IPTV: Disrupting the Balance of Power in the US Media Industry
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IPTV: Disrupting the Balance of Power in the US Media Industry Document Transcript

  • 1. Michael Tang Kenneth Ying MBA  Candidate  |  Class  of  2012   MBA  Candidate  |  Class  of  2012   Marshall  School  of  Business   Marshall  School  of  Business   University  of  Southern  California   University  of  Southern  California   Popovich  Hall  310   Popovich  Hall  310   Los  Angeles,  CA  90089-­‐2632   Los  Angeles,  CA  90089-­‐2632           IPTV:  Disrupting  the  Balance  of   Power  in  the  US  Media  Industry   Prepared  by  Michael  Tang  and  Kenneth  Ying  for  Professor  Omar  El  Sawy  (GSBA  556)   March  8,  2011       Image  source:  http://www.sxc.hu/photo/496914  
  • 2.  IPTV:  Disrupting  the  Balance  of  Power  in  the  US  Media  Industry  |  1      Table  of  Contents  EXECUTIVE SUMMARY ............................................................................ 2OVERVIEW OF IPTV WITHIN THE US MARKET ................................................ 3IPTV  Reducing  Barriers  To  Entry  For  Video  Distribution  ..............................................................................  3Online  Content  Aggregators  Emerging  As  Disruptor  ...................................................................................  4THE IPTV ECOSYSTEM ............................................................................ 5Relatively  Fragmented,  Leading  To  Multiple  Layers  Of  Intermediaries  .......................................................  5 Figure  1  –  Map  of  IPTV  Ecosystem  ...........................................................................................................  5 Publishers  Originate  Professionally  Sourced  Video  Content  .....................................................................  5 Aggregators  Provide  Content  Owners  With  Secure  Distribution  And  Shared  Revenue  ............................  5IPTV  Receiver  Platforms  Set  To  Emerge  Into  Mainstream  ...........................................................................  6 IPTV  Receiver  Platforms  Moving  Into  Financial  Intermediation  ...............................................................  7ECOSYSTEM HEALTH ASSESSMENT ............................................................. 8High  Productivity,  Driven  By  Increasing  Consumer  Demand  and  Advertising  Revenue  ..............................  8 Figure  2  –  North  America  Market  Size  for  Online  Video  Advertising  (ex  Mobile;  2004-­‐2013p)   ...............  9Robustness  Highly  Dependent  Upon  Cooperation  From  Content  Owners  ..................................................  9Niches  Emerging  In  Amateur  Content,  Gaming  .........................................................................................  10Overall,  Ecosystem  Healthy  With  Strong  Growth  Prospects  .....................................................................  11GAME CHANGERS ................................................................................. 12AllVid  Could  Dramatically  Increase  Consumer  Access  To  IPTV  Content  ....................................................  12Rollout  Of  4G  Networks  Enables  Wireless  IPTV  Content  Delivery  .............................................................  12Dynamic  Ad  Placement  Brings  Targeted  Advertising  To  Television  ...........................................................  13APPENDIX .......................................................................................... 14Exhibit  1  –  Map  of  IPTV  Ecosystem  (Landscape  Orientation)  ....................................................................  14  
  • 3.  IPTV:  Disrupting  the  Balance  of  Power  in  the  US  Media  Industry  |  2      EXECUTIVE  SUMMARY  The  Internet  Protocol  Television  (IPTV)  ecosystem  in  the  United  States  is  poised  to  move  into  the  mainstream,  driven  by  growing  consumer  demand  and  advertising  revenues.  High  productivity,  with  niches  emerging  in  amateur  content  and  online  gaming,  points  to  a  cautiously  healthy  ecosystem,  that  if  allowed  to  develop  fairly  and  unrestrictedly,  may  radically  alter  the  market  for  consumer  television.  Market  research  firm  Strategy  Analytics  predicts  revenue  from  the  US  IPTV  ecosystem  will  reach  $15  billion  by  2013,  while  PricewaterhouseCoopers  (PwC),  a  consultancy,  estimates  that  17  million  households  in  the  US  will  subscribe  to  IPTV  services  by  2013.  This  increase  represents  a  50%  compound  annual  growth  rate  over  the  period  from  2009  to  2013.1,2  The  majority  of  players  in  the  ecosystem—from  IPTV  receiver  platform  manufacturers  to  content  owners  and  aggregators—exceeded  sales  and  revenue  targets  in  2010.  PwC  also  predicts  that  advertising  spend  for  online  video  will  reach  $3.5  billion  in  2012,  an  8.4%  compound  growth  annual  rate.3  The  health  of  the  ecosystem  faces  risks  from  content  owners  withdrawing  content  from  aggregators,  restricting  consumer  access  to  direct  distribution  channels.  In  the  absence  of  rich  premium  content  available  through  aggregators  such  as  Hulu  and  Netflix,  the  consumer  value  proposition  would  be  greatly  reduced,  significantly  hindering  the  further  development  of  the  ecosystem.  Several  game  changers  are  set  to  dramatically  alter  the  environment  of  the  IPTV  ecosystem:   • AllVid  could  significantly  increase  consumer  access  to  IPTV  content:  The  Federal   Communications  Commission  is  pushing  the  home  entertainment  industry  to  adopt  AllVid,  a   proposed  technology  that  aims  to  provide  consumers  with  a  universal  interface  to  paid  video   content.  In  theory,  this  technology  would  enable  IPTV  content  to  be  seamlessly  distributed   throughout  a  home  without  the  aid  of  set-­‐top  boxes,  greatly  increasing  the  accessibility  of  IPTV   services.  As  such,  IPTV  content  would  be  placed  on  a  level  playing  field  with  cable  and  satellite   content,  greatly  increasing  IPTV’s  share  of  subscriber  and  advertising  revenues.  Furthermore,   AllVid  could  place  significant  pressure  upon  the  current  bundled  pricing  model  for  subscription   television,  leading  a  shift  towards  a  la  carte  pricing.   • Rollout  of  4G  networks  will  enable  wireless  IPTV  content  delivery:  Unlike  3G  networks,  4G   networks  provide  sufficient  bandwidth  for  IPTV  transmission,  resulting  in  increased  penetration   of  IPTV  services  to  mobile  devices  and  rural  markets.  Further  shifts  balance  of  power  from  cable   and  satellite  operators  to  wireless  providers,  with  increases  in  market  share  due  to  lower   deployment  costs.   • Dynamic  ad  placements  will  bring  targeted  advertising  to  television:  Integrating  viewing  data   with  online  behavior  and  transaction  history,  dynamic  ad  placement  allows  IPTV  providers  to   build  far  more  robust  user  profiles,  providing  advertisers  with  a  significantly  greater  value   proposition  than  that  offered  by  cable  and  satellite  providers.                                                                                                                1  “Global  entertainment  and  media  outlook  2009  –2013”,  PwC,  Jun  2009,  p  182  2  Viviek  Naik,  “U.S.  IPTV  to  hit  $15  Billion  in  Revenues  by  2013,  Study  Says”,  TMCNet,  Sep  2  2009,  http://iptv.tmcnet.com/topics/iptv/articles/63554-­‐us-­‐iptv-­‐hit-­‐15-­‐billion-­‐revenues-­‐2013-­‐study.htm,  accessed  Mar  5  2011  3  Ibid.  
