0 0 0 0.5 1 2 3 5 7 9IPTV 0 0 0 0 0 0.5 0.5 1 2 3Analog Cable 68 67 66 64 60 58 56 52 48 44Digital Cable 1.5 3 4 6 8 10 12 16 20 24Satellite 14.5 25 35 44.5 56 64.5 73.5 81 88 95Total Households 130.0 135.0 140.0 145.0 150.0 155.0 160.0 165.0 170.0 175.0 68 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012AUSTRALIA: DTT DONE RIGHT Since the introduction of digital terrestrial TV (DTT) to Australia in 2001, there has been adoubling of channels available to viewers. However, difficulties such as poor reception in many areashave been overcome slowly. While the global financial crisis had an impact on all media, free TVweathered the storm well. The Free-to-Air TV stations have increased promotion of their digital TVchannels and there is near 100% awareness across viewers. The formation of Freeview and the launch of free-to-air digital multi-channels, along with theexpansion of the DTT networks’ online and cross-platform services has created a leading viewingexperience, retaining customers to DTT when in other markets the transition has encouraged themigration to PayTV services as customers evaluate their options. Australia is an example of DTTmigration that has consolidated FTA’s position in the market, rather than weakened it; an exceptionto the usual situation. By early 2012 total overall digital TV penetration was around 82% across Australia with steadygrowth expected until 2013 when analog ceases to transmit. FTA viewer numbers have also increasedsince the digital TV offering commenced. A number of regions have now switched from analogue todigital, and of these regions most have hit 100% household penetration leading up to the changeover,with some users being assisted by the Household Assistance Scheme or the Satellite Subsidy Scheme. DTT launched in most major urban areas in 2001. Since 2003, the networks have been requiredto transmit 20 hours of locally-produced HD programming per week. By Q1 2011, 79% ofhouseholds had installed DTT on at least one TV set, according to the government-commissionedDigital Tracker survey. This was up from 74% a year earlier. And as of Q2 2012 the figure is now at84% homes, although more than half of the remaining homes claim they will wait until just beforeanalog switch-off, scheduled for end-2013. In order to deliver free-to-air digital TV to remote parts of the country, the government haslaunched a free satellite service in 2011, at a cost of A$40 million per year. The platform gives accessto 16 channels, including those provided by all the major broadcasters. It will cost customers A$300,with a further cost of A$300 subsidized by the government. Legislation providing the framework forFreesat was passed in March 2010. The satellite service is being run by Southern Cross Media andImparja, in partnership with Optus, under the name Viewer Access Satellite Television (VAST). In the projections, see Figure 29 and Figure 30, its assumed analog switch off is not delayed inresponse to some of the regional coverage issues, and some customers start to migrate to IPTVservices available from the NBN (National Broadband Network). The main difference in theseprojections compared to others is NBN starts to substitution digital cable and satellite services by2014/2015. The National Broadband Network (NBN) is a national wholesale-only, open-access data networkunder development in Australia. Up to one gigabit per second connections are sold to retail serviceproviders (RSP), who then sell Internet access and other services to consumers. The NBN has beensubject to political and industry debate for a number of years, before construction actuallycommenced. The network is estimated to cost A$35.9 billion to construct over a 10-year period, including anAustralian Government investment of A$27.5 billion. The build cost has been a key point of debate.NBN Co, a government-owned corporation, was established to design, build and operate the NBN, 69 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012and construction began with a trial rollout in Tasmania in July 2010. The mainland rollout began withfive first-release sites with the first services connected in April 2011. The fiber to the premises (FTTP) rollout is planned to reach approximately 93 percent of thepopulation by June 2021. Construction of the fixed wireless network is planned to begin in 2011,delivering its first services in 2012 and to be completed by 2015. Two satellites will be launched by2015. The network will gradually replace the copper network, owned by Telstra and currently usedfor most telephony and data services. As part of an agreement with NBN Co, Telstra will move itscustomers to the NBN, and lease access to its exchange space and extensive network ducting to assistin the rollout. Figure 29. Australian TV Households by Platform (Millions of Households) source Alan Quayle Business and Service Development Figure 30. Data for Figure 29 (Millions of Households) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Analog Terrestrial 3 2.5 2 1.5 1 0.5 0 0 0 0Digital Terrestrial 2.6 3.2 3.8 4.3 4.8 5.3 5.7 5.7 5.7 5.7IPTV (Digital) 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.3 0.3 0.4Digital Cable 0.8 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9Satellite (Digital) 1.4 1.4 1.4 1.4 1.5 1.5 1.6 1.6 1.6 1.5Total Households 7.9 8.1 8.2 8.2 8.3 8.4 8.4 8.5 8.5 8.5 SUMMARIZING THE GEOGRAPHIC DIVERSITY OTT remains a secondary viewing option through the period of the projections to 2017, thoughas a secondary viewing option it will become dominant, exceeding FTA (Free To Air) in manymarkets, reaching perhaps 67% of payTV households in the US, and likely 50% of WesternEuropean households by 2017. Other markets will vary principally on penetration and capacity ofbroadband in that country. 70 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 China will remain Chinese TV, a relatively closed market to many suppliers and serviceproviders, though increasingly a key market for content owners (the studios) to sell their “approved”content through Chinese online stores and Apple iTunes which has done well in navigating thehurdles of operating in China, unlike say Google. In many markets the move to digital FTA has prompted a move to payTV as we’ve seen inBrazil, Turkey and India. Viewers needed to do something because of the transition, so theyevaluated their options and generally selected the broader offer of payTV, and in many emergingmarkets the dominant choice is Satellite TV, hence the dominance of HBI in the hybrid TVprojections shown in Figure 3. Analog TV will remain with us in 2017; the TV world will not be completely digital. The lack ofbroadband infrastructure in many emerging markets will also limit the adoption of hybrid TV andOTT TV. As stated in the introduction, the impact of the convergence of internet and consumerelectronics on TV will be a multi-decade transition, the US model will not be simply copied aroundthe world as was the case with the internet. TV is highly regulated which makes it highly political. And as is often the case in such politicalsituations, delays in regulations often have the reverse impact of the regulation’s intention as natureabhors a vacuum so delays or self-focused technology choices that result in higher STB costs meanFTA adoption is falling in the transition to digital as seen in most markets around the world, or insome cases failing to take off with the growing prosperity of a nation. However, there are exceptionssuch as Australia which have managed the transition to digital terrestrial TV well. Cable, IPTV, Satellite will remain with us, though will see significant shifts in some markets, forexample the growth of advertising supported satellite TV in emerging markets. Simplicity and easeof use are critical; a payTV bundle makes it easy. OTT TV in emulating the existing TVconsumption experience is not simple, nor easy; OTT TV requires viewers to adopt a differentconsumption model. The growth of DVRs in STBs (70% penetration for Sky UK subscribers) iseducating customers that they can watch what they want when they want, which is the first steptoward a self-selected consumption model, think of it as a stepping stone towards OTT TV. Butsuch changes in TV viewing habits are slow, both for individuals, households and the overall market. 71 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 K E Y T E C H N OL OG I E S A N D S TA N DA R D S The purpose of this chapter is to review the status of interactive TV services and Hybrid TVstandardization, the role APIs (Application Program Interfaces) play for OTT providers, the role ofconditional access systems for TV Everywhere, and the challenge standards are causing in thetraditional payTV industry. HYBRID TV STANDARDIZATION ACTIVITIES There are many bodies working on the standardization, interoperability, and harmonization ofhybrid TV including:  Open IPTV Forum, http://www.openiptvforum.org/  ETSI MCD (Media Content Distribution), http://www.etsi.org/  EBU (European Broadcast Union), http://www.ebu.org/  HbbTV industry partnership, http://www.hbbtv.org/  ATIS IIF (IPTV Interoperability Forum) http://www.atis.org/IIF/  Broadband Forum http://www.broadband-forum.org/  DVB MHP / GEM (Multimedia Home Platform / Globally Executable MHP) are two related sets of Java based open middleware specifications  YouView previously known as Project Canvas, http://www.projectcanvas.info/ HYBRID BROADCAST BROADBAND TV (HBBTV) OVERVIEW Hybrid Broadcast Broadband TV (HbbTV) is both an industry standard and promotionalinitiative for hybrid digital TV to harmonize the broadcast, IPTV, and broadband delivery ofentertainment to the end consumer through connected TVs (Smart TVs) and set-top boxes. TheHbbTV consortium, regrouping digital broadcasting and Internet industry companies, is establishinga standard for the delivery of broadcast TV and broadband TV to the home, through a single userinterface, creating an open platform as an alternative to proprietary technologies. Products andservices using the HbbTV standard can operate over different broadcasting technologies, such assatellite, cable, or terrestrial networks. HbbTV is the association of two projects born in February 2009, with the French H4TV projectand the German HTML profile project. HbbTV can show digital television content from a numberof different sources including traditional broadcast TV, internet, and connected devices in the home.To watch hybrid digital TV, consumers will need a hybrid IPTV set-top box with a range of inputconnectors, including Ethernet as well as at least one tuner for receiving broadcast TV signals. Thetuner in a hybrid set-top box can be digital terrestrial (DVB-T), digital cable (DVB-C) and digitalsatellite (DVB-S). HbbTV was first demonstrated in 2009, in France by France Télévisions and twodevelopers of Set Top Box technologies, Inverto Digital Labs of Luxembourg, and Pleyo of France. 72 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 The HbbTV specification is based on existing standards and web technologies including OIPF(Open IPTV Forum), CEA, DVB and W3C. The standard provides the features and functionalityrequired to deliver feature rich broadcast and internet services. Utilizing standard Internet technologyit enables rapid application development. It defines minimum requirements simplifying theimplementation in devices and leaving room for differentiation, this limits the investment required byCE manufacturers to build compliant devices. HbbTV represents one solution but it is not the only one. Its specification was submitted to theETSI standardization process at the end of 2009, who published it under reference ETSI TS 102 796in June 2010. The essence of the HbbTV specification, published by ETSI is:  CE HTML is a language for creating user interface pages for Consumer Electronics (CE) devices such as televisions. These CE-HTML pages are typically placed online and are based on a 10-foot user interface for easy control from a distance. It is profiled on XHTML and associated standards with special CE-HTML extensions.  OIPF (Open IPTV Forum) Java Script Extensions for TV  DVB Broadcast IP signaling. The HbbTV (Hybrid Broadcast Broadband TV) consortium announced in April the publicationof version 1.5 of its hybrid TV specification. Building on existing standards and web technologies,the HbbTV specification provides the features and functionality required to deliver feature richbroadcast and internet TV services. Version 1.5 of the HbbTV specification notably introduces support for HTTP adaptivestreaming based on the recently published MPEG-DASH specification, improving the perceivedquality of video presentation on busy or slow Internet connections. It also enables content providersto protect DASH delivered content with potentially multiple DRM technologies based on the MPEGCENC specification, improving efficiency in markets where more than one DRM technology will beused. Version 1.5 significantly enhances access to broadcast TV schedule information, enablingoperators to produce full 7-day electronic program guides as HbbTV applications that can bedeployed across all HbbTV receivers to provide a consistent user experience. The latest advances arebased on activity within the HD Forum in France as part of the development of the TNT 2.0specification. Work is underway on the 2.0 specification with publication expected in 2013. Four new Steering Group members were elected at the consortiums first AGM to providefurther representation from across the industry. Abertis Telecom, Digital TV Labs, Opera Softwareand RTL Group have joined the existing group of Steering Group representatives from ANTSoftware Limited, EBU, France Televisions, Institut für Rundfunktechnik GmbH, NAGRA,Samsung, SES ASTRA S.A, Sony Corporation, Television Francaise 1 – TF1 and TP Vision. 73 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 MHEG-IC, GEM/MHP, AND HBBTV Various technologies are available to enable television sets to integrate broadcast and broadbandservices. Three open standards, MHEG-IC, GEM/MHP, and HbbTV, have been developed for theprovision of hybrid broadcast / broadband (HBB) television services in addition to the proprietaryhybrid solutions made available by many top-brand consumer manufacturers. Broadcasters in Europe have indicated their interest in deploying hybrid broadcast / broadbandservices to viewers. Already, 24 public service broadcasters have agreed to collaborate in the roll-outof hybrid television services in Europe and will promote the use of open standards. MHEG-IC (Interaction Channel) is an extension of the MHEG interactive middleware andmakes use of the same standard protocols used to deliver web content to computers, such as TCP-IP, HTTP and HTTPS. This standard is used in the United Kingdom for its Freeview HD (DVB-T2)and Freesat (DVB-S and DVB-S2) platforms. GEM/MHP is an open standard for interactive services based on Java developed by the DVBProject for use on its broadcast delivery standards. Italy is the most extensive MHP market in Europewith over 10 million MHP-enabled receivers in homes. HbbTV is an interactive middleware that makes use of existing broadcast and web technologiessuch as OIPF (Open IPTV Forum), CE-HTML, HTML and the DVB Application Signaling. Sinceits standardization by ETSI in June 2010, deployment of the HbbTV standard is in early stages withcommercial services so far available in Germany. In addition, HbbTV has been officially selected forhybrid broadcast / broadband services in France, the Netherlands and Spain. Currently HbbTV has the industry’s attention. Its supporters claim DVB MHP/GEM had itschance; technology and customers’ expectations have moved on, which is increasingly the case.Operators appear more circumspect, given the operational headaches in deploying the latesttechnology. We’re likely to see the CE manufacturer’s take the lead which appears to be CE-HTML,which appears to be working reliably at scale, and customers’ expectations are increasingly set byweb-based services so operators appears increasingly likely to follow to HbbTV route. Within the DVB MHP/GEM group there is some consternation that the wheel is being re-invented given the coverage of their standard across most of the hybrid TV space; there is also adegree of concern on the maturity of CE HTML/Flash based solutions compared to DVBMHP/GEM. The purpose of this report is not to get into a technical discussion, rather simplyreport on the current status of standardizations, that simply operators have choices in standardsbased hybrid TV, and it’s really up to them to decide which is more appropriate. The BBC noted back in 2008 that it must support 14 different video formats and four differentDigital Rights Management or DRM formats to ensure that its online ‘catch-up TV’ service, theiPlayer, will work across different internet and mobile platforms. This fragmentation was part of theBBC’s motivation for a single specification to access its content. Project Canvas was stuck in somepolitical wrangling, while HbbTV maintained its momentum and is now published through ETSI. 74 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 HBBTV ORGANIZATION AND DEPLOYMENT STATUS IN 2012 The HbbTV consortium has over 60 supporting members from the CE and Broadcastindustries, including:  Standardization bodies: EBU, IRT, DTG, Fraunhofer IIS  Broadcasting : France Télévisions, TF1, Canal+, NRJ 12, RTL Group, Astra, Eutelsat, Abertis Telecom, TDF, ITV, BSkyB  Middleware editors for CE devices : ANT Software Ltd, iPlus Technologies, OpenTV, Opera Software, Access, Espial, HTTV, Irdeto, NDS, Kudelski, Viaccess  CE devices and components manufacturers: Philips, Samsung, Sony, LG, LOEWE, Sharp, STMicroelectronics, Humax, Haier, Kaon Media, TechniSat, TechnoTrend, iPlus Technologies  Test Houses for CE devices: Digital TV Labs The HbbTV consortium steering group members are: Abertis, Astra, Ant Software Ltd, DigitalTV Labs, European Broadcasting Union, France Télévisions, IRT, OpenTV, Opera, Philips, RTL,Samsung, Sony, and TF1. Several countries in Europe, in particular, and worldwide have adopted the HbbTV standardand/or operated HbbTV services and trials. As at December 2011, HbbTV services are in regularoperation in France, Germany and Spain, with announcements of adoption in Austria, CzechRepublic, Denmark, Netherlands, Poland, Switzerland, Turkey, and trials in Australia, China, Japan,and the US. In 2010 German broadcaster RTL Television introduced a new information service, HD Text,making use of HbbTV and the CE-HTML user interface language and in 2012 launched an onlinemusic video service (Clipfish Music) on its HbbTV portal allowing access to TV viewers. In 2011 the Dutch national public networks, Nederland 1, 2, and 3 began broadcasting HbbTV"red button" applications including an program guide and catch-up TV instead of develop separateapps for particular platforms. In France, the government-owned public broadcaster, France Télévisions selected HbbTV for itsinteractive news, sports and weather service, and plans to add catch-up TV and social media sharingcapability. International French news channel France 24 has announced that it will launch anHbbTV interactive news service in 2012 via the Astra satellites, with support from Orange and SES. In November 2011 Spain’s Ministry of Industry approved a document signed by 54 companiesadopting the HbbTV standard and broadcasters, Mediaset España, Canal+ and Telefónica have runpilot services. The first tests of HbbTV services in Poland were started by TVN in March 2012. In the UK, most broadcasters have not adopted the HbbTV standard but Freesat, the free-to-airsatellite TV service broadcast via Astra, has revealed that the second generation "G2" specificationfor Freesat receivers will use HbbTV, to take advantage of the digital TV chipsets being developedfor that standard (but retaining MHEG compatibility of the first generation Freesat receivers). While 75 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012the Digital TV Group approved D-book 7, a detailed interoperability specification between digitalterrestrial television and HbbTV based products and services. In Nordic region (Denmark, Finland, Iceland, Norway and Sweden including Ireland) theNorDig standardization forum has adopted the HbbTV specification which replaces DVB-MHP asthe common API for hybrid digital receivers. In Finland the national HDTV Forum will adopt theNorDig Unified Specification for Hybrid Services. The members of HDTV Forum see the HbbTVspecification having a wide market acceptance supporting wide range of TV applications and newhybrid services. First HbbTV compatible receivers are expected to be available for consumers beforeSummer 2012. HbbTV also caught interest in the US, Argentina, Australia, Japan, China (which is conducting atrial) and Malaysia (where DVB-T2 broadcasting will soon start). So even though MHP has a greaternumber of STBs deployed at over 10 million, the momentum appears to be favoring HbbTV. HBBTV SPECIFICATION OVERVIEW Hybrid TV terminals have the capability to be connected to two networks in parallel:  Broadcast network (e.g. DVB-T, DVB-S, DVB-C, etc.): Via this broadcast connection the hybrid TV terminal can receive standard broadcast, that is linear TV content, application data and application signaling information. If the terminal is not connected to broadband, its connection to the broadcast network allows reception of broadcast-related applications. Signaling of stream events allows synchronization of broadcast-related applications with linear TV content, for example in TV voting, interactive quiz show or for interactive ads.  Broadband network (IP): the hybrid TV terminal can be connected to the Internet via a broadband interface. This allows bi-directional communications with the application providers. The Hybrid TV terminal can receive application data and non-linear audio/visual content over this interface, e.g. video on demand. The hybrid TV terminal can support non- real time download of content. Figure 31 provides an outline of a system containing a hybrid TV terminal, a broadcastconnection and a broadband connection, typically ADSL or FTTH domestic Internet access. 76 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 31. HbbTV Overview (source HbbTV) Through the adoption of Hybrid Broadcast Broadband TV, consumers will be able to access newservices from entertainment providers such as broadcasters, online providers and CE manufacturers. Applications are divided into 2 main categories which are defined by the standard:  Broadcast-related applications, which are declared in the DVB signaling. The content of these applications can be available either via broadcast (partly or entirely embedded in the stream) or broadband. Examples of broadcast-related applications include : o “Red Button” applications such as  Interactive advertising; and  Voting, interactive quizzes. o Program-related services including TV-commerce (ordering pizza being a common example) o Digital Teletext o Program information 77 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  Broadcast-independent applications which are only available via the broadband channel and cannot be declared in the broadcast stream. These applications can be provided by independent online providers and CE manufacturers. Examples of broadcast-independent applications include: o Catch-up TV, video on demand (VoD); o Games; and o Social networking, photo sharing. Broadcast-related applications must be declared in the DVB signaling to ensure broadcastersthat only their applications will be presented on their channels, this was an important broadcasterrequirement in ensuring the quality of content and protecting their investment in building aviewership for that channel. For example Discovery Channel can ensure a consistent look and feelacross its content, and control the ways in which business models are used across their viewership.Broadcast-independent applications enable a wide variety of services to be offer to end-users throughportals, in addition to those provided by broadcasters, providing an internet-like experience andcritically keeping the door open to innovation. Applications can be declared in channel signaling, can remain undeclared or can be referenced ina separate portal. At the same time, navigation between these applications is possible and typically, abroadcast-related application can provide a link and be enriched by broadcast-independentapplications content. Figure 32 shows the navigation of interactive Hybrid Broadcast Broadband TV services. Theuser can switch between several channels where different channel-related applications are available.When available, applications can start automatically when the channel is tuned (for instance bydisplaying a pop-up). The user can then choose to interact with these broadcast-related applicationsby pressing the red button for instance when this pop-up appears. When available, user can displaythe digital Teletext in a similar fashion by pressing the button corresponding to the Teletext buttonon the remote control. A broadcast-related application can redirect to another broadcast related application or to abroadcast independent application such as catch-up TV, games or merchandising TV-shop.Broadcast-independent applications cannot be launched by the red button and are only availablethrough a broadcast-related application or through a portal independent from a TV channel, forexample a CE manufacturer’s portal or a web-service providers TV portal. By pressing the “portal” button on the remote control, the user can switch to the Internetenabled portal. This gives access to Hybrid Broadcast Broadband TV broadcast-independentapplications related to his hybrid device manufacturer. In the example the manufacturer offers threeapplications on the portal. The “Portal” button and features are out of the scope of the standardsince it depends on device manufacturers. Mechanisms to let the end-user define new Internetenabled portals or services are not specified by the standard and implementation is left to CEmanufacturer. 78 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 32. TV Services, Broadcast Applications and Broadcast Independent Applications The HbbTV specification is principally based on existing standards. So it represents a profile ofavailable technologies than a completely new technical development. This approach is important interms of developments costs and time-to-market. This has enabled a rapid transition fromcompleted specification to HbbTV STB availability in months not years. Hybrid Broadcast Broadband TV is a web-based technology which is fully in line with the EBU’srequirements for hybrid broadcast/broadband systems. The standard is mainly formed by:  CE-HTML defines the core browser functionalities. CE-HTML is based on common W3C web standards and it specifies an HTML profile for CE devices. It uses XHTML 1.0, DOM 2, CSS TV profile 1.0 as well as Java-Script and is optimized for rendering HTML/JavaScript web pages on CE devices, specifically on TV screens. CE-HTML also contains elements such as the definition of key codes for common TV remote controls. Compliant devices support XMLhttpRequest (also known as AJAX) with enables dynamic data update for applications.  Open IPTV Forum browser profile. This specification has been developed for DVB-based IPTV systems, but the APIs (JavaScript) it provides can also be applied to any hybrid DVB systems. These APIs convey functions to combine the TV picture with HTML pages, to tune to other DVB television or radio services, to add events to the timer list, and to read DVB metadata and other DVB-related information. 79 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  DVB signaling and transport. The signaling of applications is compatible with the DVB standard. These applications can be run in the context of a specific TV or radio service in a DVB multiplex. In a very similar way to the MHP standard, this is done via Application Information Table (AIT) in the relevant DVB service and is indicated in its Program Map Table (PMT). The standard uses DCM-CC object carousels to deliver broadcast applications. Object carouselsconsist of a directory tree which is split into a series of modules that may contain one or more files ordirectories. Object carousels also provide a way for the receiver to synchronize with specific points inthe media by using “stream events”. The following functionalities are available for applications:  Triggering applications to synchronize them with a live stream. This is possible thanks to stream-events called „Do it now‟ inserted in the MPEG-TS service and combined with a special feature of DSM-CC object carousel protocol. An example of application using this feature could be a pop-up appearing on screen when a question is asked in an interactive quiz show enabling the user to give his answer.  Streaming: Application can stream media content by using HTTP or RTSP unicast protocols. This is particularly useful for applications displaying broadband originated content, such as VOD or catch-up, but enabled also extra content linked to an advertisement present on a TV channel for instance.  Data access: Transparent and simple file access from either DSM-CC carousel or HTTP. Files related to an application included in a DSM-CC carousel can be opened by using a simple syntax such as: dvb://tf1.B8/weather/data.png (where B8 is the component tag of the carousel). This provides a uniform and simple way for applications to access data.  Video control: Thanks to advanced APIs, applications can interact with broadcasted media. This enables a better integration between the application and the broadcasted A/V content.  Versioning of applications: Broadcasters can offer two versions of an application to cover the case of terminals being connected or not. In the case of a connected terminal, extra content and features can be offered to the end-user while broadcast only end-users receive a basic version of the application.  Dynamic updates: Applications can detect changes in the object carousel in order to dynamically change the content presented to the user. This is possible thanks to the versioning mechanisms of object carousels and this allows the application content to be updated in real-time. This is particularly useful for scoring, news or ticker applications for instance.  “Lifecycle” management: The AIT signaling offers mechanisms for starting, stopping and switching to different applications. This enables broadcasters to manage applications lifecycles, including priorities of applications and their behaviors when switching to a new channel for instance. It remains to be seen where the market goes with respect to direct interaction with the TV versusthe use of secondary screens, e.g. smartphones and tablets. It’s likely to remain mixed use for therest of this decade. Simple voting and information services being via the TV, and a richer interactive/ social experience coming through the smartphone / tablet. 80 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 EBIF AND TRU2WAYEBIF: CANOE IS DEAD LONG LIVE INTERACTIVE TV EBIF (Enhanced TV Binary Interchange Format) is designed for older / cheaper STBs withlimited processing power and memory, such as the Motorola DCT-2000 set top. While Tru2wayuses a Java VM (Virtual Machine), EBIF specifies a UA (User Agent) on the STB. An ETV(Enhanced TV) user agent is downloaded to the STB, each manufacturer has its own UA, whichleads to some operational discrepancies. The ETV app can be inserted into the digital TV bit stream(MPEG-2 transport stream) of the channel being watched (bounded application), when the useragent receives the ETV application it decodes and display the clickable object on the TV screen. Itenables polling, instant weather and traffic, and other simple point-and-click features. The EBIFapplications can also be unbound, such as Verizon’s FiOS service where users can experience thisusing the widget button on their remote to see local traffic and weather. Figure 33. Simplified EBIF Architecture Bound & Unbound EBIF Apps ETV STB Mux EBIF App Access Network EBIF UA App Server Request / Response over HTTP/TCP The EBIF content format represents a widget and byte code specification that defines one ormore multimedia pages for use within an enhanced television or interactive television system. AnEBIF resource file is a sequence of bytes that conforms to the EBIF content format, and is theprimary information contained in an ETV Application (also call widget, but it is not a W3Ccompliant). An ETV User Agent in the STB decodes, presents, and executes actions contained in anEBIF resource to present a multimedia page. Applications include:  Voting/Polling: Subscribers can post their opinion about reality show contestants or politicians in a debate from their remote and see the results from their TV; 81 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  Request for Information (RFI): A user is prompted that there is more information available through mail or e-mail regarding a product or service advertised. The viewer clicks “OK” on the remote and materials such as brochures or coupons are delivered to the subscriber.  Telescoping: Within an ETV application the viewer can opt to leave the current programming and jump to an on-demand video (or perhaps a microsite, see next application).  Microsites: In order to aggregate content, a dedicated channel or VOD stream can include an enhanced “microsite” where a viewer can take time to browse through content, launch video on-demand or request information from an advertiser.  T-Commerce: Broadcasters can present products for sale through ETV applications. By connecting with backend order-processing systems, a viewer can submit account login information through the remote and submit an order through the television interface. Using Comcast as an example, only 25% of their STBs will be able to support tru2way by theend of 2012; while over 94% of STBs will be able to support EBIF. So the focus was on EBIFapplications, however, the death of Canoe Ventures and the expectations of customers being set byother devices on what interactive should look and feel, increasingly makes EBIF appear an artifactfrom another generation. However, there is a vocal segment of vendors that are still looking to makemoney on EBIF, so their argument for EBIF has the following 5 points: 1) It’s a proven way to bridge over to the IP world of connected devices. Changing channels using the iPad, being reminded to record or switch channels when a favorite show is about to air, seeing the phone number of an incoming phone call on the TV screen – all are in-the-field examples of how EBIF is helping operators to do new stuff, on older boxes. 2) 30 million households is still 30 million households. That’s the U.S. count for homes set up to receive EBIF-enabled interactivity. It continues to grow. 3) Deterministic signaling still matters, as a way to synchronize interactive elements with video content (ads and shows.) “Deterministic,” in an EBIF sense, means “behaves predictably.” If there are five interactive events in a show, and trigger #1 hits at four minutes in, it plays out at four minutes in. Not before, not after. When scheduled. 4) The “pipecleaning” efforts worked. Cable operators spent the last three years “pipe cleaning” their EBIF plant, to make sure an interactive trigger inserted, say, at an uplink in L.A., would arrive intact inside a set-top in Anytown – no matter how many hops in between. 5) It’s a standard. Another trend swirling around EBIF is the comparison of it with other interactive signaling techniques, like ACR (Automatic Content Recognition). Despite the impressive momentum in the ACR category, it remains riddled by its own fragmentation. Multiple vendor participants, no agreed-upon standard. EBIF, by contrast, uses a standardized signaling format (advanced class: EISS, for ETV Interactive Signal Stream, within MPEG-2 transport streams.) 82 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Most of the media companies should not care about whether its EBIF, Tru2way or somethingelse, the payTV industry should expose a set of capabilities that make interactive TV simple andsimply work across all operators. In part like Canoe Venture just focused on being an enabler forinteractivity across all payTV providers, not a land grab for interactive and targeted advertisingrevenues. The current view is US cable operators are moving away from EBIF and Tru2way, thoughthe legacy of STBs will remain for many years.TRU2WAY Tru2way, formerly known as the OpenCable Application Platform (OCAP), has a number ofcapabilities including allowing digital TVs to connect to cable without requiring a set-top box, justlike those old unsuccessful cableCARDs. But of relevance for interactive services is it provides a Javaplatform on the STB (Set Top Box) to run applications. Most of the Tru2way STBs deployed todayuse Java 1.1. Tru2way includes a middleware technology that may be built into televisions, set-top boxes,digital video recorders and other devices. Because the middleware is based on Java technology, itenables cable companies and other interactive application developers to “write” applications onceand see them run successfully on any device that supports the tru2way architecture. With Tru2waytechnology, consumers can access interactive digital cable programming, including video-on-demandand pay-per-view content, without the need for a cable operator-supplied set-top box. Currently within the industry there is some controversy on whether Tru2way will beimplemented by most MSOs, this is in part linked to the open nature of the spec that allows anypiece of CE to connect and work without a STB, and also in part to the HbbTV / DVB-MHPdebate. Currently HbbTV has the industry’s attention. Its supporters claim DVB MHP/GEM hadits chance; technology and customers’ expectations have moved on. Operators appear morecircumspect, given the operational headaches in deploying the latest technology. We’re likely to seethe CE manufacturer’s take the lead, if it works reliably at scale, and customers enjoy the experienceoperators will likely follow. Today the argument still continues, which is testament to the lack of customer engagement oninteractive services, a lack of focus on building a line of business using this technology, fragmentationstifling adoption, and the dis-service standards do in creating fixed in time specifications that onlyevolve with great effort. DVB-MHP (MULTIMEDIA HOME PLATFORM) AND GEM Multimedia Home Platform (DVB-MHP) is an open middleware system standard designed bythe DVB project for interactive digital television. The MHP enables the reception and execution ofinteractive, Java-based applications on a TV-set. Interactive TV applications can be delivered overthe broadcast channel, together with audio and video streams. These applications can be for exampleinformation services, games, interactive voting, e-mail, SMS or shopping. For all interactiveapplications an additional return channel is needed. The MHP specifies an extensive application execution environment for digital interactive TV,independent of the underlying, vendor-specific, hardware and software. This execution environmentis based on the use of a Java virtual machine and the definition of generic APIs that provide access tothe interactive digital TV terminals typical resources and facilities. The interoperable MHPapplications are running on top of these APIs. A so-called Navigator-application, which is part of the 83 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012terminal software, allows the user the access to all MHP applications and other DVB services (likeTV and radio). The MHP is just a part of a family of specifications, which all base on the GloballyExecutable MHP (GEM)-Standard, which was defined to allow the worldwide adoption of MHP. Within the DVB MHP/GEM group there is some consternation that the wheel is being re-invented given the coverage of their standard across most of the hybrid TV space; there is also adegree of concern on the maturity of CE HTML/Flash based solutions compared to DVBMHP/GEM. The purpose of this report is not to get into a technical discussion, rather simplyreport on the current standard of standardizations, that simply operators have a number ofinteractive TV choices. Operators need to abstract the mess of standards away from developers /partners. WTVML: GREAT IDEA, BUT THE WORLD PASSED IT BY WTVML (Worldwide TV Mark-up Language) is a content format for the delivery of InteractiveTV applications using Internet Servers. The system is an Interactive television technology platformcomprising a microbrowser, a markup language. It is predominately used by the Sky InteractiveDevelopers Programme, it did not achieve significant adoption across the broadcast industry. The microbrowser and markup language are both based upon the Open Mobile Alliance WML1.3 specification. The WTVML microbrowser is currently available as an OpenTV application,although an MHP version of the browser has been built for demonstration and proof of concept. The WTVML markup language is a heavily extended superset of the WAP Forum WML 1.3specification. WML content originally designed for wireless delivery to mobile phone handsets willwork without modification on the WTVML platform. The microbrowser and the WTVML markup language were originally developed by IanValentine, Patrick Sansom and Andy Hynes who founded WAPTV Ltd. The company and itstechnology was partly acquired by British Sky Broadcasting in 2001. Platform development hascontinued within BSkyB, and version 7 of the microbrowser and WTVML markup language wasreleased in Q3 2004. The microbrowser and WTVML markup then became the cornerstone ofBritish Sky Broadcastings interactive platform strategy. The platform brings internet-style content and interactivity to the Sky Digital platform bydeploying a purpose-built WML microbrowser to the Sky Digital set-top-box over the satellitebroadcast stream. Web site owners simply have to serve well formatted WTVML from their webservers to allow Sky set-top boxes and consumers to fully interact with their web services. In March2007, Sky together with some of the Waptv founders "spun-off" the technology into a new CompanyMiniweb Technologies Ltd, with the goals of furthering the work on WTVML in a global forum, andenabling the deployment of the system in other networks and devices. One of the goals in thefoundation of Miniweb was to facilitate the interoperability of Interactive TV content and Servicesacross multiple types of TV network and devices, as it was considered that a lack of TV Centricinternet standards has inhibited the ubiquitous deployment of Internet services to TVs. TV Sites for the OpenTV based Microbrowser are therefore web sites with a WTVML skin, andare often given a "wtv." sub-domain rather than a "www." sub-domain. Until the introduction of SkyHD in 2006, most Sky set-top boxes use a standard 28.8 kbit/s modem to pull content across theonline link. Because WTVML content is compiled into an encoded format by an online gateway 84 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012before transmission, it must be decoded on the set-top-box before it can be drawn to the screen. Foroptimal performance it is recommended that WTVML files (decks) for download are no more than70 K in size, with individual cards within each deck no more than 5 K in size. When fully loaded, thebrowser comprises three separate virtual layers, devoted to MPEG-4 & JPEG still imagepresentation, MPEG video presentation and OnScreen Display (OSD) presentation respectively. Developers can combine modes to produce very rich and diverse interactive TV interfaces.Multiple modes can be defined as a modeset. Different modes in the modeset can be referencedfrom the WML cards and associated with service domains, allowing the browser to change its style asthe user navigates from one service to another. A modeset is a collection of one or more modesdefined in a standalone XML file. A modeset is referenced at deck level from the mode attribute ofthe wml element. A developer can define multiple modes within a single modeset, and can initiatechanges between Modes within that Modeset at card level. The microbrowser can access Broadcast Resources as well as online resources delivered from aWTVML enabled web server. Broadcast Resources are content elements that are delivered in thesatellite broadcast stream. Sky UK was the leader in WTVML implementation, but WTVML had notachieved significant market interest from other payTV operators. CE-HTML CE-HTML (Consumer Electronics Hyper Text Mark-up Language) is a language for creatingweb pages for Consumer Electronics (CE) devices such as televisions. CE-HTML is optimized forthe 10-foot user interface (TV) for easy control from a distance. It is profiled on XHTML andassociated standards with special CE-HTML extensions. CE-HTML was developed within the Consumer Electronics Association R7WG9 working group(mainly TV manufacturer) to solve the problem of displaying HTML on a TV. TVs have problems displaying regular web pages because:  Small fonts and images that are not readable from a distance;  Only mouse or keyboard based navigation, not navigable using the remote control;  No highlight on the navigable elements so a user cannot easily see the element they can navigate; and  No standard audio/video object implementation. CE-HTML has been adopted in standards such as the Open IPTV Forum, the Digital LivingNetwork Alliance and HbbTV. There are currently a number of browser vendors that have CE-HTML capable browsers, e.g. Espial, which is based on Webkit. Philips released the first televisionsthat support CE-HTML through the Net TV feature in Europe in April 2009, which in 2010expanded to include Sharp and LG platforms. Samsung, Sony and Panasonic are placing bets acrossa range of platforms including their own platforms, Google TV and Yahoo TV; they will likely alsoinclude CE-HTML given broad adoption and customer acceptance of web-like experiences. 