Prospects for market entry inProspects for market entry in
Northern European broadbandNorthern European broadband
IP video...
Building the ball park…Building the ball park…
but will they come?but will they come?
Analyses including those of next FCC...
Broadband in US and Canada:Broadband in US and Canada:
2.7m cable modem households 3 May 2000:2.7m cable modem households ...
Broadband Video in EuropeBroadband Video in Europe
8.23m 1999 (Ger, Ne, Fr, Swe, UK: ony 1.73m last 3)8.23m 1999 (Ger, Ne,...
Chello (UPC) Broadband SubscribersChello (UPC) Broadband Subscribers
ITM Research Survey into broadband subscriber behavio...
IP Video: KillerIP Video: Killer
Application forApplication for
Broadband InternetBroadband Internet
V id e o t o t h e P ...
Video over broadband IPVideo over broadband IP
– ABUNDANT:ABUNDANT:
– Scalability:Scalability:
infinitely expansible,infin...
European Video Rights Holders (VRHs)European Video Rights Holders (VRHs)
and Broadband Service Providers (BSPs)and Broadba...
Existing Content Libraries:Existing Content Libraries:
Disaggregated Golden EggsDisaggregated Golden Eggs
– Broadcasters a...
Ever seen an elephant fly?Ever seen an elephant fly?
– Loss-leading websitesLoss-leading websites
– VRHs can take losses; ...
‘‘Goose and Egg’ Scenario: Refusal toGoose and Egg’ Scenario: Refusal to
DealDeal
Content libraries refuse to license to b...
Plucking the goose: regulatory orPlucking the goose: regulatory or
market solutions?market solutions?
– Regulators confuse...
Intermediaries’ PartnersIntermediaries’ Partners
– Carriage with ‘closed but open’ BSPs:Carriage with ‘closed but open’ BS...
Future Research QuestionsFuture Research Questions
Infrastructure development?Infrastructure development?
– Europe late ad...
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MIT Internet Telehpony Consortium 19 May 2000

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Prospects for market entry in Northern European broadband IP video markets

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MIT Internet Telehpony Consortium 19 May 2000

  1. 1. Prospects for market entry inProspects for market entry in Northern European broadbandNorthern European broadband IP video marketsIP video markets Christopher T. Marsden,Christopher T. Marsden, Harvard Information Infrastructure Project andHarvard Information Infrastructure Project and Globalisation Centre, Warwick, UKGlobalisation Centre, Warwick, UK Info and contact: http://www.ijclp.orgInfo and contact: http://www.ijclp.org Internet TelephonyInternet Telephony Consortium MITConsortium MIT 19 May 200019 May 2000
  2. 2. Building the ball park…Building the ball park… but will they come?but will they come? Analyses including those of next FCCAnalyses including those of next FCC Chief Economist are positive onChief Economist are positive on broadband prospects….broadband prospects…. – Christiaan Hogendorn (1998 and 2000);Christiaan Hogendorn (1998 and 2000); Eisner and Lehr (1999); Greenstein (1999)Eisner and Lehr (1999); Greenstein (1999) But don’t see streaming video as theBut don’t see streaming video as the killer app - rather various shorter appskiller app - rather various shorter apps We all remember the mid-90s convergenceWe all remember the mid-90s convergence ‘hype’ (John Malone TCI in 1997) and the‘hype’ (John Malone TCI in 1997) and the QUBE and other VOD experimentsQUBE and other VOD experiments – Faulhaber (2000)Faulhaber (2000)
  3. 3. Broadband in US and Canada:Broadband in US and Canada: 2.7m cable modem households 3 May 2000:2.7m cable modem households 3 May 2000: 50,000 new connections per week50,000 new connections per week http://www.kineticstrategies.com/cable_count.html visited 18 May 2000http://www.kineticstrategies.com/cable_count.html visited 18 May 2000 End-2000:End-2000: 5.7m connections5.7m connections 3.6m cable modems3.6m cable modems (Q1 2.28m) CAGR 156%;(Q1 2.28m) CAGR 156%; 2.11m DSL lines2.11m DSL lines (Q1 0.88m) CAGR 266%(Q1 0.88m) CAGR 266% (sources Telechoice; NCTA).(sources Telechoice; NCTA). End-2003:End-2003: 25.5million connections25.5million connections 15.9m cable modem households15.9m cable modem households http://www.kineticstrategies.com/docsis/http://www.kineticstrategies.com/docsis/ 9.569m DSL lines9.569m DSL lines http://www.xdsl.com/content/resources/deployment_info.asphttp://www.xdsl.com/content/resources/deployment_info.asp