  • 4.  IPTV:  Disrupting  the  Balance  of  Power  in  the  US  Media  Industry  |  3      OVERVIEW  OF  IPTV  WITHIN  THE  US  MARKET  IPTV  Reducing  Barriers  To  Entry  For  Video  Distribution  Internet  Protocol  Television  (IPTV)  is  a  system  for  delivering  video  that  leverages  the  networks  and  protocols  of  the  internet,  replacing  traditional  broadcasting  technologies.  IPTV  is  a  rapidly  growing  market.  According  to  Strategy  Analytics,  a  market  research  firm,  revenue  from  the  US  IPTV  ecosystem  will  reach  ~$15  billion  by  2013.4  PricewaterhouseCoopers  (PwC),  a  consultancy,  estimates  that  17  million  households  in  the  US  will  subscribe  to  IPTV  services  by  2013,  representing  ~50%  compound  annual  growth  over  the  period  from  2009  to  2013.5  Broadly  speaking,  IPTV  dramatically  reduces  the  barriers  to  entry  for  video  distribution.    Broadcast  television,  the  first  technology  that  enabled  widespread  transmission  of  video,  requires  costly  licenses  for  access  to  spectrum,  a  finite  resource,  limiting  video  distribution  to  well-­‐capitalized  entities.  Cable  television,  the  next  evolution  in  video  distribution,  brought  significantly  greater  capacity,  enabling  consumers  to  access  hundreds  of  channels  through  a  single  wire.  As  wiring  a  household  for  cable  required  significant  investment,  cities  created  natural  monopolies  by  awarding  exclusive  franchises  to  cable  companies,  giving  these  firms  significant  market  power.    Unlike  broadcast  and  cable,  IPTV  provides  a  relatively  open  platform  for  video  distribution.  Services  such  as  YouTube  and  Vimeo  enable  content  creators  to  reach  a  global  audience  with  negligible  upfront  investment.  There  are  two  key  properties  of  IPTV  that  enable  this  openness:   • Packet-­‐switching:  With  broadcast  and  analog  cable,  all  channels  are  continuously  piped  through   the  transmission  medium,  regardless  of  whether  any  receiver  is  using  that  signal.  IPTV  uses  the   infrastructure  underlying  the  internet  for  video  transmission.  Instead  of  continuous   transmission,  with  IPTV,  a  video  stream  is  broken  into  discrete  packets  that  are  reassembled  by   the  receiver.  This  provides  a  fertile  platform  for  video-­‐on-­‐demand,  as  a  receiver’s  bandwidth   remains  open  until  a  video  stream  is  requested.   • Network  neutrality:  The  Federal  Communications  Commission  (FCC),  the  main   telecommunications  regulatory  body  in  the  United  States,  ruled  in  late  2010  that  internet   service  providers  (ISPs)  can  not  discriminate  between  their  own  services  and  those  provided  by   third-­‐parties.6  In  recent  years,  tensions  have  escalated  between  ISPs  and  online  video   distributors,  such  as  Netflix,  over  high-­‐bandwidth  use.  Prior  to  the  FCC’s  ruling,  Comcast,  the   largest  cable  company  in  the  United  States,  had  demanded  that  Netflix’s  content  delivery   provider,  Level  3  Communications,  pay  Comcast  as  compensation  for  handling  Netflix’s  incoming   traffic  to  Comcast  subscribers.7  By  upholding  network  neutrality,  the  FCC  maintains  the  status   quo  whereby  consumers  can  access  any  video  distributor  through  the  connection  provided  by   their  ISP.  This  is  a  significant  departure  from  the  business  models  of  cable  and  broadcast                                                                                                              4  Viviek  Naik,  “U.S.  IPTV  to  hit  $15  Billion  in  Revenues  by  2013,  Study  Says”,  TMCNet,  Sep  2  2009,  http://iptv.tmcnet.com/topics/iptv/articles/63554-­‐us-­‐iptv-­‐hit-­‐15-­‐billion-­‐revenues-­‐2013-­‐study.htm,  accessed  Mar  5  2011  5  “Global  entertainment  and  media  outlook  2009  –2013”,  PwC,  Jun  2009,  p  182  6  Jeffry  Bartash,  “FCC  approves  new  rules  governing  Internet”,  Marketwatch,  Dec  21  2010,  http://www.marketwatch.com/story/fcc-­‐backs-­‐new-­‐rules-­‐governing-­‐internet-­‐2010-­‐12-­‐21,  accessed  Mar  6  2011  7  Jeffry  Bartash,  “Comcast  in  dispute  over  Netflix  downloads”,  Marketwatch,  Nov  30  2010,  http://www.marketwatch.com/story/comcast-­‐in-­‐dispute-­‐over-­‐netflix-­‐downloads-­‐2010-­‐11-­‐30,  accessed  Mar  6  2011  
  • 5.  IPTV:  Disrupting  the  Balance  of  Power  in  the  US  Media  Industry  |  4       television,  as  these  structures  historically  provided  telecommunications  firms  with  near  total   control  over  the  video  content  that  subscribers  could  receive  through  their  services.  Online  Content  Aggregators  Emerging  As  Disruptor  The  openness  enabled  by  IPTV  platforms  has  resulted  in  two  distinct  business  models  within  the  US  market:   • IPTV  as  a  product-­‐line  extension  for  telecommunications  firms:  Prior  to  IPTV,   telecommunications  firms  lacked  the  capability  to  directly  offer  video  services  to  their   subscribers.  In  contrast,  cable  companies’  infrastructure  provided  sufficient  bandwidth  to  offer   voice,  data,  and  video  through  a  single  connection.  AT&T,  a  leading  US  provider  of  traditional   phone  and  DSL  data  services,  launched  an  ambitious  network  upgrade  in  2006  to  increase  the   capacity  of  its  infrastructure  to  support  an  IPTV  service  branded  as  “U-­‐verse”.8  Executives  at   AT&T  have  stated  that  these  upgrades  require  a  “couple  billion”  in  capital  expenditures  each   year.  9  Services  such  as  U-­‐verse  compete  directly  with  traditional  video  services  from  cable  and   satellite  firms.  Ongoing  subscriptions  for  access  to  a  basket  of  channels  are  the  primary  source   of  revenue.   • Online  content  aggregators:  Services  such  as  Netflix,  Amazon  Instant  Video,  iTunes,  Hulu,  and   YouTube  provide  consumers  with  a  library  of  video  content,  accessible  through  a  high-­‐speed   internet  connection  across  multiple  platforms,  such  as  personal  computers,  mobile  devices,  and   televisions.  This  category  can  be  further  segmented  into  aggregators  that  focus  on  professional   content,  such  as  Netflix  and  Hulu,  and  those  that  focus  on  amateur  content,  such  as  YouTube   and  Vimeo.    These  online  content  aggregators  are  disrupting  the  business  model  of  the  traditional  subscription  video  services  offered  by  telecommunications,  cable,  and  satellite  companies,  unleashing  significant  whitespace  for  opportunistic  firms  to  capitalize  on  opportunities  within  the  IPTV  ecosystem.  As  such,  the  remainder  of  this  report  will  focus  on  IPTV  as  delivered  through  online  content  aggregators.                                                                                                              8  Peter  Grant,  “Business  Technology:  AT&T  Raises  TV  Stakes  With  Bigger  HD  Lineup;  Aiming  to  Trump  Cable,  Service  Adds  27  Channels;  Big  Test  of  Internet  Tools”,  The  Wall  Street  Journal,  Dec  19  2006,  via  ProQuest,  accessed  Mar  6  2011  9  Niraj  Sheth,  “AT&T  Rethinks  U-­‐Verse  Spending  After  FCC  Move”,  The  Wall  Street  Journal,  Jun  15  2010,  via  ProQuest,  accessed  Mar  6  2011  
  • 6.  IPTV:  Disrupting  the  Balance  of  Power  in  the  US  Media  Industry  |  5      THE  IPTV  ECOSYSTEM  Relatively  Fragmented,  Leading  To  Multiple  Layers  Of  Intermediaries    Figure  1  –  Map  of  IPTV  Ecosystem  IPTV%Ecosystem:%RelaAvely%Fragmented,%Leading%to%MulAple%Layers%of%Intermediaries% Legend%(note:%size%of%arrows%represents%magnitude%of%flows)%% ILLUSTRATIVE% Financial+Flow+ Content+Flow+ AdverAsing%Networks% B2B%TransacAons% Content%Owners%/% Content%Aggregators% Content+Delivery+ Publishers% Networks+ Financial%Intermediaries% C2B%TransacAons% Internet+Service+ IPTV%Receiver%Pla.orms% Providers+ Electronics+Retailers+ Consumers%Sources:+Team+analysis;+logos+reproduced+under+Fair+Use+excepCon+(17+U.S.C.+§+107)+for+nonLprofit+educaConal+purposes;+icons+obtained+from+iconarchive.com;+tv+image+obtained+from+sxc.hu+(royaltyLfree)+Note:  A  larger  version  of  this  map  has  been  reproduced  in  the  Appendix  as  “Exhibit  1  –  Map  of  IPTV  Ecosystem  (Landscape  Orientation)”    Publishers  Originate  Professionally  Sourced  Video  Content  The  path  from  content  owners  and  publishers  to  the  end  consumer  crosses  multiple  boundaries  in  the  IPTV  ecosystem.  Media  companies,  such  as  ABC,  FOX,  and  NBC,  originate  the  flow  of  professionally  sourced  content.  Most  publishers  then  push  their  content  to  aggregators,  while  some  also  offer  consumers  direct  access  through  their  website.  For  those  publishers  that  offer  direct  access,  viewing  is  restricted  to  personal  computers.  Aggregators  Provide  Content  Owners  With  Secure  Distribution  And  Shared  Revenue    In  contrast,  aggregators  provide  consumers  the  ability  to  view  content  across  a  wider  variety  of  receivers,  such  as  smartphones,  dedicated  IPTV  set-­‐top  boxes,  and  newer  high-­‐end  televisions.  Content  owners  are  the  main  driver  behind  the  success  of  aggregators.  For  example,  Hulu,  one  of  the  most  
  • 7.  IPTV:  Disrupting  the  Balance  of  Power  in  the  US  Media  Industry  |  6      successful  content  aggregators,  is  jointly  owned  by  Disney  (parent  of  ABC),  NBC,  and  FOX.10  Jeff  Zucker,  CEO  of  NBC  Universal,  explained  in  an  interview  with  The  Wall  Street  Journal  that  Hulu  came  about  as  a  way  to  “train  people  to  legally  view  [content]  online”.11  As  broadband  providers  increased  the  speed  of  their  offerings,  video  content  owners  feared  that  consumers  would  turn  towards  unauthorized  distribution  channels,  a  trend  that  had  cannibalized  much  of  the  revenue  within  the  music  industry.  Aggregators  offer  content  owners  with  a  secure  distribution  platform  and  established  business  model  for  monetizing  content.  Three  primary  business  models  have  emerged  from  online  aggregators:  pay-­‐per  download,  subscription,  and  advertising  –  along  with  a  “freemium”  model  that  blends  elements  of  the  latter  two  business  models.  The  iTunes  Store  is  the  most  recognizable  operator  of  the  pay-­‐per  download  model.  Consumers  must  pay  a  set  price  for  each  program  they  choose  to  view.  Netflix  is  an  example  of  a  subscription-­‐based  model.  In  exchange  for  a  monthly  fee,  consumers  are  provided  unlimited  access  to  a  library  of  content.  YouTube  uses  an  advertising  supported  model,  leveraging  Google’s  strength  in  text  ads  as  an  extension  into  video.  In  an  interview  with  The  Wall  Street  Journal,  an  executive  with  Neo@Ogilvy,  a  digital  ad  agency,  explained  that  some  advertisers  are  not  comfortable  with  running  ads  alongside  user-­‐generated  content.  This  has  complicated  Google’s  efforts  to  increase  YouTube’s  revenue,  resulting  in  continued  operating  losses.  12  Hulu  is  an  example  of  the  freemium  model.  The  company  offers  consumers  free  access  to  select  video  content  on  personal  computers.  For  a  monthly  fee,  consumers  can  upgrade  to  Hulu  Plus,  which  offers  a  wider  variety  of  content  across  multiple  viewing  platforms.  IPTV  Receiver  Platforms  Set  To  Emerge  Into  Mainstream  In  2010,  internet-­‐connected  televisions  emerged,  bringing  online  content  aggregators  directly  into  the  living  room.  One  of  the  most  visible  illustrations  of  this  trend  is  Google’s  launch  of  Google  TV,  an  IPTV  receiver  platform  based  on  the  Android  operating  system.  