85 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 APPLICATION ENVIRONMENT AND APPLICATION STORES Android is likely to achieve a significant market share as it extends the Android developerecosystem to STBs. Apple TV applications will benefit from the leading iOS developer ecosystem.There are rumors Apple may offer an Apple STB to the cable operators; this would not be the firsttime as back in 1994-1995 they did work with several operators on an IPTV STB, this would extendthe penetration of iOS based applications. From interviews on the future of the TV ecosystem, the consensus view is the application modelwill be similar to that of the Smartphone, with Android, Apple, Microsoft (thanks to Mediaroom andxbox) and HTML5 being the top four platforms, with likely a number of other long-tail platforms.The view on the breakdown across those four application environments: Android is seen as thewinner by volume, followed by HTML5 in the longer-term, with Microsoft and Apple in a tie forthird position. Existing app stores will likely be extended into STB domain as service providerseither continue to struggle or close down their app stores. A question mark exists on the role the Comcast Reference Design Kit will play as an applicationenvironment. Licensees include as of August 2012: Motorola, itaas, Entropic, Broadcom, and S3Group. The RDK’s goal is to cut down the development cycle down for new set-top boxes fromtwo years to one year, or even under one year. The Comcast RDK was developed internally usingopen-source components and by working with various vendors. The RDK is a community-basedproject that allows developers, vendors and cable operators to use a defined stack of software on onelayer in order to provision set-top boxes and gateways. This would potentially be a competitor toAndroid, Apple etc. It is unlikely to become a significant player as it will not attract developerattention given a operators struggles with open innovation, the small addressable market, anddeveloper attention squarely focused on Android, Apple and with Microsoft struggling to againdeveloper attention against them. STB: TRANSITION TO A FOCUS ON SOFTWARE The key component of a payTV deployment is a hybrid STB. Worldwide spending on IP set-topboxes (STBs) has grown quickly even given the economic environment, from $2.4B in 2009 toroughly $3.4B in 2012, and expected to grow to $4.8B by 2017. These figures take into considerationthe growth of over-the-top TV and the integration of virtual STBs directly into TV sets. ThoughSTBs will remain the de facto device for video presentation in the home, and for most IPTVdeployments the STB accounts for between 50-60% of network capex (capital expenditure) There are currently about 5-7 manufacturers with a worldwide presence, with another 10-15manufacturers strong in their respective regions and/or among domestic customers. Across allpayTV STBs, Motorola and Cisco are the leaders in the market, with Thomson in third place.Specifically for IPTV STBs the top four suppliers are Motorola, Cisco, Huawei, and Amino. Motorola has historically been the leader in supplying STBs to the cable industry and has beenable to transfer this experience in developing STB to the telco IPTV market. Motorola acquiredSwedish STB developer Kreatel back in 2006. Kreatel, like Amino, was an early developer of IPTVSTBs for the telco market and has customers throughout Western Europe. Motorola took the Linux-based Kreatel software and ported it onto its own hardware, allowing Motorola STBs to interact witha wide range of IPTV middleware offerings. Motorola main IPTV customers include AT&T,Verizon, TeliaSonera, and KPN. 86 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Following Motorola are Huawei, Cisco, and Amino. Huaweis STB deployments are in China,with significant volumes in China Telecom and China Unicom. Cisco, like Motorola, is consistentlyone of the worlds leading STB suppliers to cable operators (thanks to the acquisition of ScientificAtlanta). Cisco’s customers include Belgacom, TELUS, Deutsche Telekom, Croatias T-Com, andSES Americom. In March 2012 Cisco paid $5B for NDS, which is a good complement to Cisco’s Videoscapestrategy, being the premiere creator of set-top box software solutions. The combined companywould provide security for an estimated 30% of all active set-top boxes that support encryption. However, with the exception of Cisco and Motorola, conditional access (CA) businessesgenerally operate separately from set-top box businesses. The reason is that operators want to havemultiple set-top box vendors but are resigned to having single security vendors and softwarevendors. North American cable is the only major exception to this rule. Therefore, it may now make sense for Cisco to sell its set-top box and broadband gatewaymanufacturing unit while retaining its PowerKEY conditional access system and a few other piecesof Scientific Atlanta that are integral to the Videoscape strategy. To take any other path mightthreaten the value of the existing NDS business. Typical STB pricing for TelcoTV range between $85-160:  Europe being at about $120;  North America at $155; and  APAC/CALA (Asia Pacific / Central and Latin America) at $85 due primarily to the lower HD and DVR demand in those regions. Hybrid TV STBs tend to have two price bands, the Hybrid Telco and Satellite being $85-120,and the Hybrid Cable being $120-200. OTT STBs have a large variation in price between $85 and$300 depending on memory, functionality and volume. The figures are based on operator and STBsupplier interviews undertaken in Q1 and Q2 of 2012. Examining the split in sales (revenue) of STBs is shown in Figure 34. There appears to be asignificant shift in the market to Hybrid STBs, whether they are HBB or HBI, the bulk comes fromSatellite TV adding interactive capabilities, though in the model it assumes many cable operatorsfollow ComHem with a Hybrid Cable strategy. North American cable operators remain the most significant uncertainty if they will maintaintheir current strategy or follow Verizon to a Hybrid approach. Regardless IPTV is in the strategy, it’sjust not yet clear if they’ll use hybrid TV as a stepping stone. OTT is expected to grow, but remainniche; generally OTT services will be provided through the consumer electronics such as TVs andDVRs. Note the figures for OTT STB sales are meaningless as Smart TVs, consoles, Blu-ray players,TiVo, etc. are all OTT devices. Figure 34. STB Breakdown by Number Deployed STB Split 2009 2013 2017 Non-Hybrid 98% 87% 64% Hybrid 2% 13% 36% 87 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Some telcos are starting to find their early momentum in signing up new subscribers waning.Verizon, AT&T, PCCW, Fastweb, and others all have shown signs of slowing subscriber growth,which has reduced their demand for new STBs. Some of the slowdown is likely due to economicconditions which are slowly improving, but cable and satellite competitors have also responded withupdated services and pricing. Worldwide hybrid telco STB revenue reached about $850M in 2011, with EMEA and APACdominating. Typical STB pricing was $110-120, though it’s not expected to drop significantly asmore functionality is bundled into the ATN, e.g. DVR, TV everywhere, enhanced user interface, etc.ADB leads telco hybrid STB market with 30% of revenue; Dasan Networks is in second place forrevenue at 16%. ADB is EMEAs primary provider of hybrid STBs, with contracts at Telefonica andBT; Dasan Networks is the primary supplier to South Koreas two main hybrid IPTV providers, KTand SK Broadband. Worldwide hybrid cable STB revenue reached about $500M in 2011, with Verizon, the worldslargest deployment dominating that figure; and its main supplier, Motorola, with near 100% marketshare. Typical STB pricing was $120-$140. TABLETS AND OTHER CONNECTED DEVICES US homes increasingly have non-traditional video display devices that can act as IP STBincluding Blu-ray players, Xbox, PlayStation, Wii, Apple TV, Google TV, iPods, iPads, tablets,iPhones, smartphones, Boxee, Slingbox, etc.. In most cases, these third-party devices are viewed ascompetitive to traditional pay TV providers because they enable consumers to access OTT videowithout subscribing to multi-channel service. The potential for third-party devices to be complementary to service providers wasdemonstrated by Comcast in its iPad demo during the 2010 Cable Show in Los Angeles. Theycreated an application that turns the iPad into an extension of an STB, complete with remote controland EPG. Many MSOs have leapt onto the iPad / tablet as The Next Big Thing. In fact, at least seven ofthe ten largest pay TV providers in the US have built new tablet applications that offer select TVshows and movies to their existing subscribers, often for little or no additional fee; though the offerhas caused some customer frustration as it can in many cases be little more than an EPG. The screen size of a tablet allows a service provider to break through the limitations of on-screenTV guides, and expand a consumers ability to interact with the program. Touching a listing for afavorite show can provide instant access to the shows Website, program information, bonus clips,past episodes, or chats with the programs principals or fans. If the device is properly enabled (seeCAS discussion), users can also remotely manage their DVRs and access on-demand programs. We’ll explore later the details of what operators are doing in this space. Of course the bestintegrated experience is Apple TV, which with a swipe can take the iPad video to the TV. CONDITIONAL ACCESS SYSTEMS Once digital satellite and cable services were launched, digital protection mechanisms becamecritical, since digital copies can easily be circulated. Piracy restrictions, especially for popular movie,became an important requirement for pay TV operators. Pirated chipsets, hacked smart cards and"black boxes" that could offer buyers free cable or satellite services became a major revenue threat to 88 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012both the PayTV provider but more importantly the content owner. This spurred greater focus onconditional access and improved content protection. When IPTV was initially launched, operators did not install any content protection. Instead theIPTV middleware relied on individual set-top information and the associated subscriber account todecide whether to authorize a video channel or not. However, as IPTV deployments and adoptiongrew, many cable networks and movie studios refused to allow their content to be distributed unlessan acceptable form of content protection was adopted by the operator. Today CASs are used by most IPTV providers, just like cable and satellite operators. CAS waslargely driven by the North American cable industry. The two main equipment vendors for headendand STB equipment were General Instrument (now owned by Motorola) and Scientific-Atlanta (nowowned by Cisco). This "duopoly" was accused of controlling the cable industry through their ownership of theconditional access technology. The two vendors were accused of pressuring cable operators to usetheir STBs rather than anyone elses. This led to calls for "opening" the CAS and allowing otherSTBs to be available to consumers. In Europe, the Digital Video Broadcasting (DVB) organization created a set of specificationsenabling STBs to be sold at retail. In fact, the DVB-Common Interface specification allowed adistributor to broadcast to multiple types of CAS, further broadening the scope of available devicesand services. CE manufacturers, unable to address the same market in the U.S., lobbied for a similar standardfrom the FCC. The Telecommunications Act of 1996 mandated that pay TV operators open uptheir CASs to allow third-party manufacturers to provide STBs. Subsequently, the FCC mandatedremovable conditional access cards that allowed consumers to purchase STBs at retail and simplyinsert a conditional access module from their pay TV provider. The key issue is operators are wary ofthe role that conditional access plays. Content is now being protected using parallel systems, one for each platform. For example, aservice provider may use its existing CAS with smart cards for its pay TV service. It would then use adifferent protection system, such as Microsoft WM-DRM, to protect its online video service. The service provider uses a separate license server and key to encrypt the content, and may (ormay not) require a custom media player to be downloaded on the consumers PC to decrypt and playthe content. The only point of integration is at the back office, where entitlement information ispulled from the subscriber management and billing systems. This process may be managed by theprovider, but is much more likely to be an extension of the CAS vendors solution. Some vendors have their own custom solution for all three screens. The service provider cansimply use the CAS vendors multi-screen content protection solution, which links into its keymanagement system for entitlements and authorization. The consumer would need to download a custom player with the vendors content security builtin to view content on a PC or mobile device. However, content owners may not be entirelycomfortable with that vendors technology and insist on using a vendor they feel is proven. Two other approaches are under development, by the Marlin Developer Community and theDigital Entertainment Content Ecosystem (DECE). Marlin has developed a DRM standard and 89 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012software development kit (SDK), allowing vendors and device manufacturers to create their ownstandardized multiplatform DRM that would be acceptable to content owners. DECE is developinga multi-DRM digital rights locker that would allow for users to view content across devices andDRM technologies. Figure 35 lists some of the conditional access systems, Ultraviolet has strongindustry support and is used as part of the Walmart / Vudu disk to digital service that is reviewed inthe chapter on Practical Experiences of Cutting The payTV Cord. Content owners will not license their content for distribution to additional devices withoutadequate safeguards. Online and mobile content protection are proceeding on parallel tracks. Whileseveral CAS vendors do offer specific solutions for online and mobile video distribution, the Internethas evolved separately. Content owners and online distributors are more likely to use DRM fromApple, Microsoft PlayReady, Adobe, etc., while the Open Mobile Alliance (OMA) standard is widelyused in the mobile world. Operators are more likely to have to implement and support different DRM schemes fromdifferent vendors. Consumer electronics (CE) device manufacturers looking to add value to theirdevice portfolio are keen to drive interoperability across their devices. Content owners and serviceproviders with concerns about recurring revenue may wish to impose some limits on how this isdone. Owning a DRM solution is not essential for a vendor. Multiple DRM schemes are likely to be supported across device platforms, so owning a DRM orCAS is not necessary for a player in this space. Standard solutions, such as Marlin and the DigitalEntertainment Content Ecosystem (DECE), will likely reduce the power of any individual DRMvendor. Control of subscriber authorization/key management systems, where subscriber entitlementsare managed and integration is required with the subscriber management system (SMS) and billingsystems, may actually emerge as the key area for control and influence. 90 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 35. Content Security Table Description OutlookMarlin Device industry driven, gaining service Most operators are following provider support. Designed for cross- this initiative, strong in industry multiplatform video connected TVsOpenCable US Cable centric, not really built for Only relevant to US MSOs, multiplatform video, little market impact more a source of confusionOMA Mobile focused – Windows DRM and Likely only used for the mobile PlayReady have equal market share channelApple PlayFair Based on technology created by the Likely to remain within the company Veridisc. Built into the Apple ecosystem QuickTime, used by the iPhone, iPod, iPad, Apple TV, iTunes, iTunes Store and the App StoreMicrosoft Wide availability on PC and CE devices Both operators and studiosPlayReady appear happy with PlayReady based on 2012 surveysGoogle Widevine is deployed on over 539 million Strong position in STB, but notWidevine DRM devices including 284 million televisions, considered adequate. blu-ray players, set top boxes and game consoles. No fee is charged.DLNA DTCP-IP Strategically supported by some CE Being planned for North vendors American cable deployments for protection between the gateway and STBHDCP Link protection on HDMI connections InadequateUltraViolet Content industry initiative – Studio Gaining adoption, used with backing Walmart / Vudu disk to digital service.KeyChest Disney initiative Unlikely to see adoption VERIZON CASE STUDY ON INTERACTIVE SERVICES Verizon uses three interactive technologies, as shown in Figure 36; the DVD VM (VirtualMachine) enables customers to view the DVD extras available on purchased DVDs, rather than justbeing able to watch the movie, for top titles this can be charged for, while for back-catalog itprovides differentiation from other VoD providers. EBIF is used for bounded applications, for example during the Winter Olympics; additionalinformation was available through EBIF. Then for its interactive applications Verizon is using ascripting language called LUA. The architecture is shown in Figure 37, the Lua virtual machineenables web service calls, which allows the STB widget to mash-up data / services; for example 91 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012network APIs or web services such as a Twitter feed. Figure 38 shows the user interface for widgetdiscovery (store) and the Twitter widget. Lua is a lightweight programming language, designed as a scripting language with extensiblesemantics. Lua has a relatively simple C API compared to other scripting languages. Because bothLua and JavaScript use prototype-based objects and were influenced by Scheme, they feature manycommon semantics, despite the great differences in syntax. Lua has been used in many applications,and especially in the video game industry. Figure 36. Verizon’s STB interactive Technologies LUA Focus of Widget Bazaar In-channel interactivity, e.g. EBIF Winter Olympics on NBC DVD DVD Extras, e.g. when rent a movie Figure 37. Verizon Architecture ….. Web Widget Widget service call Lua Virtual Machine FiOS TV Widget App Framework & Store FiOS TV APIs STB Middleware STB Core 92 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 38. Verizon Widget Bazaar and Twitter Widget (source Verizon) NETFLIX AND THE ROLE OF APIS Netflix is an American provider of on-demand Internet streaming media in the United States,Canada, Latin America, the Caribbean, United Kingdom and Ireland and flat rate DVD-by-mail inthe United States. The company was established in 1997 and is headquartered in Los Gatos,California. It started its subscription-based digital distribution service in 1999 and by 2009 it wasoffering a collection of 100,000 titles on DVD and had surpassed 10 million subscribers. As of June2012 it had 27.5 million subscriptions and its customers in June passed 1 billion hours of viewing inthat month, that is rough 1 hour per night per subscriber. 93 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Using its open API Netflix is embedded in 100s of devices at little or no cost to Netflix.Achieving the N-Screen vision, see Figure 39. Creating a positive feedback cycle through greatercustomer engagement they gain great insights into customer preferences and extend their reachacross more devices enabling them to sell more subscriptions to their services, generating greatercustomer insights. Figure 39. Role of APIs in Netflix Business Extend Customer Reach Customer Insight API Sell More Great Experience In 2008 Xbox approached Netflix with ideas for the v2 version of the Netflix application. Backthen streaming device apps didn’t support discovery of titles. Netflix delivered their streaming appto partners via a C-based Linux application supported by a client SDK in turn supported by privateAPIs separate from their public API. A partner app couldn’t be built directly against this API andminor extensions to the API required a whole new API version. Porting the app and SDK to a non-Linux platform like Xbox also took extra time. It took atleast a quarter (3 months) to roll out new apps through this implementation stack. A REST-basedopen API could be revved more quickly and was easier to work with cross-platform given it wasdesigned without any client requirement It happened to have a new recommendation API, internally called LOLOMO for “Lists of Listsof Movies”, which was their first attempt into enabling customers to discover movies and TV showson a device. LOLOMO was integrated into Xbox using the open API and streaming usage went up100% within a couple of months after launch. It was now clear that they could deliver new, Netflix-originated scenarios quickly to devices viathe open API. Open REST-based API accelerated the rollout of proven app scenarios quickly acrossbranded Netflix applications. The API gave Netflix flexibility to deliver to quickly do C/Linux apps,Flash apps, and more. Also variety of development approaches: Netflix, vendor or partner. Thusproviding equal access to their service functionality for all. Flexibility in both client platforms anddevelopment approaches helped deliver apps to all three major game consoles and the top 10 brandsin TVs and Blu-ray players within months. In 2010, Netflix migrated its infrastructure to Amazon EC2. Master copies of digital films frommovie studios are stored on Amazon S3, and each film is encoded into over 50 different versionsbased on video resolution and audio quality. In total, Netflix has over 1 Petabyte of data stored on 94 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Amazon, and the data is sent to content delivery networks (including Akamai, Limelight, and Level 3)that feed the content to local ISPs. Netflix uses a number of pieces of open-source software in itsbackend, including FreeBSD and nginx, Java, MySQL, Gluster, Apache Tomcat, Hive, Chukwa,Cassandra, and Hadoop. The approach of Netflix has been copied by many payTV providers insupporting the on demand service if it’s delivered over the internet, e.g. Telecom Italia’s CuboVisionand DISH on demand service. STB APIS AND THE PAYTV SILO CHALLENGE FOR INTERACTIVE SERVICES The middleware of the STB defines the APIs applications use. For broadcasters they have arange of options including: MHEG5, DVB-MHP, ATSC-DASE, CE-HTML and ARIB-BML. TelcoTV middleware suppliers have tended to build their own APIs / SDKs middleware suppliers include:Microsoft, Thomson, DreamPark, Minerva, Orca (acquired by France Tel), NDS, OpenTV,UIEvolution, Ant, Access, NSN, Huawei, Ericsson, UTStarcom, Seachange, and Cisco. Though inmany cases TelcoTV middleware supports standards, e.g. Espial supports DVB MHP and CE-HTML. Figure 40 shows the main STB middleware suppliers and their key accounts. The bottom line is the mess will not go away, operators must either provide tools to manage themess, or remain stifled until Android and Apple bring their ecosystems to bear on the TV ecosystemand media company engagement. STB middleware is a strategic decision; fortunately there is still some competition. MicrosoftMediaroom through a default choice for many Tier 1 operators continues to frustrate them onroadmap changes and slow roll-out of functionality, for example is it see as a laggard on TVEverywhere as reviewed in the later TV Everywhere survey. Opening up room for smaller, morenimble players to fill the gaps and responding to trends such as Hybrid TV and the growth of CE-HTML. A point of discussion around Hybrid TV is whether STB-less hybrid TV solutions will emerge,that is using the processing power of either the smart TV or other connected devices to provide thesame functionality as a dedicated STB. The STB middleware is the enabler of such a capability. Atpresent the race to add functionality into the STB, the variety of platforms and capabilities, theshifting-sand that is smart TV platforms means such software-only based solutions are consideredbeyond the time-frame of this report. Likely xbox and PS3 will continue to be used to at leastsupport the TV Everywhere component of service providers’ solutions. 95 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 40. STB Middleware Vendors and Their Key Accounts Supplier Reference Customer Microsoft AT&T, DT, BT Espial ComHem Thomson France Telecom Google (Motorola Mobility bought DreamPark) Canal Digital Minerva TDS, SureWest France Telecom (ViaAccess / Chungwah, JazzTel, France Orca) Telecom Across cable and satellite Cisco (NDS) operators Across cable and satellite NagraVision (OpenTV) operators UIEvolution NTT OnDemand Ant CGT, France Telecom NSN (up for sale?) Belgacom, KPN Huawei China Telecom Ericsson OTENet, Sonaecom Seachange TurkTel In my work with developers of 2nd screen experiences, that is iOS/Android apps thatcomplement shows during airing, when being time-shift viewed and without the show being played.All three states require different experiences to be presented on the 2nd screen. Developers considerwidgets on offer by some payTV providers to look like something from the stone-age compared toiOS/Android experience. The developers are web-centric and consider customers to similarly expectinteractive services to look and feel like web services as that is what they experience every day. On the business model behind interactive services, the assumption is there is already a businessmodel in place the, APIs to enable STB-based interactive services is simply a channel to complementan existing business model. Pay TV providers need to look at enabling richer more personalized andfulfilling customer viewing experiences through their platform, enabling such capabilities is importantfor customer retention. Focusing on North America, we have a mess across STBs covering industry-specific capabilitiessuch as EBIF, Tru2way, LUA, Mediaroom, and now HBB/CE-HTML. To break through theimpasse to create an interactive service ecosystem the payTV industry needs to consider:  Abstracting all the industry noise away from the content industry so they can use webkit (which they understand) to create content and experiences for the TV. That is adequate tools.  Abstract all the content standards and random requirements specified by individual payTV providers to make is simple for developers. That is, use industry-wide APIs. 96 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  Abstract all the business model barriers, it’s about keeping the payTV network relevant to customers and the content industry, rather than letting Apple and Google dominate with their ecosystems extended into the TV.  Use a start-up approach (not payTV operator ordained political entity, see this weblog article for a deeper discussion on the failure of Canoe Ventures http://www.alanquayle.com/blog/2012/03/what-the-mobile-industry-can-l.html).  Dont try to grab advertising revenue through the endeavor; it is simply an enabler to keep the payTV industry relevant.  Work with companies that enable the 5 top use cases and focus on making them happen, rather than a generic platform.  Be prepared to alter the business model as things come together, we cannot predict the future, only react to the present based on quantified data and thoughtful analysis.  The exactly structure of the endeavor is not clear, however, I discussed in this article some of the approaches: http://www.alanquayle.com/blog/2012/03/what-the-mobile- industry-can-l.html. Bottom-line: if the interactive TV party doesnt get started soon, the revenue and marginrestructuring in the payTV is going to be more painful than we currently think. TV movingcompletely to the internet is not inevitable as we discuss in this report, but the changes internet TVwill cause in viewer, advertiser and content producer behavior need not be as painful for the payTVindustry if they simply get their act together. 97 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 U N D E R S TA N D I N G T H E T V E C OS Y S T E M As we look forward into the increasingly complex payTV landscape it is important to understandthe TV ecosystem as this complex well-established ecosystem plays a significant role on the successand failure of TV delivery services. The TV ecosystem is mature, with well-established relationshipsand its own nomenclature. It is quite different to the equally self-contained telecoms ecosystem. A key difference is intelecom pricing is clear, published and comes with standard contracts. In the TV ecosystemeverything is negotiated, scale matters critically, everyone in the chain takes a cut, and advertisingfunds about half the industry. Figure 41 shows a high level view of the TV Ecosystem. A common problem telcos have withthe nomenclature is how the term network is used. Basic networks or premium networks, alsoknown as cable networks create TV channels such as Discovery or the History Channel bycommissioning Studios and Producers to create TV shows. Cable Network TV channels are only available through payTV providers (not available over theair). The name was created before today’s myriad of payTV providers with their ‘networks.’ Thesebasic and premium networks do not own an access network; rather distribute their TV channels tothe headend of the payTV operators: MSOs (Cable), Telcos (IPTV), and Satellite TV. Broadcast networks and broadcast stations, also known as broadcasters, create TV channels,such as ABC, BBC, and CBS; that are available over the air. That is any TV with an aerial can receivethe channels, it does not require a payTV provider. The broadcasters commission Studios andProducers to create TV shows. They own Broadcast Stations that transmit the ‘over the air’ signals.Broadcast Networks also provide their TV channels to payTV operators. Generally payTV operatorsare required by their license to carry these Broadcast channels. The payTV operators own what telco-people consider to be the network. They include cable TVoperators, also called Multi Service Operators (MSOs); telcos, IPTV operators; and Satellite TVoperators, also called Direct Broadcast Satellite (DBS). Underlying this industry are the advertisers, which funds the industry as about $160B annually. The structure shown in Figure 41 is essentially the same in all countries, only scale is differentand some functions are under the same organization, e.g. the role BBC plays across studio, producer,network and broadcaster. America dominates the media industry, with only China and India comingclose in achieving critical mass for international media industries Bundling of TV channels, content and rights creates many custom deals across the ecosystem.There is no standard contract, virtually everything is negotiated. This is also an ecosystem that isslow to change, where long established personal relationships matter. Telcos have struggled, andcontinue to struggle to break into this established ecosystem. Also this ecosystem is slow to respondto technology innovation; as content owners become more confident in a direct to consumer modelover the internet; and service platforms such as TVs and DVRs open up, such invariance to changecould be their downfall. 98 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 41. TV Ecosystem Advertisers Agencies, Media Buyers and Brands Producers / Basic Networks A&E, Discovery, TNT, Distributors UK Gold, Sky1 Satellite Sony Pictures TV, DirectTV, Sky King World, Warner Premium Networks Bros TV, BBC HBO, Showtime Cable Comcast, Cox, Studios VoD Aggregators Rogers, Virgin media Disney, NBC, iN Demand, TVN Universal, 20th Telcos Century Fox, Warner Broadcasters Verizon, AT&T, BT, Bros, BBC ABC, BBC, CBS, France Telecom NBC, Fox, ITV PRODUCERS / DISTRIBUTORS AND STUDIOS Examples in this category include Viacom, Sony Pictures, and Disney. Producers / productioncompanies pitch their ideas to the network executives (Cable Network or Broadcast Network) forinitial selection. Then through initial rolls, pilot episodes and audience testing successful shows arecommission for a season, usually a run of 10-12 episodes. Alternatively the Broadcast or Cable Network can identify a gap in the programming and thencommission a production house. This tends to occur less often. An oft quoted example is when Foxcommissioned David E. Kelley to produce a show that would appeal to young, urban women at aslot where they lost share (mainly men) to sports – he created Ally McBeal. Generally the Cable or Broadcast Network will invest in development costs. A one hourprimetime drama costs $3m-8m per episode to produce; one hour comedy costs $1m-2m; while aone hour reality TV show costs $250k-400k, hence why such cheap programming plagues so manyTV channels. US has well established ecosystem with both national and world-wide syndication business thatcreates a significant barrier to entry for other countries, only China and India can generate a similarscale. The BBC is able to produce a few shows based on its national license fee, but it lacks scale tocompete with the US Syndication is where Broadcast / Cable Networks shows repeats of shows shown on other TVChannel. Syndication allows the show to be repeated on other Networks in the same country or inother countries. Payment can be by cash or advertising slots which the show’s producer sells.Residuals are payments made to the producer (80%) and actors (20%) for any repeat showing – 99 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012hence shows must be tracked. Free to air broadcasts use audience estimates. Also audience size canimpact charges; that is lower audience figures results in higher per viewer charges, i.e. the contentowner ensures a minimum. Given the payTV operator’s revenue is directly proportional to audiencethis has cause many Telco TV services to struggle with profitability as customer numbers comebelow target. Networks like ITV in the UK create TV channels such as ITV3 and ITV4 to repeat thesyndicated shows to improve viewership and hence improve advertising revenues. Separatelynegotiated are rights for DVD rentals / sales, NVOD, VOD for cable, VOD for internet, and othermerchandizing. Hence the cost basis for a payTV’s content can be quite difficult to calculate. BROADCASTERS Broadcasters are granted a license to broadcast TV over the air. In the US there is a network ofaffiliates (over 1500), that is broadcasters who carry other networks signals in addition to their ownbecause of how licenses were granted. History has a big impact on this industry that has been incontinuous operations since the 1940s. My purpose is to help provide some insight into the industryas an outsider looking in. Network affiliate (or affiliated station) is a local broadcaster which carries some or all of theprogram line-up of a television or radio network, but is owned by a company other than the ownerof the network. This distinguishes such a station from an owned-and-operated station (O&O), whichis owned by its parent network. Because over the air audience is small (1500 stations), carriage fees have been falling for Stations,that is the money paid to them by Broadcast Networks. Instead Broadcast Networks have beenincreasing fees to cable and satellite operators. Broadcast licenses are granted nationally or regional, anational license will have regional content requirements In many countries the Broadcast Network owns the Broadcast Stations. In the US it is acollection of owned and affiliate stations, each operating in a ‘designated market area,’ whichapproximates to major urban areas, e.g. NYC, LA, Cincinnati, Chicago. Advertising is sold bothnationally by the broadcast network and locally by the broadcast stations Broadcasters are quite profitable with >40% margins, in the US they generate roughly $30B inrevenue. The Broadcast Network produces prime-time content, and the stations fill up the scheduleoutside prime time with local news, sports and syndicated shows (repeats). A national 30 sec ad slotcan cost up to $1M during a show like America Idol, while typically it’s in the range of $300-600k In the US, Broadcast Networks are considering whether to cut the broadcast stations (audience isdiminishing) and just use cable, satellite and the internet. However, in most Western Europeancountries there is a strong over the air service, where the focus is on using the internet tocomplement their broadcast service, e.g. the BBC iPlayer. 100 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 CABLE NETWORKS There are approximately 300 cable networks in the US. These are not MSOs, rather TVchannels that are available over payTV networks. Approximately 85% of US homes subscribe topayTV. Cable now accounts for over 60% of prime-time viewers, the other 40% being acrossbroadcast and satellite. Advertisers have recognized this shift as Cable Networks advertising spend over the first quarterof 2012 increased spending by 7%, see Figure 42. US Cable Networks generate $21B in ad revenue(2011), compare to the $21B (2011) broadcasters earn for a much smaller audience. This is anexample of bargaining power; broadcasters negotiate as 5 networks, while there are hundreds of cablenetworks which weakens their position. With the growth in IPTV providers, network bargaining power will further weaken. CableAdvertising is sold nationally; cable networks leave some slots available to local networks, which is asource of revenue that provides an incentive to carry the channel. For viewers of US TV, those arethe lower quality adverts that tend to insert themselves part-way through national advert and be for alocal car dealership. Cable Networks are also paid on a per-sub per-month basis for the right to carry a channel bythe MSOs and Telcos. Agreements span 5-7 years, can be quite difficult to negotiate, there havebeen many public arguments. MSOs typically pay $20 per sub per month for programming. Cost ofprogramming is the major driver for the rise in CableTV pricing over the past decade. With ongoinghigh profile arguments such as between DISH and AMC Networks, which dropped their channels(AMC, IFC, Sundance, and WeTV) in June 2012. Premium Networks charge an additional fee (direct to subscriber) and focus on movies/sportsand are usually advertising free. Premium channel either operate a revenue share, fixed fee per sub,or fixed fee per network with the payTV provider. Again there are many custom deals. The last 3years have been tough for ad spending, but TV continues to buck the trend as shown in Figure 42and Figure 43. 101 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Figure 42. Measured Ad Spending in the US Q1 2012 compared to Q1 2011 (source Kantar Media) 102 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 43. TV Ad Spending in US (source Nielsen) ADVERTISERS Advertisers underpin the whole of the TV value chain, Figure 45 shows the trend betweenadvertising spend and subscription fees. In North America subscription feed exceeded advertisingrevenue in 2006, this happening in Europe in 2009. However, this combination of subscription andadvertising enables the creation of quality content, and as a business model is tough to break into. Advertisers (Brands) hire agencies to create campaigns as well as create the ads. Advertisersgenerally work on commission basis on a % of campaign spend, though latterly the model is movingto a retainer or ROI (Return on Investment) as brands become much more focused on results thansimply how much is spent. Advertisers are quite traditional, it’s an old industry, and this provides a major impediment tonew technologies / business models being adopted in the industry. Advertisers focus is the 30 sec adon a given TV channel reaching a specific geo-demographic. The Cable industry created Canoe Ventures which is the cable industry’s attempt to provide acommon way for the advertisers to better target their ads and also enable interactive advertising.This is discussed in the following weblog article, http://www.alanquayle.com/blog/2009/03/why-the-mobile-industry-needs.html. Examining the mobile industry, to date advertising has failed because the industry does notunderstand the advertisers and their needs, hence if Canoe Ventures can succeed it will be a templatefor other industries. It did not, the failure of Canoe Ventures is discussed in this article,http://www.alanquayle.com/blog/2012/03/what-the-mobile-industry-can-l.html. 103 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Media planning and buying is the most relevant part of the Advertising industry to the TV value-chain, this is performed by specialist “media-buyers.” They aggregate inventory (advertising slots)across multiple campaigns to lower costs. About 12 years ago most media buyers were spun-out ofagencies, now they’re being bought back into the large agencies to create full-service agencies. Figure 44. Advertising Value Chain Advertisers (Brands) Agencies Producers Media Buyers Cable Broadcast Cash Flow Networks Networks Content Flow MSO, DBS Stations Full-service agencies tend to work on a combination of fee-based and commission basedcompensation. The fee is paid by the entity for which the marketing is being done. Thecommission is a payment from the network or payTV provider to the agency and is usually about15% of the cost of the advertisement. Full-service, or media-neutral advertising agencies produce work for many types of media,creating integrated marketing communications, also termed through-the-line (TTL) advertising. The"line", is the traditional marker between the media that pay a commission to the agency and themedia that do not. Full-service agencies are also known as traditional advertising agencies for theclient, wherein the client satisfies almost all their advertising or promotional needs with the sameorganization. This type of agency provides advertising services such as strategic planning, creativedevelopment, production, media planning, media buying, and other related services such as salespromotional activities, direct selling, design, and branding, etc. As mentioned at the start of this section the trend is for subscription revenues to exceedadvertising revenue, as show in Figure 45, where in 2006 in the US subscriptions exceededadvertising revenue, and similarly in 2009 in Western Europe similar inversion. It’s clear thesubscription/advertising model is not going away, but subscribers are becoming an important aspectof the value chain, and hence their decisions/preferences will impact the value chain more greatly. 104 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 45. Trend in PayTV Subscription and Advertising Revenues 140 120 100 Industry Rev $B USA PayTV 80 US Ad Rev 60 EU PayTV Rev EU Ad Rev 40 20 0 2006 2007 2008 2009 2010 2011 2012CANOE VENTURES In March 2009 I wrote an article about "Why the Mobile Industry needs to keep an eye onCables Canoe Ventures". This article was prompted by what I saw at MWC 2009 (Mobile WorldCongress), where the mobile advertising initiative announced in 2008 at MWC between Vodafone,Orange, O2, T-Mobile and Three was quietly swept under the carpet. The reason: because it failed,through a lack of agreement and also a lack of engagement from the advertising industry. Well, in Feb 2012 Canoe Ventures laid off 120 of its 150 employee, and from now on, with the30 employees left, Canoe will focus on ads for video-on-demand / TV Everywhere. The MSOs(Multi Service Operators - Cable Cos to those outside the industry) that own Canoe publicly said theywere spending $150 million on the joint venture. Likely they will have spent closer to $191 million onCanoe from the time it was announced to the time all of the laid-off employees leave. This was anexpensive mistake. True to my contention that we must learn from our mistakes: Why couldnt Canoe be successful?This was an industry, the US Cable MSOs, that had a long history of working with the advertisingindustry. They worked together and brought in one of the leading advertisers to run this business, itlooked like it had the ingredients for success. The creation of Canoe was simply to expand the advertising dollars MSOs receive, currentlyabout $5 billion out of a pie of $60 billion. The thought was that the MSOs could offer to theadvertisers addressability and interactivity to expand the MSOs share of the ad dollars. They aresignificant players in the advertising business, so this rationale made sense, it was simply aboutexecution. They knew the language Madison Avenue liked to hear - addressability - only targetingthose relevant to the message giving efficient ad spend, improved response and recollection rates,and all the other measures used to see if advertising impacted the brands bottom-line in a region. 105 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Everyone has their opinions on the reasons for Canoes demise, here are mine:  In herding the MSO cats, it proved too difficult to get to the necessary customer data to enable addressability and critically implement the changes in the network to execute on that accessibility. Instead the focus was on interactivity, which for the advertisers comes after addressability. Interactivity ups the per impression cost by a factor of 10-1000, especially if the click requires a sample to be sent through the post. You need to be confident that accessibility works first, before upping the costs.  They went through a number of business model changes and ended with a technology focus requiring someone else to sell the inventory they created, that is this dreaded "platform" that magically retains value without any direct customer relationship. They needed a direct Business Development and sales-force to open up the market and sell what they were creating. They had to persuade people to do something differently.  I think weve seen enough failures to realize a preordained build-it-big approach that requires network operators to play nice together just doesnt work. Businesses need to grow, find their place in the world that works. For example, they could have taken a number of approaches to improving accessibility, e.g. it could have been a project in NCC (National Cable Communications) Media, or a couple of different start-up approaches. Most of the MSOs are also partners in the cable spot business, through NCC. What can we take from this to the current mobile operator initiatives is:  Business development and sales are as important as the platform and require equal resourcing. A platform opening up a new business needs a direct paying customer relationship; someone else isnt going to do it for you.  Implement multiple approaches, do it yourself (e.g. Comcast have a go), fund a couple of start-ups with different approaches, examine existing businesses and see if you can through a couple of small projects move them in the necessary direction.  Listen to the customer (advertisers) on their needs, if the network operators limit your ability to deliver on what the customer wants, pack up immediately and do not waste their cash.ADVERTISERS AND THE NETWORK PVR AND DISH’S HOPPER As customers become more powerful in the ecosystem, and technology allows them to watchTV on their terms, the actual viewers of advertising slots is being called into question. MSOs havetaken a carrot and stick approach to why advertisers should work with the nPVR (Network-basedPersonal Video Recorder). The carrot is:  Targeted advertising increases revenues;  Opportunity to create Cable advertising market; and  Cable is the facilitator; content providers create the new market. 106 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 The Stick:  Advertising is moving away from linear TV;  nPVR is a safe haven from PVR;  Content Providers have carriage agreements with Cable companies;  Targeted advertising helps everyone in the value chain; and  Targeted advertising in nPVR gives the volume that advertisers require. So in the limit the MSOs are hoping to use the nPVR to develop direct relationships with theagencies, going around the existing TV channels. This in part reflects the battle we’re seeing betweenthe channels and payTV providers over carriage fees. To date this has not worked, and increasinglywe’re seeing DVR under the customers control, so they can use technology like Slingmedia to viewcontent on their own terms with TV Everywhere For TV Everywhere DISH uses Slingmedia, a division of Echostar that is also the owner ofDISH. This enables the content and services received by the DVR to be available on any iOS orAndroid device anywhere they are interconnects and running the SlingMedia device. DISH’s ad-skipping (AutoHop) and full TV everywhere proposition (not multi-screen offer) hascaused some concern from content owners, most recently DISH’s public spat with AMC Networks,and in May Fox, CBS and NBC Universal separately sued Dish Network over its AutoHop service. The result of this litigation will not fundamentally change the payTV business, as DISH hasmade clear ad-skipping is used by a minority of customers. However, it will likely accelerate /decelerate that rate of change as other PayTV operators will likely follow DISH in delivering suchtechnology, which will impact the contribution of advertising to the TV ecosystem, and likelyaccelerate direct to consumer efforts to have better control over advertising. PAYTV PROVIDERS Cable and Satellite make up the bulk of the market in the US, roughly 50% Cable, 30% Satellite,of the 117 million payTV households. Verizon and AT&T have a combined 8%. 13% ofhouseholds either receive broadcast only, or have no TV. The typical revenues in North America are:  Basic plan ARPH (Average Revenue Per Household) is $35-45; and  Average payTV ARPH is $55. PayTV penetration varies widely across the world:  50% in Western Europe;  20% in Eastern Europe;  <10% in India and China; and 107 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  Japan is about 20%. Figure 46 shows the global growth in payTV, which is no surprise given the relatively lowpenetration of payTV in some countries. Though in Western Europe the availability of relativelygood quality free to air content, especially where the government supports those providers, will placea cap on the maximum payTV penetration a country can achieve. Figure 46. Global Growth in PayTV (Millions of Households) source Alan Quayle Business and Service Development DEAL STRUCTURES As mentioned in the previous sections of this chapter operators have struggled with the bespokenature of deals in the TV industry. Some operators have found themselves in a situation where theirprogramming costs doubling initial estimates as customer numbers did not meet expectations, as thecontent deals ensured minimum revenue commitments. There is no magic formula, simply IPTV providers are in a weak negotiating position due to lowcustomer numbers, the only option would be to act as a consortium in buying content. Whichoperators such as Orange have achieved to some degree, but it really needs all operators, which giventhey’re competitive makes such co-ordination unlikely. The best an IPTV operator can do is employpeople experienced in such negotiations from established payTV providers to at least cut the bestdeal for their current situation. 108 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 47. Examples of Deal Structures in the Value Chain Per 10-90 sec commercial. Show sponsorship. Product Retailers Purchase / rental revenues Advertisers / Media Buyers Studios placements. Multichannel bundled purchases Rental Aggregators Customers Rev Split Broadcasters Satellite (Networks & Cable Must-carry Stations) requirement Monthly subscription Telcos PPV revenues Cable Carriage fees Example of Rev split or flat Networks fee for premium deals across channels ecosystem IMPERFECT COMPETITION AND THE BATTLE BETWEEN NETWORKS AND PAYTV TV content is essentially controlled by 6 conglomerates  Disney (largest media and entertainment conglomerate) owns ABC, ESPN, Marvel Comics;  Time Warner (2nd largest conglomerate) owns New Line Cinema, Time Inc., HBO, Turner Broadcasting System CNN (Time Warner Cable was spun off into a separate company); and  News Corporation (3rd largest conglomerate) owns BSkyB and hence has monopoly control over most US content, also owns DirecTV, FoxTel and SkyItalia;  Viacom (4th largest conglomerate) owns Paramount Pictures, CBS, MTV, and Comedy Central.  NBC Universal (now owned by Comcast) owns NBC, Bravo, SciFi, IV1 (Australia), History Channel;  Sony Pictures (mainly production); These conglomerates own multiple Broadcast and Cable Networks, as well as Studios and insome cases payTV operators. As a result ‘carriage’ (the fee payTV providers pay for carrying TVchannels) is negotiated across the Media Conglomerate’s entire network inventory so payTVproviders frequently carry channels forced on them. 109 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Conglomerates insist on inclusion in the payTV provider’s basic package as this drives upviewers, but it also drives up a payTV provider’s costs. Outside the US bargaining power of theMedia Conglomerates is reduced, though there are country exceptions. As an example from the UK,Virgin Media refused to pay Sky’s additional charges to carry their channels so dropped Sky channels.The next day Sky started a campaign targeting Virgin’s customers with the message “Don’t looseLost,” a popular TV program. We’ve seen similar battles in the US between Time Warner Cable andFox. In the UK OFCOM (UK Regulator) is trying to force Sky to provide content at fair wholesalerates Over the past two decades Cable TV has gained popularity and customers accepted priceincreases for a greater variety of content, e.g. MTV, nature channels, and dedicated sports channels,etc. However, Cable TV penetration is now flat, and for many incumbent MSOs they’reexperiencing a loss of customers due to competition from telcos. Pressure for carriage increase rates has resulted in a battle between Networks and MSOs. Butthat’s not where source of rate rise originates. Agents for stars of TV shows are demanding $1-3mper episode, sports stars are demanding $100m per season. We’re currently in a spiral of costs; theunderlying belief is that stars draw viewers.. At the moment content owners are passing their costs down the value chain and at some pointthe networks and MSOs will no longer have margin to squeeze or a willing customer base to payhigher prices. Last year Setanta UK (sports channel) went into receivership, as the costs ofpurchasing sporting events proved too great for its audience size. ESPN picked up Setanta gamesrights. SkySports dominates sports programming in the UK, this dominance stems from a 300MGBP bet they made in 1992 for the Premier League (football) rights that transformed the pricepoints, which was in part enabled by SkySports subscription model. TELCO CHALLENGES Licensing of TV programming is relatively complex compared to most telecom negotiations.Multiple parties must approve a content deal. Recurring payments are required for a variety ofplayers, including studios, unions, actors, etc. There are few ‘fixed’ prices most items are negotiated where audience reach, its appeal,demographics and bargaining power all impact the charges. Variety of business models includingshares, splits, rates and commissions which are usually negotiated annually. In most regions cableand satellite own the vast majority of payTV homes; thus have a stronger bargaining position thanTelcos. In the UK much popular programming and distribution is owned by Sky/Fox. OFCOM isattempting to force a wholesale pricing model to break their monopoly of control over popularcontent. But this is very much an exception in the market. And highlights the different countryspecific situations, while Telecom Italia suffers the same problems as BT in competitors owningcontent rights as well; France Telecom has been able to build a strong position in payTV. There is also a fundamental shift taking place, content owners are looking to the internet as away of removing the middleman of payTV providers: cable, satellite or telco. Telcos are trying tobreak into a rather insular ecosystem, with a weak bargaining position (few customers). Hencechannels are weakening while the content owners are strengthening. This will continue to squeezemargins for Telcos, and making scale critical to success as that enables being able to buy exclusiverights to popular local content (generally sports.) 110 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 IMPACT OF TECHNOLOGY ACROSS THE ECOSYSTEM There are a number of technologies impacting the TV ecosystem, as shown in Figure 48.Examining each in turn:  Internet video allows direct customer access; studios are actively exploring this, e.g. Hulu, HBO Go and BBC iPlayer which will be discussed in the Over The Top Providers chapter of this report. This allows the content owners to have a direct relationship with the customer; note Disney has done this for many decades. But at present the main US content owners appear to be pulling back from efforts to build a direct customer relationship online, reinforcing the traditional ecosystem, as discussed in the Hybrid TV, OTT TV, and TV Everywhere Surveys and Business Models chapter.  The DVR (Digital Video Recorder) is increasingly popular; it reduces ad effectiveness. As discussed in the nPVR section of this report it can empower the payTV provider to take over some of the advertising revenue, though this appears to have failed, and instead putting the DVR into the customers’ hands appears to principally empower the customer, and begin the conversion to an on-demand / self-selection viewing habit than the traditional channel zapping, a necessary step in the evolution of the customers’ viewing habits to finding an OTT TV proposition attractive. For the producers is reduces report fees and allows customers to ‘own’ content rather than buy. For Networks is reduces effectiveness of ad revenue which is a core component of their revenue.  Consumer electronics such as TVs, DVRs, Apple TV, TiVo, PS3, Wii, and Xbox enable consumption of video outside existing value chain direct from the Producers, e.g. Sony Store through the PS3. The on-device stores promote direct consumption of content (e.g. Amazon instant video or iTunes). These stores understand the scale game and provide an efficient channel for content owners to deliver directly to the consumer. Though customers increasingly expect a subscription based model for older content, than purchasing it, a comment frequently made by Apple iTunes customers.  TV Everywhere / Place shifting has rapidly evolved over the past 3 years. The main beneficiary is the payTV operator which can offer it combined with premium packages to help add value around premium bundles, as well as simply a standalone service. Increasingly we’re seeing operators offer Slingmedia type functionality, putting the subscriber in control of their content. The Content Owners have to date been frustrated by the lack of innovation on TV Everywhere in promoting new business models such as an eBay model in TV content, i.e. bringing content buyers and sellers together and taking a cut of the transaction.  