  4. 4. Broadband Video in EuropeBroadband Video in Europe 8.23m 1999 (Ger, Ne, Fr, Swe, UK: ony 1.73m last 3)8.23m 1999 (Ger, Ne, Fr, Swe, UK: ony 1.73m last 3) 21.3m broadband access lines by 200321.3m broadband access lines by 2003 – Forrester Research (‘Europe’s Digital Decade’ 11-99: note ofForrester Research (‘Europe’s Digital Decade’ 11-99: note of caution Forrester predicts 54.5m US broadband by 2003)caution Forrester predicts 54.5m US broadband by 2003) Source: http://www.screendigest.com/yp_00-02.htm Special Issue 02/2000Source: http://www.screendigest.com/yp_00-02.htm Special Issue 02/2000 John Laycock,John Laycock, VP E-Commerce (Europe) Nortel Networks, and BCDVP E-Commerce (Europe) Nortel Networks, and BCD Forum, 18 May 2000, ‘TV Meets the Web’ at http://live.tv3000.nl/tv_web/:Forum, 18 May 2000, ‘TV Meets the Web’ at http://live.tv3000.nl/tv_web/: ““many telecoms companies in Europe had delayedmany telecoms companies in Europe had delayed the deployment of DSL because they were afraid ofthe deployment of DSL because they were afraid of cannibalising their existing revenues. However, theycannibalising their existing revenues. However, they are now beginning to respond to the development ofare now beginning to respond to the development of the market and initiate rollout.”the market and initiate rollout.” TiVo digital TV next-generation set-top servers usingTiVo digital TV next-generation set-top servers using DVB standards (especially MMHP) and MPEG4DVB standards (especially MMHP) and MPEG4 compressioncompression
  5. 5. Chello (UPC) Broadband SubscribersChello (UPC) Broadband Subscribers ITM Research Survey into broadband subscriber behaviourITM Research Survey into broadband subscriber behaviour polled 1,500 chello subscribers and 2,000 non-chello users.polled 1,500 chello subscribers and 2,000 non-chello users. http://www.chello.com/press_room/P/1130/index.html 17 March 2000http://www.chello.com/press_room/P/1130/index.html 17 March 2000 6 North European markets6 North European markets – Norway, Sweden, Austria, Belgium,Norway, Sweden, Austria, Belgium, France, Netherlands:France, Netherlands: 171,000 subscribers 31/3/2000171,000 subscribers 31/3/2000 spend twice as much time on line asspend twice as much time on line as narrowband users - an average of 72 hrs/monthnarrowband users - an average of 72 hrs/month (36 hrs/month for dial-up users)(36 hrs/month for dial-up users) access the internet 4 times a day (twice a dayaccess the internet 4 times a day (twice a day for dial-up)for dial-up) spend 67% more money online than their dial-spend 67% more money online than their dial- up counterparts - an average of 471 eurosup counterparts - an average of 471 euros (£288) in the last six months as opposed to(£288) in the last six months as opposed to 283 euros (£173)283 euros (£173)
  6. 6. IP Video: KillerIP Video: Killer Application forApplication for Broadband InternetBroadband Internet V id e o t o t h e P C L e g a c y c o n t e n t R a t io n e d a c c e s s T V r o u t e - P C c a r r ia g e n e u t r a l? H u g e A r c h iv e V R H b r o a d c a s t e r T e c h n ic a l s o lu t io n ( C o n fid e n t ia l; in n o v a t iv e ; c o n s u m e r - d r iv e n ; in t u it iv e ) M a r k e t in g in t e r m e d ia r y V id e o p o r t a l s it e d a t h e a d - e n d / lo c a l s e r v e r c f. Y e s T V o n B T O p e n W o r ld D o m in a n t m o n o p o ly C o n t e n t - n e u t r a l B a n d w id t h - h u n g r y a p p lic a t io n s n e e d e d B S P t e lc o / c a b le c o I n t e r m e d ia r y M a r k e t E n t r y ?