Through  a  partnership  with  Sony,  Google’s  software  has  been  embedded  within  select  television  models.13  Google  has  also  licensed  its  software  to  manufacturers  of  set-­‐top  boxes,  such  as  Logitech.  Through  these  deals,  Google  aims  to  enable  consumers  to  watch  video  from  any  website  directly  through  their  television,  providing  direct  access  to  content  owners.  The  business  model  for  Google  TV  is  similar  to  that  of  Android:  the  Google  TV  platform  is  available  to  device  manufacturers  without  charge  from  Google,  and  in  return,  Google  can  reach  consumers  in  the  living  room  with  advertisements.  Although  some  content  owners  have  been  supportive-­‐notably  Time  Warner,  owner  of  HBO-­‐have  reacted  negatively.  ABC,  NBC,  CBS,  and  Hulu  are  among  the  services  that  block  Google  TV  devices  from  viewing  video  content.14  By  creating  a  keystone                                                                                                              10  Paul  Thomasch,  “UPDATE  3-­‐Disney  joins  Hulu  video  site,  takes  ownership  stake”,  Reuters,  Apr  30  2009,  http://www.forbes.com/feeds/afx/2009/04/30/afx6364646.html,  accessed  Mar  6  2011  11  Peter  Kafka,  “NBC  CEO  Jeff  Zucker:  Hulu  Will  Start  Breaking  Even  “Soon””,  The  Wall  Street  Journal,  May  28  2009,  http://d7.allthingsd.com/20090528/d7-­‐interview-­‐nbc-­‐universal-­‐ceo-­‐jeff-­‐zucker/,  accessed  Mar  6  2011  12  Kevin  J.  Delaney,  “Google  Push  To  Sell  Ads  On  YouTube  Hits  Snags  -­‐-­‐-­‐  Video  Site  Is  Key  To  Diversification;  The  Lawsuit  Factor”,  The  Wall  Street  Journal,  Jul  9  2008,  via  Factiva,  accessed  Mar  6  2011  13  Don  Clark,  “Google  Unveils  Software  to  Join  TV,  Web”,  The  Wall  Street  Journal,  May  21  2010,  via  ProQuest,  accessed  Mar  6  2011  14  Sam  Schechner,  Amir  Efrati,  “Networks,  Google  Spar  Over  Web  TV”,  The  Wall  Street  Journal,  Oct  22  2010,  via  ProQuest,  accessed  Mar  6  2011  
  • 8.  IPTV:  Disrupting  the  Balance  of  Power  in  the  US  Media  Industry  |  7      platform,  the  success  of  Google  TV  could  ultimately  supplant  more  established  players  such  as  Hulu  and  its  primary  owners:  ABC,  NBC,  and  FOX.  Other  companies  offering  IPTV  receiver  platforms  include  Apple  (Apple  TV),  Roku,  Microsoft  (Xbox  360  Mediaroom),  and  Cisco  (Videoscape).  While  these  platforms  are  increasing  availability  of  IPTV  in  the  living  room,  it  is  unlikely  that  cable  set-­‐top  boxes,  the  most  common  add-­‐on  device,  will  support  content  aggregators.  Content  aggregators  provide  an  alternative  source  for  video  content  distinct  from  the  traditional  subscription  model  offered  by  cable  companies.  Therefore,  for  a  cable  set-­‐top  box  to  support  a  service  such  as  Netflix  or  Hulu  would  diminish  the  value  of  the  cable  operator’s  core  video  offerings.  Nevertheless,  the  continued  proliferation  of  IPTV  receiver  platforms  into  televisions  and  other  devices  will  increase  the  reach  of  content  aggregators  into  the  living  room.  IPTV  Receiver  Platforms  Moving  Into  Financial  Intermediation  Device  manufacturers  are  primarily  limited  to  one-­‐off  revenue  from  a  consumer’s  initial  purchase  of  that  item.  In  contrast,  consumer  payments  to  publishers  and  aggregators  for  content  represent  an  on-­‐going  revenue  stream.  Developers  of  IPTV  receiver  platforms  have  begun  to  recognize  this  opportunity  by  integrating  the  capability  to  purchase  content  directly  from  their  platform.  Apple’s  iTunes  Store  is  an  example  of  dominator  strategy  that  seeks  to  maximize  Apple’s  share  of  the  overall  ecosystem.  In  February  2011,  Apple  announced  that  companies  who  sell  digital  content  for  applications  on  iOS  devices  must  use  Apple’s  in-­‐app  payment  mechanism  to  process  transactions.  In  exchange  for  30%  of  the  revenue  from  each  transaction,  Apple  would  provide  publishers  with  seamless  integration  into  iOS  devices.  Although  Apple  has  yet  to  publically  state  whether  online  video  aggregators,  such  as  Hulu  and  Netflix,  would  be  subject  to  the  new  rule,  other  aggregators  such  as  Rhapsody,  a  music  subscription  service,  have  stated  that  Apple’s  stance  is  “economically  untenable”.15  Apple,  as  an  existing  market  leader  in  Content  Aggregation  /  Financial  Intermediation  (iTunes  Music  Store),  Electronics  Retailers  (Apple  Store),  and  IPTV  Receiver  Platform  (iOS,  Apple  TV),  is  using  its  strong  market  position  to  capture  a  highly  attractive  space  within  the  IPTV  ecosystem.                                                                                                              15  Yukari  Iwatani  Kane,  Russell  Adams.  “Apple  Opens  a  Door,  Keeps  Keys”,  The  Wall  Street  Journal,  Feb  16  ‘11,  via  ProQuest,  accessed  Mar  6  ‘11  