IPTV: Weakens payTV providers bargaining position, as there are more competitors negotiating over content. Overall content owners (Studios) are strengthening their position thanks to Technology, and indoing so taking more revenue out of the ecosystem. PayTV operators continue to focus on makingDVRs and place shifting more attractive to maximize their position in the value chain. In 2012 SkyUK has achieved over 70% penetration of Sky+ DVR service, DISH has 65%, and in the US market 111 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012it is approaching 46%. The Sky+ DVR user experience is excellent, press record once for theprogram, twice for the season pass. Season pass records all showings of a program. So there areways for payTV providers to focus on their core strength in the value chain, which are the hourstheir customers spend watching TV. Figure 48. Rating Technology Impact on TV Ecosystem Members FUTURE SCENARIOS 2009 AND 2012 During a series of industry interviews completed from Dec ’09 through Feb ’10 a number offuture scenarios were discussed with operators where they were asked to rate the probability, likelytimeline and discuss the reasons for their prediction. The results of which are shown in Figure 49. There was general consistency in the responses across payTV operators and geographies.Fragmentation is the most likely scenario in the near term with multiple channels weakening thepayTV providers’ positions; content owners will use all available channels to explore theireffectiveness and financial return. PayTV margins will continue to erode as TV Networks continueto raise carriage fees and customers remain unwilling to accept subscription fee increased on thebasic packages, as well as bundling with data and voice services further discounting the TV service.Verizon is currently raising its payTV rates and initial indications are it is raising churn, though it willtake more than one year for the impact to be quantifying as most customers are locking into 1 and 2year contracts. The scenarios considered of medium probability include internet video going mainstream, butthis was seen as a long term trend and not winning out-right, rather becoming a preferred deliverymechanism for some customers and a dominant ‘secondary platform’; especially those that preferprogrammatic selection than channel selection. Consumer Electronics becomes a service platformwas considered medium probability but remaining niche, e.g. Sony Store on PS3 will be used by PS3gamers, but will not be a consumption model for the masses. The web retailers were seen as themost significant uncertainty, some viewed them as the most significant threat, and others saw it onlyfor VoD for those customers with a ‘service platform’ in their home, e.g. PS3, TiVo, Roku, Boxee,Apple TV, DVR, Internet capable TV. Business as usual and telecom operators dominating wereseen as unlikely scenarios. 112 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 49. Review of Future Scenarios, based on industry interviews 2009 Scenarios Description Probability Reason Content owners will act as arms suppliers - use all Multiple channels, channels and use the bargaining weakness of so many Fragmentation content owners channels to increase its margins as well as bypass them dominate, confusion High over the web. Sony is in a unique situation with the PS3, it can deliver Consumer Customers move to VoD and download to own from its extensive content Electronics consumption of video library. Devices are more likely to be co-opted by the Dominates from their PS3, Wii, Medium - content owners, e.g. BBC iPlayer on the Wii, or by web- TiVo and Apple TV niche retailers. Deals cut are at the sufferance of the content owners - if Likes of Amazon on current deals impacted their other revenue lines, they Web Retailers Demand become Medium - would react. But as Amazon understands web retailing Dominate customers preferred medium they can not ignore and if customers express a preference site. term they will follow the money. Internet gets to the TV, Internet Video and consumers Peoples habits change very slowly, internet video will be a Dominates change their viewing Medium - part of customers viewing habit. For some it will replace habits long term MSO / DBS, >10 years before early majority are impacted.Business as Usual Existing ecosystem Value chain is already changing, MSOs and Broadcasters continues Low are working on adapting their business models Telcos are in a weak position, and it will be weakened Telcos Dominate Customers adopt the even as their customer numbers grow due to bundle Low strengthening of the content owners position. The same survey was conducted over the summer of 2012, June-August, see Figure 50.Comparing the 2 surveys makes interesting reading. Fragmentation is clearly increasing, but the roleof consumer electronics in the ecosystem is seen to have lessened and likely be niche. The impact ofInternet TV is now seen as a medium to long term issue and limited to a minority of viewers. BAU (Business and Usual) is seen as more likely given OTT is not perceived as such as threatand the content owners seem happy to keep the current business model in place and extract morerevenue. Telcos remain niche, only if they buy a Satellite provider in their market can they become asignificant player. 113 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Figure 50. Review of Future Scenarios, based on industry interviews 2012 114 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 H Y B R I D T V A N D T V E V E RY W H E R E C A S E S T U D I E S : TELCO / SATELLITE / CABLE / TERRESTRIAL This section will review case studies of the hybrid TV roll-outs and TV everywhere deploymentsaround the world. The purpose is to provide some insight and quantification into their failures andsuccesses, to help payTV operators build a successful business and suppliers provide the bestsolutions, as well as dispel some of the misinformation that existing in the market around somedeployments as to whether they are really Hybrid TV. HYBRID TV DEPLOYMENT CASE STUDIESAT&T HOMEZONE (DISCONTINUED SERVICE) AT&T HomeZone was an integration of AT&T Yahoo! High Speed Internet, DISH satellite TVand AT&T Home Networking services via a single device. 2Wire was the STB supplier. It featured a250GB drive for storage of DISH, MovieLink, and Akimbo programming. The cost of HomeZoneservice was $10, in addition to DISH and broadband internet charges. Movies cost generally $4.99 torent. Note the DISH TV service was available stand alone, so the often quoted 2.1M quoted AT&THomeZone customers were not all HomeZone customers, in fact most were not. AT&T neverpublished the number of HomeZone customers. It is estimated that HomeZone customers arecurrently <50k. The DISH partnership has been withdrawn as a service, as has the HomeZone service. AT&Tnow partners with DirecTV which has its own Hybrid Satellite service “DirecTV on Demand.” The factors leading to HomeZone’s failure include:  The DISH / AT&T partnership was difficult as they are competing payTV suppliers. The partnership was based on expediency from both sides for geographic areas were AT&T could not provide U-Verse.  They did not integrate customer data so there were many customer relationship problems, poor customer service resulted in high costs.  The product was not bundled, customers had to buy the DISH service, then Yahoo! Broadband, then HomeZone it required multiple service selections and installs by the customers.  Pricing was too high, at $4.99 per movie it is 5 times the price of Redbox (popular automated kiosk rental service in the US), plus a monthly $9.99 makes it uncompetitive with services such as Netflix and the MSO (Multi Service operator / Cable TV operator). 115 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Critical learning from the AT&T DISH experience is:  Simplicity in:  purchase, one click;  installation, one box; and  customer service, one number.  Market will not accept a subscription fee for VoD when movies are charge for in addition.  Cable offers most of the interactive TV content for free, with purchase of premium movies.  Interactive TV is a secondary concern to customers. More important issues are available TV channels, multi-room, HD, DVR, and picture quality. AT&T has now focused on a 2 tier strategy:  U-Verse where available, fully integrated triple/quad play offer; and  DirecTV where U-Verse is not available – only value-add is integrated billing. But still there are issues in customer management, two separate databases so offers sometimesdo not get applied, or problems are not closed especially when cases are transferred between AT&Tand DirecTV. AT&T is one of the few examples of where two payTV providers attempted to work together indelivering a hybrid TV service. The long term commercial pressures and the difficulty in carving outenough revenue to justify the interactive services proved too great. A conclusion is hybrid onlyworks when the broadcast partner is free to air programming, e.g. BT Visions IPTV service, or asingle payTV provider owns both the broadcast and interactive streams, e.g. Verizon FiOS, OrangeTV or ComHem. Today AT&T focused on an IPTV service called U-Verse in regions where is can support VDSL.And reselling DISH TV in regions where it is not the access network provider, e.g. in Verizon’sterritories, so the focus is on bundling wireless (mobile phone) service and TV. Generally trying tolock customers into 2 year contracts where the first year price is good and clear and the second yearpricing is generally perceived by customers as not reasonable. If a contract is required a totalcontract lifetime cost should be required.VERIZON FIOS Verizon FiOS is consider a hybrid TV service because it uses the traditional cable TV digitalmultiplex for delivering broadcast services, and IPTV over MoCA (Multimedia over Cable) forinteractive services such as VoD and widgets. Verizon chose a hybrid approach purely to avoidtechnology risk; the plan is to move to full IP with all services delivered over MoCA around 2015. 116 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 FiOS TV customers are currently at 4.5M (Q2 2012) see Figure 52, FiOS internet at 5.1M. Thehybrid STB is the Motorola’s series of Hybrid QAM/IP SD/HD Set-Top (with optional DVR). Hybrid TV is an interim solution, VZ see the move to all IP around 2015. However existingdeployments are unlikely to be transitioned out, hence Verizon will likely run a heterogeneousnetwork for the foreseeable future. Verizon’s solution addresses the simplicity issues raised inAT&T’s deployment with one STB connection, one purchase, and one customer support number. Interactive services are available at no charge, and premium movies can be rented at the sameprice as the cable providers. This makes it easy for customers to understand and use the service.Verizon is one of the most successful TelcoTV deployments in the world, its hybrid architecture iscritical to its success, as the service is comparable to existing offers, just better. An interesting question is whether the North American MSOs will follow Verizon’s lead in themove to hybrid TV. MSOs have stated the plan to move to IPTV, but an interim hybrid solution isunclear. Currently it does not appear the case, but if Verizon is able to achieve service differentiationthat impacts customers’ purchase decisions either in churning to Verizon, or within Verizon inachieving a higher than average ARPH (Average Revenue Per Household), then they will likely react. Figure 51. Verizon FiOS Architecture and Migration Plan (source Verizon) 117 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 52. Verizon FiOS Customer Numbers (source Verizon) Verizon Flex View: Multi-Screen TV As will be discussed in the TV Everywhere market survey the focus of payTV operators hasmoved from trying to use TV Everywhere to compete with OTT to using TV Everywhere to limitcustomer migration to OTT services. However, the term TV Everywhere is generally not used as theservice tends to be limited to the home, so the term multi-screen TV is preferred to avoid customerconfusion and frustration, or simply the payTV operators application for smartphone, tablets, smartTVs and games consoles. The FiOS TV App is currently available for LGs Smart TV Platform, xbox and Samsung SmartTV platform supporting 26 live channels, and access to video on-demand, including the 20,000 FlexView On Demand titles. Channels include TNT, Nickelodeon, HBO, TBS, Cartoon Network andComedy Central with more channels coming in Q4 2012. The limited number of channels meanscustomers still need to rent a STB from Verizon to see all their subscribed channels; it’s not a BYOD(Bring Your Own Device) proposition. Customers connect to the FiOS router (must have Verizonbroadband) via a capable device in the home and download the FiOS TV app from the relevant appstore. There is also a My FiOS app available for iOS and Android which includes a media manager, butdoes not yet include live channel support, only VoD which has the restriction that the Flexview apprequires that the customer is within a FiOS home with FiOS Internet and FiOS TV service. Livestreaming is not supported to this app yet, though it was demonstrated at CES 2012. This is a good example of the partial offer made to customers by payTV providers in an attemptto stifle adoption of OTT services. However, what it does is generate is confusion and frustration,and encourages customers to explore TV Everywhere and discover the broader OTT offers available.For those customers already experienced with services like Netflix and Hulu it simply highlights thegap between what a PayTV operator can offer and an OTT provider, the OTT services are 118 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012increasingly setting customers’ expectations. We’ll explore this later in the chapter on the ViewerSurvey. There is popular assumption that premium subscription customers are getting the service for freeso they will be tolerant of partial offers. The service is not marked as beta and it requires thecustomer to invest their time and effort into setting it up, only to discover a partial offer. Figure 53. Verizon MY FIOS App (source Verizon) Verizon FiOS Widgets The technology behind the widgets is discussed in the previous chapter on Key Technologiesand Standards. Developers can publish their widgets to over 8 million interactive FiOS TV screens,see Figure 54. In developer interviews the main problems appear to be:  Addressable customer base is too small, better to focus on the 2nd screen of iOS and Android at 550-600 million users. Verizon FiOS is at 4.5M subscribers, but less than 5% of those customers regularly use widgets as the experience is not great compared to web-services. Which makes a total addressable market of 225k users at present, so likely user numbers will be in the 10-20k range at best for any new app. And the widget has to be built for their platform so is not portable.  Telco developer communities are poorly designed making finding basic information on SDKs (Software Development Kits), API definitions and business models very difficult. For Verizon Widgets we still haven’t received a clear explanation on the content standards for our widget, never mind the issue of using advertising to support our application.  Telco’s have not delivered an engaged user base for widgets.  Most interest appears to be from 2nd screen applications that would like to interact with the customer through the TV screen as well as their application using APIs not widgets. Knowing what a customer is currently watching, and being able to push content via the TV is given as one generic use case. The business model should be seen as creating a better FiOS experience.  Discussion on need for an IPTV API aggregator, note the term API is used to cover the business models, processes, content standards, etc. 119 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 54. FiOS TV Widgets (source Verizon)DIRECTV AND DISH DirecTV and DISH are satellite operators in the US and exemplify the dominance of Hybrid TVin the Satellite TV sector. DIRECTV, is an American direct broadcast satellite service provider and broadcaster. Itssatellite TV service, launched on June 17, 1994, transmits digital satellite television and audio tohouseholds in the United States, Latin America, and the Anglophone Caribbean. Its primarycompetitors are Dish Network and cable television providers. At the end of 2011, DirecTV had19.89 million subscribers. DIRECTV On Demand gives access to over 7,000 shows. DIRECTV On Demand required anHD DVR connected to the home broadband Internet service with the DIRECTV CINEMAConnection Kit, see Figure 55. All DirecTV’s HD DVRs support HBI. 120 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 55. DirecTV Hybrid Set Top Box (source Verizon) DISH, is a United States satellite broadcaster, providing direct broadcast satellite service—including satellite television, audio programming, and interactive television services—to 14.3 millioncommercial and residential customers in the United States. Dish has made diversifying and updatingthe companys technology a high priority with the aim to provide internet, video and phone servicefor both home and mobile applications. In April, 2011, DISH purchased Blockbuster in a bankruptcy auction, agreeing to pay $322million in cash and assume $87 million in liabilities. DISH Network also made a bid to purchaseHulu in October 2011, but Hulus owners chose not to sell the company. The exercise was simply toprice Hulu and demonstrate to the studios the value the company had created. DISH CEO Ergenstated, "Given the assets weve been accumulating, I dont think its hard to see were moving in adifferent direction from simply payTV, which is a market thats becoming increasingly saturated." Dish Network put its Blockbuster acquisition to work by announcing Blockbuster movie pass,which allows on-demand movies, game and DVD rentals, and online streaming services for a flatmonthly fee. Dish Network plans a similar service for non-Dish Network customers as Blockbusterhad agreements that allow it to receive DVDs 28 days earlier than Netflix. In May 2012, Dish launched the service DishWorld on the Roku streaming player. Thisbroadband service provides international programming to subscribers of the DishWorld service.Customers do not need to be a satellite or cable customer to subscribe; packages range from $5-$45per month, covering Arabic, Brazilian and Indian channels. Similar to DirecTV all DVRs including the Hopper (its top of the line integrated receiver DVR)support On Demand via HBI either through USB connected WiFi or built-in powerline, see Figure56. Hoper includes features such as:  Automatically skip commercials in primetime TV – ABC, CBS, FOX and NBC in HD  Connect up to 4 HD TVs using a single Hopper and 3 Joeys (remote device for the Hopper)  Full HD DVR functionality on every TV, including the ability to pause, fast-forward and rewind live TV 121 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  Share DVR recordings between any HD TV in the home  Record up to 6 live HD channels during primetime  2 TB hard drive – record and store up to 2,000 hours  PrimeTime Anytime instant access to primetime shows from ABC, CBS, FOX, and NBC in HD (stored up to 8 days – catch-up TV service)  Watch hundreds of On Demand titles on your TV, no internet connection required – recorded from the broadcast feed.  Remote Control Locator- Never lose your remote again. Figure 56. DISH Hopper (source Dish Networks) For TV Everywhere DISH uses Slingmedia, see Figure 57, a division of Echostar that is also theowner of DISH. This enables the content and services received by the DVR to be available on anyiOS or Android device anywhere they are interconnects and running the SlingMedia device. DISH’s ad-skipping (AutoHop) and full TV everywhere proposition (not multi-screen offer) hascaused some concern from content owners, most recently DISH’s public spat with AMC Networks,and in May Fox, CBS and NBC Universal separately sued Dish Network over its AutoHop service. The result of this litigation will not fundamentally change the payTV business, as DISH hasmade clear ad-skipping is used by a minority of customers. However, it will likely accelerate /decelerate that rate of change as PayTV will likely follow DISH in delivering such technology, whichwill impact the contribution of advertising to the TV ecosystem, and likely accelerate direct toconsumer efforts to have better control over advertising. 122 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 57. DISH DVR and SlingMedia (source Dish Networks)BT VISION BT Vision was launched on 4 December 2006. The number of customers is currently at about450k (Q4 2009), well below the target 2-3M predicted at launch; by June 2012 they had reached 728k.Revenues are also below initial targets as the base tier package is only 12.50 GBP (Great BritishPounds) per month, down from the 15 GBP per month charge in 2010. And they have introducedan essentials package at 4 GBP per month; no figures are given on the split between the essentialsand unlimited packages. But subscriber numbers rose significantly when the Essentials package wasintroduced. The UK is a highly competitive market, and Sky UK offers a more traditional basepackage for 21.50 GBP (currently it has 10.6M customers (Aug 2012).) A challenge has been for customers to compare the offers. BT offers programs, while Sky offerschannels, which most customers find easier to understand. That is a channel like Sky One meansfirst UK broadcast of shows like the Simpsons and Lost. Also Sky has the rights to the premierfootball league, so BT lacks a critical sports package to attract many viewers. In addition, BT Visioncan only support one TV. BT Vision provides digital TV channels using a Freeview decoder. The STB supports 80 hourstelevision programs to be recorded, and films, TV program and sports events can be viewed ondemand via broadband. The service is described as providing a range of on demand content without compulsorysubscriptions. However, a BT broadband connection with a guaranteed line speed is required, thissignificantly limits the addressable market. And this is a cause of customer frustration as the serviceis not available throughout the UK, the customer has to be interested, and then have that interestquashed when their DSL line is not fast enough. The BT Vision+ set top box was originally the Philips DIT9719 operating Microsoft Mediaroomsoftware. Motorola will supply the next generation of BT Vision+ box. BT’s broadband accessstrategy remains confused, it has claimed both VDSL and FTTH plan and changed the targets severaltimes. Lack of success with BT Vision means it will likely not follow Verizon in an aggressive fiberdeployment. Hence the hybrid telco STB approach will remain in place for the foreseeable future asthe cost of upgrading to VDSL or FTTH remain high given the relatively low penetration of the TVservice. 123 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 BT Vision has suffered from the problem that customers still watch TV channels, and in theircomparison between offers channel line-up not specific programs is how customers decide.Consumers’ behavior has not yet changed so that most customers are willing to build their ownschedule – programmatic purchase. Hybrid STB has proven essential for BT Vision to provide a base-level broadcast quality service.But that base tier of service is available from all TV providers, including Sky. Purchase of BT Visionrequires customer to also have a BT phone line, BT broadband (with enough capacity) and anexisting terrestrial aerial. This is much more complex purchase than Sky (Satellite) or Virgin Media(Cable provider). And Sky’s control over both sports and popular US content puts BT Vision at asignificant disadvantage in attracting the majority of UK viewers BT will remain niche, focused on early adopter customers that want to build their own schedule,do not have a significant interest in premier league football, and only require payTV services on oneTV. This raises a significant issue about whether telco based IPTV providers will be competitive inthe long-term, especially as HD and multi-room payTV becomes important. The hybrid telco TVmarket may be limited in some markets, not by the technology, but by the ability of the telcos tocreate an attractive package for the majority of customers. BT has confirmed that it will begin offering the YouView TV service in the autumn of 2012.The telco is one of seven launch partners for YouView, the UK’s connected TV service thatlaunched earlier this month. It said the service would appeal to customers “looking for the nextevolution of the Freeview service” but did not reveal details of how it would bundle YouView withits broadband and telephony products. BT has also announced that it is to offer its BT Vision Essential TV package for free tocustomers signing up to its TV, broadband and calls package. The package normally costs £17 (€21)per month, but the price is being reduced to £13 for a limited time, with the £4 per month VisionEssentials element offered for free. YouView is a UK consortium, is generally viewed negatively in the market for the followingreasons: Unclear Addressable Market YouView’s stated target audience of mass-market consumers appears to have been defined bywhat is cannot address, for example, people who will pay subscription for lots of TV are already Skyor Virgin Media subscribers. And those who will not pay are FreeView subscribers. Most Freeview TV viewers appreciate extra choice, but not enough to pay a regular subscription.Additionally, viewers who already refuse to buy a Freeview+ DVR are unlikely to pay £300 forYouView’s similar functions. Confused Consumer Proposition The public mission statement is that YouView is the natural, internet-connected long-termupgrade to digital terrestrial’s Freeview standard, but its internal hopes were pinned more onYouView’s use by its ISP stakeholders to prevent short-term broadband customer churn. 124 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Both make sense. But a glaring problem remains: how will YouView and the existing Freeview+DVR brand compare? YouView is not a bargain at £300. YouView and Freeview+ boxes are competing to win new customers. How can Arqiva, Channel4, ITV and the BBC be shareholders in both when they seem so similar? And is that a good use ofinvestor and license fee money? Unclear Revenue Currently the focus is a relatively expensive STB. However, there is no clear plan on paid-forcontent. And advertising will be limited source of potential value because broadcasters will not sharetheir linear-channel revenue. So are the investments from ITV, C4 and C5 recoupable through itsown increased advertising CPM? If so, would that necessitate first replacing Freeview? Intense Competition Across All Viewer Categories YouView has to compete against Sky, Virgin, Freeview, BT Vision, Amazon (LOVEFiLM),Netflix, Apple and Google, with no clear proposition. No Apps No Ecosystem Third party developers need incentives to spend their resources and forgo other opportunities tobuild products and services for YouView. Despite earlier talk of on-board “apps”, opportunities fordevelopers to even consider building them for YouView are absent. The box is closed and there areno developer tools or info discussed or cited anywhere.SKY ANYTIME+ Sky Anytime+ library of entertainment on demand includes series box sets, comedy,documentaries and kids shows see Figure 58, plus hundreds of movies if customers have Sky Movies1 & 2, at no extra monthly cost to their Sky TV subscription. And its available with any broadbandprovider; simply connect the compatible Sky+ box to the router to start watching. Anytime+ offers around 1,000 hours of content from Sky Arts, Sky Box Office, Sky Movies,Sky1 and Sky Sports, along with material from other broadcasters, such as the Disney Channel,ESPN, HBO, National Geographic and UKTV. A "key focus" for the service is movies, with around500 made available at launch. In Q2 2012 there were 650 movies available. Acting as a companion tothe existing Anytime service, Anytime+ is offered without charge to all Sky customers with Sky+ HDboxes, although access to premium content such as sport and movies will depend on the subscriberspackage. All Anytime+ content will initially be standard definition. High definition VOD content willcontinue to be offered to Sky subscribers over satellite in the Anytime service. However, Skys headof TV services Kathryn Downward said that Anytime+ could offer HD content in the future and 3Don-demand was "definitely something we are considering". 125 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 On 30 January 2012, it was announced that BBC iPlayer and ITV Player would be added toAnytime+. ITV Player became accessible through the main Sky Anytime+ menu as well as adedicated ITV Player section from 31 January 2012, featuring archive content. BBC iPlayer will arrivelater in 2012 along with catch-up programming for ITV Player. On 26 July 2012, it was announcedthat Demand 5 would also be added to Sky Anytime+ later in 2012. Content in Anytime+ is supported by progressive download, meaning it downloads in thebackground while the user is watching. Movies are typically around 1.3GB, which takes about oneminute to start playing on 2Mbit/s+ connection, but up to 40mins on sub-1Mbit/s lines. Downloadscan also be paused if the user wants to free up their broadband line for another task. However,Anytime+ was initially only made available to Sky customers with a Sky Broadband connection,meaning anyone on another internet service provider missed out. However, on 20 March 2012, SkyAnytime+ was made available across all broadband providers. Unlike BT Vision, Anytime+ will contribute towards the users broadband data limit. Customerswho sign up for Anytime+ and are on the Sky Broadband Everyday Lite package are warned abouthow much content (180 minutes) they can consume before they hit their cap and anyone withAnytime+ that does exceed the cap is reminded that the service is contributing to their data usage. Figure 58. Sky Anytime+ (source Sky) Sky Go is the OTT service available for free to Sky subscribers or for the pricing (as of August2012) in Figure 59. It is available on selected Android smartphones, iPad, iPhone, laptop or Xbox360 in the UK or Ireland with a 3G or Wi-Fi connection. Sky Go lets viewers watch channels fromtheir Sky TV package, live and on the move, see Figure 60. For example, Sky Movies customers canwatch live Sky Movies channels and movies on demand and Sky Sports subscribers can watch all sixSky Sports channels, live. Customers can register Sky Go on two different devices. And if they want to change the devicesthat are registered, they can do this quickly and easily on a monthly basis. This 2 device limit may beraised as it appears to be a cause of customer frustration. 126 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 59. Sky Go Pricing (source Sky) Figure 60. Sky Go Experience (source Sky) 127 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012ORANGE TV France Telecoms IPTV service requires 5 Mbps of sustained bandwidth, which, according to thecompanys data, means that around half of all broadband subscribers in France cant receive IPTVover DSL. This is a common problem for many operators IPTV service, their advertising leads tocustomer disappointment when they cannot receive the service, which is worse than not being awareof the service, because the operator has disappointed the customer. Having invested in premium football and movie rights, France Telecom needed to increase thereach of its TV services, so, in July 2008, it launched a hybrid service combining satellite andbroadband delivery to achieve 98% coverage, see Figure 61. This aggressive move has resulted inOrangeTV being the most successful TelcoTV service in Europe. This provides access to broadcast channels via satellite, and to VOD via the Internet. In fact, theSTB contains direct-to-home (DTH) and DTT tuners, so if subscribers are in an area where theycant receive satellite service, they can still get access to a more-restricted range of broadcast channelsvia terrestrial TV. Figure 62 shows the decision tree for a customer interested in OrangeTV, thecritical advantage Orange has compared to only DSL based solutions is the customer will be able toreceive Orange TV, so disappointment is avoided. Figure 61. How OrangeTV Delivers on Service Ubiquity (source Orange) Eutelsat is supplying the capacity on its satellites, while France Telecom subsidiary Globecastdeals with encoding, encryption, and channel transmission. Although Samsung has been chosen as aset-top box supplier, the offer was launched with lower specification OpenTech set-top boxes(Korean supplier not Hybrid). However, Thomson is now the prime STB supplier. In 2008 France Telecoms Orange TV division saw its subs numbers swell by 72% compared to2007 (1.7M versus 1M). Orange TV is the leading European hybrid TV success case. FranceTelecoms hybrid satellite service had more than 300,000 subscribers at the end of March 2009. Thetotal Orange TV subscription base is 4.7M (estimated) by the end of June 2012, see Figure 63. The OTT VOD service provides downloads rather than streaming, and requires a minimumbandwidth of 500 Kbps. With a 2 Mbps connection, subscribers have to wait about 10 minutes for amovie to start; alternatively, they can preorder the movie via PC, and then its downloaded inadvance. Clearly, this doesnt provide the same quality of experience as the full IPTV service, but it 128 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012doubles the number of households that are able to receive the VOD component of the Orange TVservice. Figure 62. Simplifying the Purchase decision – Regardless the customer will get OrangeTV (source Orange) Control was critical to Orange for its Satellite service, and partnership with CanalSat was not anoption because they are a competitive, it needed to own the Satellite service not partner. Hencethrough owning both DSL and Satellite delivery enabled an integrated experience and avoidscommercial risks. FT considered it the only way to achieve near 100% penetration. Note France hasa more competitive market than the UK, where Sky dominates. Currently in the French market FT is executing a payTV land grab against CanalSat and cable.FT is focused on achieving a dominant position in the payTV market, as without scale it cannot buythe necessary content such as local sports events, hence its TV service will not be competitive. 129 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 FT’s satellite investment is significant, few telcos could afford such as investment. DominatingpayTV is one of the top 3 domestic consumer objectives for FT, hence their willingness to makesuch as investment. HD can be supported over Satellite, IPTV and DTT. This hybrid approachmaximizes lifetime of their DSL investment, before fiber to the home is required. Hybrid TV willremain FT’s core TV strategy, which is IPTV / DTT and Satellite / IPTV. Orange TV has clearly demonstrated taking a hybrid TV approach across DSL and Satellite canbe success for a Telco enabling near 100% coverage, hence avoiding customer disappointment, anddelivering on a customers’ core service expectations. Figure 63. Orange TV Subscribers (source France Telecom)CANAL+ LE CUBE Canal+ Le Cube is the hybrid satellite STB, supplied by Pace. Design is by FuseProject, thedesigners of Jawbone Bluetooth headset. Le Cube is an award winning integrated design across STB,remote and UI. Hybrid satellite STB enables services such as:  Catch-up TV;  DVR through a 320 GB hard disk drive providing the ability to record up to 100 hours of HD;  Access to the latest imported series, in high definition, less than one week after they have been shown to American audiences;  Recommendations for viewers; and 130 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  IP connection allows progressive download of VOD (CANAL+ and CANALSAT on demand) whereby content is buffered onto the HDD. Canal Group is the leading payTV operator in France with over 10.5 million subscribers inFrance (12.7M across all its operations), 5.3M to Canal+ (premium channels). Figure 64 shows thecustomer proposition. Launched on 4th Nov 2008, rental price of the Le Cube STB is 18 Euro permonth, 10 Euro more than the standard HD STB. It is claimed hundreds of thousands of users ofLe Cube. 10 Euro was significant premium for being able to access interactive services, thatpremium did limit customer take-up like AT&T HomeZone. Le Cube remains, it has become theiconic STB for Canal+ / CanalSat, the premium has gone and Canal Group has managed to maintainaudience share in the face of aggressive competition from Orange, SFR and Free. Canal group’sstrong position in the French Movie industry gives it an edge with respect to content to the otherproviders. Figure 64. CanalSat Proposition (source CanalSat) France presents the leading hybrid TV case study. Both telco and satellite TV providers aregoing head to head with hybrid TV solutions. Orange uses HBB across DSL and Satellite, andCanalSat uses HBI across satellite. A key feature of the French market compared to the UK is themore even competition, the UK is dominated by Sky UK, and more open access to popular content.France Telecom made a firm commitment to TV in its home market, addressing the geographicavailability concern. 131 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012DETSCHE TELEKOM T-ENTERTAIN Deutsche Telekoms IPTV service, T-Entertain, had about 800,000 subscribers in Germany atthe end of 2009. Its target was to reach one million subscribers by the end of 2009. Germany is anotoriously difficult market for payTV operators, because theres good-quality free-to-air (FTA)programming on cable, satellite TV, and over the air; including a wide range of movies and nationalsports. By the end of June 2012 T-Entertain had 1.83 million subscribers, an increase of over half amillion in a year.
 Of that total figure, 239,000 took the Entertain via Sat DTH service that launchedin September 2011. The telco said revenue from TV services increased 29.6% year-on-year. DT’sshare of the German broadband market stood at 45% in the first six months of the year; and thenumber of broadband lines increased by 149,000 to 12.4 million. Deutsche Telekom believes that the critical success factors for IPTV in Germany are:  Content: The service must have a wide selection of premium content, and, in particular, the VOD service must have the same day-and-date release as DVDs.  Only T-Entertain has the entire national football league (Bundesliga) live and on- demand in HD quality. Deutsche Telekom, like France Telecom, has made a significant investment in the necessary poplar content.  Multiscreen: The service mustnt be purely for the TV, but must also deliver video content to PCs and mobile devices.  Interactivity and personalization: IPTV must offer a completely new level of customer experience compared with cable and satellite; in particular, it must include personalized recommendations within the electronic program guide (EPG).  Third-party access: IPTV services mustnt be restricted, walled-garden services, but rather must provide open application programming interfaces, giving access to OTT-TV and user-generated content (UGC) on the public Internet. This is to be determined, but DT is in discussions with several providers of WebTV service compatible with their current Moto STBs. T-Entertain’s STB is the HD-ready Motorola VIP1616E (European version of the Hybrid STBVIP1616T) set-top with DVR. It supports broadcast television, time-shifted television, multicast andvideo on demand, and is fully compliant with Microsoft Mediaroom. The plan is to continue withthe current hybrid TV strategy for the foreseeable future as it must offer the basic free-to-air packagethat its customers value most with the necessary quality and geographic ubiquity. There are now three IPTV services competing in the German market: T-Entertain (DeutscheTelekom) and Alice Home TV (Hansenet, now owned by Telefónica), and also Vodafone who re-launched a TV service, Vodafone TV, in 2011. In May 2011, Deutsche Telekom claimed to have 1.3million subscribers to its IPTV service; this grew by 34% so by May 2012 the figure stood at 1.75million subscribers. According to analysis of the ALM, the T-Entertain IPTV service is nowcompeting directly with the pay TV services of Kabel Deutschland (just over 1m) and the subscribersto Sky Deutschland (2.4m). In general, IPTV services were being accessed in 3% of households inmid-2011 (from 0.5% in 2008) according to ALM. 132 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 In November 2008, the football rights for 2009-2012 were allocated. The payTV rights went toPremiere (now Sky Deutschland), with highlights shared between the two main public servicebroadcasters and Sport 1 (formerly DSF). Deutsche Telekom was allocated IPTV and mobilebroadcast rights. However the recent Sky Deutschland acquisition of all rights to German top-tierfootball, including IP as well as broadcast rights, is in line with its overall growth strategy. Sky’sturnaround had been based on getting the basics right, including delivering differentiated content thatconsumers care about. Football was a part of that. Sky now has Bundesliga rights for the next fiveyears. Christian Illek, marketing director at Deutsche Telekom said that Sky’s plan was ambitiousand Deutsche Telekom had to live with the decision. He said Telekom was in discussion with Sky toget access to football, and that its own Liga Total! service would continue while Telekom had therights, but that the brand would not continue beyond that point. Deutsche Telekom (DT) was starting to make significant progress in the IPTV sector andovertook Satellite TV, in terms of subscriber numbers, in 2011. The loss of Bundesliga football rightswill impact growth; IPTV is likely to reach 3.8 million subscribers by 2017 versus 4.7 million forSatellite TV in the Germany market. A key difference between Germany and the US market was that in the US cable was expensive,allowing Netflix to compete on price, while in Germany cable services were much cheaper, as is thecase in France. So OTT is unlikely to play a significant role as the primary viewing platform, throughit will provide a secondary platform to around 37% of households by 2017.TELECOM PORTUGAL MEO Telecom Portugal’s Meo is often cited as an example of a hybrid TV service, however the STBsand delivery are not yet hybrid, only the back-end systems. There is Meo Sat, a Satellite TV package;and Meo IPTV, a DSL and FTTH IPTV offer in the main urban areas. Satellite is provided wherethe IPTV service is not available. So Telecom Portugal’s approach is similar to France Telecom inusing both DSL and Satellite to deliver geographic ubiquity. It was anticipated that later in 2010there will be Meo DT (Digital terrestrial offer), Portugal Telecom did win the license to provider theFTA service, but Hybrid FTA/IPTV STBs have not been deployed. Analog switch off wascompleted in April 2012 and DTT remains a separate service. Meo (marketed as meo) is the commercial brand-name of a triple-play subscription hometelecommunications service provided by Portugal Telecom. The service can be delivered eitherthrough ADSL2+, FTTH or Satellite link and is available throughout Portugal. The service was started as a pilot test in the city of Lisbon in 2006 and was later extended toPorto and Castelo Branco, Portugal. The commercial launch of the ADSL2+ service took place inJune 2007, and the satellite service took place in April 2008 operating in the Hispasat satellite, soonfollowed by the FTTH service. The ADSL2+ and FTTH offers reach the several areas in Portugal and include broadbandInternet services (at up to 200Mbit/s currently) as well as telephone service. There were plans tolaunch a new digital television DVB-T service also under the meo brand known as meo TDT. Meo subscribers passed 500k in Q2 ’09 and are at the end of 2011 they announced they hadreached 1 million subscribers. The Kudelski Group provides its Nagravision conditional access 133 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012system and end to end integration. Meo uses OpenTV Core 2.0 and OpenTV PVR2 as well asOpenTV’s HTML execution environment. Quative provides the next-generation Service DeliveryPlatform (SDP). So the backend system is common across the different access methods, it’s just thedelivery is not yet hybrid. In mid-2009 Telecom Portugal launched a mobile TV service based on Meo content and part ofthe Meo bundle, using the Lysis Content Management System (CMS). There is currently no hybrid STB. Meo Satellite is the Phillips DSR 7131/24 (SD/HD). HDwas critical for the rapid growth in Meo (most of the subscribers are Meo Sat). Preferred IPTV STBsupplier is Motorola VIP1200E and VIP1216E models. There is discussion on a hybrid STB acrossSatellite, DTT and IPTV, but no decision has yet been made. Over the summer of 2009 Telecom Portugal added a number of interactive services to MeoIPTV. A Minha Conta ("My Account"), which is accessed through a new category in the Meo mainmenu, called "My Meo" ("O Meu Meo"), where Portugal Telecom plans to showcase Meospersonalization features. The service allows customers to review the channel and programmingpackages to which they are subscribed, as well as the VOD movies they have rented during thecurrent month. A great example of how Telecom Portugal is focusing upon the customer is the launch of MeoMagazine, an interactive magazine (also accessed through "My Meo") that showcases Meosprogramming offerings, and provides programming and VOD movie recommendations. Its contentis organized into Entertainment, Sports, Videoclube (Meos VOD platform, which currently offersaround >3000 titles), Culture and Lifestyle categories. The service also allows customers to schedulerecordings and to purchase or subscribe to the programs and channels that it features. Jugos ("Games"), a free interactive TV games service that organizes its offerings into threecategories: Kids ("Moggles" and "Sudoku Jr."), Strategy and Puzzle ("Sudoku," "Cosmox," and"Patience") and Board and Arcade ("Drop Duel," "Kaboom" "Rockswap Adventures," and "ChessChallenge"). Key features of Meo are Telecom Portugal made the investment in its own Satellite TV likeFrance Telecom. It thought a partnership with competitive Satellite provider could not work, andwould put them at a competitive disadvantage. The HD offer with Meo Sat has been critical to rapidtake-up of service since its launch in 2008. Meo Sat is the dominant service, with about 30% ofsubscribers taking Meo IPTV. Backend is integrated across all delivery channels, so Telecom Portugal has taken a structuredapproach to market development. Currently they have an un-integrated STB offer, however this islikely to change once Meo DT is launched in mid-2010. Motorola, ADB and Amino appear to be thefront runners to become the preferred hybrid STB supplier. Meo launched new DVR Full HD Satellite Box in 2009. This Philips digital receiver includes aDVR Full HD Satellite Box, HD-ready and with incorporated Digital Recorder, allowing up to 300hours recording time. Meo Satellite customers can now access several features, in the satellite reception, only availableon Meo IPTV up to now. The DVR Full HD Satellite MeoBox is a Philips-made equipment, withHigh Definition program reception capability, an incorporated Digital Recorder (DVR with 320 GBhard disk drive), allowing, apart from 300 hours of recording time, the total control of the television 134 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012transmission (pause, go back and resume at will) and the looking up of 7 days of programming inMeo’s TV Guide. New MeoBox’s TV Guide is also presented in a programming grid format, allowing the lookingup and the recording in a simpler and more intuitive way, similar to the functionality present on MeoIPTV. MeoGo: Alcatel-Lucent (Euronext Paris and NYSE: ALU), and AuthenTec (NASDAQ:AUTH)are jointly supporting Portugal Telecom (PT) in the launch of ‘Meo Go!’. The new Meo Go! serviceenables subscribers of Portugal Telecom (Lisbon: PTC; NYSE: PT) – the largest communicationsservice provider in Portugal – to use their smartphones and tablets to access content that waspreviously confined to their TVs and PCs, including 60 live TV channels and video-on-demand. The Meo Go! service is available to subscribers using Android, Apple iOS and Windows-basedsmartphones and other mobile devices, and includes features to ensure secure delivery and smoothplayback of a variety of different video content formats. Subscribers can access programming from awide range of international channels such as AXN, Sony Entertainment Television, FOX, SyfyUniversal, MTV, Disney Channel, National Geographic Channel, Eurosport and several Europeanfootball club channels such as Benfica TV, Chelsea TV, Manchester United TV, Barça TV, RealMadrid TV and Inter channel. MEO@PC: Envivio’s Three Screens delivery platform to support the commercial rollout ofMEO@PC—a complete television service for delivery to PCs. The service relies on Envivio’scomplete Internet TV solution, including 4Caster™ C4 encoders configured to deliver content viaMicrosoft Internet Information Services (IIS) Smooth Streaming and Silverlight, protected withPlayReady DRM, providing subscribers with high quality video and playback delivered overbroadband. After an initial trial period, PT plans to offer subscribers a channel lineup andinteractivity that mirrors its MEO@TV service throughout Portugal. The focus of Meo is on multi-screen rather than Hybrid TV.TELEFONICA O2 CZECH REPUBLIC O2TV Telefónica O2 Czech Republic is a major integrated operator in the Czech Republic. It is nowoperating more than seven million lines, both fixed and mobile, making it one of the world’s leadingproviders of fully converged services. The organization offers the most comprehensive portfolio ofvoice and data services in this country. It is paying special attention to the exploitation of the growthpotential, particularly in the data and Internet sector. Telefónica O2 Czech Republic operates thelargest fixed and mobile network including a 3rd generation network, CDMA (for data), and UMTS,enabling voice, data and video transmission. Telefónica O2 Czech Republic is also a notable providerof ICT services. Telefónica O2 Czech Republic (previously Cesky Telecom) (www.telecom.cz) deploys the hybridSTB ADB-3800TW, high definition (HD) ready, IPTV/DTT. Telefónica Czech Republic ended2011 with 136,000 O2 TV customers, up 5% year-on-year. The telco said a Christmas promotionbundling TV with internet services helped to increase its TV customer base. The number of xDSLaccesses reached 872,000 at the end of December, up 8.1% year-on-year. DTT provides the base package of services, with IPTV delivering premium channels and Videoon Demand (generally HD). The data rate required to support IPTV does limit service availability, 135 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012generally to urban areas. Availability of HD content has been an important driver of the service.O2TV focuses on Czech content and premium international channels to differentiate from Satellite.There are no plans for a hybrid satellite offer, focus is on improving the access network in increaseDSL penetration. O2TV will maintain a hybrid TV approach for the foreseeable future, asinvestments in Satellite or FTTx (Fiber To The x=Home/Kerb/Cabinet) are too large to be justifiedby the IPTV margins. It has not yet launched a multi-screen offer, rather enabling remote control ofthe service via an iPhone or Android app. Figure 65. O2TV Hybrid STB ADB-3800TW (source Telefonica)HANSENET ALICETV (NOW TELEFONICA O2) HanseNet is a small German ISP previously owned by Telecom Italia, now owned by TelefonicaO2. It has 2 Million subscribers across phone, internet and IPTV. It launched an IPTV/DTTservice using the ADB ADB-3800TW High Definition-ready H.264 hybrid set-top box in 2008. Currently it has bout 32k IPTV customers. Its focus is price competition in the German market.But it lacks scale so IPTV margins are slim, and it cannot differentiate meaningfully from acustomer’s perspective. There has been high churn in IPTV customer base. The focus remains a hybrid DTT/IPTV strategy, no Satellite or cable partnerships areconsidered commercially viable. They would prefer a Satellite/IPTV offer as it has better experienceand HDTV capability, but this is not possible as Sky Germany will not partner as they considerHanseNet’s AliceTV competitive. In 2012 Telefonica decided that it will no longer market its IPTV service ‘Alice TV’, which thefirm inherited as part of its acquisition of rival HanseNet from Telecom Italia in early 2010. Thereason Telefonica gave was due to changes in the customer needs and market environment in thissegment, but said there would be no changes for existing subscribers of Alice TV, who will be able tocontinue using the service. Telefonica is currently working on a new television service ‘which willenable them to provide music, games and video services to our customers in a clever way and, mostimportantly, on all devices.’ The take-up of Alice TV has been slow since it was launched byHanseNet in April 2006; at the end of 2011 Telefonica reported only 83,300 subscribers to theservice, up slightly from 82,800 three months earlier and 77,200 at the end of 2010. By comparison,Telekom Deutschland’s IPTV bundle Entertain had signed up over 1.55 million customers at 31December 2011. 136 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Scale is critical to the economics of TV, seeing in European countries if not in the top 2 or 3positions, ability to complete for content limited. Address segment that is not that interested andacross Europe the FTA service provides a good fit to that category of customer.TELECOM ITALIA CUBOVISION Domination of Satellite TV and DTT in Italy over both delivery and content makes IPTV asecondary service. VoD profitability remains a critical issue as most deals require a minimumrevenue commitment. Focus is on how to improve both customer awareness and usage of VoD. Itis anticipated the hybrid approach will continue into the medium / long term. However, TelecomItalia is migrating their HBB service to a HBI service called CuboVision which was announced inJanuary 2010, this struggled to get passed 10k subscribers. It struggled as AT&T HomeZone did,asking customers to pay for VoD in equipment and subscription fees. Today Samsung or LG Smart TVs connected to the Internet come bundled with the CuboVisionapplication in Italy, or can be downloaded from the Smart TV’s store. Customers can watch for freeentertainment in the Web TV section, and explore Video On Demand pay per view with titles in HDand 3D. In addition, customers can purchase the Subscription TV for channels with a monthly fee of€ 9.99 / month. This has elevated the customer numbers into the 100s of thousands. To support this OTT service TI used a Cisco CDN. The CuboVision WebTV portal is openand free in Italy to all broadband subscribers (9 million) who have full access to various innovativeservices. (Note: By using geo-filtering technology, Telecom Italia has the ability to block any clientoutside of Italy from viewing the CuboVision portal content, thereby easily abiding by their ContentProvider licensing agreements.) The "Community TV" service offers consumers the ability to create,publish, and share their own TV channel playlists with others in the CuboVision social networkcommunity. And for users wanting a more passive lean-back viewing experience, the web portalserves up professional live and on-demand video content that was traditionally only viewed viawalled-garden IPTV set-top boxes (STBs), for example, 19 major national and international TVchannels, and a VoD library of approximately 40,000 movies, TV programs, music, news, and sports. Telecom Italia launched in December 2009 an all-in-one broadband TV device calledCuboVision, offering access to DTT channels, interactive Web TV and on-demand pay-per-viewvideo, including high-definition content. It is a HBI solution as it does not require a managed IPconnection; this removes the geographic availability issues, as well as allowing TI to deliver servicesover competitor’s broadband networks. CuboVision connects to the TV aerial and any ADSL broadband connection to provide DTTcontent blended with IP-delivered services such as on-demand TV. Hence Telecom Italia isproviding a HBI (Hybrid Broadcast Internet) also known as OTT TV. The customer propositionfocuses on enabling access their personal content such as photos, videos and music on theirtelevision, as well as widgets for access to weather forecasts, and general and business news. The STB uses the Intel Sodaville chipset, MeeGo OS and SDK for the app store, ismanufactured by Amino and includes a 500 GB hard drive for storing multimedia files, which can betransferred via USB drive, SD card, WiFi or DLNA. A dynamic scrolling news bar offers access to avariety of widgets from Telecom Italias Virgilio Portal including: real-time weather in a selected city,general and business news updates, daily horoscopes, and access to the main types of service. Theseapplications will be expanded over time. 137 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 CuboVision is an innovative response to the needs of ever more well-informed broadbandconsumers," said Franco Bernabè, CEO of Telecom Italia. "This new package is, to begin with,focusing on heavy internet users. We want to involve them in a new experience, a new paradigm foraccessing news and entertainment content by channeling content from the web, broadcasters andviewers themselves - more than ever responsible for creating their own programming – via homeTVs. After the launch of LA7.tv, which allows viewers to watch the channel’s programs from theirown PCs, CuboVision is the next step in Telecom Italia’s ongoing quest to find groundbreaking waysof accessing content. Critical in the service’s design is CDN (Content Delivery Network)dimensioning, see Figure 66. Figure 66. CuboVision WebTV Solution Topology (source Cisco)JAZZTEL AND TELEFONICA JazzTel and Telefonica both use the ADB Hybrid STB. Telefonica dominates the Spanish IPTVmarket with >850k IPTV subscribers to JazzTel’s 71.5k (out of approximately 1.2M JazzTel ADSLcustomers). DigitalPlus dominates payTV in Spain, it controls the rights to the football games. Ithas approximately 1.8M subscribers, which is roughly 50% of the payTV market. It partners withboth Telefonica and Orange to deliver a triple play bundle. 138 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 In January 2012 JazzTel launched the Jazzbox uses the BCM 7413, which also powers TiVoPremiere boxes. The Roku (LT, 2HD, 2XD and 2XS) models use the BCM 2835. Both feature256MB of double data rate (DDR2) RAM. The Roku 2 has twice as much NAND Flash memory asthe Jazzbox and uses half as much power, a reflection of ongoing advances in a retail brand that firstlaunched in 2008. Both have USB, HDMI and Ethernet ports. The Prisa content involved inJazztel’s service uses Nagra’s end-to-end service delivery platform (SDP). The box manufacturer isTaiwan-based Zinwell. In June 2012 Jazztel has added the five channels to its Jazzbox OTT service with Canal +Yomvi.Jazzbox service users can access Canal+ a la carte content and Jazztel’s broadband service as part ofa flat-rate tariff plan. Jazztel’s Premium OTT package subscribers can now also access Fox, TNT,Calle 13, Disney Junior and National Geographic channels. Jazz box subscribers reached about 10kby the middle of 2012. Customers can subscribe to Jazztel’s ADSL service and Jazzbox OTT service for a monthly feeof EUR 24.95 during the first 12 months of service. Subscribers will also be charged a line fee ofEUR 14.95. The package also includes 60 minutes for calls to national mobile numbersCOMHEM ComHem is a Swedish cable operator offering triple play services. As of 2012 it has 1.74million-subscribers. It is deploying a hybrid system similar to Verizon FiOS, which is using MoCAto deliver the interactive TV services. Ericsson is the prime contractor; Espial supplies the hybrid TV middleware and VoD platform.The STB is supplied by Motorola, European version of Verizon FiOS STB. The plan is to expand IPdelivery of interactive video services including Web TV, while keeping broadcast services on theexisting digital multiplex. This approach enables a smooth migration over the coming years to an allIPTV solution, when appropriate for the market. The hybrid strategy is likely to remain in place forthe next 5 years. Driver for the approach was cost and flexibility offered by IPTV delivery forinteractive services. Their view is for most cable operators this is the best approach for deliveringinteractive services. US firm TiVo has been selected by Swedish operator Com Hem to provide its DVR technologyand deliver personalized TV experiences for the later’s 2mn+ triple-play subscribers. This deal marksthe first time that TiVo has been selected for a “pure” managed IPTV service, and the solution that itprovides will deliver seamless access to linear payTV content, Com Hem’s large video-on-demandlibrary, over-the-top (OTT) content and applications across a range of devices. The deployment also marks the first outing for TiVo’s concept of anytime, anywhere access tocontent. This includes a One-Stop-Shop where consumers can navigate and view available contentacross numerous devices, including set-top boxes, tablets, smart phones and PCs; Universal Search,which will enable subscribers to search across all content sources; and the ability to learn what asubscriber likes to watch and automatically record recommended shows. Com Hem delivers its IPTV service over a combination of fiber and hybrid fiber-coaxial (HFC)technology, and roughly 40% (1.74mn) of Sweden’s households are connected to its network. Thenew TiVo-based service is expected to launch in the spring of 2013. TiVo’s existing Europeancustomers include UK cableco Virgin Media and Spain’s ONO, while its North American clientsinclude DirecTV, Comcast, Charter and RCN. 139 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012TELECOM NEW ZEALAND AND TIVO Launched in November 2009 Telecom New Zealand’s hybrid TV service is HBI, that is a hybridDTT / OTT STB supplied by TiVo (cost $700 USD,) the monthly TiVo service charges is includedin the price. For on-demand services without a managed IP connection progressive download isused which means the customer must allow 3 to 5 minutes preload then movie will play. The deal is between Telecom New Zealand and Hybrid Television Services (the licensee of TiVoproducts in Australia and New Zealand). This provides Telecom NZ broadband customers with theability to download movies and shows to their TV with no impact to their monthly broadband dataallowance as well as access to all of the Freeview HD channels. TNZ evaluated the cost of building their own managed IP network to support IPTV, and thelikely margins such as limited market would return. They decided it would be easier to partner andtake a revenue share of an OTT service than build out a dedicated network and cut content deals.This is an interesting approach by a small regional operator, a question is whether other smalloperators will follow this approach for delivering interactive services. On Demand content is provided by Hybrid Television Services (ANZ) Pty Limited. Hybrid TVis the exclusive licensee of TiVo products in Australia and New Zealand. Hybrid TV is owned byNew Zealand broadcaster TVNZ (33%) and Australian Seven Media Group (67%) essentially it is thelocal broadcasters. In January 2010 content was limited, only about 10-15 shows across drama,comedy, documentary and Kids; and about 150 movies. It’s unclear why content is so limited givendistribution rights are owned by the Hybrid TV company. Hybrid TV is using TANDBERG Television’s WatchPoint Content Management System (CMS),OpenStream Digital Services Platform on-demand back-office solution, AdPoint AdvancedAdvertising Platform and Xport Producer storage encoding solution. This provides a good example of how Ericsson is able to leverage its broadcast expertise andpresence from the Tandberg acquisition into hybrid TV. Essentially TNZ has cut a deal with HybridTV ANZ. Details are not public, but it is thought TNZ takes a carriage fee for each piece ofpremium content, and a share of the purchase price of the STB. Unfortunately such a high price and poor customer proposition meant the service received muchbad press. The set-top box lacked an electronic programming guide (EPG) for one of the majorfree-to-air channels, Prime. The companies behind TiVo in NZ never realized what an issue thiswas, because they didn’t use their own product. Managers at Hybrid TV (the one-third TVNZowned Australasian TiVo licensee) lived on the other side of the Tasman. At the exclusive TiVoretailer Telecom, they watched Sky TV. A second problem: slim content on TiVo’s pay-per-viewdownload service, Caspa. To top things off, Caspa was slower and buggier than downloadalternatives like Apple TV. Finally, TiVo got Primes (main TV channel in NZ) EPG at the start ofJanuary 2012. This means TiVo has finally become a fully functional digital recorder for those in theFreeview camp. And this came at a time when the box is $299, a third of its original price. However TVNZ and Telecom NZ have given up on the TiVo STB. TVNZ recently wrote offits $17.7 million investment, and has entered a joint venture with Sky TV, called igloo, whose paiddownload service will compete with TiVo’s Caspa in Hybrid TV. Telecom, which used to featureTiVo displays at the front of many of its retail stores, now has little of no mention of the service. Thetelco has got back into bed with Sky TV. 140 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 LEARNING FROM HYBRID TV DEPLOYMENTS Virtually all IPTV operators have either deployed or are planning / evaluating hybrid TV.Hybrid TV has become the dominant delivery mechanism for TelcoTV. Only those operators withfiber to the home or VDSL (Very High speed Digital Subscriber Line) can consider a pure IPTVsolution, e.g. NTT or AT&T U-Verse. Verizon chose a hybrid approach for its FTTH (Fiber ToThe Home) solution, to avoid technology risk, meet customers’ base expectations, and enable asmooth migration to all-IP when customer demand and economics dictate. Operators are not partnering with broadcasters to deliver hybrid TV, because of the difficulty inpartnering with a payTV competitor (Satellite / Cable / Terrestrial provider), AT&T’s HomeZoneservice demonstrated the problems of such a partnership. Cable operators in Europe are adding IPTV via MoCA; its remains unclear US cable operatorswill follow such an approach, though many Cable operators are experimenting with such technologyover their networks. Satellite TV operators in Europe and the US are adding OTT video serviceswith progressive download (HBI) as they do not control the access networks. A few Telcos (e.g. Orange TV and Portugal Telecom) have acquired Satellite capacity to deliver acomprehensive TV service across their country. However, most Telcos delivering IPTV over DSLhave taken advantage of the free to air DTT service to complement their IPTV offer. Telecom New Zealand provided an example of a hybrid service where they have partnered withTiVo. TiVo provides the STB and interactive services, while broadcast TV is provided by DTT.However, a series of missteps meant the service never got off-the-ground, and has been quietlymoth-balled. However, such TiVo partnering is becoming more common with Virgin Media,Charter, ComHem and RCN following this route. It will be interesting to see if other smalloperators follow this strategy to market, rather than making the investment in a managed IP networkand the difficulty in making the necessary content deals with a small customer base. Most operators remain disappointed in the lack of customer take-up for interactive services, i.e.VoD (Video on Demand). Penetration remains <10% penetration for most operators. Mostoperators are examining ways to improve consumption. Key is broad relevant library, a great userexperience for a low entry price ideally subscription based. That is, Netflix has set customerexpectations. Operators in the strongest position with respect to Hybrid TV are telcos with a Satellite andIPTV solution (e.g. Orange/Telecom Portugal); and Hybrid Cable operators (e.g. Verizon, ComHem). As they address the key issues of simplicity in:  purchase, one click  installation, one box  customer service, one number They do not disappoint customers with limited geographic availability. They do not have anypartnership risks. They can deliver the full package of SD/HD channels customers expect withcontrol over the access to avoid potential additional charges and maintain quality of service overtransport and hence quality of experience. 141 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Verizon and Orange have achieved consistent growth in mature payTV markets. There focushas moved on from Hybrid TV to multi-screen TV. Second tier hybrid solutions are:  Satellite and OTT (e.g. Canal+) has no control over the broadband connection, hence requires progressive download and could incur additional charges for broadband data use. Content delivery network dimensioning is key for service quality with OTT services. Increasingly important to Satellite providers.  IPTV and DTT (e.g. BT Vision) has limited channel line-up compared to Cable and Satellite, requires customers to ‘purchase’ shows (this requires a change in behavior), limited HD capability, and limited geographic coverage due to DSL limitations. Third tier hybrid solution:  DTT and OTT partnership (e.g. Telecom New Zealand.) TNZ is simply a pipe provider. Content delivery network dimensioning is key for service quality with OTT services. Increasingly their tier 3 solutions are being closed down as a payTV service requires focus and commitment; it is not a simple service add-on like voicemail to a voice service. It is a complex multi-faceted service that critically requires national scale to be commercially viable. A challenge with tier 2/3 operators is scale in TV businesses. Content is king, on demand isnice, but core offer is critical across sports, movies and national content. Tier 2/3 providers havestruggled, the middle market between premium PayTV and FTA is small in many countries, key hasbeen low pricing like BT Vision or going pure-OTT with a focused proposition like Telecom ItaliaCuboVision. All operators interviewed plan to continue their hybrid TV strategy into the medium term (next 5years) at least. All have deployed or are experimenting with TV Everywhere. Note payTV providershave been constrained by the limitations imposed by the content owners on how their content isdistributed, but this restriction is being removed as discussed in the TV Everywhere survey. Hulu and BBC iPlayer have much greater freedom of operation as they are run by the contentowners. However, we’ll discuss some of the challenges Hulu faces in the OTT chapter of the report.This limits the payTV provider’s ability to delivery OTT TV to any internet connected customer.However, CuboVision from Telecom Italia and the JazzBox from JazzTel provide examples ofoperators exploring this model. Underlying all the unmanaged IP TV services is a content deliverynetwork (CDN), who’s dimensioning is critical to service performance. TV EVERYWHERE CASE STUDIES Virtually every operator with a payTV offer is doing something on TV Everywhere, the list herecaptures some of the more interesting or archetypal TV Everywhere deployments. Roughly one-third of all broadband households now watch Internet video on a TV or computer, andapproximately 25 percent view online video on tablets and mobile devices in 2011. 142 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Overall, mobile devices account for one-fourth of the average persons video consumption.Over the past year, the amount of time spent watching video has doubled for tablets and computersand has almost tripled for mobile phones, a trend that will accelerate as the quality and quantity ofmobile improve. The term "TV Everywhere," also known as operator multiscreen or "N-screen" services,describes the delivery of television content, including live and on-demand programming, from apayTV provider to connected consumer devices, including computers, tablets, mobile phones, andsmart TVs.AT&T, USA In 2010 AT&T launched an initial offer with ESPN’s FIFA World Cup 2010 to PCs and mobilephones. In August 2010 AT&T launched a U-Verse app for subscribers to allow downloads ofprogramming to the iPhone or iPod Touch, it also including social TV options and premiumsubscription content. Both in-home and out-of-home use is via online authentication. This wasexpanded to the iPad in 2012. AT&T claims their U-Verse app is used by over 250,000 U-Versesubscribers each month. AT&T also offers online VOD access to HBO Go, Max Go, Cinemax, STARZ, ENCORE,MOVIEPLEX Fox News, Fox Business, and Music Choice videos, all on-demand for U-Versesubscribers, supporting doth in-home and out-of-home use via online authentication. U-Versesubscribers can share what they think about, say, the latest twist in True Blood, with new integrationto Facebook and Twitter, direct from the app. Sports fans have a new capability to link an iPad to a U-verse TV receiver via AT&T U-verseapp, in order to access up-to-the minute sports companion content and scores from various leaguesfor the days games, plus reviews of yesterdays games, and previews of tomorrows. The updatedapp now features the convenient ability to use an iPhone or iPod Touch to control U-verse TV witha remote control interface that includes channel changing, a programming guide, DVR controls andvideo on demand (VOD) functionality. "The second-screen complements and enhances TV by letting viewers explore and have a deeperexperience with the content they care about, on the device they use most," said Jeff Weber, presidentof content and advertising sales for AT&T Home Solutions. "With our U-verse apps, you can pull upmore info about shows, share about what youre watching, and whether youre in or outside thehome, you can access compelling content. And its included as part of your U-verse TV packages." MobiTV powers operator-branded mobile TV solutions on AT&T, Sprint, T-Mobile, USCellular and TELUS, all with hundreds of live events and full-episode programs. Most include theability to download and store programming for local playback as well. AT&T is also trailing a new software platform from SeaChange International Inc. designed toinsert ads dynamically into on-demand and live video shipped to set-tops as well as to tablets, PCsand smartphones. AT&T confirmed that the telco is in the "evaluation phase" with SeaChangesrecently launched Infusion platform, which aims to preserve the advertising business model asservice providers extend video services to more types of screens. Its not known when AT&T might pull the trigger on trialing or deploying Infusion, but the telcois already scaling up its use of SeaChanges Spot ad-insertion scheduler, which is splicing spots into 143 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012U-verse TVs linear channels. Infusion essentially combines Spot with AdPulse, its video-on-demandad system. On the hardware side, AT&T is already using BigBand Networks Inc.s Media ServicesPlatform (now part of Arris Group) to insert ads into live TV streams. If SeaChange gets a revenue-generating deployment out of this, it would gain a high-profilecustomer for its new TV Everywhere-focused ad system. At 2012 International CES, SeaChangeannounced a partnership with video processing vendor Envivio aimed at delivering demographicallytargeted ads to iPads. In a May 2012 survey by Parks Associates, AT&T U-verse customers are at the high end of theTV Everywhere awareness spectrum, but only about a quarter of its 4 million subscribers knowabout its TV Everywhere services. Charter Communications is last among the major pay TVoperators, only about 5 percent of its 4.3 million subscribers know about TV Everywhere. Generallymarketing efforts are targeted towards early adopters of OTT TV services, to demonstrate the valueof paying for a multi-channel offer, rather than cutting the payTV cord, this is coupled with thelearning through 2011 and into 2012 that customers are not cutting the cord as rapidly as they fearedin 2010, so the push on TVE has lessened, and the focus has moved back to the core offer.BELGACOM, BELGIUM Belgacom launch an online VOD (1300 films) rental service launched in Nov 2010 forsubscribers and non-subscribers. Subsequently they launched an online TV service in December2010 called TV Partout with access to live TV channels. Offers free PC and mobile access tofootball channel for existing IPTV subscribers covering matches of the Jupiler Pro League but alsothe Primeira Liga and the Copa del Rey; as well as Belgacom 5 - the best of the Belgian basketball,exclusively on Belgacom (available in PPV for non-subscribers). TV Partout supports session continuity, resumption of viewing the same content on a mobiledevice after watching a portion on TV. Channel line-up includes RTL-TVI, Club RTL, Plug RTL,AB3, AB4, Trace, MCM, Tiji, Nickelodeon Junior (FR and NL), Eurosport (FR and NL), LCI, CanalJ, Een, Canvas/Ketnet, vtm, 2BE, vtmKzoom, Vitaya, VT4, VIJFtv, Acht, anne, JIM, and BelgacomZoom (FR and NL). It also supports program recordings remotely on Belgacom TV (IPTV service). TV Partout isavailable for tablets and smartphones with Android, and also on iPads, iPhones and PCs/laptops.Customers can use TV Partout at home, via their Wi-Fi network and if theyre on the go and donthave access to a Wi-Fi network, access is possible via the 3G network (charges apply for data used).When connected via 3G there is a warning message that the average consumption data is 200MB perhour. TV Partout is available for Belgacom TV customers. On tablet or smartphone customersdownload the TV Partout application on Google Play™ Store and Apple App Store. On the PC useTV Partout on www.tvpartout.be. Take-up has been similar to many operators at roughly 5% of subscribers, with a commonconcern on the data usage such it 3G connected. 144 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 67. Belgacom’s TV Partout iPad Screen Shot (source Belgacom)BELL, CANADA Provides “Bell TV Online” VOD service for TV and movie content, available to Bell TVsubscribers. Includes content from Disney, HBO, The Movie Network, YTV, Treehouse. Workingwith ExtendMedia (bought by Cisco in Sept 2010) to enable delivery technology. In March 2012 Bell Canada bought specialty television and radio broadcaster Astral media in a$3.4 billion deal aimed at creating a media powerhouse poised to take on rivals in providing digitalcontent to consumers. The deal gives Bell important new content for online services and mobiledevices like smartphones and tablet computers. Bell has 200,000+ customers now watching itsmobile TV services (supplied by Quickplay) and wants to increase the numbers, as well as sellcontent to its competitors.BHARTI AIRTEL Offers “Airtel broadband TV” which started in March 2011, the service includes live TV, VODand movies provided via broadband to the PC/laptop. Naked TV service (PC TV subscribers do nothave to have separate Bharti Airtel television-based service). Subscribers have to have Bharti Airtelbroadband service. Monthly subscription packages ranging from INR 49 for 3 channels to INR 99for all channels, VOD, and movies. PC access is provided via a Flash-based web application.Subscription includes 28 live channels, 19 Video on Demand (VoD) channels and 12 Movies. The28 Live TV channels are across genres, languages and include the likes of UTV Bindass, UTVMovies, Bloomberg UTV , TLC, Animal Planet, all Discovery channels, Sakshi TV, Live India, NETV, Otv News, Suvarna News and Tarang Music. 145 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Bharti Airtel also acquired the exclusive mobile TV rights for the UEFA Euro 2012 footballtournament, just as Neo Sports, UEFAs exclusive broadcast partner in the subcontinent, enlistsiStream.com to provide digital online streaming of live matches. The jointly hosted tournament in Ukraine and Poland, which kicked off on 8 June, featured thetop 16 national football teams in Europe, including Spain: current World Cup champions and victorsof the last UEFA Euro tournament in 2008. The 19 matches from Euro 2012 were available to 180million Airtel mobile customers across India, along with match updates and other related content.Live video streaming with Airtel will be priced at INR 40 per week, allowing 20 minutes on a 3Gnetwork and 80 minutes on a 2G network. In addition, Neo Sports live stream of the tournament, which ran until 1 July, was be available toIndias internet users on iStream.com, as well as on demand via www.neosports.tv andwww.istream.com. Match highlights, team and player statistics, profiles, and other news from theevent will also be available.CABLEVISION, USA In Q1 2011 CableVision release an app to allow subscribers to move content from the TV to theiPad or gaming systems. It can only be used on an in-home network. Currently they have no plansto allow access to content outside of the home. They worked with thePlatform for deliverytechnology. Cablevision was one of the last MSOs to strike a deal with HBO, March 2012, to offer itssubscribers access to its TV Everywhere website and mobile video app. Featuring HBOs library oforiginal series and movies, HBO Go is one of the hottest apps for Apples iPad and iPhone, andmobile phones and tablets that run Googles Android platform. The TV To Go portal is a unique approach to packaging TV Everywhere content, and couldhelp Cablevision differentiate itself from the content rival Verizon offers its FiOS TV customers.Verizon plugs HBO Go, ESPN3 and Showtime on its MyVerizon customer portal, and also offersaccess to online video from more than 20 cable networks through a FiOS TV Online section of itswebsite. But the listings on Verizons site require subscribers to scroll through several pages ofcontent, whereas Cablevision offers quick access to its TV Everywhere sites in a single grid featuringa dozen images from shows featured on networks such as HBO and TBS. Web surfers who click onone of the images are prompted to authenticate that they are a subscriber by entering theirCablevision ID and password. 146 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 68. CableVision’s TV To Go (source CableVision)CHARTER, USA Charter Communications is the first pay TV provider to integrate online video content fromNetflix, Amazon, and Hulu with its TV Everywhere portal. The MSO also lets subscribers usemobile phones and tablets to search both online video from pay TV networks and over-the-topvideo providers, but it doesn’t allow distribution of OTT content through cable set-tops. Charters TV Everywhere platform has content from Turner Entertainment Networks. With thenew agreement signed at the end of 2011, more than 4 million Charter subscribers now have accessto more than 500 hours of video entertainment from the likes of TBS, TNT, truTV, CartoonNetwork and Adult Swim – at no additional cost. Charter customers can view the content online and via mobile apps via the companysCharter.net Web portal and Turner websites. As is the case with most of cables TV Everywhereservices, Charter customers must be subscribers of the various Turner networks before theyauthenticate themselves prior to viewing. "Charter customers will enjoy the wide range of entertainment Turner brings to the table," RichDiGeronimo, Charters senior vice president of product and strategy, said. "Over the past severalweeks, Charter has expanded choice and increased convenience for our customers by adding greatmovies and shows and organizing online content into a single online directory on Charter.net." 147 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Charter subscribers can access the video content via iPhone and iPad mobile apps, whileAndroid apps are planned for launch early this year. Live streaming is also available from CNN andHLNs 24-hour television networks. To access online content, Charter Internet customers need to use their Charter.net email address,password and zip code for the first time. Charter TV customers can log in with their "My Account"credentials. Charter first tested its TV Everywhere platform in 2010 with a trial that included showsfrom TNT, TBS, Style, E!, G4 and The Weather Channel.CHINA TELECOM, CHINA IPTV and multiscreen offerings are part of China Telecoms “Value-added Services” businessunit. The company is promoting integration of TV, broadband and mobile services rather than abranded TV Everywhere experience. The TV market in china is very different to that of the US, sothere is less focus on defending the multi-channel bundle revenues, and more a search forincremental revenues and bundled offers. "e Surfing Live" service was spun off as its own business in March 2011. The service includesaccess to HDTV content as part of broader integrated mobile/broadband service with 20 millionsubscribers as of June 2012. Chinavnet and "My E Family" (broadband) customers can access the “eSurfing Live” content and services on a PC as well as a smartphone. "e Surfing Video" is a video-specific service for mobile phones, including live broadcasts, catch-up TV, and VOD. The “e Surfing Live” product provides users with free text messages, a free mailbox, free high-definition TV, integrated communications, multiple network entry, and access to Internet services.Text messages, cell phone service, and chatting functions are implemented across multiple terminals(PC / phone), and value-added services like a mailbox and HDTV are available for free. Every month customers receive 300 free text messages. Because it is interconnected with MSN,users can easily transfer all of their MSN contacts into the e surfing terminal. Users can log into theirfree voice mailboxes with only one key, which makes it easier to send and receive mails. Users canlog in to the online service center of China Telecom with only one key, making it easier to conductbusiness. The service gives users access to musical Best Tones. Free HDTV, accessible anywhere,anytime. Detailed information on stocks, finance and the economy is available in real-time. Onlinesecurity shield lets customers surf safely online. Other available services include weather forecasts,car information and online photo developing and printing. Customers with a broadband VIP bundlehave the ability to call E family network phones. “e Surfing Live” is a comprehensive information service product provided by China Telecom forindividual and family users that integrates telecommunications and Internet service. It provides ChinaTelecom broadband and cell phone customers with a multimedia and communications platform forcharacters, sound and videos. It also can be displayed on the desktops Chinavnet and My E Familycustomers. It is available in both a PC and cell phone versions. 148 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012COMCAST, USA Comcast launched Fancast Xfinity TV service in December 2009 for PC access of content,which was rebranded Xfinity TV later in 2010 (just accesses from the PC). Customers viewed 4billion VOD items in 2010 (350M views per month). Originally offered to Comcast dual playcustomers (broadband + TV), now offered to all TV subscribers regardless of broadband provider.The service limits the number of PCs for access (up to 3). Offering content from dozens ofnetworks / some premium content is only available to Comcast dual-play customers. The agreementwith Time Warner will allow next-day access to TV broadcasts and live streaming of TurnerBroadcasting channels. In-home use planned for linear TV / out-of-home services planned for laterin 2011. VOD content can be accessed outside of home. Comcast worked with thePlatform for delivery technology. Support for mobile devices will beenabled later this year. They added Xfinity TV Everywhere widget on Samsung connected TVs,which offers online access to content from MAX Go, Starz, Encore, and MoviePlex for subscribersof those premium channels. In Feb 2012 Comcast launched a broader product XFinity Streampix enabled customers tostream full seasons of shows and top movies instantly on multiple screens, like laptop, iPad, iPhoneor iPod touch, and where available on TV in HD. Enjoy unlimited streaming of every episode fromevery past season of top shows like Lost, Heroes, 30 Rock and more. Plus, get a deep catalog ofaward-winning movies you can watch anytime, anywhere. If a Comcast customer subscribes to any of the following packages, XFINITY Streampix isalready included: HD Preferred Plus XF Triple Play, HD Premier XF Triple Play, HD Complete XFTriple Play, or Blast Plus. XFINITY TV customers can upgrade to XFINITY Streampix for just$4.99 more a month. Xfinity Streampix that complements the 75,000 hit TV shows and top-quality movies available toour customers today on Xfinity TV. Xfinity Streampix enables Comcast’s customers to instantlyview popular entertainment — both in and out of the home — from leading movie studios andprogrammers including Disney-ABC Television Group, NBCUniversal, Sony Pictures, Warner Bros.Digital Distribution and Cookie Jar. Weve always been focused on giving our customers the best and most current entertainmentchoices available across platforms. We also recognize theres a marketplace for streaming deeper-library movies and TV shows and thats where Streampix comes in. With Xfinity Streampix, wereadding more past season TV shows, more movies and more value to our customers subscriptions.For customers that are interested in this type of content, Xfinity TV and Streampix combinedprovide a one-stop solution for all of their video entertainment needs across screens. Xfinity Streampix also gives us packaging and bundling flexibility for new and existingcustomers. We will include the service to millions of our customers in many of our bundled packageson day one and as a low-cost service sold separately to other video customers. At launch, Streampix gives customers access to top programming like complete seasons of TVseries, popular childrens franchises and hit movies they can instantly stream on their TV, on XfinityOn Demand, online at XfinityTV.com and through the Xfinity TV app. In the coming year, our planis to significantly increase the number of TV shows and movies available through Streampix, as wellas, to bring the service to additional devices like the Xbox 360 and Android-powered devices. 149 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 69. Xfinity Streampix (source Comcast)COX COMMUNICATIONS In May 2011 Cox launched its TV everywhere service. Cox Communications has officiallylaunched its TV Everywhere service, TV Online. TV Online offers free shows, movies and othervideo content from broadcast, cable and networks to Coxs video subscribers via the companysonline Web portal. The TV Online content requires no additional equipment but does need a Flash-supportedbrowser, a Cox user ID and password, and a broadband connection for viewing content anywhereacross the United States. TV Online features shows from TBS, TNT, Cartoon Network and TruTV,as well as movies from HBO, Cinemax, Epix and Vutopia. Cox said many of the TV shows would beavailable for online viewing the day after their premieres. The TV Online site was designed so that customers can find content quickly and easily bybrowsing through the thumbnail graphics or filter for TV shows or movies. They can further narrowtheir search by genre, network or show name – even by movie rating such as G or PG titles. 150 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 In December 2011 Cox has announced the release of Cox TV Connect, an app for the iPad thatbrings live streaming content to those who own Apple’s tablet. The app provides over 35 channelsof content, significantly lower than the hundreds of channels that Cox offers, and it allows customersto stream television on up to five iPad’s at once. However, like the other apps, Cox TV Connect isinaccessible outside of the home. So, you’ll be limited to the confines of your recliner or couch if youwish to fire it up. Cox provides an example of a me-too MSO, following the likes of Comcast andTWC.DIRECTV, USA DirecTV launched an iPad app to stream NFL games in September 2010. The iPad app isavailable for free in the iTunes store. Service is only available to subscribers of DirecTVs NFLTicket service, and is only available within the home. Live TV streaming features were added to the to the DirecTV iPad app in Q3 2011, they thenexpanded the features in March 2012 by pushing an upgrade that lets viewers watch video (but nolive TV) even when theyre away from home. Dubbed DirecTV Everywhere see Figure 70, it followsup on the companys promises of more video for customers mobile devices, offering "selected"video on-demand programming for on the go viewing. But the restrictions mean most viewers thinkit does not work resulting in low ratings of the app in the Apple App store. This highlights aproblem that the available content is confusing for most customers, and the term TV Everywhere (aslong as you’re at home) is constantly mocked by customers. Available content consists of premium movie channels (HBO networks, Starz, Sony MovieChannel) and DirecTVs own Audience Network. Other new features include the Whats Hot socialmodule pulling from your Twitter and Facebook friends to see what theyre watching, and socialcheck-ins with Miso. The DirecTV Everywhere app is now available for the Kindle Fire as well. Figure 70. DirecTV Anywhere (source DirecTV) 151 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012DISH NETWORKS, USA Offers a TV Everywhere adapter via SlingMedia that allows access to live TV DISH channelsand DVR recordings, true TV anywhere. It does not require authentication, allows in and out ofhome use. Website (DishOnline.com) launched in Aug 2010 with content from HGTV, MTV andDiscovery. In Dec 2011 began allowing subscribers to access live TV and DVR content on the iPadvia the Sling Adapter against opposition from programmers. Note back in 2007 Dish Networksbought Sling Media. TiVo is also implementing a similar function. This appears well aligned tocustomers’ expectations on what a TV Everywhere service should be. Announced in Jan 2011 their Remote Access app is now available for Android devices. It offersonline access to content from Starz, Encore, and MoviePlex for subscribers of those premiumchannels. The DISH Remote Access app for smartphones and tablets lets customers take Live TVand DVR content with you wherever you go:  Watch all live TV channels  Watch select On Demand content  Watch all DVR recordings  Schedule and manage DVR recordings  Search the program guide  Control your receiver In May 2012 they introduced an update to the app which new automated ad skipping built intoits DVRs, but Dish Network has also just revamped its Remote Access iPad app. While other payTVproviders are proud about streaming channels to mobile devices only within the home or shifting afew recordings, Dishs tight Sling integration still provides the most video wherever the user mightbe, as well as DVR management, a full guide and remote control. The May 2012 upgrade brings anentirely new user interface thats optimized for the retina display, guide data without interrupting thevideo, favorite channels list, and claims to speed up the process of both loading various screens andconnecting to stream live TV. Figure 71 shows the use ratings, if the app works generally people like it as long as they areconnected on a fast enough wireless connection, but there are a significant number of people thathave problems getting the app to work. Reflects in part the Android diversity issue, as well aschallenge of app based approached rather than browser approach. 152 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 71. DISH Remote Access Rating on Google Play (source Google Play)MEDIASET, ITALY In November 2011 launched Premium Play, a service available on all Mediaset Premiumpackages from €19 per month. Italian TV viewers can now choose when, how and where to enjoyselected programs. The offer includes 2000 content among movies, TV series, cartoons,documentaries and football, in addition to the programs broadcast over the past seven days on theMediaset terrestrial TV channels. Besides movies on payTV, Premium Play also offers the possibility of renting PPV movies fromWarner, Universal, Disney and Medusa, only a few months after their cinema run. The new productfrom Mediaset can be enjoyed on TV sets with integrated DTT decoders, as well as on the Xbox 360console and PC, with independent access to the service from a broadband connection. Premium Play service was made available for the iPad from April. The service provides access toover 2,000 TV programs that can be watched on a TV, a computer or an Xbox console. Between April 2012 and November 2011, the Premium broadband service has now been runningfor 100 days and subscribers have downloaded every month an average of 2,300,000 programs (films,TV series, football, cartoons, documentaries), while the average time daily spent on ‘Premium Play’ is80-100 minutes. Mediaset promises to expand the service, through 2012, to other games consolesand HbbTV enabled devices. Working with Accenture for delivery technologyORANGE, FRANCE In 2009, Orange offered access to live TV on the PC via a dongle, content is delivered throughthe LiveBox residential gateway. The Orange portal provides online access to much of the contentavailable on the TV and also includes VOD catalog and catch-up TV. As part of the Orange TVpackage within the home they can receive TV on most WiFi connected devices in the home,smartphones, tablets and xbox. Subscribers can receive live TV on mobile device for free via Wi-Fi in the home. Subscription tomobile TV service is required for access to TV via mobile network with the TV max option, accessto over 70 channels and 3,500 videos in HD quality on their mobile. View with unlimited over 70 153 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012TV channels in all areas you like. Sports, news, entertainment, youth, music, find all your favoriteshows for 9 Euro per month. GlobeCast, a subsidiary of France Telecom, is the leading global provider of contentmanagement and worldwide transmission services for professional broadcast delivery) worked withEnvivio to create a new multi-screen TV service to support the growing needs of Orange France. As a result, Orange France became the first European operator to offer more than 50 live TVchannels to subscribers’ mobile devices, tablets and PCs. Orange and GlobeCast selected Envivio4Caster C4 as the foundation of a new convergence headend capable of accommodating the massivenumber of streams offered by the service. The new headend streamlines operations; a single encoding platform delivers each channel in 13profiles to support viewing by all target devices and eliminates the need to manage, power andmaintain multiple, concurrent, platform-specific headends. The new system handles Orange France’smobile, Wi-Fi and Internet services and will enable the launch of new services using technologiessuch as adaptive bit rate protocols without interrupting ongoing operations.ROGERS, CANADA Rogers provided the “On Demand Online” VOD service back in November 2009 (Beta) andlaunched in May 2010. It offers premium cable programming, about 1,500 hours of content from 50broadcast and cable programming partners. It’s only available in Canada (no streaming outside ofCanada). Less than three weeks after launching its TV Everywhere product, about 100,000 RogersCommunications subscribers had registered for access to site. Rogers, which has about 2.3 millioncable subscribers, is on track to hit its forecast of registering "a few hundred thousand" subscribersto Rogers On Demand Online by the end of the year. Rogers worked with thePlatform and Empathy Labs for the delivery technology and the userinterface / EPG. They added live streaming, social networking, and wireless access in 2011. Rogers Anyplace TV (formerly Rogers On Demand Online) is available on PC atrogersanyplacetv.com, tablets, and their Xbox 360. Rogers wireless customers can watch on selectsmartphones. They can stream LIVE sports, and rent new release movies instantly onRogersAnyplaceTV.com. Or watch TV shows and free movies, catch clips and exclusive contentlike movie trailers, music videos. They must register an account for free at rogersanyplacetv.com tostart watching on whichever device they choose, and add their Rogers Digital TV account number toget access to content included with their Digital TV subscription Customers can also access their Rogers Digital TV subscription on their laptop, selectsmartphones and tablets, and Xbox 360. Allowing access to premium channels like The MovieNetwork, HBO Canada, Super Channel, AMC, The Food Network, Showcase, Treehouse, DisneyJunior, and Teletoon. Customers can catch up on their favorite Primetime TV shows, when its convenient for you onChannel 100 or on Rogers Anyplace TV on the device thats most convenient for them such aslaptop, select smartphones and tablets, and Xbox 360. Rogers customers who are registered atRogersAnyplaceTV.com and have an Xbox LIVE Gold subscription can catch-up on prime timeshows, movies, trailers and more with the brand new Rogers On Demand app on Xbox 360, its 154 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012available for download from the Apps hub on Xbox LIVE. Customers with a Kinect for Xbox 360are able to browse the app and control video using voice or gesture controls.ROMTEL, ROMANIA RomTel launched Dolce TV Online portal (dolcetv.ro) for TV, movies and sports in March2011. Its available to any Romanian broadband subscriber. Content is either free or for rental (€1.10- €1.90). Three main content sections: TV, movies, sports with 200 movies/1000 trailers, live andon-demand TV of popular Romanian channels and 15 live TV channels.SFR, FRANCE In late 2010, SFR launched an app for iOS and Android devices to receive live TV. Contentincludes 120 live TV channels on their mobile devices. Subscribers can access the EPG, browseVOD titles, and schedule DVR recordings. It works via Wi-Fi or 3G and is available with bothneufbox and neufbox EVOLUTION services. Users do not have to be SFR mobile customer tosubscribe to the service.SHAW, CANADA Shaw offers a broadband VOD player and online access to content via the VOD.SHAW.CAwebsite. Most of the content is from Universal Studios, Maple Pictures and MGM. The service isgenerally a “pay-as-you-go” with fees depending upon payTV subscription level. Subscribers to thepremium Movie Central service can stream movies and shows from that service.SK TELECOM SKT offers the Hoppin VOD service, see Figure 72, that provides VoD content for multiplescreens (www.hoppin.com). Uniquely the Samsung Galaxy S phone can be used as a set top box(mobile to TV access). Content includes 5000 VOD assets with stated plans to increase the library to10,000 items later in 2012/2013. Figure 72. SKT Hoppin Experience (source SKT) 155 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012SKY, GERMANY In June 2010, Sky Germany launched an iPad app for subscriber access to football coverage tothe Bundesliga, Champions League. Content was in standard definition and was free to subscribersof Sky Sport or Sky Bundesliga. In 2011, Sky offered an HD version of the app and free access to allsubscribers for a limited period to promote usage of the service. Usage is estimated at around 18%of the customer base, which is relatively high compared to other operator experiences.SKY NEW ZEALAND The iSky online TV service includes VOD (free and pay), live TV (Sky News New Zealand,CNN and Sky Sports channels), and catch-up TV for subscribers. They are working withthePlatform to for the service. iSky online rentals range in price from $4.99 (NZD) for a librarymovie, $6.99 (NZD) for a box office movie and $24.99-$34.99 (NZD) for episode series. To save customers busting their monthly broadband allowance, Sky has partnered with some ofNew Zealand’s broadband providers to create unmetered plans. What that means is that anythingcustomers watch with iSky doesn’t count towards their monthly data allowance. Current broadbandpartners include: Vodafone, Orcon, Slingshot, Woosh, Xnet, Snap, Wiz Wireless, Farmside andPlaNet.SKY, UK Sky Go is the OTT service available for free to Sky subscribers or for the pricing (as of August2012) in Figure 73. It is available on selected Android smartphones, iPad, iPhone, laptop or Xbox360 in the UK or Ireland with a 3G or Wi-Fi connection. Sky Go lets viewers watch channels fromtheir Sky TV package, live and on the move, see Figure 74. For example, Sky Movies customers canwatch live Sky Movies channels and movies on demand and Sky Sports subscribers can watch all sixSky Sports channels, live. Customers can register Sky Go on two different devices. And if they want to change the devicesthat are registered, they can do this quickly and easily on a monthly basis. This 2 device limit may beraised as it appears to be a cause of customer frustration. Figure 73. Sky Go Pricing (source Sky) 156 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 74. Sky Go Experience (source Sky)SWISSCOM Swisscom “TV air” service for PC and TVs includes online access to linear TV, VOD, and PPVsports. TV air is a standard part of Swisscom’s bundled service, ensuring high uptake. They workedwith Harmonic for content delivery. Swisscom offers a mobile app for iPhones / iPad and Androidmobile phones with EPG and content discovery and mobile content viewing.TELECOM ITALIA, In 2011, released a CuboVision App via the Apple and Samsung Application Stores that allowstablets and smartphones to connect to the multimedia OTT serviceTERRATV Terra is a subsidiary of Telefonica and operates as an ISP in many Latin American countries andhas a web portal/broadcaster (www.terra.tv). It is an ad-supported service is available online and onmobile devices. Terra has signed agreements (as a broadcaster) to provide multiscreen access tomajor sporting events, including 2012 Olympic gamesTIME WARNER CABLE TWC TV brings high quality streaming of live TV via an app, free with your TV subscription,brings your favorite shows onto your smartphone or computer. Subscribers can watch live TVacross 250 channels on their home computer, iPhone, iPad and Android device. The app includesTV listings or use Search. Control your TV by using the portable device as a TV remote to changechannel, they are working with thePlatform for content delivery 157 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012VERIZON Launched FlexView in Jan 2011. Allows FiOS customers to access VOD or purchased contenton mobile phones, tablets, and PCs/laptops. It requires download and installation of software onthe client device. The FiOS TV App is currently available for LGs Smart TV Platform, xBox and Samsung SmartTV platform supporting 26 live channels, and access to video on-demand, including the 20,000 FlexView On Demand titles. Channels include TNT, Nickelodeon, HBO, TBS, Cartoon Network andComedy Central with more channels coming in Q4 2012. The limited number of channels meanscustomers still need to rent a STB from Verizon to see all their subscribed channels; it’s not a BYOD(Bring Your Own Device) proposition. Customers connect to the FiOS router (must have Verizonbroadband) via a capable device in the home and download the FiOS TV app from the relevant appstore. There is also a My FiOS app available for iOS and Android which includes a media manager, seeFigure 75, but does not yet include live channel support, only VoD which has the restriction that theFlexview app requires that the customer is within a FiOS home with FiOS Internet and FiOS TVservice. Live streaming is not supported to this app yet, though it was demonstrated at CES 2012. This is a good example of the partial offer made to customers by payTV providers in an attemptto stifle adoption of OTT services. However, what it does is generate is confusion and frustration,and encourages customers to explore TV Everywhere and discover the broader OTT offers available.For those customers already experienced with services like Netflix and Hulu it simply highlights thegap between what a PayTV operator can offer and an OTT provider, the OTT services areincreasingly setting customers’ expectations. We’ll explore this later in the chapter on the ViewerSurvey. There is popular assumption that premium subscription customers are getting the service for freeso they will be tolerant of partial offers. The service is not marked as beta and it requires thecustomer to invest their time and effort into setting it up, only to discover a partial offer. Figure 75. Verizon MY FIOS App (source Verizon) Verizon Wireless customers can receive Sling Media smartphone subscription service to accessall pay TV content. Subscribers receive a Slingbox which attaches to a STB and delivers all TVcontent to the mobile phone 158 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 LEARNING FROM TV EVERYWHERE DEPLOYMENTS TV Everywhere activity has been intense since the previous version of this report written in2009. However, most TV Everywhere offers have been reactive, delivering a partial offer, and henceresulting in low customer engagement; and critically not stopping customers adopting OTT as asecondary viewing experience. For most customers OTT is not a reason to cut the cord, rather acomplement, which caps payTV on demand and critically puts a service platform in the home thatcan cap other revenues including advertising and interactive services. DISH has delivered the most complete TVE offer from a technology perspective, but the on-demand service from a content perspective has frustrated customers with its limited selection.Content is king even in on-demand. So TVE engagement remains low. It has even stated that usageof its autohop technology is low, to which it is being sued by Fox, CBS and NBC Universal for thistechnology. DISH should not be taken as indicative that TVE does not matter to customers, Netflix’24 million subscribers in the US shows it matters, as they’re paying $7.99 per month for the service,but customer expectations have been set, and payTV operators need to find the correct recipe tocontain the latent threat posed. TVE awareness remains low in most markets, in a May 2012 survey by Parks Associates, AT&TU-verse customers are at the high end of the TV Everywhere awareness spectrum, but only about aquarter of its 4 million subscribers know about AT&T’s TV Everywhere services. CharterCommunications is last among the major pay TV operators, only about 5 percent of its 4.3 millionsubscribers know about TV Everywhere. Generally marketing efforts are targeted towards earlyadopters of OTT TV services, to demonstrate the value of paying for a multi-channel offer, ratherthan cutting the payTV cord. With the learning through 2011 and into 2012 that customers are notcutting the cord as rapidly as they feared in 2010, the push on TVE has lessened. However, it’s critical in surveys with viewers not to use words like TVE, rather ask if vieweraware that cable operator has an app to let them watch TV on their smartphone or tablet. And nottalk about Internet TV or OTT TV and rather name Netflix and Hulu. As we’ll see in the ViewerSurvey chapter awareness is higher near 50% in North America and 40% in Western Europe fromthat survey. We’re entering a second phase of TVE deployments as offers become more complete and closerto customers’ expectations on both content and features. Customers’ expectations have been set andhalf measures do not cut it, as discussed in the Viewer Survey chapter. 