  • 9.  IPTV:  Disrupting  the  Balance  of  Power  in  the  US  Media  Industry  |  8      ECOSYSTEM  HEALTH  ASSESSMENT  The  health  of  the  ecosystem  will  be  evaluated  based  on  three  “critical  measures  of  health”:  productivity,  robustness,  and  niche  creation.16  High  Productivity,  Driven  By  Increasing  Consumer  Demand  and  Advertising  Revenue  The  primary  measure  of  productivity  of  an  ecosystem  is  the  ability  of  firms  within  that  ecosystem  to  generate  revenues.  For  the  evaluation  of  the  IPTV  ecosystem,  we  will  be  looking  at  value  and  cash  generation  through  three  primary  sources:  device  unit  sales,  subscriber/pay-­‐per-­‐view,  and  advertising.    Unit  sales  of  IPTV  receiver  platforms  have  been  growing  steadily  over  the  last  few  years.  In  2010,  Apple  and  Roku  both  announced  that  they  have  sold  one  million  units  of  the  Apple  TV  and  Roku  Player  respectively.17  Revenues  at  Roku  exceeded  $50  million  in  2010,  and  are  expected  to  reach  $100  million  in  2011.18  While  this  represents  just  a  small  proportion  of  the  US  television  market,  hitting  the  one-­‐millionth  unit  sales  mark  was  still  a  significant  milestone.  Demand  for  such  IPTV  receiver  sets  delivering  niche,  non-­‐traditional  television  content  has  seen  an  uptick  in  recent  years.  While  it  took  Apple  four  years  to  hit  this  target  when  it  launched  the  Apple  TV  in  January  2007,  Roku  achieved  this  same  target  in  a  little  over  a  year.  19,20  Sales  of  other  non-­‐dedicated  IPTV  devices  have  seen  even  faster  growth.  Game  consoles  such  as  the  Xbox  360,  PlayStation  3,  and  Nintendo  Wii  all  have  capabilities  to  connect  via  Wi-­‐Fi  to  IPTV  content  aggregators  such  as  Netflix.  Since  its  launch,  the  Nintendo  Wii  has  generated  worldwide  sales  of  85  million  units  (33  million  in  the  US),  while  the  Xbox  360  and  PlayStation  3  has  sold  over  50  million  units  (19  million  in  the  US)  and  48  million  units  (12  million  in  the  US)  respectively.21,22,23  Furthermore,  many  consumer  electronic  goods  such  as  HD  television  sets  and  Blu-­‐ray  players  by  LG,  Samsung,  Sony,  and  Philips  come  standard  with  Wi-­‐Fi  connectivity,  providing  connectivity  to  IPTV  content  on  a  limited  basis.  In  late  2010,  Roku  announced  that  it  would  begin  licensing  its  platform  to  third-­‐party  hardware  manufacturers.24  In  a  move  seen  as  a  direct  challenge  to  the  much  delayed  Google  TV  platform,  this  is  predicted  to  greatly  increase  market  penetration  for  Roku,  and  allow  many  more  consumers  access  to  IPTV  content  available  only  through  the  Roku  Channel  Store.  On  the  content  subscription  front,  content  aggregator  Netflix  announced  revenue  increases  of  34%,  with  a  52%  surge  in  profits  during  their  forth  quarter  earnings  call.25  The  Wall  Street  Journal  reported  that  Netflix’s  “movie-­‐streaming  service  fueled  the  addition  of  3.1  million  subscribers  over  the  holidays”,                                                                                                              16  Marco  Iansiti,  Roy  Levien.  “Strategy  as  Ecology”,  Harvard  Business  Review.  Mar  2004,  p.  72    17  Tracey  Schelmetic,  “Apple  TV  and  Roku  to  Announce  Million-­‐Sales  Milestone;  Google  TV  Lags”,  TMCNet,  http://iptv.tmcnet.com/topics/iptv/articles/128696-­‐apple-­‐tv-­‐roku-­‐announce-­‐million-­‐sales-­‐milestones-­‐google.htm,  accessed  Mar  05  2011  18  Ibid.  19  Wolfgang  Gruener,  “Apple’s  History  Lesson:  The  iPhone  and  AppleTV”,  TGDaily,  http://www.tgdaily.com/mobility-­‐features/30712-­‐apples-­‐history-­‐lesson-­‐the-­‐iphone-­‐and-­‐appletv,  accessed  Mar  06  2011  20  Press  Release,  “Roku  Launches  Open  Platform  for  Delivery  of  Content  to  the  TV”,  http://www.roku.com/Libraries/Press_Releases/Roku_Channel_Store_Release.sflb.ashx,  Nov  2009,  accessed  Mar  06  2011    21  Nintendo  Co.  Ltd.  Consolidated  Financial  Highlights,  http://www.nintendo.co.jp/ir/pdf/2011/110127e.pdf,  accessed  Mar  06  2011  22  Tor  Thorsen,  “Xbox  Sells  50  million;  Kinect  ships  8  million”,  Gamespot,  http://ces.gamespot.com/story/6285921/xbox-­‐360-­‐sells-­‐50-­‐million-­‐kinect-­‐8-­‐million,  accessed  Mar  06  2011  23  “PlayStation®3  Worldwide  Hardware  Unit  Sales  |  CORPORATE  INFORMATION|  Sony  Computer  Entertainment  Inc:”,  http://www.scei.co.jp/corporate/data/bizdataps3_sale_e.html,  accessed  Mar  06  2011  24  Mark  Hachman,  “Roku  Says  It  Will  License  Platform”,  PCMag,  http://www.pcmag.com/article2/0,2817,2371611,00.asp,  accessed  Mar  06  ‘11  25  Nick  Wingfield,  “Netflix  Sees  Surge  in  Subscribers”,  The  Wall  Street  Journal,  Jan  27  2011,  via  Factiva,  accessed  Mar  06  2011  
  • 10.  IPTV:  Disrupting  the  Balance  of  Power  in  the  US  Media  Industry  |  9      bringing  its  total  subscriber  base  to  over  20  million.26  Other  IPTV  subscription  based  content  aggregators  are  also  slowly  gaining  traction.  One  Touch  Intelligence  recently  estimated  that  Hulu  Plus,  a  relatively  new  entrant  into  the  subscription-­‐based  IPTV  model,  has  achieved  4%  conversion  across  Hulu’s  total  user  base  of  30  million.27  Another  report  by  Screen  Digest  puts  Apple’s  iTunes  Store  at  the  forefront  of  on-­‐demand  video  sales  and  rentals,  noting  that  overall  sales  increased  60%  in  2010  compared  to  2009.28    Online  video  advertising  has  experienced  a  resurgence  in  recent  years  as  “rising  broadband  penetration  and  increased  broadband  speeds”  has  increased  the  market  for  streaming  video,  and  made  online  video  advertising  feasible.29  PwC  predicts  that  online  “video  advertising  spend  in  North  America  will  grow  at  an  8.4%  compound  annual  rate  to  $3.5  billion  in  2012  from  $2.4  billion  in  2008.”30  Several  factors  are  driving  this  trend.  Multiple  studies  show  that  more  and  more  consumers  are  watching  television  programs  on  the  web,  climbing  to  22%  in  2010  from  8%  in  2006.31  In  addition,  research  from  comScore  indicates  “people  who  watch  TV  shows  online  will  tolerate  about  twice  the  amount  of  ads  the  medium  now  averages”.32  All  these  factors  working  together  are  predicted  to  drive  online  video  advertising  revenues  for  both  content  owners/creators  and  aggregators  in  the  years  ahead.    Figure  2  –  North  America  Market  Size  for  Online  Video  Advertising  (ex  Mobile;  2004-­‐2013p)   Wired Internet rich media/video advertising market† (US$ millions) North America 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 United States 960 1,000 1,010 2,120 2,350 2,450 2,575 2,765 3,070 3,500 Canada NA NA NA 8 16 18 20 24 32 45 Total 960 1,000 1,010 2,128 2,366 2,468 2,595 2,789 3,102 3,545 †At average 2008 exchange rates. Sources: Interactive Advertising Bureau, Interactive Advertising Bureau of Canada, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Wired Internet rich media/video advertising market growth (%) 2009–13 North America 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 CAGR United States 46.6 4.2 1.0 109.9 10.8 4.3 5.1 7.4 11.0 14.0 8.3 Canada — — — — 100.0 12.5 11.1 20.0 33.3 40.6 23.0 Total 46.6 4.2 1.0 110.7 11.2 4.3 5.1 7.5 11.2 14.3 8.4 Sources: Interactive Advertising Bureau, Interactive Advertising Bureau of Canada, PricewaterhouseCoopers LLP, Wilkofsky Gruen AssociatesSource:  “Global  entertainment  and  media  outlook  2009  –2013”,  PwC,  Jun  2009   We expect declines in display and classified to offset Including e-mail, sponsorships, lead generation, andRobustness  Highly  Dependent  Upon  Cthat gains in search and video in 2009, with the result other categories, wired online advertising for the overall overall wired Internet advertising will decrease. ooperation  From  Content  Owners   percent compound forecast period will advance at a 5.8 annual rate to $32.9 billion in 2013 from $24.8 billion inRobustness  oa 3.9 ecosystem  may  2009, easured  several  w2008.One  method  is  to  analyze  the  antensity  of   We expect f  an  percent decline in be  mwith the US falling by 4 percent and Canada by 3.5 percent. ays.   The United States will increase at i 5.7 percent rate compounded annually to $30.9 billion, and Canadapartnerships  w Spending will ithin  the  e2010 as gains ith  content  aggregators  as  a  measure  of  the  quality  of  content   edge up in cosystem  w in search and will grow by 7.7 percent on a compound annual basis video offset declines in display and classified. In bothavailable  for  consumers.  Content  that  consumers  are  willing  tbillion. for  creates  value  that  can  be  divided   countries we expect mid-single-digit increases in 2011 to $2 o  pay   and double-digit growth in 2012–13.and  shared  for  the  benefit  of  the  entire  ecosystem.      Wired    Internet  advertising                          (US$ millions)                                                                 market         †26  Ibid.  America North 2004 2005 2006 2007 2008p 2009 2010 2011 2012 201327  Will  Richmond,  “Report:  Hulu  Plus  Starting  to  Get  Some  Traction”,  Seeking  Alpha,  http://seekingalpha.com/article/237232-­‐report-­‐hulu-­‐plus-­‐ United States 9,626 12,542 16,879 21,206 23,448 22,520 22,750 24,330 27,230 30,935starting-­‐to-­‐get-­‐some-­‐traction,  accessed  Mar  06  2011  28  “Apple’s  iTunes  Store  Dominates  Online  DVD  Sales,  VOD”,  Studio  Briefing,  http://www.studiobriefing.net/2011/02/apples-­‐itunes-­‐store-­‐ 1,970 Canada 341 527 844 1,164 1,360 1,313 1,336 1,407 1,641dominates-­‐online-­‐dvd-­‐sales-­‐vod/,  accessed  Mar  06  2011   17,723 Total 9,967 13,069 22,370 24,808 23,833 24,086 25,737 28,871 32,90529  “Global  entertainment  and  media  outlook  2009  –2013”,  PwC,  Jun  2009,  p.  155   †At average 2008 exchange rates.30  Ibid.   Sources: Interactive Advertising Bureau, Interactive Advertising Bureau of Canada, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates31  Wayne  Friedman,  “TV  Trends:  More  Internet  TV  Viewers  Erode  Trad  Media”,  MediaDailyNews,  http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=124522,  accessed  Mar  06  2011  32  “Online  TV  Viewers  will  Tolerate  Twice  As  Many  Ads”,  Television  Broadcast,  http://www.televisionbroadcast.com/article/106518,  accessed  Mar  06  2011  
  • 11.  IPTV:  Disrupting  the  Balance  of  Power  in  the  US  Media  Industry  |  10      Firms  in  the  IPTV  receiver  platform  niche  such  as  Roku  have  been  actively  seeking  new  channels  and  content  for  inclusion  into  their  channel  lineup.  With  over  100  channels  to  choose  from,  both  free  and  subscription  based,  Roku  is  a  leader  as  a  provider  of  non-­‐traditional  television  content.  Roku  provides  a  broadcast  platform  for  niche  and  international  channels  to  deliver  their  content,  often  with  too  narrow  of  a  focus  to  appeal  to  traditional  cable  and  satellite  television  broadcasters.  Content  aggregators  such  as  Netflix  and  Hulu  are  also  adding  partners  to  continuously  boost  their  content  library.  Hulu,  as  a  joint  venture  of  Disney,  Fox,  and  NBC,  has  access  to  a  rich  library  of  content  to  draw  upon  from  its  equity  partners.  Most  notably  absent  from  the  Hulu  lineup  is  CBS  and  Warner  Brother’s  CW  network.  However,  what  has  been  regarded  as  Hulu’s  loss  is  Netflix’s  gain.  Netflix  recently  signed  a  deal  with  CBS  to  begin  distributing  CBS’s  content  to  its  subscribers.33  The  licensing  of  the  Roku  platform  and  Google  TV  platform  to  third-­‐party  hardware  manufacturers  indicates  the  beginnings  of  a  convergence  between  standard  home-­‐theater  equipment,  such  as  HDTVs  and  Blu-­‐ray  players,  with  IPTV  hardware.  Until  recently,  IPTV  receivers  have  been  considered  a  niche  supplemental  device.  As  these  platforms  become  standard  equipment  in  consumer  electronic  goods,  they  become  more  accessible  to  the  mass  consumer,  increasing  the  robustness  of  the  ecosystem.  However,  the  continued  robustness  of  the  IPTV  ecosystem  hinges  on  content  owners  continuing  to  provide  aggregators  with  quality  content.  A  large  draw  for  consumers  towards  IPTV  today  is  the  result  of  the  rich  content  available  through  aggregators  such  as  Hulu  and  Netflix.  If  content  owners  shift  towards  a  dominator  strategy  by  withdrawing  content  from  aggregators  and  limiting  consumer  access  to  direct  distribution  channels,  a  reduced  consumer  value  proposition  could  lead  to  the  failure  of  the  ecosystem.    