159 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 H Y B R I D T V, OT T T V, A N D T V E V E RY W H E R E S U RV E Y S A N D B U S I N E S S M OD E L S DRIVERS FOR HYBRID TV FOR IPTV PROVIDERS Early IPTV deployments showed customers expect firstly a broadcast experience; on-demand isnot the primary requirement. The channel bouquet must include the ‘standard’ broadcast package ofchannels, as customers compare payTV offers by channel line-up. However, customers have becomediscerning on what constitutes an adequate on-demand offer. For example, DISH has a limitedselection of free movies and TV shows compared to other on demand offers, this has resulted incustomer frustration, see Figure 71. Technical drivers for hybrid TV for IPTV providers over DSL:  Overcome network constraints;  Access – limited capacity due to poor network condition;  Aggregation – improve contention ratios of available capacity and avoid multicast;  Core – avoid multicast; and  Simplicity in delivery of the core product (broadcast bouquet) – less things to go wrong. Commercial drivers for hybrid TV for IPTV provider over DSL:  Difficulty in cutting content deals for start-up IPTV providers;  Provide ‘base-level’ service expectation: access a bouquet of free to air channels;  HDTV gap filler while IP connection lacks the capacity to support HD (assumes operator is planning on network investment);  Time to market;  Lower network costs; and  “Free” entry then up sell customers to premium services. Regulatory drivers for hybrid TV:  Constraints in supporting national free to air broadcast services could impose significant costs / delays. So leveraging a network that has already solved the problem avoided regulatory issues. 160 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 DRIVERS FOR HYBRIDTV FOR SATELLITE TV PROVIDERS Satellite TV providers have become the most innovative in the use of Hybrid TV. As anexample DISH networks has been leading the way with the ecosystem disrupting autohop technology(to skip adverts), and automatically recording the primetime shows for a catch-up TV-like servicewithout the need for interactivity, and using Slingmedia to deliver a true TV everywhere service forthe customers payTV service and recorded content, that is there is no geographic limitation, themedia (live broadcast channels and recorded content) can be distributed to the app anywhere it isinternet connected. The Triple play bundle has become a core offer in many markets, and we’ve seen Sky make suchoffers where local loop unbundling enables a competitive market place for broadband providers, forexample in most of Europe. However, in North America ineffective regulation meant suchcompetition in broadband providers did not happen. Hence, in markets like the US, Satelliteoperators wait for 4G technologies to enable wireless broadband connectivity. For Satellite providers their drive to Hybrid TV is primarily commercial in extending their corebroadcast offer to include on-demand to remain competitive with the cable and IPTV providers.Unlike the IPTV providers which has as many technical as commercial reasons to adopt thetechnology. Commercial drivers for hybrid TV:  Provide comparable feature set to IPTV and Cable providers for interactive services as a defensive move to maintain their large installed customer base;  Support TV Everywhere and bundle for free with premium payTV packages to encourage greater per household spend; and  Incremental revenue for movie rental and purchase (though this remains very small compared to the subscription revenues.) BROADCASTER PARTNERSHIP? Hybrid TV does not mean a partnership between a broadcast and IPTV provider:  In Europe no IPTV operator has of yet struck a deal with a satellite or cable provider, rather they’ve used the DTT service, e.g. Freeview in the UK, then complemented that offer with additional channels and interactive TV.  Satellite providers Canal+ and Sky Germany have launched HBI boxes that use an unmanaged internet connection, i.e. progressive download of content. This enables them to provide interactive services in additional to the broadcast multiplex. Generally satellite TV providers are not interested in a partnership with an IPTV service provider as they are both payTV competitors.  Telia Stofa in Denmark sends IPTV through its cable modem (no partnership required). In the US Verizon used MoCA for IPTV, no partnership is required, it’s purely a technology decision. 161 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  AT&T has stopped its DISH partnership; its DirecTV partnership (reseller agreement) does not include a hybrid STB. The hybrid customer numbers were misreported; most DISH customers did not use the AT&T provided VoD capability. BUSINESS MODEL HYRID TV: IPTV PROVIDERS The overriding reason given for the investment in IPTV / hybrid TV is churn reduction frombundling services. Simply, a subscriber of a voice, data and TV bundle is much less likely to churnthan a subscriber to just voice, or data, or TV. Churn can be reduced by up to 33% with triple playbundling. This was true across most telcos regardless of size. There are some differences in the details / focus on the churn reduction strategy:  Defensive move in reaction to increasing churn, e.g. BT;  Pre-emption in anticipation of increased churn or changes in TV market structure, e.g. O2TV in Czech Republic;  Land-grab for payTV customers, e.g. in France; and  Simply increase ARPU (note margin per user tends not to be discussed.) Service pricing is subscription based, to cover the STB cost and access to a bouquet of contentnecessary to be competitive with the current payTV operators (satellite and cable) operating in thatcountry. Pricing levels are generally set by the base service package of the incumbent payTVoperator. Generally on-demand pricing is set by the content owners. Advertising revenues are currentlynear zero as most IPTV operators’ subscriber numbers are too small to interest advertisers, hence thechannel’s advertising is used, and in some cases this is demanded else the payTV provider will have alean inventory of on-demand content. STB applications are generally free, but most operators do anticipate having premiumapplications at some point, though this is looking increasingly uncertain given the currentfragmentation in STB platforms. STB applications have been slow to take off, customers’ userexperiences are set by Apple and Android, and EBIF / Java based apps on STB lack that slickness. PAYTV OPERATOR HYBRID TV SURVEY During January to May 2012 a survey of 75 hybrid TV operators was undertaken across IPTV(DSL), Satellite, Cable / FTTH and Broadcast. The results of this survey are compared to that of a2009 survey shown in the previous version of this report; the 2009 survey was conducted inSeptember and October 2009 across 82 hybrid TV operators, generally IPTV operators. So thesurvey group is broader, but I break the 2012 survey out across the different operator types to enablecomparison to the 2009 survey for the IPTV (DSL) operators. 162 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 On the scale shown in the diagrams in this section:  4: Critically Important / Relevant / Excellent  3: Important / Relevant / Good  2: Neutral / Average  1: Not Important / Irrelevant / Poor Respondents were allowed to choose any fractional value in this range. Respondents weregenerally in the CTO or product management divisions of operators, and generally known to me sowe could have a frank and open exchange of views, not maintaining the company’s public line. Figure 76. Geographic Distribution of Respondents for 2012 Survey Source Alan Quayle Business and Service Development (Number of Respondents in brackets) The focus of both surveys was to gather information around their perception of the drivers;barriers and applicability of hybrid TV, TV Everywhere and OTT TV. The questions were posedwith free form answers, hence why there is a relatively long list of responses. Figure 77 and Figure 78are for the 2012 and 2009 surveys respectively shows the range of answers to what operator thoughtwere the drivers for hybrid TV. The 2012 survey is broken down across the different operator typesof IPTV, Satellite and Cable. The number of broadcast hybrid operators was not significant. Examining the 2012 results first across operator types, there is clearly differences in motivationbetween IPTV and Cable/Fiber and Satellite operators for Hybrid TV. Firstly, Satellite TV’smotivation is to match the on-demand offer from its competitors (this is also true for the BroadcastTV operators as well), which has become a base service requirement for payTV, even though usageremains low. 163 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Secondly to experiment with OTT TV, which is definitely the case in Satellite as they do notcontrol the access network, hence their systems need to adapt to varying congestion requirements.Expanding revenues (though not significantly), enhanced EPG and Applications were mentioned.Generally on-demand services were used to encourage customers to adopt a premium servicepackage with a tier of free movies and TVshows, with top titles being paid-for. One pointmentioned in the North American market is a vocal (social media and the web) minority ofsubscribers that are being educated by services such as Netflix and Hulu Plus on what to expect foran on-demand service in terms of price and variety of content. Customers are increasingly unwillingto pay $4.99 for a movie that is not a recent release, rather expecting it to see it bundled in theirpayTV subscription. Given the increasing costs of content, this simply is not viable for most payTVproviders. I separated the DSL based IPTV providers from the Fiber based IPTV providers rathergrouping the later with the cable providers as their responses were quite similar. For the fiber andcable providers the use of Hybrid TV had a broader range of drivers, including getting to marketfaster, and overcoming network constraints. The rest of their responses were quite similar to theSatellite TV providers in delivering on demand services, expanding revenues and experimenting withOTT and applications. The fiber / cable providers did not raise the issue of meeting base-levelservice expectations as their systems inherently support on demand. The DSL IPTV providers had the broadest set of drivers for Hybrid TV. Some of thedifferences between the 2009 and 2012 survey include the avoid negotiating with broadcasters, asIPTV operators have found that even including the FTA service has included some negotiations forexample for on-demand and EPG content. Also the drivers had expanded to include experimentingwith OTT and STB applications; expanding revenues; and delivering an enhanced EPG. The EPG remains a critical tool, and a source of much frustration for payTV providers. Theelegantly simply UI of Netflix and Amazon Instant Video on Roku enable 50k+ items to bepresented in an intuitive and easy to use and pleasant to view experience. Most payTV providerEPGs remain grids of dense information for the few hundred channels. Simply, things like groupingthe channels based on the customers viewing preferences which could be learned throughmonitoring their viewing preference could go some of the way to making the experience morerelevant. As a simple example we moved away from using the TiVo for OTT services as the Rokuwas just so much easier and elegant an experience. 164 OF 307
    • Si m pl ify de li v er y of th e co re Av br oi oa d dc 0.5 1.5 2.5 3.5 0 1 2 3 ne a st go bo ti a uq tin g ue t M wi ee th tb br as oa e- dc le as ve te ls rs er vi ce ex Fi pe ll ct ga at p io in n de l iv er in g H G D et TV to m ar ke tf O Lo as ve w te rc er r om ne e tw ac or O k165 OF 307 ce co ve ss rc ne st s om e tw or ag gr k co Av eg ns oi at d io tra in im n ts pl ne em tw or en ti n k co g ns IP tra m in ul ts ti c as ti n th e Source Alan Quayle Business and Service Development Source Alan Quayle Business and Service Development ne tw H or ar k Figure 78. What are your drivers for Hybrid TV (2009 Survey)? Figure 77. What are your drivers for Hybrid TV (2012 Survey)? ne ss In M te © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 ee rn tq et TV ua li t y ex pe ct at io ns
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Examining the DSL IPTV providers’ results in more detail the top drivers for hybrid TV are:  Meet base level service expectations. That is, provide the most popular content in a channelized (not individual program based) format. As well as geographic availability of the service.  Lower network costs. Using the FTA service to reduce the IP transport costs.  Meet HDTV gap. Capacity constraints on DSL limit picture quality compared to free to air, satellite, cable or fiber. Interestingly the above drivers are commercial / customer experience focused; not technologyfocused. This reflects the maturity of TelcoTV that technology in no longer their prime focus. Nextmost important drivers are the simplification of broadcast delivery and mitigate access constraints,and meet TV quality expectations. Some of the constraint to hybrid TV mentioned by operators during the 2009 interviewsincludes:  STB cost. Though additional DVB-T/C tuner should only add 10% to STB cost, STB accounts for between 45-55% of the total network cost (at target roll-out.)  In-house wiring complexity. At first this may not appear an issue, but wiring the unit twice could be too complex for self-install. The most common installation problem is customer thinks they’re buying a telco service so connect to the DSL unit, without connecting to the aerial for the DTT service.  Broadcast and IPTV management could be different, or broadcast component could be out of SP’s control. Generally the Telco will insert their own EPG – as this is a critical customer relationship interface.  Wholly dependent on broadcast partner and deal they allow, hence why most hybrid solutions are for the free-to-air broadcast channels only.  EPG lacks features delivered on the broadcast channel. Channel line up may be what customers’ expect, usability could be impaired. IPTV middleware must be hybrid aware.  Subscriber management integration / complexity between IPTV service and partners broadcast service. Back to a single content and management point from the learning from AT&T’s failure. 166 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 79 shows the results of the September / October 2009 a survey of 82 hybrid TVoperators, to the question, ‘What are the barriers to hybrid TV?”  Subscriber management complexity was considered most important  Difficulty in managing two separate systems  With DTT this is mitigated as the service if free to air, so no provisioning is require  Middleware is important in masking complexity from customer, and in providing an enhanced free to air experience through using on-line channel  Conflict with the broadcast channel was next, which is why most hybrid TV solutions do not partner with another payTV provider  Next Deployment Complexity, Customer Confusion and STB Management  Simple step by step instructions (Maximum of 3 steps) or an installation service are required  Service management platform must be Hybrid aware Figure 79. What are the Barriers to hybrid TV (2009)? Source Alan Quayle Business and Service Development 167 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 For the 2012 survey, shown in Figure 80, the cost of the STB has risen in importance. Given thetypical learning curve for consumer electronics it would be anticipated that this issue would diminishover time. However, competition and customer expectations are driving up the functionality andperformance of the boxes. For example in the US, DISH’s Hopper DVR includes 2TB of storage,ability to record up to 6 live HD channels during primetime, and customer features like PrimeTimeAnytime instant access to primetime shows from ABC, CBS, FOX, and NBC in HD (stored up to 8days – catch-up TV service). Across all payTV operators this remains a critical issue. As discussed previously from the 2009 DSL focused survey, customer confusion and ease of useremain issues. While the next common issue across all operators is customers’ willingness to pay forthe additional services provided. We’ll discuss this in more detail in the Viewer Survey chapter, butthere appears to be a mismatch in expectations between viewers and payTV providers on the breadthof content and charging method of subscription versus pay per view, which means on-demandremains an under-performing service. Satellite TV providers also highlight the challenges inintegration of the hybrid system as it encompasses many vendors and they attempt to keep aconsistent user experience, and expand their backend systems to support real-time transactionalservices. Figure 80. What are the Barriers to hybrid TV (2012)? Source Alan Quayle Business and Service Development Figure 81 shows the responses to the question on the applicability of hybrid TV to operatorsfrom the 2009 and 2012 surveys. Firstly, the overall level of relevance of Hybrid TV has increased asits matured. As we’ve seen in the mobile industry with the rise of supporting multiple networks, sohas payTV undergone a similar transition? 168 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Satellite has shown an overall increase in relevance to Hybrid TV across all regions. The reasonsgiven for that are the increased confidence in using HBI in 2012 compared to 2009, coupled with theoverall improvement in broadband connectivity rates in most developed countries. In Europe its relevance has increased across all operator types, while in North America the useof VDSL and FTTH means increasingly Telcos can deliver all services over IP, while for Cableoperators there was a perception of a traditional digital broadcast in combination with IPTV could bea migration strategy that some Cable Operators may adopt, hence the increase in relevance of HybridTV. While in LATAM the results are generally the same, and in APAC the importance of Hybrid TVto Satellite operators is the main increase. Figure 81. Applicability of Hybrid TV (2009 and 2012) Source Alan Quayle Business and Service Development Figure 82 provides a summary of the STB vendor perceptions, most STB venors fall betweenaverage and good. STB suppliers are a rapidly changing and consolidating market. Generally theplatforms as consolidating around supporting all access networks (IPTV, Satellite, Cable, Terretrial),PVRs, OTT, HBB, and gateways. In the limit its about global volume for the common STBplatform. That is the hardware is increasingly commoditized, while the software retains the value. Some of the changes between the 2009 and 2012 survey are the Pirelli STB assets were acquiredby ADB. The Motorola lead as gone, there are now a number of strong STB players in the market,e.g. ADB, Amino, Cisco, Echostar, Pace, Technicolor. Some of the cheaper suppliers are alsocatching up as the industry matures. Echostar came up often in the discussions and has generatedsignificant interest in its products, it also sells direct to consumers. TiVo is not included as it did nothave enough data points. 169 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 It remains unclear if we will see a split in the industry between STB hardware and STB softwaresuppliers like the PC industry. Rather it appears to be following the consumer electronics industry oflead integrators that adopt strategies such as user experience excellent (Amino), featuredifferentiation (Echostar) or value (Entone); and have a range of hardware and software suppliersthey use to deliver on their STB strategy. Figure 82. Hybrid STB Vendor Comparison Source Alan Quayle Business and Service Development KEY POINTS FROM PAYTV OPERATOR HYBRID TV SURVEY There are clearly differences in motivation between IPTV and Cable/Fiber and Satelliteoperators for Hybrid TV. Satellite TV’s motivation is to match the on-demand offer from itscompetitors (this is also true for the Terrestrial Broadcast TV operators), which has become a baseservice requirement for payTV, even though usage remains low at about 15% of households butgrowing. Secondly to experiment with OTT TV, which is definitely the case in Satellite as they donot control the access network, hence their systems need to adapt to varying congestionrequirements. Expanding revenues (though not significantly), enhanced EPG and Applications were mentionedas motivation for Hybrid TV. Generally on-demand services were used to encourage customers toadopt a premium service package with a tier of free movies and TV shows, with top titles being paid-for. 170 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 One point mentioned in the North American market is a vocal (social media and the web)minority of subscribers that are being educated by services such as Netflix and Hulu Plus on what toexpect for an on-demand service in terms of price and variety of content. Customers are increasinglyunwilling to pay $4.99 for a movie that is not a recent movie release, rather expecting it to see itbundled in their payTV subscription. Given the increasing costs of content, this simply is not viablefor most payTV providers. For the fiber and cable providers the use of Hybrid TV had a broader range of drivers, includinggetting to market faster, and overcoming network constraints. The rest of their responses were quitesimilar to the Satellite TV providers in delivering on demand services, expanding revenues andexperimenting with OTT and applications. The fiber / cable providers did not raise the issue ofmeeting base-level service expectations as their systems inherently support on demand. The DSL IPTV providers had the broadest set of drivers for Hybrid TV. Some of thedifferences between the 2009 and 2012 survey include the avoid negotiating with broadcasters, asIPTV operators have found that even including the FTA service has included some negotiations forexample for on-demand and EPG content. Also the drivers have expanded to include experimentingwith OTT and STB applications; expanding revenues; and delivering an enhanced EPG. The EPG remains a critical tool, and a source of much frustration for payTV providers. Theelegantly simply UI of Netflix and Amazon Instant Video on Roku enable 50k+ items to bepresented in an intuitive, easy to use, and pleasant to view experience. Most payTV provider EPGsremain grids of dense information for the few hundred channels they offer. Simply, things likegrouping the channels based on the customers viewing preferences which could be learned throughmonitoring their viewing preferences could go some of the way to making the experience morerelevant. PayTV operators are becoming increasingly concerned about their user experience. The cost of the Hybrid STB has risen in importance. Given the typical learning curve forconsumer electronics it would be anticipated that this issue would diminish over time. However,competition and customer expectations are driving up the functionality and performance of theboxes. For example in the US, DISH’s Hopper DVR includes 2TB of storage, ability to record up to6 live HD channels during primetime, and custom features like PrimeTime Anytime instant access toprimetime shows from ABC, CBS, FOX, and NBC in HD (stored up to 8 days – catch-up TVservice). Across all payTV operators STB cost remains a critical issue. As discussed previously from the 2009 DSL focused survey, customer confusion and ease of useremain issues. While the next common issue across all operators is customers’ willingness to pay forthe additional services provided. We’ll discuss this in more detail in the Viewer Survey chapter, butthere appears to be a mismatch in expectations between viewers and payTV providers on the breadthof content and charging method of subscription versus pay per view, which means on-demandremains an under-performing service. Satellite TV providers also highlight the challenges inintegration of the hybrid system as it encompasses many vendors and they attempt to keep aconsistent user experience, and expand their backend systems to support real-time transactionalservices. On the applicability of Hybrid TV, Satellite has shown an overall increase in relevance to HybridTV across all regions. The reasons given for that are the increased confidence in using HBI in 2012compared to 2009, coupled with the overall improvement in broadband connectivity rates in mostdeveloped countries. 171 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 In Europe its relevance has increased across all operator types, while in North America the useof VDSL and FTTH means increasingly Telcos can deliver all services over IP, while for Cableoperators there was a perception of a traditional digital broadcast in combination with IPTV could bea migration strategy that some Cable Operators may adopt, hence the increase in relevance of HybridTV. While in LATAM the results are generally the same, and in APAC the importance of Hybrid TVto Satellite operators is the main increase. Most STB vendors fall between average and good with respect to vendor perception. STBsuppliers are a rapidly changing and consolidating market. Generally the platforms as consolidatingaround supporting all access networks (IPTV, Satellite, Cable, and Terrestrial), PVRs, OTT, HBB,and gateways. In the limit it’s about global volume for a common STB platform. That is thehardware is increasingly commoditized, while software retains the value. It remains unclear if we will see a split in the industry between STB hardware and STB softwaresuppliers like the PC industry. Rather it appears to be following the consumer electronics industry oflead integrators that adopt strategies such as user experience excellent (Amino), featuredifferentiation (Echostar) or value (Entone); and have a range of hardware and software suppliersthey use to deliver on their STB strategy. TV EVERYWHERE SURVEYINTERVIEWEES A survey was conducted between April and June 2012 of PayTV providers around the world ontheir TV Everywhere plans. Interviewees included 75 operators and 11 content providers / studios,giving a total of 97 people interviewed. There were all responsible for TV Everywhere services, andgenerally VP level or above. Most either know me, or were introduced through a friend so mostconversations were frank and to the point. Appendix 2 outlines the questionnaire that wasconducted through a series of phone and face to face interviews. Figure 83. TV Everywhere Interviews by Companies Interviewed IPTV Cable Satellite Terrestrial Tier 1 18 15 11 9 Tier 2/3 Developed 7 7 0 0 Tier 2/3 Developing 4 4 0 0 Content Providers / Studios 11KEY FINDINGS PayTV providers in 2012 are less worried about cord-cutters and OTT competition supported bythe Studios than in 2011. This is in part from the overall growth in PayTV revenues in many marketsand the Studios apparently moving away from trying to build direct customer relationships andinstead focusing on expanding revenues within the existing ecosystem. Put simply, content owners 172 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012can squeeze much more revenue out of the existing ecosystem with relatively little investment andrisk, than try and build the direct channel. HBO Go is a good example of how the content ownersare keeping it closely linked to the existing payTV service, as it’s only available through a payTVbundle subscription. So the PayTV ecosystem proves resilient and will continue to be supported by its existingmembers, this was discussed in the 2009 version of the report as the likely situation. The contentowners see Pay TV as the cash cow BUT the content owners are frustrated by what they see as a lackof progress on the TVE opportunity in exploring new business models. Hybrid viewing is essentially expanding the TV revenue pie, i.e. PayTV customers that also payfor OTT TV. In the Studio’s view TVE enables new innovative business models to be explored suchas providing a distribution and payment platform for content and innovative advertising andsponsored content models. TVE is seen principally as a defensive move, rather than for customer acquisition. Only a nicheof cord cutters is expected <10% in the US market, see Figure 84. Content rights are no longer anissue for TVE according to both payTV operators and studios. It has moved to an “online rights”model that enables the delivery of TV Everywhere to wherever the payTV customer wants toconsume their content. Figure 84. TV Everywhere Market Structure Source Alan Quayle Business and Service Development The are no longer TVE Content Rights Issues, Just Old Deals Playing Out The Studio’s view is there are no issues they’ve moved to an ‘online’ model, i.e. rights are towherever the customer wants to consumer their paid-for content. Historic legacy of rights forspecific access networks will disappear as contracts run their course. 173 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Though there was some frustration from the studios on the lack of payTV operators’commitment to TVE, treating it more as an experiment than building solid commitments for whichthe content providers can better plan their advertising. Several operators mentioned the importanceof enabling the content provider to control ad insertion for the TVE content. Without it theinventory is limited, which becomes a source of customer frustration. TV Everywhere is NOT a well-defined solution category PayTV operators are seeing a range of propositions, from an extension to the existing platform,online TV solution, STB based solution, silo targeting tablets, and mobile solution, see Figure 85. Figure 85. Scope of TV Everywhere Offers Incumbent Middleware Suppliers are Extending their Solutions into TVE For example, Orange has, as of Mar 2012, migrated 400,000 of its 5M IPTV customers to Orca’sUnified platform, see Figure 86. Philippe Rozes, head of TV service platforms at Orange Group,said: “The operational difficulty of managing multiple separate service platforms (for ADSL, web andHybrid Satellite-IP) was impairing our ability to keep pace with the market. Collapsing all thoseseparate silos onto a single platform has given us significant operational efficiency and has freed upresources to allow us to innovate faster. 174 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 86. Example of how Existing Systems are Extended into TVE TVE Packages and Services For most PayTV operators they plan to have the full package available anywhere their customerwants to consumer their content. The capabilities of TVE will likely reflect the subscriber’s currentbundle, with the base package likely not offer TVE unless the customer subscribes to a triple ordouble play bundle. There is a plan to include targeted advertising, but at present the content providers appear towant to own that space around their content. Innovative tariffing options such as trial to buy andfreemium have been experimented with by many operators with generally positive results onadoption. So this will likely be extended as the TVE offer becomes more complete, to win-backcustomers put off by the initial limited TVE offers. From the studio’s perspective they are willing to support the payTV operator in whatever waythey want to promote their content, and share in the incremental revenue. We’re clearly at a positionwhere studios are willing to work with payTV operators to continue to grow revenues within theexisting ecosystem. There challenge as we’ll see in the Viewer Survey chapter is it’s unclear if there ismuch room left for revenues to grow. Vendor Review The results shown in Figure 87 and Figure 88 capture a diversity of opinions on the TVEsuppliers. An important conclusion is it depends on the service provider’s specific situation, on therelevance of suppliers listed. Clearly we’re entering a second phase of TVE investment as silo’edsolutions become integrated into the operators’ content management and back office systems, this isfavoring middleware suppliers and more traditional integrated suppliers, with the exception beingEchostar which has taken a more viewer centric approach. 175 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 87. Vendor Perception Rating Source Alan Quayle Business and Service Development Figure 88. Vendor Perception Rating and General Comments Source Alan Quayle Business and Service Development Vendor Score General CommentsAccenture 3.6 System integratorALU 3.5 Strong in IPTV, extending existing platformAvailTVN 3.7 North America focusedAzuki 3.7 Strong tablet solutionCisco 3.7 Waiting for VideoscapeEchostar 3.8 Real TVE with SlingmediaEricsson 3.7 Broad solution capabilityEspial 3.7 Innovative TVE solutionHuawei 3.5 Strong in China and developing marketKuldeski 3.6 Strong in content protectionMicrosoft 3.5 Strong in IPTV less so in TVENSN 3.5 Are they up for sale?QuickPlay 3.6 Mobile focusedSeachange 3.6 Extending existing platformTiVo 3.4 STB based solutionZTE 3.4 Strong in China 176 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 KEY POINTS FROM THE TVE SURVEY PayTV providers in 2012 are less worried about cord-cutters and OTT competition supported bythe Studios than in 2009/2010. This is in part from the overall growth in PayTV revenues in manymarkets and the Studios apparently moving away from trying to build direct customer relationshipsand instead focusing on expanding revenues within the existing ecosystem. So the PayTV ecosystemproves resilient and will continue to be supported by its existing members, this was discussed in the2009 version of this report as the likely situation. The content owners (Studios) see Pay TV as thecash cow, but the content owners are frustrated by what they see as a lack of progress on the TVEopportunity in exploring new business models to expand revenues (squeeze more cash out of specificcustomer segments.) Hybrid viewing is essentially expanding the TV revenue pie, i.e. payTV customers that also payfor OTT TV. In the Studio’s view TVE enables new innovative business models to be explored suchas providing a distribution and payment platform for content and innovative advertising andsponsored content models. They remain frustrated on the lack of experimentation with TVE, this isin part linked to the diversity of interactive platforms and the lack of payTV provider co-ordination,as discussed in the Standards and Technologies Chapter. TVE is seen principally as a defensive move, rather than for customer acquisition. Only a nicheof cord cutters is expected <10% in the US market in the medium to long term, see Figure 84.Content rights are no longer an issue for TVE according to both payTV operators and contentowners. It has moved to an “online rights” model that enables the delivery of TV Everywhere towherever the payTV customer wants to consume their content. However, TV Everywhere is not a well-defined solution category, a number of approaches havebeen taken and we are entering a second phase in the market focused on consolidation where we areseeing incumbent middleware suppliers extending their solutions into TVE. Most PayTV operators plan to have the full package available anywhere their customer wants toconsumer their content. The capabilities of TVE will likely reflect the subscriber’s current bundle,the base TV package likely not offer TVE unless the customer subscribes to a triple or double playbundle. There is a plan to include targeted advertising, but at present the content providers appear towant to own that space around their content. Innovative tariffing options such as trial to buy andfreemium continued to be market tested by many operators with generally positive results onstimulating adoption. So this will likely be extended as the TVE offer becomes more complete, towin-back customers put off by the initial limited TVE offers. From the studio’s perspective they are willing to support the payTV operator in whatever waythey want to promote their content, and share in the incremental revenue. We’re clearly at a positionwhere studios are willing to work with payTV operators to continue to grow revenues within theexisting ecosystem. There challenge as we’ll see in the Viewer Survey chapter is it’s unclear if there ismuch room left for revenues to grow from subscribers even with much better segmentation. We’re entering a second phase of TVE investment as siloed solutions become integrated into theoperators’ content management and back office systems, this is favoring middleware suppliers andmore traditional integrated suppliers, with the exception being Echostar which has taken a moreviewer centric approach. 177 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 OV E R T H E TOP P R OV I D E R S OVER THE TOP TV OPTIONS Over The Top TV covers a broad range of players, from the traditional broadcasters and contentowners, through social networks and struggling online TV networks, to brands and internet TV-ledprogramming, as shown in Figure 89. The plurality of models reflects the storming phase of marketdevelopment enabled by the internet supporting adequate video content delivery, since the initialversion of this report written in 2009, we’re still very much in the storming phase of internet TV. The content owners / broadcasters have had significant customer engagement, e.g. the BBCiPlayer had in January thru’ April 2012 on averaged 190 million requests per month, with 140 millionfor TV and 46 million for Radio programs, up +24% on the same period last year. YouTube wasonly founded in 2005, yet remains the dominant OTT TV site by hits, though we’re seeing Hulu andBBC iPlayer catch up and exceed when measured by time spent viewing video. Simply, qualitycounts, YouTube provides a fun snack, while Broadcasters provide a ‘full meal’ of content, as wehave seen YouTube extend its model into delivering quality content. Increasingly social networks have adopted video capabilities, enabling people to share theirvideos, or share amusing or interesting videos from other websites amongst their friends. Those oldenough will remember the days in the ‘90s when people would clog-up inboxes by sending amusingvideos by email. The flatness of the internet enables some producers to publish directly on theinternet, avoiding the challenges and vagaries of pitching to network executives, instead letting thecustomer decide directly. Also brands have started to use OTT TV for the direct delivery of video content to customers,for example the car manufacturers. I remember in many early IPTV discussions attempting todevelop the interactive advertising concept for adverts to break-out into an on-demand video of thecar being advertised. Instead the car brands have gone direct. This was always a tough model to forthe TV; it highlights the fundamental nature of the lean-back and lean-forward experience of the TVversus the PC. When shopping for a new car, or admiring your favorite car, its more lean forwardthan lean-back. Hence the fit to the TV was never strong. Figure 90 shows some of the key trends we’ve seen in TV consumption to arrive of the rich setof OTT models. The evolution is broken into 3 phases, though not technically correct, for exampletime shift TV can be shown using analog TV with NVOD (Near Video On Demand), its purpose isto highlight some of the main trends, in consumption from a live consumption model on one TV setin the living room, to multiple channels with time-shifted TV across multiple TVs within the home,to consumption anytime, anywhere on any device. Examining the trends in power bases in Figure 90, payTV networks have created a richprogramming environment and enabled a subscription revenue model, which has overtakenadvertising as the main revenue source for the industry. But the content owners now have theopportunity re-establish a direct relationship with customers, which at present it appears they havebacked away from. And customers appear to remain consumers of a bundle of channels, as to watchwhat they want when the want and only expect to pay for that consumption remains too complexand confusing for most customers. 178 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Of course when it comes to the mass market nothing is entirely replaced, we’ll see a spectrum ofconsumptions models, from the retired couple that’s happy with their broadcast channels, through tothe time poor professional couple that have a few specific programs they watch. So subscription willlikely not go away, but programmatic content purchase will grow, e.g. rather than purchasing $50 permonth of 500 channels most of which they never watch, a niche of customers do appear to be optingfor paying $16 per month for subscription based consumption of Internet TV from Netflix and HuluPlus. Figure 89. Plurality of OTT Options (Diagram is from 2009 to Highlight how Quickly Brands have Changed in Dominance) Traditional TV Social Networks Online TV Internet TV-Led Brand-Owned Goes Online AS TV Networks Programming Online TV Figure 90. Trends in the Evolution of TV Evolution of TV Phase 1: Analog TV Phase 2: Digital TV Phase 3: Internet TV Consumption Live, on the TV set Themed channels, Anytime, anywhere, time shifted TV any device, Broadcast Network PayTV Networks PayTV network bypassed, Access direct channel/content TV channel gatekeeper Multichannel providers owner relationship Multi-channel TV, time Personal TV, Service Broadcast TV shifted TV / VoD Social TV Program purchase, Funding Public, Advertising Subscription, Advertising Advertising Content owners, Broadcast Content owners, Device Content owners, Broadcast / Cable Channels, PayTV manufacturers, Search Power bases channels networks engines, Social networks 179 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 On the trend in services shown in Figure 90, broadcast TV started it all, Digital TV added multi-channel and time shifted TV, and the Internet TV age has added Social TV and Personal TV.Broadcast, multi-channel and time-shifted TV still exists; we’ve just added new services that willengage specific audiences. This remains the biggest uncertainty in this emerging internet TV age; thespeed at which specific segments of the customer base will adopt the new consumption models andwhich segments will shift their behaviors from today’s multi-channel model. Underlying the TV landscape are four power bases fighting it out, as shown in Figure 91.There’s network power, the telcos and MSOs; there’s device power, the consumer electronicsmanufacturers such as Samsung and Apple; there’s computing power of their data centers whichhave redesigned the internet from Google, Amazon and Microsoft; and finally but most importantlythere’s content power of the seven major studios which owns the content people want to watch. I show between content and computing power YouTube and Facebook, as they harness UGC(User Generated Content – snack TV) and simply provide a way to either search for content or findrecommendations. At the center of this landscape is the Customer, which has relationships with all,though with the studios it is generally through a payTV provider and Broadcast / Cable Network.Disney is an exception which builds a strong direct relationship. I highlight Hulu and TiVo as examples of two services that are impacting how customersconsume TV, Hulu is moved from being PC-bound and is now available across a broad range ofdevices, e.g. TiVo, Roku, and smart TVs. TiVo separates the customer from the payTV provider, andacts as a service platform for such things as Amazon-on-demand, and Hulu. TiVo has struggled asits subscription model simply made it uncompetitive to adopting the payTV providers DVR service. In the limit the customer will decide, and their decisions are likely to be based on their specificpersonal needs (e.g. professional time-poor family wanting to control specifically what programmaticcontent their children watch; through to a more traditional family that is happy flicking through lotsof familiar channels), so the market is unlikely to move in one direction. However, Figure 91 showsthere are some large organizations vying for customer attention. Briefly examining the trajectory of the power bases:  Network power will focus on bundling of communication services. Need to focus on social TV, protecting the customer data, maintain viewing times which remains attractive for both content owners and advertisers alike – creates a business model that will be tough to break without customers making a definitive move in how they consume content.  Content power will use all channels to ensure they’re in a strong bargaining position, and determine if they can make more money through customers choosing programmatic content directly, or if the old multi-channel model is still best.  Device power will focus on selling their equipment, not interested in selling services, so will act as a service platform for content owners and web service providers alike.  Computing power will innovate in business models, social networks, consumption models, and customer experience. For example Amazon-on-demand providing recommendations on content, with just one click from the PC content is made available on the TV, TiVo or DVR. 180 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Through the coming decade customers are in for both an exhilarating and confusing ride as theywill have multiple options for consumption, with multiple qualities of service and experience, withmultiple price points making it very difficult to compare what is being offered. Just like the old daysof mobile telephony in the US where the price plans were so complex even the people selling theservice did not know. Figure 91. TV Landscape Content Power Studios Broadcast / YouTube, Cable Networks Facebook Hulu Google, Network Telcos & Amazon, Computing Power MSOs Customers Power Microsoft TiVo Consumer Electronics Manufacturers Device Power TRADITIONAL TV GOES ONLINE The UK provides a great example of how traditional broadcasters have successfully taken theircontent online. And have played a major role in helping the mass market adapt to the idea ofwatching TV online. Their critical advantages include quality of existing content, user recognition,and existing ‘trust.’ During the months of January through April 2012 BBC iPlayer averaged around 190 millionrequests per month, with 140 million for TV and around 46 million for Radio programmes - up+24% on the same period last year. Back in January 2010, requests for the BBC iPlayer across alldevices including Virgin TV, topped 120 million. While iPlayer is used for TV at roughly the sametime of day as linear TV viewing, on demand makes up the great majority of TV program requestswith only 8% of requests were for live simulcast streams, although two thirds of requests for radiostreams are for live programs. Back in January 2010 the PCs remained the firm favorite for viewing iPlayer content, accountingfor around 87 per cent of all traffic, with mobile devices delivering only a thin sliver of requests. Thestats do show just what other kinds of devices will contribute to the bandwidth crunch, with theSony PlayStation 3 and the Nintendo Wii accounting for eight per cent and four per cent of requestsrespectively. However, in April 2012 mobile and tablet devices delivered a significant increase inrequests, up 94% on April 2011; with 15% of total program requests coming from mobiles andtablets in April 2012. Apple announced in May 2012 the BBC iPlayer app for iPads is the top freeapp of all time in the UK. Internet connected devices such as Smart TVs, games consoles and blu- 181 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012ray players continue to grow and delivered 11% of all requests in April 2012, up 57% on April 2011.Some historical data for the BBC iPlayer in December 08 alone saw 41m requests for programs,that’s 300% growth in just over one year. BBC iPlayer total requests in 2008 were 271m. COMPARING UK OTT PROVIDERSBBC IPLAYER The BBC iPlayer provides free services to UK residents (through UK based IP addresses). It hasachieved in just a few years significant engagement across the UK, with 190 million requests permonth on average betwee January through April 2012, up from 120m requests in January 2010, and ademographic shown in Figure 93 that is relatively broad-based across age ranges compared to theyouth dominated viewership of YouTube. Figure 92. BBC iPlayer Requests January through April 2012 (source BBC) The content provided by the BBC iPlayer is all BBC broadcast and radio programs, plusimported and overseas programs. Catch up period is 7 days, 30 days for downloads. To receive theservice the iPlayer download manager is required which runs on a wide range of devices including:PC/Linux/Mac, Game consoles (Wii, PS3, Xbox), Home Media Hubs, Mobiles and Tablets (Appleand Andorid), Portable Media Players (PMP), and Smart TVs. Over recent months, BBC iPlayer hasseen particularly significant growth in requests from tablets and internet connected TVs. Requestsfrom computers now make up less than 60% of total requests, see Figure 94. 182 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Figure 93. BBC iPlayer Demographics January thru April 2012 (source BBC) Figure 94. iPlayer Requests by Device Type (source BBC) 183 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 95. BBC iPlayer – use for TV by time of day, April 2012 (source BBC)SKY GO (REPLACED SKY PLAYER) Sky Go is the OTT service available for free to Sky subscribers or for the pricing (as of August2012) in Figure 59. It is available on selected Android smartphones, iPad, iPhone, laptop or Xbox360, wherever you are in the UK or Ireland with a 3G or Wi-Fi connection. Sky Go lets viewerswatch channels from their Sky TV package, live and on the move. For example, Sky Moviescustomers can watch live Sky Movies channels and movies on demand and Sky Sports subscriberscan watch all six Sky Sports channels, live. Customers can register Sky Go on two different devices so they’ve always got Sky TV with you.And if you want to change the devices that are registered, you can do this quickly and easily on amonthly basis. This 2 device limit may be raised. Figure 96. Sky Go Pricing (source Sky) 184 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 97. Sky Go ExperienceITV PLAYER (WWW.ITV.COM/ITVPLAYER) ITV Player is an online video on demand service accessible though the main ITV website. Theservice offers a variety of programs from homegrown programming to imports across ITV1, ITV2,ITV3, ITV4 and CITV. Some sports programming is available to watch again via the service, the2010 FIFA World Cup and highlights being examples. Some programs, imports and movies are notcurrently available due to rights issues, and until the latest version, most childrens programming inparticular was generally unavailable. Programs are available for 30 days on the site after being first shown on ITV. The service wasoriginally called ITV Catch Up but was then rebranded ITV Player on 5 December 2008 as part ofITV’s aim to create a recognizable and consistent brand for video-on-demand content across the weband TV. ITV Player is also branded as ITV Net Player and referred to as the ITV Network Player inbranding and communication around programming intended for consumption across the UK, suchas on Virgin Media. Platform Availability BT Vision: In December 2008, ITV Player was added to BT Visions TV Replay service, the dealwas ITVs first with a set-top-box VOD operator. It allows access to popular ITV1, ITV2, ITV3 andITV4 shows up to 8 days after their transmission as well as a selection of archive shows. Freesat: ITV Player Beta as displayed by Freesat. A place for a full version of ITV Player hasbeen reserved on Freesat channel 903. A beta release was made available in December 2010 forHumax receivers, requiring the input of a code. The beta was made public on 26 July 2011, withsupport expected to be extended beyond Humax devices. On 31 July 2012, an update was releasedfor Manhattan receivers which included support for ITV Player. 185 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Sky: On 30 January 2012, it was announced that ITV Player would be added to Skys Anytime+service on 31 January 2012. The service is accessible through the main Sky Anytime+ menu as well asa dedicated ITV Player section. ITV Player initially only offers archive content, with catch-upprogramming to become available later in the year. Televisions and Blu-ray players: On 6 July 2012, it was announced that ITV Player had beenmade available on Samsungs Smart TVs and Blu-ray players through their Samsung Smart TVservice, for 2011 and later devices. Virgin Media: On 8 January 2009, it was announced that ITV Net Player would be added toVirgin Medias digital cable TV service. The deal allows Virgin Media’s 3.5 million TV customers toview over 40 hours of programming from ITV1, ITV2, ITV3 and ITV4 each week. Popular showssuch as Coronation Street and Emmerdale are all available for seven days after being broadcast aspart of Virgin Medias free Catch up TV service. Virgin Media’s viewers are able to choose from 500hours of award-winning ITV comedies, documentaries and dramas, on demand through the TVChoice section. The service began a three day deployment program on 24 February 2009. YouView: ITV Player was one of four service available at the launch of YouView in July 2012.At launch the ITV Player app contained options to resume watching recent programs and browse bychannel, day and A-to-Z, but lacked integrated search and contained non-skippable adverts. PlayStation 3: ITV Player was released on 14 December 2010 on PlayStation 3 via thePlayStation Network. ITV Player on PS3 is free and ad-funded with pre-, mid- and post- roll videoads being sold and served by ITV. Under the terms of the deal with Sony, STV, UTV and ChannelTelevision will be able to add their own equivalent services so they are also accessible from the PS3platform on a similar basis to ITV Player. Xbox 360: ITV Player is to launch on the Xbox 360 before the end of 2012. iOS: On 11 May 2011, ITV chief executive Adam Crozier announced that a dedicated ITVPlayer application would be released on a "wide range of mobiles and tablets" during 2011. The appfeatures programming from ITV1, ITV2, ITV3 and ITV4 for up to seven days after broadcast.However content is only available to view in the UK and ITV1 programming is blocked outside ofits licensed areas (England, Wales and the Scottish Borders). A Wi-Fi connection is also required.The mobile apps were developed by digital agency Candyspace. Android devices: An application for devices running Googles Android operating system wasreleased on 20 June 2011. The app requires Android 2.2 (Froyo) or higher and Adobe AIR. Eachshow is broken up to feature non-skippable advert breaks. Users are forced to register an emailaddress to use the app in order to allow ITV to “keep you informed about improvements and otherexciting developments at ITV.” ITV is also planning on releasing an app thats optimized forAndroid 3.x (Honeycomb) tablets. iOS devices: An application for Apples iOS (iOS 4.3 or later) operating system and either theiPad (1st generation or later), iPhone (3GS or later) and iPod Touch (3rd generation or later), waslaunched on 1 July 2011. 186 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 20124OD (4 ON DEMAND, WWW.CHANNEL4.COM/PROGRAMMES/4OD) 4oD is a video on demand service from Channel Four Television Corporation. Launched inNovember 2006, 4oD stands for "4 on Demand". The service offers a variety of programs recentlyshown on Channel 4, E4, More4 or from their archives. However some programs and movies arenot available due to rights issues. The cable and IPTV versions are operated through an appropriate set-top box whilst the internetvariant can be accessed via websites such as Channel4.com. 4oD generated around 215 million long-form video views on all platforms where it is available in the first half of 2011, making Channel 4 thebiggest UK broadcaster in the video on-demand market during the period. Platform Availability Channel4.com: 4oD is the main source of on demand programs from Channel 4, E4 and More4,the catch up service currently lasts 30 days and the archive has thousands of hours of programming.As of April 2009, the internet version is fully available to Windows, Mac and Linux users with AdobeFlash Player installed. The "catch-up" service offers content free of charge a program for thirty daysafter its broadcast on Channel 4. As of 2012 not all content is available to Irish users, due to licensingrestrictions, however the majority of the programming is available. Channel 4 re-launched 4oD on 31 August 2011. At the heart of the changes is My 4oD,allowing registered users to build playlists, schedule shows, maintain a record of what they havewatched, save their favorites in a single place and receive in-page reminders from Channel 4whenever a new episode is available for them to watch. Other features include better full-pageviewing and optimized site navigation during viewing. Blinkbox: Blinkbox has acquired licenses for a number of programs to be access on its website,although 4oD itself is not available. Some TV series are available for free such as Shameless, Skins,Embarrassing Bodies and Balls of Steel while others, for example The Big Bang Theory, ShamelessUS and ER have to be bought to be able to watch. SeeSaw: 4oD on SeeSaw had access to 4oD archive of shows such as the The IT Crowd, Skins,The Inbetweeners, Bo Selecta! and many more. In August 2011, all 4oD content was removed fromSeeSaw, following SeeSaws failure to renegotiate its deal with Channel 4. YouTube: 4oD is also partly available on YouTube, launching in the United Kingdom in late2009 with seven genres dedicated channels for 4oD, additional to separate channels Channel 4 andE4. BT Vision: 4oD is available on BT Vision, offering programs for 7 days after broadcast withoutaccess to the 4oD archive. TalkTalk TV: 4oD is available on TalkTalk TV, which offers programs up to 7 days afterbroadcast. TalkTalk TV does not offer the back catalogue of programs. Virgin Media: 4oD is available on Virgin Medias cable television service. This platform offersprograms for 7 days after broadcast and Virgin has exclusive use of most of Channel 4 archive whichis free on XL package. In 2007, Virgin Media announced plans to offer high definition programmingthrough 4oD but as of 2012 no further information has been released. 187 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 YouView: 4oD was one of four services available at the launch of YouView in July 2012. Atlaunch the 4oD app contained options to resume watching recent programs and browse by mostpopular, categories, collections and A-to-Z, but lacked a search function and contained non-skippable adverts. PlayStation 3: 4oD was released on 14 December 2010 on PlayStation 3 via the PlayStationNetwork. 4oD on PS3 is free and ad-funded with pre-, mid- and post- roll video ads being sold andserved by Channel 4. This service is a 14 day catch-up version of 4oD it is accessible throughps3.channel4.com. Xbox 360: On 5 October 2011, it was announced that 4oD would be made available Xbox LiveGold members. The service also integrates with the Xbox 360’s Kinect controller. 4oD was added tothe Xbox Live on 21 December 2011. iOS devices: A 4oD iPad app launched on 3 May 2011, the app offers a 30-day catch-up service.The current requirements to run this app is a compatible with iPad with iOS 3.2 or later. A 4oD appfor the iPhone and iPod Touch allowing a 30-day catch-up was released in September 2011, alongwith an update to the iPad app. Both apps now feature improved search functionality to enable usersto more easily navigate the catch-up and archive content. They can both be browsed in 3G, but videoplayback is still only available with a Wi-Fi signal to "ensure the quality of the viewing experience isntaffected". The apps also feature a link to Channel 4s content on iTunes, offering the chance topurchase shows.DEMAND FIVE Demand 5 is the brand name of video on demand services offered by Channel 5 in the UnitedKingdom. The service, which was previously known as Five Download, went live on 26 June 2008.As Five Download the service offered Windows Media Video format downloads of the US importsCSI, House and Greys Anatomy. Individual episodes of these series could be rented with someepisodes available 7 days before they appear on TV. More varied content from Channel 5s programming has become available since June 2008 with awider prevalence of free content offered for 30 days after broadcast. In January 2009, Demand 5began to offer content in the Flash Video format, allowing users with Apple Macintosh computers toaccess their content. Platform Availability Demand 5 website: Demand 5 is the main source of on demand programs from Channel 5, 5*and 5USA. It offers a 7 day catch-up service as well as an archive of shows from the past. Facebook: Demand 5 launched on Facebook in August 2010, becoming the first televisionnetwork in the world to embed its programming into the social networking site. SeeSaw: Demand 5 had been available on SeeSaw since the launch of the service, with access toDemand 5s archive of shows such as Cowboy Builders, Fifth Gear, Home and Away, Neighbors andmany more. In September 2011, all Demand 5 content was removed from SeeSaw. 188 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 TV.com: In February 2010, Demand 5 launched on TV.com with around 250 hours of archivecontent as well as catch-up. This represented the first major deal for long-form content in Europefor TV.com. As part of the deal, advertising is sold by CBS Interactive. YouTube: Demand 5 is also partly available on YouTube, launching in the United Kingdom on 4December 2009. Demand 5s catch-up content reaches YouTube shortly after TV transmission andusers are able to browse 250 hours of the broadcasters archive content. BRAVIA Internet Video: Demand 5 is available through Sonys Blu-ray Disc players, Blu-rayhome cinema systems and Smart TVs, via the BRAVIA Internet Video service. BT Vision: Demand 5 launched on BT Vision on 7 October 2008. Demand 5 was removed fromBT Vision on 6 October 2010,[12] although the two companies continued discussions in a bid toreinstate the service, having previously stalled during contract renegotiations. The service returned toBT Vision in May 2011. Samsung Smart TV: On 13 May 2011, it was announced that Demand 5 would also be availableon Samsungs Smart TVs through their Samsung Smart TV service. However, as of August 2012 thishas not occurred. Sky: On 26 July 2012, it was announced that Demand 5 would be added to Sky Anytime+ laterin the year. Virgin Media: Demand 5 is available on Virgin Medias cable television service, offeringprograms for 7 days after broadcast since November 2010. YouView: Demand 5 was one of four services available at the launch of YouView in July 2012.At launch the Demand 5 app contained options to resume watching recent programs, accessfavorites, browse featured programs or a full list of shows, find similar programs or more episodesand an integrated search bar. Xbox 360: On 5 October 2011, it was announced that Demand 5 would be made available to allXbox Live Gold members. The service also integrates with the Xbox 360’s Kinect controller.Demand 5 was added to Xbox Live on 21 December 2011. iOS devices: A Big Brother Demand 5 app for the iPad, iPod Touch and iPhone launched on 19August 2011, the app offers a 30-day catch-up service for Big Brother content. The app is compatiblewith iOS 4.2 or later. The app will be extended to incorporate catch-up content from Channel 5, 5*and 5USA, creating overall Demand 5 app in the coming months.YOUVIEW (PREVIOSULY PROJECT CANVAS) YouView is an IPTV television service in the United Kingdom which was formally launched on4 July 2012, with receivers going on sale from 26 July. The venture is a partnership between fourbroadcasters (BBC, Channel 4, Channel 5 and ITV) and three communications companies (Arqiva,BT and TalkTalk). YouView allows access to television channels, radio stations, on-demand services and internetcontent using a set-top box, hybrid connected with an internet connection and an aerial to watch 189 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012digital terrestrial television channels (similar to BT Vision). At the launch of YouView, ChairmanAlan Sugars ambition for the service was to replace Freeview devices. The project was previously known under the working title of Project Canvas, and was brandedYouView in September 2010. Although YouView was originally scheduled to launch by the end of2010, its launch date has been continually delayed until finally launching in July 2012. General perspective on the industry is negative for the following reasons: Unclear Addressable Market YouView’s stated target audience of mass-market consumers appears to have been defined bywhat is cannot address’ for example people who will pay subscription for lots of TV are already Skyor Virgin Media subscribers, and FreeView subscribers. Most Freeview TV viewers appreciate extra choice, but not enough to pay a regular subscription.Additionally, viewers who already refuse to buy a Freeview+ DVR are unlikely to pay £300 forYouView’s similar functions Confused Customer Proposition The public mission statement is that YouView is the natural, internet-connected long-termupgrade to digital terrestrial’s Freeview standard, but its internal hopes were pinned more onYouView’s use by its ISP stakeholders to prevent short-term broadband customer churn. Both make sense. But a glaring problem remains: how will YouView and the existing Freeview+DVR brand compare? YouView is not a bargain at £300. YouView and Freeview+ boxes are competing to win new customers. How can Arqiva, Channel4, ITV and the BBC be shareholders in both when they seem so similar? And is that a good use ofinvestor and license fee money? Unclear Revenue Currently the focus is a relatively expensive STB. However, there is no clear plan on paid-forcontent. And advertising will be limited source of potential value because broadcasters will not sharetheir linear-channel revenue. So are the investments from ITV, C4 and C5 recoupable through itsown increased advertising CPM? If so, would that necessitate first replacing Freeview? Intense Competition Across All Customer Segments YouView has to compete against Sky, Virgin, Freeview, BT Vision, Amazon (LOVEFiLM),Netflix, Apple and Google, with no clear proposition. 190 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 No Apps No Ecosystem Third party developers need incentives to spend their own resources and forgo otheropportunities to build products and services for YouView. Despite earlier talk of on-board “apps”,opportunities for developers to even consider building them for YouView are absent. The box isclosed and there are no developer tools or info discussed or cited anywhere. TV MANUFACTURERS Before diving into the details of the different suppliers this table provides a good current statusof how the smart TVs compare on application availability, see Figure 98. This is for the US market;application availability does vary by country and frustratingly within the suppliers range of TVs,making a complex mess for any consumer. My recommendation remains don’t do it on smart TVs,invest in a Roku for $50-$75 which gives most of the services and can easily be changed out every 3years without hurting the pocket, unlike a HDTV. Figure 98. Major Internet Services on TVs (source CNET) 191 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012SHARP For their 2012 Aquos branded TVs, Sharp has implemented their Smart TV platform calledSmartCentral, SmartCentral has a sparse selection of apps and lack of an app store are the mainproblems. The entire lineup consists of Netflix, CinemaNow, YouTube, Hulu Plus, FilmFresh, andVUDU Movies, see Figure 99. Figure 99. Sharp SmartCentral UI (source Sharp)TOSHIBA Toshiba’s Places platform (2012) is only really emerged in the summer of 2011, a full year aftermost of the other brands had managed to get some fairly substantial platforms up and running. Andin some ways it’s all too obvious that Places still has a way to go before it even gets close to the moreestablished platforms offered by other brands. Places presentation is an unusual but very attractive and vibrant interface that runs counter to theSmart Hub screens of LG and Samsung by striving to keep onscreen content levels as minimal aspossible. This approach isn’t as well suited to quick ‘browsing’ as the Smart Hub screens, but it doesmake the Smart TV experience feel more friendly, accessible and manageable to casual/technophobicusers. The division of apps into dedicated ‘places’ - eg social, video and music places - makes perfectsense and works well. 192 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 100. Toshiba’s Places Platform User Interface The most obvious problem with the Toshiba Places system is its shortage of content. Just beforewriting this feature it had, thankfully, added Facebook and the AceTrax movie cloud platform, whichjoined other highlights of the BBC iPlayer, Daily Motion, Viewster, You Tube, and the Box Office365/Cartoon Network/HiT Entertainment subscription trio. Overall, though, there really aren’tenough free video services or apps on Places right now to make it a satisfying service - and ironicallythe structure of the Places menu exposes this rather than hiding it. It should be said, too, that while for the most part the Places operating system works brilliantly,it is rather let down by the fact that you can’t access either the iPlayer or YouTube apps from themain Places menus. Instead, if you choose them from within Places you get a message instructingyou to quit Places and access the two key features from elsewhere in the TV’s menus! 193 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012PANASONIC Panasonic offers its own internet platform under the Veira Connect brand (previouslyVEIRACAST). Content includes all the usual services including Netflix, BBC iPlayer, YouTube,Picasa Web Albums, Bloomberg and weather service, the UK UI is shown in Figure 101. Figure 101. Panasonic Veira Connect (2012) UK Version (source Panasonic)LG LG also uses a Smart Hub screen to provide you a one-stop jumping off point to a large numberof different sources, including, AV inputs and ‘Smart’ features such as video streaming platforms andsmaller apps, see Figure 102. LG’s Smart Hub isn’t quite as slick and well organized as Samsung’s,but it’s still much better than the onscreen menus of most other current Smart TV systems. LG has also put together a solid system for presenting all the second-tier apps you can browsethrough with a view to downloading. Basically the app ‘store’ appears as a virtual ‘book shop’, withicons for all of the apps - organized by genre and type - appearing on virtual bookshelves. Achallenge with some of the apps is causing system crashes, which for most customer will turn themoff bothering with smart TV apps. 194 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 102. LG Smart Hub Experience (UK Version)PHILIPS ELECTRONICS Philips plans to step up their Smart TV offerings with a new platform dubbed Smart TVPremium, from the older netTV. The platform will offer TV apps, Skype calling, an app store whereusers can download new apps (previous system was limited to 33 apps in some regions) and Philipsalso promises new video-on-demand partners. Most TVs come with built-in WiFi and USB recordingfunctionality. The recording function allows users to record TV shows, pause live TV and rewind. Itjust requires an external USB hard drive connected to one of the USB inputs.SAMSUNG Samsungs Smart TV platform is the most content-rich and capable on the market. Its bigAchilles heel, aside from its cluttered interface, is lack of Amazon Instant Video, a service found onPanasonic, Sony, and Vizio TVs, but not LG in 2012. Otherwise the available content is superb. Thebig standout is HBO Go, available on no other TV so far (its not available on the 2012 models yet,however; Samsung confirmed it would be but couldnt specify a time frame). It joins just about everyother mainstream non-Amazon video service, as well as numerous niche video options and 3D-specific app. Theres no traditional Internet radio app like vTuner or Shoutcast, but you do getPandora and subscription music via Mog. The companys TV app store is the biggest outside Googles, with offerings like MTV MusicMeter and ESPN ScoreCenter as well as umpteen less-impressive paid and free games, educationalapps, screensavers, and so on. Skype takes advantage of the built-in camera and mic, as does a simpleCamera app that you can use to, uh, save pictures of you sitting on your couch. Samsung also has a few relatively rich proprietary apps, like Family Story, which is a way to"share photos, memos, and family events stored in the cloud," Fitness and Kids (both with customVOD), and a Social TV app combining Facebook, Twitter, and Google Talk in a bar alongside liveTV. Theres also a new AllShare Play app coming soon to enable the TV to grab files from the cloud.Samsung boasts the best browser weve tested on any TV, although its still slower and morefrustrating to use than the browser on a laptop, tablet, or phone. 195 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012SONY Sony smart TVs has the most app-based functionality of any smart TV. For starters, it has a widearray of video apps, so you can watch internet content from the most popular online sources. Onlinevideo apps include Video Unlimited, Blip.tv, Dailymotion, Hulu Plus, Netflix, Amazon InstantVideo, Sony Pictures Television, Cinemanow, SnagFilms and, of course, YouTube. It also has a wide selection of music-streaming apps. You have the ability to listen to yourfavorite tunes through services such as Pandora, Singingfool, Music Unlimited and more. Furtherstill in the apps department, youll find photo-sharing apps from popular brands such as Picasa,Shutterfly and Photobucket. These services allow you to access the pictures you have stored onlineand browse your friends as well, right from your TV. If youre a sports buff, youll love theprofessional and college league apps. Out of the box, this smart TV comes equipped with apps suchas Golflink.com, NHL Vault and College Sports. The Skype app allows you to turn your smart TV into a video-phone device. Honestly, with thisapp combined with this smart TVs enormous screen, blazing refresh speed and online capabilities,youll feel like youre on the bridge of the starship Enterprise when you use this app for video calls. INTERNET TV AND BRINGING IT BACK TO THE TV Internet TV has had a short history, since YouTube was founded in 2005. Google Sites, drivenprimarily by video viewing at YouTube.com, ranked as the top online video content property in Maywith 151.7 million unique viewers, followed by Yahoo! Sites with 57.8 million, VEVO with 48.3million, Microsoft Sites with 44.4 million and Facebook.com with 44.3 million. Nearly 36.6 billionvideo content views occurred during the month, with Google Sites generating the highest number at17.6 billion, followed by Hulu with 888 million and Yahoo! Sites with 845 million. The averageviewer watched 21.9 hours of online video content, with Google Sites (7.7 hours) and Hulu (4.2hours) earning the highest average engagement among the top ten properties. Figure 103 Online Video Content Properties Ranked by Unique Video Viewers May 2012 (source comScore) 196 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Americans viewed an all-time high of 10 billion video ads in May. Hulu ranked first with morethan 1.6 billion video ads delivered, followed by Google Sites with nearly 1.4 billion, BrightRollVideo Network with 1.1 billion, Adap.tv with 966 million and TubeMogul Video Ad Platform with897 million. Time spent watching video ads totaled 4.5 billion minutes, with Hulu delivering thehighest duration of video ads at 725 million minutes. Video ads reached 52 percent of the total U.S.population an average of 64 times during the month. Hulu delivered the highest frequency of videoads to its viewers with an average of 56, while ESPN delivered an average of 29 ads per viewer. Other notable findings from May 2012 include:  84.5 percent of the U.S. Internet audience viewed online video.  The duration of the average online content video was 6.5 minutes, while the average online video ad was 0.4 minutes.  Video ads accounted for 21.6 percent of all videos viewed and 1.9 percent of all minutes spent viewing video online. Appendix 3 provides a summary of the main online TV services globally, subset are reviewedhere.BOXEE Boxee stared a cross-platform freeware home theater PC program designed for the living-roomTV. Marketed as the first ever "Social Media Center", Boxee enables its users to view, rate andrecommend content to their friends through many social network services and interactive mediarelated features. Boxee is still in its early development stages and is currently only available as betaversion releases for Mac OS X, Windows, and Linux, as well as Apple TV, for computers with x86architecture processors. The first public alpha of Boxee was made available on the 16 June 2008, andthe first public beta version was officially released for all previously supported platforms on 7 January2010. The developers of Boxee have stated that their goal is to have Boxee media center software runon as many third-party hardware platforms and operating systems as possible, and they recentlyreleased a dedicated set-top box (hardware) called "Boxee Box" in cooperation with D-Link which isthe first "Powered by Boxee" branded device to be announced. Boxee supported NBC Universals Hulu quite early on, but in February 2009, was asked by Huluto remove the service at the request of Hulus content partners. Boxee later reinstated the featureusing Hulus RSS feeds, but Hulu once again blocked access. Boxee recently introduced a new pluginarchitecture based on the Mozilla corebase architecture for plugins, since this is the same corearchitecture that Firefox uses Hulu will see Boxee as any other Mozilla browser so Hulu doesntblock the app. Hulus latest attempt to thwart Boxee involves JavaScript scrambling. The Boxee box is the most expensive dedicated device in the list at $180, the consoles aremultipurpose. But it provides the most functionality, full web browser, so you can watch onlineshows on the TV. Facebook integration for those that like to share what they are watching. Totalsales are around 200k-250k. since it was launched. 197 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 This appeals to the geeks, it enabled tech-savvy users to have full control over their content andwatch is on their terms, about 200k units have been sold. Boxee app for the iPad provides airplayfunctionality. The problem is no Hulu Plus or Amazon Instant Video. Personally I think Boxeecould provide a perfect complement to the Google TV line-up, with its focus on openness, andwould help lift this device into the millions of devices given the reach of Google’s brand.TIVO TiVo is digital video recorder (DVR) with a service fee. TiVo was introduced in the UnitedStates and is now available in New Zealand, Canada, Mexico, Australia, Taiwan, and the UK. TiVoDVRs provide an electronic television programming schedule and features such as Season Passrecordings which records every episode of a series; and WishList searches which allow the user tofind and record shows that match their interests by title, actor, director, category, or keyword. TiVoalso provide a range of features when the TiVo DVR is connected to a home network, including filmand TV show downloads, advanced search, personal photo viewing, music offerings, and onlinescheduling. TiVo has added a number of broadband features, including integration with Amazon Video onDemand, YouTube, Jaman.com and Netflix Watch Instantly, offering users access to tens ofthousands of movie titles & TV shows right from the comfort of their couch. Additionally,broadband connected to TiVo boxes can access digital photos from Picasa Web Albums orPhotobucket. Another popular feature is access to Rhapsody music through TiVo, allowing users tolisten to virtually any song from their living room. TiVo also teamed up with One True Media to givesubscribers a private channel for sharing photos and video with family and friends. They can alsoaccess weather, traffic, Fandango movie listings (including ticket purchases), and music throughLive365. In the summer of 2008 TiVo announced the availability of YouTube videos on TiVo. The TiVo service was launched in the United Kingdom in the autumn of 2000. It sold only 35kunits over the next 18 months. Thomson, makers of the only UK TiVo box, abandoned it in early2002 after BSkyB launched its Sky+ integrated set-top decoder and DVR which dominated themarket for DVRs in homes subscribing to BSkyBs paid-for satellite TV service. Manymanufacturers, including Thomson have launched integrated decoder boxes/DVRs in the UK forother digital platforms, including free satellite, terrestrial, cable and IPTV. On 24 November 2009, Virgin Media entered into a strategic partnership with TiVo. Under theagreement, TiVo will develop a converged television and broadband interactive interface to powerVirgin Medias next generation, high definition set top boxes. The terms of the deal are not disclosed.TiVo will become the exclusive provider of middleware and user interface software for VirginMedias next generation set top boxes. Virgin Media will become the exclusive distributor of TiVoservices and technology in the United Kingdom. Virgin Media currently anticipates its first TiVo co-branded product in 2010. As payTV providers added DVR capabilities to their STBs competition has grown. As ofOctober 2009, TiVo has 2.76 million subscribers in the US, down from a peak of 4.36 million inJanuary 2006. Hence, why TiVo has modified its business model to work in partnership withoperators and offering a TV Everywhere proposition. ONO, the largest cable operator in Spain uses the TiVo platform for a hybrid TV viewingexperience. Features include three tuners, giving TiVo users more recording and viewing options. Avideo-on-demand service that integrates assets from ONOs Videoclub library into its search feature 198 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012and offers the ability to go back in time in the grid guide to catch-up on programs that have alreadyaired. Plus, the updated YouTube leanback application underpins TiVos ability to seamlesslyintegrate industry leading third-party apps into the TiVo experience. With over six million Spanish homes passed, ONO has made TiVo available nationwide acrossall of its markets, following successful launches in Madrid, Barcelona, and Valencia, ONOs largestmarket, and an accelerating number of ONO customers now have the TiVo experience. ONO has created its own apps for its TiVo users, giving them access to weather information,music, photos and more. Combined, these capabilities have created the most advanced hybridtelevision service available in Spain and a TV viewing experience that is unmatched in the region. Sweden’s largest cable operator, Com Hem, has signed an exclusive agreement with TiVo. Theoperator will launch as advanced television service in 2013, running it over both cable and, for thefirst time for TiVo, over IPTV infrastructure. In addition to set-top boxes a seamless experience willbe created that will also include smart phones and tablet devices. “TiVo will play a big role in our future plans, which means that we will redefine our subscriptionofferings to include features to watch TV on multiple platforms, remote recording, advanced search,recommendations and access to a wide range of interactive applications from third parties, says ComHem CEO Tomas Franzén.ROKU Roku is an American, privately held, consumer electronics company that sells home digital mediaproducts. Roku manufactures a variety of digital media receivers that allow customers to accessinternet streamed video or audio services through televisions. This includes subscription basedservices as well as services that are available through the receiver free of charge. On May 20, 2008, Roku announced the first Netflix Internet video streaming receiver box, theRoku DVP. The NXP-powered device runs Linux. Prior to Autumn 2010, three versions of the Roku DVP were available: the Roku SD, HD, andHD-XR. The Roku SD only streamed standard definition (SD) content. The Roku HD streams bothSD and HD (720p) content. The Roku SD and HD both have an Ethernet connection and built in802.11g Wi-Fi compatible with wireless B, G, and N routers. Their third box was the Roku HD-XR,which streams both SD and HD (720p and 1080p) content, has built in dual-band 802.11n WiFisupport, and has a USB port on the back. In 2010, Roku revamped its lineup of devices: The revised HD is the basic model of the line,offering 720p resolution, 802.11g WiFi reception (as well as an Ethernet connection), and an HDMIoutput. The middle of the line, the XD, adds 1080p resolution (if channel programmers provide it),an enhanced remote with replay capabilities, and single-band wireless N WiFi. The flagship XD|Soffers the same feature set as the XD but also adds component video and optical audio outputs,dual-band wireless N, and a USB port for playing videos, photos, and music (USB Playback Supportis available as of February 1, 2011). On July 20, 2011, Roku updated its product lineup with three new boxes, each in the same pricerange as before. However, the Ethernet connection and remote with motion control for games areavailable only on the XS model. The Roku Game Remote uses Hillcrest Labs Freespace motion 199 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012control technology, so users can control games with natural gestures. The Netflix application wasrevamped for the Roku 2 HD, Roku 2 XD and Roku 2 XS. The current models now provide theoption of subtitles, when the program provides this aid. In 2012 Roku raised US$45 million of investment from companies including UK pay TVoperator BSkyB and News Corp. Other investors include Menlo Ventures and Globespan CapitalPartners. Sky has invested US$10 million in the company. Its new OTT platform Now TV will soonbe available on Roku devices in the UK. Under the terms of the deal, Sky has the option to rebrandand distribute versions of Roku’s devices in the future. Roku said it would use the new capital to build further brand awareness through advertising,develop new international markets and increase engineering and production to support sales growthof both hardware and digital media services on the platform including advertising, games,transactional and pay-per-view video as well as content packages. Roku launched in the UK inFebruary and currently offers over 150 channels, including Netflix, iPlayer and Crackle.CRACKLE Crackle (formerly known as Grouper) is a digital network and studio, featuring ad-supportedstreaming video content in Flash Video format. It is owned by Sony Pictures Entertainment, and itscontent consists primarily of Sonys library of films and television shows. Crackle provides its contentthrough a web syndication network, including YouTube, Hulu, AOL, MySpace, and mobile serviceproviders. It is one of the promoted channels on Roku, being a button on the remote control.Crackle is available on Apple phones and devices, the PlayStation 3 and Xbox 360 games consoles,Boxee and Bravia TV sets. Crackle currently features original content and licenses movies from Columbia Pictures, TriStarPictures, Screen Gems, and Sony Pictures Classics and TV shows from Sony Pictures Television. InJanuary 2012, Crackle added the worlds largest anime television network, Animax, also owned bySony, to its main United States and Canada channels.WALMART / VUDU Vudu in 2010 said it would no longer make its own set top box but would rather stream moviesvia other companies’ devices. The Vudu Box is designed to exist separately from both a computerand cable/satellite television system. A user must only provide a broadband Internet connection touse the service. Users do not pay a monthly subscription fee; instead they add a selected amount toan online account which is depleted depending on how many movies the user rents or purchases.Users can purchase and rent movies via the set-top box or through the company’s website. On February 24, 2009, VUDU became the first on-demand service to offer high-definitionmovies for download to own. Prior to VUDU allowing users to purchase high-definition movies,studios only allowed their films to be purchased in standard-definition format. LG was the first tointegrate VUDU into their HDTVs, with access beginning in August of 2009 though the TVsNetCast application. On Jan. 8, 2010 Vudu announced it was abandoning its set top boxes and would provide itsservice to select HDTVs and Blu-ray players from LG, Mitsubishi, Samsung, Sanyo, Sharp, andToshiba. The company also announced its Vudu apps platform for delivering internet services 200 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012including embedding Wikipedia links in its movie descriptions On February 22, 2010, Wal-Martannounced that it was acquiring the company for a reported $100 million. Walmart bought Vudu in February 2010. Vudu originally sold set top boxes for their service, butlater moved to a pure service model. It does stream, but the focus is offering movies to rent for at$4-6 for 24 hours, similar to Amazon Instant Video and iTunes, just offers HDX. Standard Definition (SD) $3.99 High Definition (HD) For HDTVs: High-definition 720p picture $4.99 Full High Definition (HDX) For HDTVs: Best-quality 1080p picture $5:99 The Vudu Disk to Digital service involved bringing your physical discs to Walmart to prove thatyou own them, and the store will authorize access to a digital copy that you can view through thecompanys VUDU video-on-demand service, it is also authorized in your UltraViolet account whichis linked to the Vudu account. The cost is $2 to get an SD version of a DVD or an HD version of aBlu-ray disc; for $5, you can upgrade your DVD to an HD digital copy. Disc-to-Digital uses the newUltraViolet digital-locker system. Walmart links the digital copies to VUDU, which is accessiblethrough any Web browser and a wide range of TVs, Blu-ray players, and standalone streaming mediaproducts. The following studios are involved at present, Dreamworks, Fox, Paramount, Sony, Universaland Warner Bros. So not all content is covered. Vudu is a service targeting the Home Theatre HD crowd that care about quality, but to be frankit’s all limited by the connection speed on streaming. While for download 720p/1080i (TiVo) forAmazon and 720p/1080i/1080p Vudu. Netflix is streaming only.APPLETV Apple TV is a digital media receiver made and sold by Apple. It is a small form-factor networkappliance designed to play digital content originating from the iTunes Store, YouTube, Flickr,MobileMe or any Mac OS X or Windows computer running iTunes onto an enhanced-definition orhigh-definition widescreen television. Apple TV can function as either a home theater-connectediPod device or a digital media receiver, depending on the needs of the user. The devices started shipping on March 21, 2007. This initial version shipped with 40 GB ofstorage. A second version with a larger 160 GB hard disk started shipping on May 31, 2007. Since thelaunch, sales appear to have grown: in the fourth quarter of 2008, sales were triple that of the fourthquarter of 2007. On September 14, 2009, Apple discontinued the 40 GB model, leaving the 160 GBmodel as the sole Apple TV offering. A third generation of the device was introduced at an Apple event on March 7, 2012, with newfeatures such as higher resolution (1080p) and a new user interface. Netflix streaming integrationwas added in the September 2010 revision. And Hulu Plus integration was added on August 2012. 201 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012AMAZON INSTANT VIDEO Amazon Video On Demand (VOD) is an Internet video on demand service, only available in theUnited States, offered by Amazon.com which offers television shows and films for rental andpurchase. The service became available on September 7, 2006 as Amazon Unbox. On September 4,2008, the service was rebranded as "Amazon Video on Demand.” Amazon.com describes the content as "DVD quality". The average video bit-rate of an AmazonUnbox download equals 2500 kbit/s; this means that a two hour movie consumes roughly twogigabytes (2 GB) of storage space. In comparison, a typical DVD averages 5600 kbit/s, which makesa 2-hour movie about 4.7 GB. However, Amazon uses the VC-1 codec, a more modern codec than MPEG-2, which is used onDVDs. VC1 achieves a higher quality picture at a smaller file size. The quality for the TiVo files isadvertised as being 2800 kbit/s and as being "of equal or better quality than videos recorded at theBest Quality setting on a TiVo Series2 DVR." Due to the large size of the files being downloaded, the service requires a broadband internetconnection capable of sustaining transfer speeds of 800 kbit/s. A 2-hour movie may take 7 hours and20 minutes to download using a 750 kbit/s DSL/cable connection or 1 hour and 50 minutes with a3.0 Mbit/s DSL/cable connection. Amazon asserts that for customers with an internet connection of 3 Mbit/s or more, any Unboxfile will start playing within 5 minutes. In November 2007, TiVo enabled "progressive download" forcontent so that users may watch downloaded files before the download is complete. Users of the streaming video on demand service need only a web browser with the 32 bit AdobeFlash plugin to stream videos. For transfer to portable device, the service requires the installation ofa client application which manages playback and the transfer of video to portable devices that bearthe Microsoft PlaysForSure certification, such as the Creative Zen or a Portable Media Center. For use with a TiVo DVR, no client application is needed. The user only needs a broadbandenabled (and connected) Series2 or Series3 DVR. Sony BRAVIA TVs require an Internet VideoLink to play Amazon VOD videos. Some models come equipped with this device; for other DMeX-capable models, a separate device must be purchased and installed. It is also available on PanasonicTVs with VIERA CAST; and available on Samsung 650 series and above HDTVs, as well as newerVizio and LG TVs. The cost of episodes and series available from Amazon on Demand vary from 99c to $2.99 perepisode, complete series are available for $5-$20. A critical experience difference competed toPayTV on demand services is selection is made through the PC, hence the experience is far morerefined than via the TV.NETFLIX Netflix offers online flat rate DVD and Blu-ray Disc rental-by-mail and video streaming in theUnited States. The company was established in 1997 it started its subscription service in 1999. In2009 it was offering a collection of 100,000 titles on DVD and surpassing 10 million subscribers. OnFebruary 25, 2007, Netflix announced the billionth DVD delivery. On July 19, 2010, Netflixannounced its service would be made available in Canada starting in the third quarter of that year. 202 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Netflix offers internet video streaming ("Watch Instantly") to all subscribers, enabling theviewing of films directly on a PC or Mac, or TV at home. Internet video streaming comes at noadditional charge with Netflixs regular subscription service, however only a limited portion ofNetflixs content is available via the "Watch Instantly" option. In its simplest form, video is streamed to the user using standard PC hardware, and requiresMicrosofts Silverlight software to be installed. Viewing is initiated by pressing a "Play Instantly"button, and played back on the PC monitor. Films can be paused or restarted at will. Video can also be viewed on various set-top devices which are listed in the Device supportsection. Technically, the system streams videos in VC-1 format at lower or similar qualities than thatavailable on DVD-Video (typically affected by the users broadband bandwidth, and more often bythe processing power of their computer if using the newer Netflix player and Microsoft Silverlightversions). Currently the Watch Instantly service features more than 17,000 movies and recorded televisionshows. Major studios including NBC Universal, MGM, 20th Century Fox, CBS/Paramount, ABC-Disney, Warner Brothers, Lions Gate Entertainment and New Line Cinema distribute films andtelevision shows via the service. On October 1, 2008 Netflix announced a partnership with Starz Entertainment to bring 2,500+new movies and television shows to Watch Instantly in what is being called Starz Play. According toCEO Reed Hastings, the Watch Instantly feature will become available to users outside of the UnitedStates during the second half of 2010. In August 2010, Netflix announced it had reached a five-year deal worth nearly $1 billion tostream movies from Paramount, Lionsgate and MGM. The deal increases the amount Netflix spendson streaming movies annually. It spent $117 million in the first six months of 2010 on streaming, upfrom $31 million in 2009. This deal adds roughly $200 million per year. Underlying Netflix is a critical technology, that of CDN (Content Delivery Network) which isprovided by Level 3. The CDN ensures optimum deliver of content to the customer, using bothDNS and local storage at the customers’ ISP’s peering point. Netflix is also available in the UK andIreland where in August 2012 it achieved 1 million subscribers.GOOGLETV Google TV is an optimized version of Android. It struggled at launch in 2010 as the pricing waswrong. It Comes with Netflix, Amazon, YouTube, and a full web browser. And lots of apps, butnothing blockbuster. Hulu is blocked. Google TVs are expensive $1700 - $2300. I still prefer to geta good quality TV as a display device as I will likely keep it for 10+ years, while the connecteddevices will change every 3-4 years. The Nexus Q (a Google TV device like the Boxee) will be on themarket in Q4 2012. Today we have Apple TV, Boxee, Roku, and a slew of so-called "Smart TVs" with apps andstreaming services built in. So with all the competition out there, Google has an uphill battle gettinginto the streaming business with the Nexus Q, especially considering that it already has Google TV. The Nexus Q is a $299 spherical gadget that hooks up to your TV and streams music or videofrom the Google Play online store. Theres no interface like you get on the Apple TV or Google TV. 203 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Instead, you control everything from an app on your Android phone or tablet. Unlike ApplesAirplay, content doesnt stream to your TV from your device, but directly from Googles servers.Your droid is just the controller. With the Nexus Q, the user experience is more about what you cant do than what you can. Forexample, you cant: Stream music from other services like Spotify or Rdio. Or play videos on yourAndroid device that come from outside the Google Play store. Or stream video from third-partyvideo services like Netflix, Hulu, or HBO GO. Or play your own music files unless you upload themto Google Music first. For a device that costs about three times as much as the competition underperforms in mostcategories. Unless all your digital content comes from Google Play, the Nexus Q is next to useless.And chances are you dont have much content from Google since the Play store only recently addeda broader selection of music, movies, and TV shows. When you want to play a video on the Nexus Q, you have to get it started on your Androiddevice first. Then you tap a "Play" icon in the top right corner to tell Google to send the video toyour Nexus Q. It takes forever. I often had to wait up to 30 seconds for a video to finally appear onmy TV. Music was a bit faster, but overall its nowhere as seamless as Apples AirPlay. Once you do get a video up and running, the experience is awful. The Nexus 7 tablet I reviewedcame with a free copy of the new Transformers movie. I couldnt even get the Nexus Q to load thevideo. After staring at the "loading" animation for several minutes, I just gave up. I was able to get aNational Geographic show running, but it was almost unwatchable. Video quality was nowhere nearas good as what I get on my Apple TV or Boxee and the stream would stop and restart every fewseconds. CUSTOMERS’ CRITICAL MATH For customers that are more movie and show-centric in their viewing, that is sportsprogramming is not a deciding factor, and taking a US centric view of the cost equation as shownbelow, customers are currently paying a up to an additional $600 in taking a Cable or Satellite servicecompared to an OTT approach. Now the decision is more complex than that as picture quality alsomatters and there is the risk that their ISP may start charging, capping or rate limiting the customerhence impacting the analysis shown below. Cost of premium Cable per year ($137.5) $1650 Cost of premium Satellite $1460 Cost to Replace Cable Digital antenna (local free to air) Free-$50 Hulu+ $120 Joost, YouTube, Fox, other websites Free Netflix on Demand $120 Cost of box (TiVo, PS3, Wii, Xbox) Free-$80 204 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Amazon on Demand $778 (one show per week night in HD, 2:99) Total $1018-1148 Cost of laziness up to $632 MAPPING THE LANDSCAPE Figure 104 shows one slice of the Internet TV landscape. It is divided into 2 groups, contentaggregators and devices. The Aggregators are divided into 2 groups, subscription VoD like Netflix,Hulu and Amazon Prime Instant Video. Then the stores, which include YouTube as it now sellscontent. And of course there is the broader world wide web of content that can be brought to theTV. For the devices I shows them in order from challenging the aggregators / content owners tocomplementing. Roku has the broadest coverage of the main TV services, see Figure 98. TiVo andSmart TVs are supporting internet TV, while Smart TVs are following a Roku like model, TiVoplaying both a consumer (though its market size continues to decline) and service provider angle(where is it growing its business). Apple TV best supports Apple’s silo, but does work with Netflix and recently Hulu. WhileGoogleTV and Boxee have focused on challenging the content aggregators and owners so have lesscoverage, e.g. missing Hulu or Amazon Instant Video. Internet TV is a market in transition, thediagram here is very different in its focus compared to 2009, where the focus was more on the rolepayTV providers would play. Clearly they are not relevant in this landscape in 2012. For payTV providers this marriage with TiVo is not as surprising as some have found. The mainprinciples of greater consumption are shown below, and it’s clear across recommendations, relatedcontent and search TiVo has a well patented lead.  