Niches  Emerging  In  Amateur  Content,  Gaming  The  growth  of  IPTV  has  spun  off  a  flurry  of  niche  creation  in  the  ecosystem.  Television  content  production  in  the  past  was  limited  to  large  studios  with  big  budgets,  and  supported  by  heavy  subscriber  fees  and  advertising  revenue.  With  IPTV,  independent  producers,  some  with  just  a  cell  phone  camera,  can  create  content  and  deliver  it  to  millions  of  viewers  through  content  aggregators  such  as  YouTube  and  Vimeo.  While  advertisers  have  hesitated  to  fully  embrace  amateur  content,  Google’s  acquisition  of  YouTube  illustrates  the  potential  for  monetizing  independent  and  amateur  video.  Gaming  through  IPTV  receiver  platforms  may  be  the  next  emerging  market  opportunity,  and  already,  this  is  generating  niche  creation  within  the  space.  With  the  integration  of  the  iPad  and  Apple  TV,  several  app  creators  have  designed  multiplayer  games  that  utilize  the  iPad  as  a  game  controller,  with  graphics  projected  onto  a  television  display  through  the  Apple  TV  set-­‐top  box.  Furthermore,  rumors  in  the  blogosphere  hint  that  “new  code  in  the  iOS  4.3  beta  3  firmware  may  soon  support  online  gaming”.34  Roku  also  currently  offers  several  basic  games  through  its  Roku  Channel  Store.  As  the  market  for  gaming  emerges  within  the  IPTV  ecosystem,  niche  creation  is  sure  to  follow  as  entrepreneurs  seek  to  capture  value  from  this  market  segment.                                                                                                                33  “CBS  and  Netflix  announce  2-­‐year  Licensing  Agreement  for  Library  Content”,  Daily  News,  http://www.dailynews.com/news/ci_17453787,  accessed  Mar  06  2011  34  Ross  Miller,  “Apple  TV  Gaming  Hinted  Strongly  in  iOS  4.3  beta  code”,  Engadget,  http://www.engadget.com/2011/02/09/apple-­‐tv-­‐gaming-­‐hinted-­‐strongly-­‐in-­‐ios-­‐4-­‐3-­‐beta-­‐code/,  accessed  Mar  06  2011  
  • 12.  IPTV:  Disrupting  the  Balance  of  Power  in  the  US  Media  Industry  |  11      Overall,  Ecosystem  Healthy  With  Strong  Growth  Prospects  As  the  ecology  of  IPTV  evolves,  forward-­‐looking  statements  of  revenues  generated  by  the  ecosystem  seem  healthy;  robustness  of  the  ecosystem  is  strong,  but  not  without  the  absence  of  risks  that  could  destroy  the  ecosystem;  and  niche  creation  continues  to  advance  in  this  relatively  young  ecosystem.  All  this  points  to  a  cautiously  healthy  ecosystem.  Allowed  to  develop  fairly  and  unrestrictedly,  IPTV  is  expected  to  radically  alter  the  market  for  consumer  television.  
  • 13.  IPTV:  Disrupting  the  Balance  of  Power  in  the  US  Media  Industry  |  12      GAME  CHANGERS  AllVid  Could  Dramatically  Increase  Consumer  Access  To  IPTV  Content  AllVid  is  an  IP  gateway  adaptor  proposed  by  the  Federal  Communications  Commission  (FCC)  as  a  replacement  for  the  failed  CableCARD  initiative.35  In  its  current  form,  the  AllVid  requirement  will  “require  U.S.  cable,  satellite  and  telecommunication  TV  operators  to  supply  all  their  customers  a  device  or  gateway  –  capable  of  delivering  as  many  as  six  different  IP  video  streams  to  TVs,  DVRs  or  other  equipment  in  the  home  –  beginning  no  later  than  the  end  of  2012.”36  The  implementation  of  AllVid  will  significantly  impact  the  IPTV  ecosystem,  as  it  places  IPTV  content  on  an  equal  playing  field  as  traditional  cable  television  content.  Viewers  will  be  able  to  search  for  content  across  the  entire  spectrum  of  IPTV  niche  channels,  as  well  as  traditional  channels  offered  by  cable,  satellite,  and  telecommunications  providers.  The  effect  of  this  is  two  fold.  First,  niche,  independent,  or  amateur  content  currently  only  available  on  an  IPTV  receiver  platform  such  as  Roku,  can  directly  compete  for  viewers,  subscribership,  and  advertising  dollars  against  the  much  larger  broadcast  and  cable  channels.  This  will  lead  to  an  expansion  of  such  niche  channels,  and  possible  migration  of  some  smaller  channels  from  a  broadcast  to  an  IP  platform.  Secondly,  content  owners  will  view  aggregators  like  Hulu  as  a  substitute  to  their  broadcast  channels,  causing  tension  in  the  relationship  between  the  content  owners  and  aggregators.  Furthermore,  fragmentation  of  the  channel  lineups  of  cable  and  satellite  operators  may  occur,  as  more  and  more  niche  channels  migrate  towards  the  IP  platform,  in  an  attempt  to  capture  value  through  direct  subscription.  As  a  result,  the  traditional  bundled  pricing  models  of  the  incumbent  cable  and  satellite  broadcasters  could  shift  towards  a  la  carte  pricing,  ending  the  current  common  industry  practice  of  cross-­‐subsidizing  channels  within  a  content  owner’s  portfolio.  Rollout  Of  4G  Networks  Enables  Wireless  IPTV  Content  Delivery  4G,  the  forth  generation  cellular  wireless  standard,  promises  to  deliver  download  speeds  of  up  to  100  Mbps  over  a  wireless  cellular  network.37  This  will  enable  mobile  users  to  stream  multiple  channels  of  HD  video  content  on  their  mobile  devices,  and  more  importantly,  allow  users  to  unplug  from  fixed-­‐line  broadband  connections.  The  biggest  limiting  factor  for  IPTV  growth  today  is  its  reliance  on  broadband  internet  connections.  While  broadband  penetration  in  the  US  reached  94.5%  in  2009,  broadband  speeds  still  lag  against  the  EU,  with  US  connections  averaging  9.54  Mbps.38,39  4G  connectivity,  without  the  need  to  improve  any  physical  wired  infrastructure,  while  providing  uninterrupted  mobile  coverage,  is  projected  to  solve  these  issues  and  impact  the  IPTV  ecosystem  in  several  ways.                                                                                                              35  Clint  Boulton,  “Google  Touts  AllVid  to  FCC  for  Google  TV”,  eWeek,  http://www.eweek.com/c/a/Web-­‐Services-­‐Web-­‐20-­‐and-­‐SOA/Google-­‐Touts-­‐AllVid-­‐to-­‐FCC-­‐for-­‐Google-­‐TV-­‐743680/,  accessed  Mar  06  2011  36  Todd  Spangler,  “FCC  AllVid  Rule  Would  Ban  The  Set-­‐Top  As  We  Know  It”,  MultiChannel  News,  http://www.multichannel.com/article/451984-­‐FCC_AllVid_Rule_Would_Ban_The_Set_Top_As_We_Know_It_Analyst.php,  accessed  Mar  06  2011  37  “ITU  global  standard  for  international  mobile  telecommunications”,  http://www.itu.int/ITU-­‐R/index.asp,  accessed  Mar  06  2011  38  “Study:  Americans  Lead  World  in  Broadband  Use  -­‐  US  Broadband  Penetration  Jumps  to  94.5%  -­‐  December  2009  Bandwidth  Report”,    http://www.websiteoptimization.com/bw/0912/,  accessed  Mar  06  2011  39  Tim  Conneally,  “US  Broadband  Speeds  Improve  in  2010,  Still  Second  Rate  Against  EU”,  Betanews,  http://www.betanews.com/article/US-­‐broadband-­‐speeds-­‐improved-­‐in-­‐2010-­‐still-­‐second-­‐rate-­‐against-­‐EU/1297805705,  accessed  Mar  06  2011  
  • 14.  IPTV:  Disrupting  the  Balance  of  Power  in  the  US  Media  Industry  |  13      First,  IPTV  receiver  platforms  will  integrate  support  for  embedded  wireless  chips  to  tap  into  4G  wireless  networks.  Wireless  chipmakers  such  as  Qualcomm  will  realize  an  uptick  in  demand  as  the  “internet  of  things”  concept  takes  hold  in  IPTV  consumer  electronic  products.  Furthermore,  fixed-­‐line  broadband  providers,  such  as  Comcast  and  Time  Warner,  will  face  renewed  competition  from  wireless  broadband  providers,  such  as  AT&T  and  T-­‐Mobile.  Second,  4G  connectivity  will  enable  real-­‐time  interactivity  with  video  content,  and  new  niches  will  form  within  the  ecosystem  to  develop  interactive  content  and  ways  of  monetizing  such  activity.  Content  owners  and  producers  must  rethink  how  they  produce  television  content,  and  how  best  to  leverage  this  interactivity  for  maximum  profit  generation.  In  addition,  the  shift  toward  4G  will  reduce  bandwidth  unit  costs  for  operators,  whose  savings  can  then  be  passed  on  to  consumers.  Broadband  penetration  in  rural  areas  still  lags  that  of  urban  areas,  in  large  part  due  to  the  lower  potential  return  on  investment  fixed-­‐line  operators  face  in  rural  communities.  MatrixStream,  a  start-­‐up  within  the  IPTV  ecosystem,  believes  that  mobile  operators  could  deploy  IPTV  networks  over  4G  networks  at  just  20%  of  the  cost  for  a  similar  deployment  over  a  fixed-­‐line  network.40  Dynamic  Ad  Placement  Brings  Targeted  Advertising  To  Television  Cable  and  satellite  companies  are  experimenting  with  technologies  that  allow  them  to  provide  highly  targeted  ads  to  individual  households,  based  on  that  household’s  viewing  behavior  and  other  personal  and  demographic  data.41  The  concept  of  dynamic  ad  placement  is  not  new.  Internet  users  have  been  exposed  to  online  ads  that  aggregate  user  information  from  a  variety  sources  to  deliver  targeted  messaging.  With  dynamic  ad  placement  on  cable  and  satellite,  data  mining  companies  can  combine  viewing  data  with  frequent  shopper  cards  for  a  specific  address,  and  “turn  up  surprising  associations  such  as:  “Jersey  Shore”  viewers  are  frequent  buyers  of  yogurt.”42  The  fundamental  limitation  that  cable  and  satellite  companies  face  is  that  the  data  collected  is  aggregated  by  household,  meaning  that  a  teenager’s  constant  viewing  of  the  MTV  channel,  and  her  parent’s  shopping  behavior  may  combine  to  result  in  ads  being  shown  that  appeal  and  relate  to  neither.  With  IPTV,  and  especially  with  the  growth  in  IPTV  being  viewed  over  mobile  platforms,  user  data  collected  for  dynamic  ad  placement  can  be  far  more  individualized  than  what  traditional  cable  and  satellite  companies  can  obtain.  By  integrating  IPTV  viewing  data  with  online  behavior  and  transaction  history,  IPTV  providers  are  positioned  to  build  far  more  robust  user  profiles,  providing  advertisers  with  a  significantly  greater  value  proposition  than  that  offered  by  cable  and  satellite  providers.                                                                                                              40  “New  4G  IPTV  Platform  Includes  3D,  1080p,  HD  and  7.1  Surround  Sound”,  http://www.worldtvpc.com/blog/4g-­‐iptv-­‐platform-­‐includes-­‐3d-­‐1080p-­‐hd-­‐71-­‐surround-­‐sound/,  accessed  Mar  06  2011  41  Jessica  Vascellaro,  “TV’s  Next  Wave:  Tuning  Into  You”,  The  Wall  Street  Journal,  Mar  07  2011    42  Ibid.  
  • 15.     IPTV%Ecosystem:%RelaAvely%Fragmented,%Leading%to%MulAple%Layers%of%Intermediaries% Legend%(note:%size%of%arrows%represents%magnitude%of%flows)%% ILLUSTRATIVE% Financial+Flow+ Content+Flow+ AdverAsing%Networks% APPENDIX   Content%Owners%/% Content%Aggregators% Content+Delivery+ Publishers% Networks+ B2B%TransacAons% Financial%Intermediaries% Internet+Service+ IPTV%Receiver%Pla.orms% Providers+ Exhibit  1  –  Map  of  IPTV  Ecosystem  (Landscape  Orientation)   C2B%TransacAons% Electronics+Retailers+ Consumers%Sources:+Team+analysis;+logos+reproduced+under+Fair+Use+excepCon+(17+U.S.C.+§+107)+for+nonLprofit+educaConal+purposes;+icons+obtained+from+iconarchive.com;+tv+image+obtained+from+sxc.hu+(royaltyLfree)+    IPTV:  Disrupting  the  Balance  of  Power  in  the  US  Media  Industry  |  14