Recommendations  From sophisticated algorithms, to simple things such as top rated, “last night’s TV,” or “what’s new”  Package up-sell, essential its related to viewing habits  Related Content  Follow a theme, e.g. episodic programming, same Director, same subject  Community  The ability to communicate and share with friends on STB, PC or mobile (TV Everywhere) – both real-time and off-line  See who’s watching what, and what they are thinking of the show (canned messages for STB) 205 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  See friends ratings and recommendations  Search integrated into the EPG and available across PC, mobile and STB  PC remains the best search tool for programmatic content, discover on the PC and view wherever (TV Everywhere) However, devices like Roku move fast their user experience has set the standard. And coupledwith the power of Netflix’s recommendation engine and large content library, they have set astandard beyond that of TiVo. Figure 104. Mapping the Internet TV on the TV Landscape Source Alan Quayle Business and Service Development SOCIAL NETWORKS AND TV Social recommendations and community are becoming elements of how both payTV and OTTTV providers are improving the customer’s experience, essentially encouraging customers to spendtheir time on their services. 206 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Bebo is a social network owned by AOL. Bebo successfully pioneered running TV contentspecifically for online TV. Sofia’s Diary first ran on Bebo before later transferring to channel Five inthe UK, episode 2 on Bebo got 5m views, about the same as The Bill (a popular prime time show inthe UK.) And it’s not just content for teenage girls. Shampoo brand Suave partnered with US operatorSprint to target at home mums. Written by Hollywood screenwriters, it starred sitcom actress LeahRemini. Consumers were given opportunity to contribute own stories, social network style. Thecampaign was MSN’s best performing webisode series to date. It was later snapped up by ABC torun on its TV network. And of course YouTube, the most popular source of online video: 140m unique users/month.Predominantly UG (User Generated) short form content, but in reaction to customers’ engagementwith Hulu, BBC iPlayer etc. YouTube works with a limited number of content partners providingfull length formats, e.g. Star Trek and Beverley Hills 90210. It has invested $150 million to seeddozens of new video "channels" on its Web service and see what works. So far, Google likes what it sees from the eight-month effort. The company says it will put inanother $200 million to market the channels as it attempts to upgrade its content from simple user-generated videos and to lure more viewers and advertising. The site has launched nearly 100 newchannels so far this year, attracting talent such as actor Amy Poehler to create or star in originalepisodes in an effort to draw new audiences—and blue-chip advertisers. YouTube has secured commitments from advertisers to run more than $150 million of ads onthe channels this year, according to a person with direct knowledge of the sales. Social has also become a feature within many services, enabling people, should they desire, toshare what they are watching. Boxee has been a leader in enabling this type of sharing. SOCIAL TV There have been a number of Social TV trials. One of the earliest was TNO in 2007, see Figure105 for summary, whose results have been confirmed in numerous other trials. Customer feedback,shown in Figure 106, shows it’s considered a valuable additional service. Figure 105. TNO Field Trial (Source TNO) 207 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 106. TNO Results (source TNO)Figure 107. Commercial Opportunities Enabled by Social TV (Source TNO) 208 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Social TV brings the same everyday social pressures into TV viewing to drive value added services tobe seen as an individual (personalization), status (premium services), and churn reduction (loss ofbeing part of a group), as shown in Figure 107. TNO Telecom’s social TV trials demonstratessignificant customer engagement, with increased viewing and active (every day) use ofcommunication featuresMajority of customers found Social TV improved their IPTV experience, with key Social TVFeatures:  Buddy lists with channel/program context (i.e. what they are watching)  Recommendations (programs / channels)  Presence / context (including privacy)  Chat (voice, video, text)  Emoticons  Games / quizzes / league tables / status  Must be easy to use from the remote control  This requires canned messages and use of T9 for text input  Must be integrated into the operator’s broader communication infrastructure  Across mobile and PC However, Social TV has continued to struggle to take off as an integrated feature of TV viewing.Rather it has become a second screen interaction, associated with viewing on the TV. The challengeis the closed proprietary nature of STB, TV and other connected equipment. While across tabletsand smartphones there are 600 million customers on just two OS (iOS and Android). Likely thesecond screen experience will dominate.  BBC current affairs series Free Speech incorporates a Twitter based panelist approval platform called the Power Bar. Viewers are able to tweet-in their approval or disapproval of the panelists comments.  BBC series Up for Hire incorporated social media content from television viewers into a massive in-studio display. Viewers could get their comments on TV and the hosts would interact with the content.  ZDFs Rette die Million! allows TV viewers to play and answer the same questions as they appear on TV during the whole two hours show.  C-SPAN streamed tweets from US senators and representatives during the quorum call 209 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  Top Gear has an integrated Facebook branded page and has integrated Facebook into its website. After each episode ends, Top Gear posts clips of the last episode on Facebook.[  American Idol is piloting a program where users can login with Facebook and vote for their favorite candidate for free.  The Voice had the judges of the program tweet during the show and the posts scrolls on the bottom of the screen. The use of Twitter also led to an increase in viewers.  "Glee" Entertainment Weekly created a second screen viewing platform for the Glee season 3 premiere.  "Psych" USA Network created a scripted social network where fans could interact with Sean and Gus. ONLINE TV NETWORKS Most Online TV networks have ceased operations. Owning content is critical; Hulu is backed bythe owners of most of the content available on TV. So Hulu is very similar to broadcasters such asBBC making their content available over the internet with the iPlayer.HULU Hulu offers web-based commercial-supported streaming video of TV shows and movies fromNBC, Fox, ABC and many other networks and studios. Hulu videos are currently offered only tousers in the United States. In order to ensure that no international users outside the US have accessto the video channel, Hulu has blocked many anonymous proxies and virtual private networks. Huluprovides video in Flash Video format, including many films and shows that are available in 360p and480p. Hulu also provides web syndication services for other websites including AOL, MSN,MySpace, Facebook, Yahoo!, and Comcasts fancast.com. Hulu is a joint venture of NBC Universal (General Electric), Fox Entertainment Group (NewsCorp) and ABC Inc. (The Walt Disney Company)[5], with funding by Providence Equity Partners,which made a US$100 million equity investment and received a 10% stake. At an industryconference on October 21, 2009, News Corporation Deputy Chairman Chase Carey stated that Hulu"needs to evolve to have a meaningful subscription model as part of its business" and that it wouldlikely start charging for at least some content by 2010. Hulu suffers from “dancing with elephants,” that is the studios are investors in Hulu and havedifferent objectives for Hulu. The Studios are set to buy out their co-owner Providence EquityPartners in September 2012. This will highlight a critical difference of opinion between Fox andDisney. Fox wants to focus on authentication. Fox shows started showing up with an eight day delay onHulu a year ago. Only viewers that either subscribe to Hulu Plus or authenticate themselves as payTV subscribers have next-day access to shows like Glee or Family Guy. So far, Hulu is providing 210 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012authentication for subscribers of DISH, Verizon and CableOne. Fox wants to extend this to otherpay TV operators, and essentially make Hulu a TV Everywhere service for payTV. Disney, on the other hand, does not want to constrain Hulu. The popular speculation remainsHulu will eventually transform to a TV Everywhere service that will only give pay TV subscribersaccess to its content. It is possible the Studios could do their own thing, as we see in the UK whereBBC, ITV, Channel Four and Five run their independent OTT services.ALSO RANS Joost: On December 17, 2008, Joost sent an email to its customers explaining that the projectwas moving to a website-only model, and that the Joost application would stop working Friday,December 19 2008. On November 24, 2009, Adconion Media Group announced that they would bepurchasing the companys assets. On 30 April 2012 the joost.com website announced, withoutfurther explanation: "We are re-evaluating the Joost.com purpose and services. For the near-term wehave decided to suspend the site to allow for a full re-evaluation." Veoh: On February 11th, 2010, in an open letter published on his blog, company founder andCEO, Dmitry Shapiro, indicated that "the distraction of the legal battles, and the challenges of thebroader macro-economic climate have led to our Chapter 7 bankruptcy.” On April 7, 2010, it wasannounced that Israeli start-up company Qlipso acquired Veoh for an undisclosed sum. Qlipso aimsto use the acquisition to add users and revenue to its multi-user content sharing service. Zattoo: Lawyers for Universal and Warner Bros instigated legal proceedings against Zattoo inMay 2009. As of February 2010, a new Linux version of the Zattoo client has been made available,but as before, only in the Deb file format. On 23 April 2010, Zattoo dropped all the BBC channelsfrom their UK channel list, after ongoing pressure from the BBC to remove them. On 15 June 2010,Zattoo dropped ITV1, Channel 4 and Five from their UK channel list, leaving none of the main UKchannels. They appear to be transitioning to a sports EPG. CONCLUSIONS In the battle across the TV landscape, see Figure 108, its clear content power is critical and willremain critical for the foreseeable future. Essentially online TV networks can only be successfullyrun by the content owners. The wildcard in this landscape is the customer, will they change their TVconsumption behavior, and if so how fast? It’s clear some customers are moving towardsprogrammatic consumption thanks to DVRs, but will it remain anything more than a niche for thosecustomers capable and prepared to cut the payTV cord? For most content owners the currentlucrative business model is likely to be tough to move away from, as witnessed by the excessivesalaries earned by ‘stars and sports players’ compared to the average wage. Can the other Consumer Electronics manufacturers copy Apple in getting the user experienceright and building a store? Or will they focus on being a service platform for other web-basedservices, e.g. Google, Amazon, Netflix and Hulu. It’s likely Apple will remain the exception ratherthan the rule, hence Device Power and Computing Power may join forces to put payTV providersunder increased competitive pressure, by capping their ability to win on-demand and TV everywhererevenues. And in time dominating interactive service revenues and advertising as the Apple and 211 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Android ecosystems start to focus on the TV experience. This is the consensus developer view atpresent. PayTV providers’ strength today comes from their network, the hours customers spend watchingTV over their networks, and an established and sophisticated business model. So the skill comes inensuring they remain the content owner’s best path to cash from the customer. Hence ensuringcontinued high levels of consumption (viewing times), and leveraging their network-related assetsand services to maintain an edge. In reviewing the principles of greater consumption and how the payTV providers candifferentiate:  Recommendations  From sophisticated algorithms, to simple things such as top rated, “last night’s TV,” or “what’s new” – given the bounded problem payTV operators should be able to match Amazon’s engine.  Package up-sell, essential it’s related to viewing habits. Local content matters, payTV operators have the edge of their subscription-based business model (e.g. Sky UK winning the Premier League rights.)  Community (Social TV)  The ability to communicate and share with friends on STB, PC or mobile (TV Everywhere) both real-time and off-line. Social communications is key, deliver in a user friendly way across multiple platforms. Telcos should be solving this as a general communications problem, so should be well placed to leverage their solutions.  Search integrated into the EPG and available across PC, tablet, mobile and STB  PC / tablet remains the best search tool for programmatic content, discover on the PC / tablet and view wherever (TV Everywhere.) Telcos have potentially an edge in the PayTV business as they understand all three channels and how to create a good experience. For the payTV provider focusing upon the user is going to be critical to remain relevant in theemerging TV landscape, as in the limit it’s the customer that’s going to decide the payTV providersfuture. 212 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 108. Battle Across the TV Landscape Content Power Studios Broadcast / YouTube, Cable Networks Facebook Hulu Google,Network Telcos & Amazon, Computing Power MSOs Customers Power Microsoft TiVo Consumer Electronics Manufacturers Device Power 213 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 P R A C T I C A L E X P E R I E N C E S OF C U T T I N G T H E PAY T V C O R D This chapter is a personal review of my experiences in cutting the payTV cord. I review some ofthe OTT services and devices discuss early but from a consumer perspective rather than indepenentanalysis. In considering cutting the cord there are many great resources, some of the ones I usedinclude:  The Gigaom Cord Cutters Channel: gigaom.com/video/topic/cord-cutters/. Great product reviews, through US centric provides an excellent resource on the latest technologies and services. It is quite geeky, but that is where we are in the evolution of cutting the cord, it’s not mass market.  Clicker and Yidio provide useful resources to find your favorite shows across the plethora of viewing options: clicker.com and yidio.com. I also found just going to the websites of the services, like Amazon on Demand, Netflix, Roku, Hulu slightly for helping me decide.  FCC Digital TV Transition website, transition.fcc.gov/mb/engineering/maps/, convinced me I could receive FTA (Free To Air) Digital TV, unfortunately I could not.  Broadband Technology Report, http://broadbandgear.net/tag/cord-cutting/, though payTV industry biased provides a counterpoint to the Gigaom site, as it’s good to look at both sides of how the latest data is analyzed, as an analogy is the cup half full or half empty.  Beyond this are many weblogs from people sharing their cord cutting experiences. INITIALLY: A FAILURE TO LAUNCH As an experiment my family and I decided to have a go at cutting the payTV cord in March2012. An important facet of our TV viewing that enables us to consider cutting the cord is we donot watch sports nor reality TV. Since we got a DVR (Digital Video Recorder, a TiVo) several yearsago our viewing of live TV has dropped to near zero. We read the news on the web and have appsfor the weather on smartphones (iPhones) and tablets (iPad and Kindle Fire). We tracked ourviewing over a 12 month period to understand the content we like and when and where we watchedit. For example, Dexter is a show we enjoy, but we didnt get around to watching the episodes until 3months after the show ended; were not appointment TV viewers. Our preference is to gorgethrough a season over a couple of week’s viewing rather than be drip fed on a weekly basis. Thesecharacteristics put us in a minority of TV viewers. Our son is the TV Everywhere viewer; he uses the Kindle Fire (Prime Amazon Instant Video),the iPad, Kindle and our iPhones for about 50% of his viewing. The other 50% being on a regularTV for shows on TV 80% via Roku, 20% live broadcast on PBS. My wife and I’s viewing isrestricted to those 1 to 1.5 hours in the evening when the kids are in bed and we have a little time toourselves, generally viewing content from the TiVo connected to the HDTV in the basement. It isimportant to understand your viewing needs first, as cutting the cord may not and most probably isnot right for you and your family, the PayTV providers have crafted a set of packages aimed atmeeting the needs of most of its audience at a price they are prepared to pay. 214 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Before making the move to cut the cord, we attempted to set up a free to air (FTA) antenna. Wedid not have a legacy FTA antenna, so we needed to get one set up. Finding an installer provedchallenging, we used Redbeacon and got very high $1000+ quotes. In the end we selected a localhome theater installer who was frank about the challenge we faced in getting FTA working as wewanted the antenna in the attic. Were on north-west side of a hill, surrounded by trees. We used along range antenna and amplifier, in the attic the local channels like NJN came through strong, thepicture quality was amazing. But ABC, NBC and Fox were not detected. Even up on the roof wecould not receive those signals. So it looks like the local channel service from the payTV provider isthe only option at $12.99 per month (cable price quoted, as Verizon requires rental of set top boxesat $5 or $10 per month for SD / HD). Just getting to this point took significant research and effort,and I can see most people simply giving up and continuing with PayTV. Through the process I called Verizon during that week to understand the price of moving to justinternet access where I discovered I was still trapped in a 2 year contract so had until August 2012 towait, else pay a $345 early termination fine. It looks like the FCC (Federal CommunicationsCommission) hasnt got around to pro-rating those early termination fines for fixed services onlymobile. REVIEWING THE OPTIONS: SERVICESAMAZON ON DEMAND: NETFLIX AND HULU COMBINED (WITH FREE SHIPPING) Amazon Prime came free with the Kindle Fire we bought in 2011. Once we discovered the joyof receiving our Amazon orders within a couple of days, we would happily pay the fee. And for thatfee to also include a “(cut-down) Netflix and (paid-for) Hulu” offer, it’s really hard to say no. Amazon Prime costs $79 per year, $6.58 per month. Amazon Prime members are given freeaccess to a sub-set of the available content; see Figure 109, Figure 110, and Figure 111. As of July2012 there are 1801 TV shows available for free with Amazon Prime (475 HD and 1326 SD) and3347 movies available for free, out of a repository of 62,323 Amazon Instant Video items. Amazonis currently 720p for HD, though on the TiVo for downloaded content it is at 1080i. Whichcompared to the other services which all run up to 1080p is the only downside. Depending on the studio the Amazon Instant Video (paid-for) can be only a few months behindbroadcast TV shows, though some premium cable television networks like HBO are several seriesbehind in availability on Instant Video. This is because HBP have an online TV service called HBOGo, free with a monthly subscription to their PayTV service at $17 per month. HBO is owned byTime Warner. HBO made up a significant percentage of our viewing, so in cutting the cord we arelosing access to these shows for a year or so. But as mentioned in the previous section are viewinghabits tend to mean we watch the shows after the series has ended, so though an inconvenience it isnot a deal stopped in cutting the cord. Pricing for content not included in Prime Current TV shows they vary between $2-3 per show for SD / HD, and $30-$40 for a seasonpass. There is no TV show rental only purchase. They are commercial free. Movie rentals vary from $2 to $4. Movie purchase varies from $10 to 15. Though there areoffers where prices can be lower. With all the above content there are no adverts. 215 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Platform Availability The full list of the 400+ compatible devices is here contained here (note it includes TV modelsper year) http://www.amazon.com/gp/video/ontv/devices/ Figure 109. Amazon Prime Eligible TV Shows (1801 Results, 475 HD and 1326 SD) Figure 110. Amazon Prime Instant Video Movies (3347 items) 216 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 111. Amazon Video Content, 62,000 Instant Videos, and surprisingly 300k VHS tapes!CRACKLE Crackle (formerly known as Grouper) is a digital network and studio, featuring ad-supportedstreaming video content in Flash Video format. It is owned by Sony Pictures Entertainment, and itscontent consists primarily of Sonys library of films and television shows. Crackle provides its contentthrough a web syndication network, including YouTube, Hulu, AOL, MySpace, and mobile serviceproviders. It is one of the promoted channels on Roku, being a button on the remote control, and iswhere I first became aware of the service. The content selection is small, but it occasionally has amovie of interest, and being ad-supported it’s easy to dip in with no commitment, simply an addedbenefit of the Roku device. Crackle is available on Apple phones and devices, the PlayStation 3 andXbox 360 games consoles, and Bravia TV sets. Crackle currently features original content and licenses movies from Columbia Pictures, TriStarPictures, Screen Gems, and Sony Pictures Classics and TV shows from Sony Pictures Television. InJanuary 2012, Crackle added the worlds largest anime television network, Animax, also owned bySony, to its main United States and Canada channels.HBO GO I include because of the quality of its content, but it requires you subscribe to a payTV serviceand then the HBO package. Limited device coverage, xbox and Apple devices, only some SamsungTVs, at least it’s available on Roku. Xbox requires the xbox live gold subscription starting at $5 permonth, as well as subscription to HBO through a payTV provider. Such crazy hurdles simply putpeople off from cutting the cord, as it’s not easy. 217 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012HULU: CATCH-UP TV Think of Hulu as an Online TV network offering catch-up TV across some of the major studios,so it includes limited advertising, it’s a TV network. After the show has aired it is normally availablebetween immediately or up to 8 days depending on whether you use the free service or the premiumHulu Plus service for $7.99 per month. It carries shows from ABC, NBC, Fox, Comedy Central andA&E, with about 10k shows. But it does not carry CBS content, though that is available from theCBS website through a browser, which on devices like Boxee is relatively easy to view, though thequality of the video is noticeably lower than other services. Hulu does not have the device coverage of Netflix, though it is available on xbox, PS3, Roku,Apple TV and of course PC, it’s not available on Boxee (though there are hacks) nor GoogleTV (thestudios view Google as evil). On TiVo Hulu is only available on their Premier line of devices.Device coverage remains an issue, as the connected TV may not support the service, I’d thenrecommend buying the Roku device, for $50-$80, to provide access to most services. Hulu is also producing its own content to differentiate from Amazon on Demand. It has alimited movie selection, but really the focus is catch-up TV. Another feature Hulu focuses on is thesocial connectivity, allowing people to share what they are watching, which appeals to a segment ofthe addressable market.ITUNES AND APPLE TV The challenge with Apple is its all or nothing. The experience is best with all-Apple products.Its pricing is the same as Amazon Instant Video for purchased content, and Netflix provides thefixed price streaming content service for the device. With the latest devices its all 1080p capableacross iTunes and Netflix. Hulu and Amazon Instant Video are only available with a hacked AppleTV unit, similarly getting iTunes content onto other devices like Boxee / Roku / TiVo is notintuitively obvious but can be done. Which in the limit makes Apple a great choice if you buy allApple products.LOVEFILM: EUROPE’S NETFLIX LOVEFiLM is a UK-based provider of home video and video game rental through DVD-by-mail and streaming video on demand in the UK, Germany and Scandinavia. It is an Amazon.comsubsidiary, and operates the LoveFilm website, as well as providing outsourced website and deliveryinfrastructure for other British companies:  CD-WOW! - an online retailer.  Sofa Cinema - the Guardian newspaper sponsors this site.  WHSmith Movies Direct - from the WH Smith bookstore chain.  Tesco DVD Rental - Service for the Tesco supermarket chain website.  EasyCinema - Service in conjunction with the Easy Group.  Odeon Direct - Service in conjunction with the Odeon cinema chain. 218 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  Nectar DVD Rental - Service for the Nectar loyalty card In January 2012, LoveFilm announced that it had reached 2 million subscribers. Netflix alsocompetes with LOVEFiLM in the UK. Netflix operates in 40 international markets with a totalsubscriber base of 4M. It also claims over 70,000 titles, and over 4 million DVD, Blu-ray or Gamesrentals per month across five countries. Through a series of mergers and acquisitions, LoveFilm hasbecome the leading online DVD rental and streaming outlet in the UK and across Europe. The company previously offered a download service alongside postal delivery, but this ceased inFebruary 2009. Instead, the company has started a "watch online" service which offers over 4,700films available to watch as part of subscription. This online viewing is available free for subscriberswho have opted for one of their unlimited monthly rental plans. Available on the following devices: PlayStation 3, Xbox 360 (Gold account is required), iPad(LoveFilm mobile app), Sony TV, Samsung TV, LG TV, Cello TV, PC, Samsung Blu-ray player,Sony Blu-ray player, LG Blu-ray players, Sony Home Cinema, Digital Stream set top box, and SonyNetwork Media Player. LOVEFiLM and Netflix operates in the "post-DVD window", which means some studios dontlet it stream their films until long after their DVD release. There are noticeable omissions such asDisney. ABC shows such as Lost and Modern Family are missing too from Netflix UK, in the UKABCs signed with LoveFilm, not Netflix. The Amazon-owned LoveFilm is Netflixs main rival, andso far it seems like studios are choosing favorites: for example, where Netflix has announcedstreaming deals with Miramax and MGM, LoveFilm is pally with Sony Pictures and Warner Bros.The main deals across Netflix, LOVEFiLM and Sky are:  Netflix has film and TV from All3Media, BBC Worldwide, CBS (NYSE: CBS), Channel 4′s 4oD, Disney (NYSE: DIS) UK & Ireland, ITV (LSE: ITV), Lionsgate (NYSE: LGF) UK, MGM, Miramax, Momentum Pictures, NBCUniversal (NSDQ: CMCSA), Paramount (NYSE: VIA), Sony (NYSE: SNE) Pictures Entertainment, Twentieth Century Fox (NSDQ: NWS) and Viacom International Media Networks.  In the pay-TV movie window, Sky Movies currently has exclusive deals with Hollywood’s six largest studios (Sony, Disney, 20th Century Fox, Paramount, Warner Bros. (NYSE: TWX) Universal) for linear and SVOD via subscription.  In the second pay-TV movie window, Lovefilm has exclusive deals with Sony Pictures and Warner Bros., as well as delas with Entertainment One, Studio Canal (formerly Optimum Releasing), Disney, Lionsgate and Momentum. In TV, Lovefilm just signed deals to add archive ITV and BBC Worldwide shows. Netflix UK is £5.99 per month, and theres a months free trial. Its a flat-rate, unlimited service,so you wont click on a film only to discover that youve hit your rental limit or that its a pay-per-view title. Pricing  LoveFilm instant £4.99 (though its anticipated this may rise as it was a competitive measure to limit Netflix’s initial penetration into the UK market) 219 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012  By post 3 disc a month for £5.99 (1 disc out at a time plus 2 hours lovefilm instant streaming)  LoveFilm Instant streaming + Unlimited DVDs and Blu-rays by post 1 disc out at at a time is £7.99. 2 disc out at a time is £9.99. 3 disc out at a time is £13.27  LoveFilm Instant streaming + Unlimited DVDs and Blu-ray and games by post for 2 disc at a time is £11.32 and for 3 disc at a time is £14.99.NETFLIX: GOLD STATNDARD VOD All you can eat for $7.99 per month, 50k movies and TV shows, and works on hundreds ofdevices including Roku, Boxee, iPads, games consoles, etc. Its breadth of content is greater thanAmazon Prime Instant Video, as is the video quality with up to 1080p. Depending on your connectspeed it may optimize for continuous playback which will drop the quality. It offers one month free,so the family can get on board with the service. Most of the content is over one year old. For those looking to break from the annoying adverts,its ad free. It’s great for gorging on a TV show series, but it doesn’t carry HBO content. This is animportant aspect of OTT TV viewing, it’s like buying a TV series on DVD (ignoring the extras), youcan simply watch show after show, following the story line without being asked about a plot line asits been over a week since you last saw the show. From my own experiences Netflix has the edge on quality compared to Amazon. And thedifference between Vudu and Amazon for rentals depends on the device as the HD files arestreamed in 720p resolution, or can be downloaded to TiVo at 1080i resolution. The differencebetween 1080p and 1080i though perceptible will be generally too small for most viewers to notice. The great thing on the kids programs is no adverts. They have a “Just For Kids” web interface,see Figure 112, so your instant queue is filtered to just the children’s content. Netflix also has lots ofinternational content, Korean Dramas, lots of BBC content. They also have exclusive content tohelp manage their costs and differentiate offer compared to Amazon on Demand. Its strength is its recommendation engine in showing similar shows / movies and shows you maylike. Its core strength is its great for complete TV shows series that are >1 year old. There are norecent movies. It’s available on >280 devices with generally a slick UI, though on the older TiVoboxes the UI is a little clunky compared to the Roku experience. 220 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 112. Netflix Just For Kids Web Interface (source Netflix)SONY VIDEO STORE On the PS3 the Sony Video Store has several thousand titles for purchase and rental in SD andHD. It is a download and view model, so after a couple of minutes it is possible the start watchingthe movie. Rental periods are 24 hours and the pricing is similar to all the other online video rentalservices. We’ve used the service a few times before we started using Amazon on Demand as theselection of video content in the Comcast and Verizon VoD stores was relatively limited. But todaywe simply do not use it as the selection in Amazon is greater.VODDLER Voddlers offers movie rentals and some free content. Its media player client softwares isprimarily designed for the living-room TV instead of a desktop computer interface, much like thegraphical user interface of Boxee. But it only runs on PC/Macs no other devies. The service in itsadvertisement-financed version is currently only available in parts of Nordic countries of Europeduring the ongoing beta phase, although they claim that their subscription model will in the futurealso be available in almost all countries in North America, Western Europe, Russia and the Balticstates. They claim over 1 million users. Voddler is developed by a privately held for-profit startup company Voddler, Inc. which is aSwedish high tech company with its head office in Stockholm, the corporation was founded in 2005and is responsible for the development of the Voddler P2P/TV video content delivery service andVoddler Player client software. 221 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 In September 2010, Voddler also introduced Voddler Social with integrated social networkingfeatures into the Voddler media player client that allow you to directly share recommendations toyour friends, similar to that of Boxee and Spotify media player clients and their respective socialnetworks. Movies that are new or popular will only be made available through subscription or pay-per-view, while older and less popular movies can be seen for free with advertisements. Voddler have deals to carry content from Noble Entertainment, Scanbox Entertainment, Non-Stop Entertainment, Film-Factory, Paramount Pictures and The Walt Disney Company, this includessubsidiary companies such as Touchstone Pictures and Miramax Films from Disney and alsoDreamworks Studios from Paramount. Voddler have also announced that they have also signed anagreement to carry content from Sony Pictures Television, including subsidiary companies of SonyPictures such as Screen Gems, Columbia Pictures Television, TriStar Television, Columbia TriStarTelevision, and Metro-Goldwyn-Mayer (MGM), as well as Warner Bros and New Line Cinema. Inaddition to Sandrew Metronome (a Scandinavian film distributor) that is one of the biggestdistributor companies in the Nordic countries, which is the market that Voddler is targeting first withexpansion to Norway, Denmark, and Finland. HBO is rumored to be launching a multiplatform TV service in the Nordic territories, placing itdirectly in competition with the likes of Voddler and LoveFilm as well as Netflix, which in August2012 announced it is launching service in the region.
HBO said it was launching a “multi-platformvideo distribution venture”, without clarifying exactly what that would be. It has already launchedonline catch-up service HBO Go in some central and eastern European territories, but not inwestern Europe.WALMART / VUDU: HIGH QUALITY RENTAL SERVICE Walmart bought Vudu in February 2010. Vudu originally sold set top boxes for their service, butlater moved to a pure service model. It does stream, but the focus is offering movies to rent for at$4-6 for 24 hours, similar to Amazon Instant Video and iTunes, just offers HDX. Standard Definition (SD) $3.99 High Definition (HD) For HDTVs: High-definition 720p picture $4.99 Full High Definition (HDX) For HDTVs: Best-quality 1080p picture $5:99 The Vudu Disk to Digital service involved bringing your physical discs to Walmart to prove thatyou own them, and the store will authorize access to a digital copy that you can view through thecompanys VUDU video-on-demand service, it is also authorized in your UltraViolet account whichis linked to the Vudu account. The cost is $2 to get an SD version of a DVD or an HD version of aBlu-ray disc; for $5, you can upgrade your DVD to an HD digital copy. Disc-to-Digital uses the newUltraViolet digital-locker system. Walmart links the digital copies to VUDU, which is accessiblethrough any Web browser and a wide range of TVs, Blu-ray players, and standalone streaming mediaproducts. The following studios are involved at present, Dreamworks, Fox, Paramount, Sony, Universaland Warner Bros. So not all content is covered. 222 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Vudu is a service targeting the Home Theatre HD crowd that care about quality, but to be frankit’s all limited by the connection speed on streaming. While for download 720p/1080i (TiVo) forAmazon and 720p/1080i/1080p Vudu. Netflix is streaming only.YOUTUBE / GOOGLE PLAY Youtube remains the one to watch, its building a portfolio on content including free and paid formovies. Pricing is similar to other digital media stores. What is more interesting is its $150 million experiment to seed dozens of new video "channels"on its Web service and see what works. So far, Google likes what it sees from the eight-montheffort. The company says it will put in another $200 million to market the channels as it attempts toupgrade its content from simple user-generated videos and to lure more viewers and advertising.Like Hulu and Netflix they are investing in the creation of original quality content. The site has launched nearly 100 new channels so far this year, attracting talent such as actorAmy Poehler to create or star in original episodes in an effort to draw new audiences—and blue-chipadvertisers. YouTube has secured commitments from advertisers to run more than $150 million ofads on the channels this year, according to a person with direct knowledge of the sales. Figure 113. YouTube’s Renaissance in part from its Channel Investment (source ComScore) 223 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 The Main problem remains the patchy nature of Android, it either works or it doesn’t, see Figure114. Personal experience is I can get Disney clips like Cinderella to show the kids, remain surprisedDisney hasn’t asked for it to be removed. The vast majority is content that is copyrighted butavailable to view. It’s great for the long tail content, but the UI and recommendation engine remainweak compared to Amazon and Netflix. Figure 114. Google Play Review (Source Google Play)COMPARING THE OPTIONS SIDE BY SIDE Figure 115 compares the options, with my perspective.  If you’re an Amazon prime customer, which is especially the case for families, then likely you are start there. Dip into Hulu Plus and possibly Netflix for a month at a time. If not an Amazon Prime customer then Netflix is likely the first stop, and if have teenagers that need to be current, then Hulu plus.  Apple zealot then iTunes and Netflix and Hulu Plus.  Vudu to those who use Netflix and Hulu Plus but not iTune / Amazon Instant Video. As well as to movie buffs who demand the best quality.  YouTube remains the one to watch, its making investments but still has to improve the overall experience for customers and decide on its strategy. Will be become like Apple with a complete Google TV proposition closely specifying the hardware its platform will run on, will it adopt an Android-like model, or will it try to become The Internet TV channel, with its own unique content and proposition and ride on as many devices as possible, e.g. Roku, TiVo, Boxee, games consoles, etc. Regardless, there are important advertising dollars and Google will win as TV consumption moves increasingly online. 224 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 I’ve also see a group of high consumption viewers work their way through Netflix and themmove onto Hulu and HBO Go. Note this group did not cut the cord, for them its about gorging onparticular content that appeals to them. News - internet, get BBC News on Roku, but after 1 minute play, watch on PC / Tablet in AM. Sports – MLBB.tv, NBA, NFL, NHL, Fight Night, all have OTT packages – but I’ve neverresearched extensively and most neighbors want the live big screen experience with no faff, and thisis where PayTV providers think they can retain majority of viewers, and to date it looks like that isthe case. But I am seeing some defections for those that have a narrow sports interest, e.g. Baseball,see Figure 116. Interestingly in August 2012 MLB.TV released usage data on their service,comparing 2011 and 2012 showing PC viewing fell by nearly half from 46% to 25%, with wireless(mobile) being responsible for most of that shift. So in the limit diversity will reign for the coming decade. Figure 115. Comparison of Over The Top TV Services Netflix Hulu Plus Amazon iTunes Walmart / Vudu Video on Demand and its High quality rental service, Store (purchase recent and your personal online The gold standard Video on Online catch-up TV Network content) given the broadest Store for renting and library of some for your Core Offer Demand service (in the US) (so it includes advertising) available catelog. purchasing movies DVDs/Blu-rays 6.58 per month for Prime, rental $2-5 (24 hours), Rental $2-5 (24 hours), purchase $1-$20 (show in a purchase $2-$20 (show in a Price 7.99 per month 7.99 per month series to a recent movie) series to a recent movie) $4-6 rental (24 hours) Only service for catching up Ad free lots of content, great on main TV shows, though not entry point into online TV Great for complete TV shows CBS and premium cable viewing if you are already an Strength series that are >1 year old. networks Amazon Prime customer. Slick integrated expeirence. Quality of Video (1080p) Expensive if want recent shows, Hulu Plus can be Apple only and no Just TV shows, limited movie cheaper and Netflix has a subscription service (partners Weakness No recent movies selection broader subscription library. with Netflix) Cost of content Available on >280 devices Xbox, PS3, Roku, and of Xbox, PS3, Roku, and of Availability with a slick UI course PC >400 devices Apple only course PC Library 50k+ 10k+ 62k total / 5K free in prime 12k+ 10k+ YouTube HBOGo LOVEFiLM Voddler European Netflix (focus on Core Offer Store and long tail video Catch-upTV & HBO catalog movies) Nordic Vudu Must subsribe to payTV ($50) 4.99 GBP per month for Free for long tail, Rental $3-5 and HBO channel ($17) per streaming only, offers Price purchase $20 month DVD/blu-ray rentals as well. $3-$5 Rental Complete HBO catalog, source of quality (BBC-like) content DVDs and Blu-rays in addition Strong Nordic market Strength Lots of stuff, live streams in the US to streaming position. Pay extra from some content, A show such as Weeds, which is available in the Netflix package, will cost you £1.89 per episode on Lovefilm, on User Interface is not as Can not cut the cord with this top of your package. Advertising, limited on-TV Weakness elegant option options PC/Mac, iOS, Android, Lumia Mainly Android devices and and MeeGo. No games Availability Google TV Limited device availabiltiy 100+ devices consoles or TVs. Millions but mostly crap on the long tail, store has 10k+ Library video items Complete HBO catalog 10k+ 8k+ (across all langugaes) 225 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 116. Example OTT MLB.TV Offer (source MLB.tv) Figure 117. MLB.TV Usage by Platform 2011 and 2012 226 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 REVIEWING THE OPTIONS: HARDWAREAPPLE TV: STEP TOO FAR INTO THE APPLE CHASM FOR ME Apple TV is the most popular dedicated device with about 5 million units sold by Q3 2012 at$100 and supports 1080p. It’s a great device for those that have iPads and Macs. I supports Netflix,Hulu, YouTube (thanks for Airplay), and of course iTunes. However there is no Amazon App. Enables home movies and photos to be shown on TV. Airplay which is Apples streamingservice is easy to set up and allows content to be streamed from Apple to devices to the Apple TV. If you’re an Apple household then Apple TV is for you. If you’re not then some of the otheroptions may be more appealing.BOXEE: ROLLS ROYCE SOLUTION, PERHAPS A LITTLE TOO GEEKY (AT THE MOMENT) The Boxee box is the most expensive dedicated device in the list at $180, the consoles aremultipurpose. But it provides the most functionality, full web browser, so you can watch onlineshows on the TV. Facebook integration for those that like to share what they are watching. This appeals to the geeks, it enabled tech-savvy users to have full control over their content andwatch is on their terms, about 200k units have been sold. Boxee app for the iPad provides airplayfunctionality. The main problem in no Hulu Plus or Amazon instant video. Personally I think Boxee could provide a perfect complement to the Google TV line-up, with itsfocus on openness, and would help lift this device into the millions of devices given the stability ofGoogle’s brand.CONSOLES, SONY PS3 AND XBOX: BECAUSE THEY ARE THERE PS3 / Xbox are fine devices, its just fan noise on my PS3. And Xbox requires live goldsubscription from $5 per month. Wii – over that fad so not really tried (quality is limited to SD).Preference is a dedicated device like Roku, experience is simpleGOOGLE TV: ONE TO WATCH TV optimized version of Android. Struggled at launch in 2010 as the pricing was wrong. Comeswith Netflix, Amazon, YouTube, and a full web browser. Lots of apps, but nothing blockbuster.Hulu blocked. Google TVs are expensive $1700 - $2300. I still prefer to get a good quality TV as adisplay device as I will likely keep it for 10+ years, while the connected devices will change every 3-5years. Nexus Q (Google TV device like Boxee) will be on the market in Q4 2012. Today we have Apple TV, Boxee, Roku, and a slew of so-called "Smart TVs" with apps andstreaming services built in. So with all the competition out there, Google has a tough uphill battle inbuilding its streaming business with the Nexus Q, especially considering that it already has GoogleTV. 227 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 The Nexus Q is a $299 spherical gadget that hooks up to your TV and streams music or videofrom the Google Play online store. Theres no interface like you get on the Apple TV or Google TV.Instead, you control everything from an app on your Android phone or tablet. Unlike ApplesAirplay, content doesnt stream to your TV from your device, but directly from Googles servers.Your droid is just the controller. With the Nexus Q, the user experience is more about what you cant do than what you can. Forexample, you cant: stream music from other services like Spotify or Rdio; or play videos on yourAndroid device that come from outside the Google Play store; or stream video from third-partyvideo services like Netflix, Hulu, or HBO GO; or play your own music files unless you upload themto Google Music first. For a device that costs about three times as much as the competition underperforms in manycategories. Unless all your digital content comes from Google Play, the Nexus Q is next to useless.And chances are you dont have much content from Google since the Play store only recently addeda broader selection of music, movies, and TV shows. When you want to play a video on the Nexus Q, you have to get it started on your Androiddevice first. Then you tap a "Play" icon in the top right corner to tell Google to send the video toyour Nexus Q. It takes forever. I often had to wait up to 30 seconds for a video to finally appear onmy TV. Music was a bit faster, but overall its nowhere as seamless as Apples AirPlay.PC: Used before we have the iPad and Kindle Fire, now very rare. Boxee does virtually all you cando with a PC, just in cheaper and easier form factor. Struggle to see why not use Boxee apart fromalso is their hardcore gaming machine as well.ROKU: SWEET CHEAP LITTLE DEVICE Roku devices are small and come in the price range $50 (LT)-$100 (XS), the top end Roku device(XS) includes being able to play the game angry birds on your TV, which I remains perplexed as towhy anyone would, but it is the most popular of the devices on Amazon.com so it’s clear lots ofpeople at least want to at the time of purchase. About 3 million devices have been sold by Q3 2012,putting it in second place to Apple TV. Roku has the easiest to use interface and includes access to Netflix, Hulu, Amazon, HBO Go aswell as countless other channels in the Channel Store and private channels, such as France24 andBBC World news which a quick search on the internet can show you how to enable for your device. But no YouTube and No web browser. And it’s not for playing your home movies and photoson the TV.SMART TVS Recommendation is keep the display high quality and dumb. Put the smarts outside as thatsmart TV could look quite dumb in 5 years’ time. 228 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 LG Comes with MediaLink to stream from your PC to the TV. Built in browser support, noHTML5 or Flash (so browser will be out of data very soon). Launch Google TV device in 2012.Google TV remote includes key board, see Figure 118. But if you have a tablet it’s easier, especiallyfor those over 40 whose eyes are starting to struggle with quickly focusing between near and fardistances. Figure 118. Google TV Remote (source LG) Panasonic Viera Connect is their platform which supports Netflix, Hulu, Amazon, etc. Samsung Increasingly owning the experience and deliver a range of its own applications. Also has Googleand Yahoo TVs – sees it simply as a customer preference. Yahoo TV Implemented on Samsung, Sony and Vizio TVs. I see TV manufacturers increasingly takingcontrol of the experience as Yahoo’s strategy in the space remains unclear.TABLETS Android Tablets: Some Good Some Bad The Nexus 7 has set the standard for 7 inch tablets at $200. Samsung Galaxy Tab range haveproven popular ($250-$400) and are adequate video consumption devices. But with tablets the wholeproposition is more important than simply the device. 229 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Apple iPad: The Gold Standard Expensive ($500-$830). We waited for the iPad 2 as we wanted video comms with the tablet. Itis primary video comms device for the family. Next for gaming. Finally for watching video. Kindle Fire: Great Video Experience, Great Android App Recommendations Cheap ($199) tablet with easy video consumption and great Android app recommendations.And you can access all your Amazon cloud services including your books. No videocommunications. The new Google tablet the Nexus 7 beats the Kindle Fire in performance, but theintegrated content experience keeps us locked in. Nook: Really for Books. Really for books and magazine. COMPARING THE OPTIONS Figure 119and Figure 120 provide a great comparison of the options available. Source TheVerge: http://www.theverge.com/2012/5/17/2997361/buying-set-top-box-buying-guide (May2012)Figure 119. Comparing Internet TV Service Coverage for Some of the Devices (Source The Verge) 230 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 120. Comparison Table of Internet TV Devices and Service Coverage (source The Verge) AND FINALLY THE LAUNCH AND INITIAL EXPERIENCES When we made the decision to cut the payTV cord Verizon was charging $171 per month. Wemoved to Comcast for an internet-only access price of $50 per month with no contract. The nearestVerizon would come was $85 at a similar downstream rate, but higher upstream rate. The Comcastservice includes two one-time fees a $35 set-up and the cost of a DOCSIS 3 modem $50. So overthe next 6 months the total Comcast cost will be $385 + Netflix, while to stay with the bundle wewould be playing $1026. This gives a total annual saving of $545 in the first 6 months, being on nocontract we will likely look again at what offers are available. We have experimented with Amazon Prime Instant Video ($6.58), Netflix ($7.99), Vudu, iTunes,and the Sony Store. Overall the experience is one where there is always something to watch. NetflixInstant Queue continues to have a long list of interesting movies and shows. The quality of our TVviewing time in the evening is much higher. The children are not exposed to TV adverts whilewatching their programs. It is to be seen if we tire of Netflix, but at present it has become areprimary viewing service. We watch roughly 180 shows per month (kiddies shows make up a big % ofthat number) across the family for $14.57, 8c per show. 231 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 LOOKING INTO THE LONG TERM ON INTERNET TV The primary challenge is it’s just not that easy to adopt Internet TV. There are complexoverlapping services. There are lots of devices, some of which still feel as if they are targeting geeksnot the mass market. Every viewing household is different, this is a critical point, it’s a household’sdecision, so with any group decision, indecision remains the likely outcome. There is also the risk of your ISP (Internet Service Provider) may introduce a cap. Comcast hasa 250GB monthly cap which it is not currently enforcing, but what will happen when it does? Willthe end of the month become no-video days? Will another month’s charge be taken, and then theregular monthly charge applied a few days later; as AT&T does on its mobile data plans. Thisuncertainty limits viewers’ willingness to adopt internet TV. The Free To Air service is not available for all households in the US, my personal experience iswe are only 25 miles away from the transmitter in New York city and cannot receive the service.Cutting the payTV cord for some means going to just internet TV; though payTV providers do offera package with just the broadcast channels for $20 to $25 per month, including digital STB rental. People’s viewing habits vary widely, the convergence on the internet and consumer electronicsenables these diverse habits to be well served. So payTV providers need only adapt their bundles tobetter support a greater diversity of use cases to limit the attractiveness of cutting the payTV cord. No internet TV offer is complete, Netflix and Hulu combined are the closest, but as discussed inthe OTT chapter the future of Hulu remains unclear. For the time being it provides a catch-up TVservice for those wishing to cut the cord. But it could revert to TV Everywhere service for existingpayTV customers. Or the Studios could go their own way, with each studio offering their content, asit the case in the UK and many other countries. OTT will remain niche as a primary viewing option. The multi-channel offer is simple for sportsfans, for lean-back viewers, and for high volume viewers. It’s priced so that it’s at the upper end ofwhat most viewers are prepared to pay, but not so much as to motivate action. The Studios realizethis and want payTV operators to get smarter with the packaging and bundles to squeeze additionalcash out of those prepared to pay, and offer innovative sponsorship options to win additionaladvertising and sponsorship dollars. Our experience of cutting the cord to date is it has improved the quality of our life; a couple ofanalogies Id use are:  Its like when you finally realize that eating a little less and exercising a little more (watching only what you want when you want) makes you feel a whole lot better (gives you more time in the day and leaves you feeling better entertained).  PayTV makes us pay for the buffet before we can get to the choice cuts, e.g. HBO. OTT enables us to go straight to the choice cuts, though from the previous sitting (here the analogy breaks down a little as the entertainment value of a show does not go off, and gorging through a whole season of a TV show is just so much better an entertainment experience than the weekly drip feed). 232 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 One aspect my wife is guilty of is with old shows it’s easy to see the synopsis of the series online,essentially jumping to reading the last page of a book once you’ve gone a few chapters into the bookto see what happens. This can potentially degrade the entertainment value, but all it takes is a littleself-discipline. Most of the cord cutters I know tend to be time poor with more a philosophical dispute at beingasked to pay for the buffet and extra for the choice cuts, when all they want is the choice cuts. Iobject to paying for ESPN, comparing to taxes is incorrect, that’s the government and we live in ademocratic society – you have no choice. But in the free market we have a choice on where wespend our money, and payTV providers will need to respond to this to limit the impact and riskinternet TV poses to their business. The TV ecosystem is a unique market; it’s hard to draw analogies to other industries in history.But the dual forces of technology development and customer empowerment will continue to changethe industry. Some future scenarios, which I can guarantee with all predictions, are wrong:  Google buys Hulu and becomes a network for catch-up and original content allowing artists, creators and producers to sell direct and make good business, not wait for a studio to sign them. Or Google buys Netflix, adopts their recommendation engine and becomes the dominant source of video on demand globally across paid for and free content.  The Studio system moves to a more open web-model, less conglomerates, richer more dynamic content, and production companies become like start-ups where anyone can fund them, not just the established conglomerates. Current content slips from their control, so they hike up prices on the back-catalog they own. Social networks, recommendation engines, etc. flatten the barriers that existed between production and consumption, weakening the distribution companies of the content owners.  Gone are the days where good shows are cancelled because they were scheduled against a competing channel’s blockbuster, or a good show gets its slot shifted through a season and never builds an audience, e.g. Firefly and American Gothic. Good can be measured over a more considered period of time and targeted to the right consumers.  The TV experience focuses on the individual consumer, rather than broadcast. For example, I detest reality TV shows, they are formulaic and as a result incredible boring. I will never be subjected to a recommendation or advertisement for such a show once the trusted broker knows of my dislike for such shows.  Sports leagues focus on D2C (Direct to Consumer) for their premium service as it delivers on a global customer base and can be structured to squeeze out the maximum revenue possible from each customer.  Stores add levels of subscription pricing in reaction to customer demand, e.g. iTunes adds subscription options, and the more you pay the closer to shows broadcast date you can watch.  Content prices rise dramatically as content producers demand ever higher compensation; advertising dwindles as customers prefer uninterrupted content over interrupted content driving up TV network fees. PayTV reaches a breaking-point where self-selection 233 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 becomes the only way to manage the cost spiral and keep customers, so Netflix-like service becomes a base tier in the self-selection world of payTV.  The window between theatrical and VoD release shortens to the point a maximizing margin, which for some films will be simultaneously as we see with the OTT provider Film4oD.  Product placement goes everywhere and interactive on the second screen of the tablet. Opening up new sponsorship and advertising revenues, which bypass payTV operators has they cannot deliver a coordinated interactive service to the content owners unlike Android and Apple.  HBO Go becomes a stick to beat the PayTV providers on rates and a way to maintain keep people buying HBO through their payTV provider. No payTV provider can afford not to have HBO in their offer.  We pass Peak TV, investment in shows drops, quality drops, viral campaigns and marketing spin dominate, advertising increases and becomes more intrusive, TV viewership (audience and hours) drops as people go elsewhere to games, social networks, reading, hobbies, shopping, exercise, talking, enjoying life rather than passively sitting there watching yet another reality TV show.  The Social TV fad fades, it becomes part of their recommendation engine, people just want to watch a show or movie and not get interrupted by someone’s opinion on what they are watching, but they do care about those opinions in make the selection. Video within social networks continues to grow, but it remains snack-size. The list of future scenarios goes on; it will be an exciting time for the TV ecosystem. Othercountries are going to be very different to the US depending on penetration of adequate broadband,regulation, availability of national content rights, availability of FTA and FreeSat, penetration ofpayTV, content consumption patterns, and the role of national content champions like the BBC.Examining the UK it will likely be a head-to-head fight between Netflix and Amazon (LOVEFiLM)for OTT, with Sky also offering a compelling TV Everywhere offer for its existing customers and aniche of pure internet customers, the BBC and other broadcasters will continue to deliver catch-upTV over the Internet for their content libraries, and the Smart TV or internet TV device will manageits presentation. US generated content remains important in most open markets. Netflix and Amazon have ahome advantage they can take into other markets through scale, technology, recommendation engine,and UI (User Interface). Telecom Italia’s CuboVision demonstrates people do want access topopular US content. Most other markets are unlikely to see the obsession on payTV cord cuttingdiscussed in the North American market. Rather a multi-platform consumption model will existacross payTV and internet TV as a secondary platform to enable the studios to maximizeinternational revenues which have generally underperformed compared to North American market. 234 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 V I E W E R S U RV E Y The Survey presented here is from 241 payTV viewers in North America and Western Europe,across a range of geo-demographic profiles. They were approached via a consumer brand that sells arange of goods and services both in physical stores as well as online. The results presented here are asubset permitted by the brand to be shared; viewers were interviewed over the phone, or completedan online survey during May 2012, with follow-up questions in June 2012. INTERVIEWEES Figure 121 shows the geographic distribution of the interviewees, WE – Western Europe andNAR – North America Region (US and Canada). Figure 122 shows the household status of theinterviewees, they also came from a broad distribution of income range, but that information is notavailable. The interviewees were selected to give as representative as possible sample of the payTVviewing population across Western Europe and North America. Figure 121. Geographic Distribution of Interviewees source Alan Quayle Business and Service Development WE, 112 NAR, 129 235 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 122. Household Status on Interviewees source Alan Quayle Business and Service Development RESULTSWHAT IS YOUR VIEW OF INTERNET TV SERVICES LIKE NETFLIX, HULU, LOVEFILM ? This question focused on awareness of Internet TV, and asked directly their view on whetherinternet TV is a replacement or complementary to existing payTV services. Figure 123 shows theresults for this question, generally Internet TV is perceived as a complement to existing payTV, not areplacement. This backs up the payTV providers position that OTT is not a significant threat, andonly a niche (17% / 15% NAR / WE) even consider it as a replacement to existing payTV. Thoughthere remains a significant minority who currently have no view or are not interested (28% / 34%NAR / WE). 236 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 123. What is your view of internet TV services like Netflix, Hulu, LOVEFiLM? source Alan Quayle Business and Service DevelopmentARE YOU CONSIDERING MOVING FROM YOUR CURRENT PAYTV PROVIDER TOINTERNETTV? Rather than awareness of internet TV this question focuses on whether viewers are consideringmigrating to internet TV. There is a significant gap between thinking and doing, but the resultsshown in Figure 124 clearly show only a niche of viewers are considering such a move (7% / 5%NAR / WE). Though it was interesting that in Western Europe the niche is not that far behind theUS figure, even though the internet TV options are not as rich in some European markets. Clearlythe majority of viewers are not looking to move from payTV to InternetTV (69% / 75% NAR /WE). Some of the reasons given for the resistance to cutting the payTV cord are:  Sports content, especially live sports content;  Internet TV content is old for subscription services, and expensive for new content (bought / rented through online store);  Difficulty in getting the whole family on board with the idea;  DSL broadband barely supports BBC iPlayer, so viewers are not convinced it can support a replacement for payTV; and  Complexity, confusion, general suspicion on the readiness of Internet TV. 237 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 124. Are you considering moving from your current payTV provider to Internet TV? source Alan Quayle Business and Service DevelopmentWHAT IS YOUR VIEW OF YOUR CURRENT PAYTV BILL? NAR appears to be less happy on the size of their payTV bill, which is not surprising given it canbe up to 3 times the size of the bill in Western Europe, particularly compared to France. Roughly50% / 40% (NAR / WE) consider the payTV bill high or too much and are considering action.Again the gap between thinking and doing remains large. Only a niche of 12% / 10% (NAR / WE)consider it great value. Even though much is made in the press on the frustration of customers withtheir cable or satellite bills, it’s interesting to see that it is not the general case. Figure 125. What is your view of your current payTV bill? source Alan Quayle Business and Service Development 238 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012HAVE YOU HEARD OF TV EVERYWHERE / MULTI-SCREEN TV / TV APP (E.G. PAYTV ONYOUR PHONE / IPAD)? This question focused on awareness of TV Everywhere / Multi-Screen TV, see results in Figure126. Naturally NAR has higher awareness (65%), while in WE it’s roughly equal between those thathave heard of TV Everywhere and those that have not (44% / 46% Yes / No). Figure 126. Have you heard of TV Everywhere / Multi-Screen TV (e.g. payTV on your phone / iPad)? Source Alan Quayle Business and Service DevelopmentIF YOU HAVE USED TV EVERYWHERE / MULTI-SCREEN TV WHAT WAS YOUR EXPERIENCE? For those customers that had used TV Everywhere, just over one quarter enjoyed theirexperience, see results in Figure 127. The rest had problems with the service, were confused by theservice or found it incomplete, e.g. only worked in the home though they thought it was TVEverywhere, or the range of content / channels was small compared to their subscribed package, orthe tablet app did not allow streaming. There is a long list of sources of frustration from customersin their initial experiences with TV Everywhere. Many operators came to market with a partial offer as a knee-jerk reaction to the OTT threat.It’s clear such an approach did not do them any favors in building a loyal customer base to such aservice. And the push on TVE has lessened as operators better understand the limitations of theOTT threat. So in market partial offers remain. One highlight in this was DISH with their TVEverywhere service, that did get complementary ratings, though it does require the purchase of theSlingmedia unit and is limited by the internet connectivity between the customers STB and theirdevice. 239 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 127. If you have used TV Everywhere / Multi-Screen TV what was your experience? Source Alan Quayle Business and Service DevelopmentWHAT DO YOU EXPECT FROM A TV EVERYWHERE / MULTI-SCREEN TV SERVICE A follow-on question from their experiences on TV Everywhere was what do they expect, seeresults in Figure 128. Working outside the home, provides the same service as they’re currentlypaying, and the data used is included in the plan; if it is a paid for service, it if it free then they wouldnot expect the data to be included. NAR and WE were quite similar in their responses. Interestinglycustomers do not expect it to all on all capable devices, a subset appears to be expected. In furtherquestioning customers saw the fragmented and complex nature of devices means it’s more likely towork on Apple / Android and possible smart TVs but they do not expect it to work there. Figure 128. What do you expect from a TV Everywhere / Multi-Screen TV service 240 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012WHAT IS YOUR VIEW OF YOUR PAYTV PROVIDERS ONDEMAND SERVICE? And the final question focused on the impact of internet TV on customers’ perceptions of whata PayTV providers on demand service should be, compare Figure 129 and Figure 130. ClearlyInternet TV is shaping customers’ expectations on user experience, available content andsubscription based models not PPV. A challenge is customers are expecting on demand to be available as part of the package. Thisrequires careful balance, there needs to be a free tier, and then perhaps a subscription level similar toNeflix but at a discount, and then the PPV (recent blockbuster movies or TV series). DISH is doingsomething interesting in storing the last 8 days of prime-time TV shows, Hulu like service for ‘free.’ User interface was criticized especially those that have Roku or Apple TV experiences.Challenge of the data plan, why seen Sky in UK offer triple play including BB to get around thisissue. Figure 129. What is your view of your PayTV provider’s on-demand service? (Used Internet TV) source Alan Quayle Business and Service Development 241 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012Figure 130. What is your view of your PayTV providers on-demand service? (Not used Internet TV) source Alan Quayle Business and Service Development KEY POINTS FROM THE VIEWER SURVEY From the Viewers’ perspective OTT is only of interest to a niche of the market in the short tomedium term; it is generally considered complementary to existing payTV services, with only 17% /15% (NAR / WE) of viewers considering it as a replacement to existing payTV. And this falls to 7%/ 5% (NAR / WE) when viewers are asked if they are considering moving from their current payTVservice to Internet TV. Some of the reasons given for the resistance to cutting the payTV cord are:  Sports content, especially live sports content;  Internet TV content is old for subscription services, and expensive for new content (bought / rented through an online store);  Difficulty in getting the whole family onboard with the idea;  DSL broadband barely supports BBC iPlayer, so viewers are not convinced it can support a replacement for payTV; and  Complexity, confusion, general suspicion on the readiness of Internet TV. 242 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 However Internet TV is setting viewers’ expectations on what on-demand and catch-up TVservices should include and how they should be priced. A challenge is customers are expecting ondemand to be available as part of the payTV package. This requires careful balance, there needs tobe a free tier, and then perhaps a subscription level similar to Netflix but at a discount, and then thePPV (Pay Per View of recent blockbuster movies or TV series). DISH is doing somethinginteresting in storing the last 8 days of prime-time TV shows, Hulu like service for ‘free.’ User interface was criticized especially those that have Roku or Apple TV experiences. There isthe challenge of the internet data plan, hence why we’ve seen Sky in UK offer triple play includingbroadband to get around this issue. On Viewers feelings about their current PayTV bill roughly 50%/ 40% (NAR / WE) consider the payTV bill high or too much and are considering action. On awareness of TV Everywhere / Multi-Screen TV, NAR has higher awareness (65%), while inWE it’s roughly equal between those that have heard of TV Everywhere and those that have not(44% / 46% Yes / No). For those customers that had used TV Everywhere, just over one quarterenjoyed their experience. The rest had problems with the service, were confused by the service orfound it incomplete, e.g. only worked in the home though they thought it was TV Everywhere, or therange of content / channels was small compared to their subscribed package, or the tablet app didnot allow streaming. There is a long list of sources of frustration from customers in their initialexperiences with TV Everywhere. In the second phase of TVE, we need to get it right, else payTVoperators continue to leave the door open to the OTT providers to dominate secondary viewingmaking the step to cutting the cord very rapid and painful for the operator, as well as capping newrevenues. 243 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 R E C OM M E N DA T I ON S RECOMMENDATIONS FOR PAYTV PROVIDERS Regardless of access technology hybrid TV has become a core part of most payTV providers’strategy, as predicted in the previous version of this report. For Satellite and Cable TV providers thefocus is in supporting on demand, interactive services, and even TV everywhere for STB recordedcontent. However, as discussed earlier, the interactive services are increasingly going to the 2ndscreen (PC, tablet or smartphone) given the fragmented mess across payTV STB and failed industryinitiatives such as Canoe Ventures. For IPTV (DSL) providers the drive for Hybrid TV is much broader in meet a range of networklimitations and customer expectations on the base payTV experience. VDSL and more recent FTTHpayTV networks have focused generally focused on pure IPTV STB. Though hybrid TV hasbecome main-stream, it must now be viewed as part of an integrated solution in delivering anenhanced viewer experience. PayTV providers’ strength today comes from their network and customer relationship. Both areunder attack from the internet removing the barrier of the TV network and consumer electronicsbuilding new relationships in TV viewing. However, the hours customers spend watching TV overtheir networks and an established and sophisticated business model will prove resilient in themedium term. The skill comes in ensuring they remain the content owner’s best path to cash fromthe customer. Hence ensuring continued high levels of consumption (viewing times), and leveragingtheir network-related assets and services to maintain an edge. It will increasingly involveunderstanding the customer and delivering a more personalized experience, than operating thenetwork. Examining Netflix, its large content library and strong value proposition are important, butit’s the recommendation engine that ensures the customer always has a quality experience wheneverthey sit down to watch TV that’s the clincher in acquiring customers. Initial TV Everywhere offerings were a misstep, payTV operators must listen to viewers’expectations on content and features, if they cannot match them then consider partnering with aprovider that can, rather than deliver offers that frustrate and degrade the viewers’ opinion of thepayTV providers ability to offer internet TV services. Studios are keen to work with payTV providers in exploring new business models such as:  Get smarter with the packaging and bundles to squeeze additional cash out of those customer segments prepared to pay; and  Offering innovative interactive services to win additional advertising and sponsorship dollars. The latent threat is by 2017 67% US and 50% WE (Western European) viewers could be usingOTT TV for secondary viewing. This caps on-demand and potential TVE revenues for payTVoperators; as well as deploying platforms that could deliver interactive experiences, and newsponsorship and advertising opportunities that payTV providers will struggle to match because oftheir fragmented networks and legacy STBs. An issue highlighted in both the hybrid TV deployment examples and the country specificanalysis is scale is becoming critical to payTV operators. They need scale, ideally global scale, for 244 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012negotiating content rights by having a large audience; scale for efficient operations, e.g. networkoperations centers that cover multiple countries, negotiating with vendors; scale for adequatemarketing; and scale to simply compete with the global scale of the OTT TV providers. PayTVproviders will need to consolidate both within country (e.g. cable operators) and multi-nationally(across all payTV operators) to compete. Like the telecoms industry, payTV standards are both a strength and a weakness to the industry.Given the rate of innovation today, standards are increasingly becoming an impediment tocompetitive performance as they delay payTV operator action and focus the industry on technicalissues not core business and user experience issues. PayTV operators have implemented a plethoraof interactive standards over the years. Also in exposing those capabilities they have done so as asilo, e.g. AT&T U-verse offers APIs that only work for its customers. Interactive services and advertising revenues are at risk from the Android / Apple ecosystemmigrating onto the TV. Developers of 2nd screen experiences are focused on delivering slickexperiences on these platforms 2nd screens (tablets and smartphones). The payTV network is a riskof being bypassed for interactive services as Internet TV devices (Roku, Apple TV, Google TV,Boxee, etc.) offer easy to use APIs focused on simply making the experience better for their users.The failure of Canoe Ventures demonstrates as an industry we need to look at alternative ways toremain relevant, there is no clear answer; rather the industry should experiment with a number ofoptions as discussed in this weblog article, http://www.alanquayle.com/blog/2012/03/what-the-mobile-industry-can-l.html. The user interface is critical. Customers can spend $50 on a Roku device and experience a muchslicker and engaging experience than current STB provided by the payTV provider and generallyrented at $5 to $10 per month, which over a 2 year contact costs them 2.4 to 4.8 times the price.PayTV providers must focus on delivering leading experiences, not continue the traditional densegrid of information. In reviewing the principles of greater consumption and how the PayTV providers candifferentiate:  Recommendations  From sophisticated algorithms, to simple things such as top rated, “last night’s TV,” or “what’s new” given the bounded problem PayTV operators should be able to match Amazon’s engine.  Package up-sell, essential it’s related to viewing habits. Local content matters, payTV operators have the edge of their subscription-based business model (e.g. Sky UK winning the Premier League rights.)  Search integrated into the EPG and available across PC, tablet, mobile and STB  PC and tablet are the best search tool for programmatic content, discover on the PC and view wherever (TV Everywhere.)  Integrated security and content protection across the network and devices to keep customers safe as their service becomes interactive. 245 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 For the payTV provider focusing upon the user is going to be critical to remain relevant in theemerging TV landscape, as in the limit it’s the customer that’s going to decide. RECOMMENDATIONS FOR SUPPLIERS Hybrid support should be a core capability of all TV solutions, across the backend systems, STBsand middleware. Solution providers should look to the broadcast industry as potential customers especiallySatellite TV and Terrestrial TV providers. The traditionally siloed payTV industry can no longerafford such fragmentation, scale it critical to survival and integrating innovation. Standardization is a tough issue, HbbTV will dominate, but it’s unclear such a global standardwill be enough. Speed of action and learning what matters to the customer are more important todaythan some specification decided by engineers in a room. What this means is suppliers need to bemore flexible, adopt web-principles, use open source, match and better web experiences, elseviewers’ attention will increasingly move to Internet TV and its consumer electronics suppliers.Netflix on average already has 1 hour per day viewing from its customers, which has been taken frompayTV viewing time. Integrated security and content protection across the network and devices to protect customersas their devices come online. Though not a significant threat today, it will increase, as we seeAndroid devices being increasingly affected by security issues. Suppliers must aim to be the strategic partners of the payTV providers, supporting them withnew services and user experience innovations with a far leaner model, enabling them to remainrelevant to their customers. Else there is a long-term risk of the consumer electronics suppliers andthe “build-in yourself” model of internet service providers replacing traditional vendors. Overall suppliers need to respond to the following three themes from payTV operators:  Hardware independent solutions to avoid the same vendor for STB and middleware, with the objective of lowering cost and accelerating innovation, e.g. Comcast’s RDK (Reference Design Kit).  Software (middleware) independent user interfaces based on HTML 5  Software independent applications innovation, i.e. STB applications are not middleware dependent. RECOMMENDATION FOR APPLICATION DEVELOPERS CE-HTML appears to be the one to focus on as a developer, BUT it’s a fragmented mess withoperators and equipment providers creating their own platforms with differing APIs, content rules,little understanding of developers, and little customer education to build an engaged customer base. 246 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 PayTV Operators need solve the above problems. Until that is done, focus on the 600Mengaged customers in the iOS and Android ecosystems with second screen experiences, as there arelots of content owners wanting to develop applications for current and legacy content. RECOMMENDATIONS FOR INVESTORS There will be further STB consolidation as scale becomes critical in supporting all TV deliveryplatforms, creating opportunities for M&A. This is true across both tradition and internet focusedSTB suppliers, e.g. Boxee could complement several traditional STB suppliers’ portfolios both from aplatform and technology component perspective. The middleware on the STB and in the network will be a critical battle ground as morefunctionality is added such as on-demand, recommendations, TV Everywhere, UI innovations, tabletand smartphone application support and integration, etc. There are many small middlewarecompanies, e.g. Espial, creating M&A opportunities. 2nd screen applications, on tablets and smartphones, will dominate interactive TV in the shortand medium term. Companies focused on this space will also become acquisition targets for theintegrated payTV solution providers. OTT TV will be the dominant secondary platform for viewing TV creating opportunities forinnovative interactive service, technology innovations, and business models. Innovations will bemore readily supported in the more open internet TV ecosystem than in the traditional payTVecosystem. The TV ecosystem is well-established with significant regulatory involvement. Innovations thatrock that ecosystem are high risk and likely to suffer from the traditional anti-bodies that stifleinnovation in established businesses. Rather companies focused within the Internet TV ecosystemwill have more room to grow and innovate without the dependence of payTV operator / supplier co-operation. A FINAL NOTE The challenge the payTV industry faces is its strength is also its greatest weakness, a profitablewell-established ecosystem that is resistance to change and hence innovation; the InnovatorsDilemma. The threat from the web-based service providers is latent; over the study period of thisreport OTT TV will become the dominant secondary viewing platform in many markets; 67% ofpayTV households in the US, and likely 50% of Western European households by 2017. It will onlybecome a primary viewing platform for a niche of viewers, with subscription revenues dominating;the situation will financially appear OK. The main threat for the period of study is capping ofinteractive TV revenues, new advertising revenues and losing control of the emergent TVapplications business; which will remain relatively small, perhaps reaching 8-14% of existingsubscription and advertising revenues by 2017. 247 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 But by 2017 payTV providers in North America and Western Europe will find themselves in aprecarious situation. OTT TV will be capturing the hearts and minds not only of viewers, but ofadvertisers, and in time content owners. So that without adequate response from the payTVindustry, the constant well-funded innovation from the OTT TV providers could finally find theright recipe to attract the bulk of the ecosystem so that core subscription revenues could be halvedwithin a little as 5 years of that recipe being found. But this tipping point is difficult to predict, andmay not happen if payTV operators take adequate action. There is much to learn from the struggles both the mobile and fixed telecom industries havefaced over the past two decades in competing with web-based service providers. They tried andfailed to create application ecosystems, proving unable to open their networks and business modelson terms that make sense for all ecosystem members, they were too self-focused. They have let theuser experience become dominated by over the top providers that are substituting revenues, e.g.Apple’s iMessage is substituting highly profitable SMS revenues. Android phones make is as easy touse OTT services as operators’ services for voice and messaging. PayTV providers and their suppliers must:  Innovate with other ecosystems. TVE must be more than simply delivering TV to other screens. TVE must explore other business models in co-operation with the content providers, advertisers and other ecosystems. Getting smarter with the packaging and bundles to squeeze additional cash out of those customer segments prepared to pay; offering innovative interactive services to win additional advertising and sponsorship dollars; and an eBay model in TV content, i.e. bringing content buyers and sellers together and taking a cut of the transaction.  Focus on customer experience. That’s so much more than the TV interface; it’s across every touch-point with the customer. Do not repeat the mistakes of partial service launches that plagued TV Everywhere, it makes payTV operators appear out of touch and incapable of matching the performance of Netflix, Amazon, Apple, Google, etc. Dish Network is doing some great service innovation, but its basic customer service is letting it down, it’s across the whole customer experience. Segmentation is critical, different customers have difference needs, and operators must understand their customers to survive in the long term.  Find a way of acting together with agility. There needs to be some down-side to selfish service provider behavior that invariably kills industry initiatives such as Canoe Ventures and WAC (Wholesale Application Community). Put simply financial markets need to penalize operators for failing to act together in competing with the latent threat from OTT TV.  Consolidate both nationally (cable franchises) and multi-nationally (across all payTV operators) as the OTT TV will bring its global scale to achieve advantages in content rights, cost of operations, vendor negotiations, and marketing power. The current fragmented mess of payTV operators must in the long term either consolidate else wither and die. From the timings discussed in this report, e.g. payTV remaining a niche phenomenon, it wouldappear we have time; but 5 years is but a blink of an eye for payTV providers and their suppliers tofundamentally change their business to focusing on the diversity of customers rather than operatingtheir single network. 248 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 A P P E N D I X 1 . G E OG R A P H I C M A R K E T DA TA This appendix provides a summary of TV households’ primary viewing platform trends from2008 to 2017 for interesting markets around the world. Providing a deeper dive into the regionalnumbers that were used to make up the global market numbers presented in the main section of thereport. The markets reviewed include: Australia, Brazil, Canada, China, France, Germany, India,Italy, Japan, Mexico, Russia, Singapore, South Africa, Sweden, Turkey, United Kingdom and theUSA. The data was collected from interviews with the main TV providers in the markets, gatheringtheir opinions on the trends impacting the market and their subscriber projections. As you wouldimagine, aggregating the household number projections across all service providers in a country oftenresults in more households than exist in that country. So regulator and supplier interviews wereessential to normalize the numbers both for 2011/2012 as well as the projections through to 2017. Data was gathered for more countries than is presented here, the rational for presenting thesecountries is they either present a good regional case study, e.g. Turkey for the Middle East, or there isstrong confidence on the country’s data and analysis. AUSTRALIA: DTT DONE RIGHT Since the introduction of digital terrestrial TV (DTT) to Australia in 2001, there has been adoubling of channels available to viewers. However, difficulties such as poor reception in many areashave been overcome slowly. While the global financial crisis had an impact on all media, free TVweathered the storm well. The Free-to-Air TV stations have increased promotion of their digital TVchannels and there is near 100% awareness across viewers. The formation of Freeview and the launch of free-to-air digital multi-channels, along with theexpansion of the DTT networks’ online and cross-platform services has created a leading viewingexperience, retaining customers to DTT when in other markets the transition has encouraged themigration to PayTV services as customers evaluate their options. Australia is an example of DTTmigration that has consolidated FTA’s position in the market, rather than weakened it; an exceptionto the usual situation. By early 2012 total overall digital TV penetration was around 82% across Australia with steadygrowth expected until 2013 when analog ceases to transmit. FTA viewer numbers have also increasedsince the digital TV offering commenced. A number of regions have now switched from analogue todigital, and of these regions most have hit 100% household penetration leading up to the changeover,with some users being assisted by the Household Assistance Scheme or the Satellite Subsidy Scheme. DTT launched in most major urban areas in 2001. Since 2003, the networks have been requiredto transmit 20 hours of locally-produced HD programming per week. By Q1 2011, 79% ofhouseholds had installed DTT on at least one TV set, according to the government-commissionedDigital Tracker survey. This was up from 74% a year earlier. And as of Q2 2012 the figure is now at84% homes, although more than half of the remaining homes claim they will wait until just beforeanalog switch-off, scheduled for end-2013. In order to deliver free-to-air digital TV to remote parts of the country, the government haslaunched a free satellite service in 2011, at a cost of A$40 million per year. The platform gives accessto 16 channels, including those provided by all the major broadcasters. It will cost customers A$300, 249 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012with a further cost of A$300 subsidized by the government. Legislation providing the framework forFreesat was passed in March 2010. The satellite service is being run by Southern Cross Media andImparja, in partnership with Optus, under the name Viewer Access Satellite Television (VAST). In the projections, see Figure 131 and Figure 132, its assumed analog switch off is not delayed inresponse to some of the regional coverage issues, and some customers start to migrate to IPTVservices available from the NBN (National Broadband Network). The main difference in theseprojections compared to others is NBN starts to substitution digital cable and satellite services by2014/2015. The National Broadband Network (NBN) is a national wholesale-only, open-access data networkunder development in Australia. Up to one gigabit per second connections are sold to retail serviceproviders (RSP), who then sell Internet access and other services to consumers. The NBN has beensubject to political and industry debate for a number of years, before construction actuallycommenced. The network is estimated to cost A$35.9 billion to construct over a 10-year period, including anAustralian Government investment of A$27.5 billion. The build cost has been a key point of debate.NBN Co, a government-owned corporation, was established to design, build and operate the NBN,and construction began with a trial rollout in Tasmania in July 2010. The mainland rollout began withfive first-release sites with the first services connected in April 2011. The fiber to the premises (FTTP) rollout is planned to reach approximately 93 percent of thepopulation by June 2021. Construction of the fixed wireless network is planned to begin in 2011,delivering its first services in 2012 and to be completed by 2015. Two satellites will be launched by2015. The network will gradually replace the copper network, owned by Telstra and currently usedfor most telephony and data services. As part of an agreement with NBN Co, Telstra will move itscustomers to the NBN, and lease access to its exchange space and extensive network ducting to assistin the rollout. Figure 131. Australian TV Households by Platform (Millions of Households) source Alan Quayle Business and Service Development 250 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Figure 132. Data for Figure 131 (Millions of Households) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Analog Terrestrial 3 2.5 2 1.5 1 0.5 0 0 0 0Digital Terrestrial 2.6 3.2 3.8 4.3 4.8 5.3 5.7 5.7 5.7 5.7IPTV (Digital) 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.3 0.3 0.4Digital Cable 0.8 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9Satellite (Digital) 1.4 1.4 1.4 1.4 1.5 1.5 1.6 1.6 1.6 1.5Total Households 7.9 8.1 8.2 8.2 8.3 8.4 8.4 8.5 8.5 8.5 Telstras Hybrid Fibre Coax (HFC) (commonly referred to as "cable") network is one of thedelivery systems used by the Australian Subscription Television provider Foxtel. Telstra owns 50% ofFoxtel in a joint venture with News Corporation and Consolidated Media Holdings. Telstra alsoresell Foxtels "Digital" to customers in Foxtels service area (as "Foxtel from Telstra"). Telstra offersdiscounts for Telstra full-service fixed line customers, with internet, pay TV and/or mobile serviceswith Telstra. Such discounts can include free installation and the first month of the best Foxtelpackage (all channels) for free. Foxtel launched as a cable-only service in 1995, adding a DTHoption in 1998. It is now the pay TV market leader. The company is 50%-owned by Telstra, withNews Corp. and PBL owning a 25% stake each. Launched in 1995, Austar is the second largest pay TV operator. Austar is the sole provider ofpay TV services in almost all of its service area, which numbers 2.5 million homes outside the capitalcities, but includes Hobart and Darwin, and Western Australia. Austar is predominantly a Satellite TVservice. Triple-play operator Optus is a 100%-owned subsidiary of SingTel. It operates Australia’sthird pay TV service via cable TV. 251 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 BRAZIL Since the regulator, called Anatel, removed restrictions preventing new entrants from accessingthe cable market in 2010 the payTV market has grown rapidly reaching more than 12 million in 2012.With Digital Cable services growing rapidly; providing a richer choice in content, HD, and on-demand services. Legislation (Bill 29/116) approved by the Senate in 2011 allows telcos to launchIPTV services, the bill enables the entrance of telephone companies in the IPTV market, and iteliminates restrictions on foreign capital in cable TV, it also set a quota policy for national contentbroadcasting. The Satellite market has also become quite competitive with 6 operators, whichensures none will dominate the market unlike say the UK, which enables Sky to buy the sports rightsand hence dominate the market. Most (69%) of the 43 million TV households, see Figure 133 and Figure 134, continue to useanalog terrestrial TV in 2011. Though lagging many LATAM countries, Brazil’s payTV market isfinally growing rapidly, with the number of primary analog terrestrial TV households dropping to60% in 2012. Telco’s IPTV services are planned to target more affluent areas, with Satellite beingtargeted as a mass market service. Brazil Telecom’s Videon VOD service was the first IP-based TVservice to go live, in late 2007. But like many other markets a VoD-only service struggles unless itadopts the model of Netflix of a low fixed subscription and access to tens of thousands of shows andmovies. Net Servicos (Net) accounts for 80% of cable households after a period of consolidation in themarket, it acquired operators Vivax, Big TV and ESC 90 Telecomunicacoes. Second-place MSOTevecap (TVA) was acquired by Telefonica in 2007. Telefonica then expanded its payTV service bylaunching a Satellite TV services and carrying the dominant content owner Globosat. NoteTelefonica owns 11% of Telecom Italia so if Telefonic bought TI outright there could be furtherconsolidation in the Brazilian market. But this is unlikely at this time given the economic struggles ofthe Southern European countries. DTT was launched in December 2007. DTT STB sales remain slow because of high set top boxcosts given the Brazilian regulators choice of the ISDB-Tb standard. Analog switch-off remainstargeted for 2016, though it is possible this could be delayed, the model shown in Figure 23 assumesit is closed down on schedule, but recently reports indicate this is likely to slip. ISDB-Tb stands for International System for Digital Broadcast, Terrestrial, Brazilian version. Itis a Digital TV system based on Japanese ISDB-T (Integrated System for Digital Broadcast,Terrestrial). The ISDB-Tb system is also known as SBTVD (Sistema Brasileiro de Televisão Digital,Brazilian System for Digital Television in English) and is used in Brazil, Argentina, Chile, Peru,Venezuela, Bolivia, Ecuador, Costa Rica and Uruguay. Hopefully this greater addressable market willhelp drop the price. ISDB-Tb was developed by a Work Group composed by members of Brazilian Ministry ofCommunications, National Agency for Telecommunications (ANATEL), Brazilian Institute forInformation Technology (ITI), Technology Development and Research Center (CPqD), severalBrazilian Universities, R&D institutes, Organizations related to the matter (broadcast professionalsassociation, broadcast companies association, etc.) and electro-electronics manufacturers. ISDB-Tb differs from original Japanese ISDB-T by using MPEG-4 (H.264) as videocompression system and a middleware called Ginga composed by procedural (Ginga-J — Javaportion) and declarative (Ginga-NCL — NCL/Lua portion) modules that allow more complexinteractive TV programs. 252 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 Implementation of ISDB-Tb (SBTVD) on the network side has progressed according to plan with over 65% of the Brazilian territory covered. But in most locations the transmission is still limited to one or two channels and most of the broadcasting is not yet in High Definition, except for some soccer matches and locally produced soap operas. Globo is the dominant TV player in Brazil, owning the top terrestrial network. The company also controls leading cable operator Net and thematic channel provider Globosat. It also owns part of DTH platform Sky. Behind Globo, the other four national broadcast networks: Sistema Brasileiro de Televisao (SBT), TV Record, TV Bandeirantes and Rede TV all struggle for a small portion of the market. Globo are likely to remain the dominant content provider, and in control of the critical sporting rights, at least for the next 3 to 6 years. Figure 133. Brazilian Market Status and Projection (Millions of Households) source Alan Quayle Business and Service Development Figure 134. Data for Figure 133 (Millions of Households) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Analog Terrestrial 35.3 34.5 32.7 29.6 25.4 21.2 14.3 7.3 3.5 0Digital Terrestrial 0 0 0.6 2.1 4.7 7.5 11 15 17 19IPTV (Digital) 0 0 0.1 0.3 0.6 1.1 1.8 3.2 4.5 5.5Analog Cable 3.2 3.2 2.5 2.1 1.7 1.2 0.9 0.5 0 0Digital Cable 1.1 1.5 2.7 3.4 4.1 5 6 7 8 8.5Satellite (Digital) 2 2.9 4.3 5.5 6.5 8 10 11 12 12Total Households 42 42 43 43 43 44 44 44 45 45 253 OF 307
    • © ALAN QUAYLE BUSINE SS AND SERVICE DEVEL OPMENT 2012 CANADA Canada is one of the most developed TV markets with over 80% penetration of payTV, which isdominated by Cable TV, it is very similar to the US market. If you judge what country you are in bywhat’s on the TV, its hard to know if you’re in Canada or the US. In fact a common complaint fromthe regulator is the large percentage of revenue spent on imported content rather than locallyproduced content, particularly from the US. The roles of TV and telecoms providers have merged,with all the major operators now competing in TV, internet and voice services. In 2008, theCanadian Radio and Television Commission (CRTC) acted to stop pay TV and broadcastconsolidation by amending media ownership rules. The regulatory change came after two deals: in 2006 CanWest Global acquired Alliance AtlantisCommunications, which owns 20 local ‘specialty’ channels, and produces some top series includingCSI. A year later leading terrestrial broadcaster CTV Globe Media purchased the national networkCHUM TV. The new regulations mean a single company cannot own more tha