  7. 7. Video over broadband IPVideo over broadband IP – ABUNDANT:ABUNDANT: – Scalability:Scalability: infinitely expansible,infinitely expansible, tailored for 1 viewertailored for 1 viewer DISPERSED:DISPERSED: – Scope economies:Scope economies: content exponentially increasing;content exponentially increasing; audience fragmentsaudience fragments PERFECTLY REPRODUCIBLE:PERFECTLY REPRODUCIBLE: – Scale economies:Scale economies: information goodsinformation goods copy costs zerocopy costs zero SUM IS GREATER THAN THE PARTS:SUM IS GREATER THAN THE PARTS: – Network effects entry barriersNetwork effects entry barriers – Cumulative eyeballsCumulative eyeballs
  8. 8. European Video Rights Holders (VRHs)European Video Rights Holders (VRHs) and Broadband Service Providers (BSPs)and Broadband Service Providers (BSPs) Value Chain VRH content I ntermediary? BSP carriage Stage 1 Rationed Legacy Partners • Broadcasters • Film archives • Music Majors • Promotional placement • Merchandising Click-through • Telcos • Cable MSOs • WAPcos Stage 2 Abundance Partners Originators: • Independents • New Media • Cultural and Sports Orgs • Subscription • Advertising • Direct Marketing • TiVo-enabled digital TV • New BSPs • 3G licences • WLL/MMDS
  9. 9. Existing Content Libraries:Existing Content Libraries: Disaggregated Golden EggsDisaggregated Golden Eggs – Broadcasters and film distributorsBroadcasters and film distributors have millions of hours archivedhave millions of hours archived Vertically integrated legacies:Vertically integrated legacies: – cinema-TV behemoths have traditionally rationedcinema-TV behemoths have traditionally rationed consumption in collaboration with governmentsconsumption in collaboration with governments The super-abundant world of broadbandThe super-abundant world of broadband distribution and consumer sovereignty hasdistribution and consumer sovereignty has exploded their monopolyexploded their monopoly – Fear of cannibalising existing revenue streams inFear of cannibalising existing revenue streams in mass audiences (Netspeak: ‘channel conflict’)mass audiences (Netspeak: ‘channel conflict’) – 10 years of UK Gold, an appalling waste of talent10 years of UK Gold, an appalling waste of talent The geese have little strategy for collating theirThe geese have little strategy for collating their gold - they need an aggregator to bring theirgold - they need an aggregator to bring their existing product to marketexisting product to market
  10. 10. Ever seen an elephant fly?Ever seen an elephant fly? – Loss-leading websitesLoss-leading websites – VRHs can take losses; new media cannotVRHs can take losses; new media cannot – Carlton Popcorn website on BT OpenWorldCarlton Popcorn website on BT OpenWorld – Integrated portalsIntegrated portals – branded content achieves instant recognitionbranded content achieves instant recognition – Cross-promotionCross-promotion – broadcast channels permit subsidised advertisingbroadcast channels permit subsidised advertising – Carriage-content agreementsCarriage-content agreements – Branded funded portals leverage carriage terms:Branded funded portals leverage carriage terms: e.g. Disney-ABC dispute with Time-Warnere.g. Disney-ABC dispute with Time-Warner – Majority owned hothousesMajority owned hothouses – VC but avoiding the dead hand of old media execsVC but avoiding the dead hand of old media execs – Established advertiser relationshipsEstablished advertiser relationships – Trust, recognition, networks, SoHo HouseTrust, recognition, networks, SoHo House
  11. 11. ‘‘Goose and Egg’ Scenario: Refusal toGoose and Egg’ Scenario: Refusal to DealDeal Content libraries refuse to license to broadbandContent libraries refuse to license to broadband open portals;open portals; – Only sell dead duck content, not golden geeseOnly sell dead duck content, not golden geese Broadcasters ‘go it alone’ on branded sites:Broadcasters ‘go it alone’ on branded sites: – putting all their analogue eggs in separate basketsputting all their analogue eggs in separate baskets Carriage providers fractious: refuse to fair,Carriage providers fractious: refuse to fair, reasonable and non-discriminatory termsreasonable and non-discriminatory terms – Deal-making omelettes by breaking eggsDeal-making omelettes by breaking eggs New media is scarce and expensiveNew media is scarce and expensive – risk incubating original content when it doesn’t layrisk incubating original content when it doesn’t lay – ‘‘Who are these guys?’Who are these guys?’ – media and telcos don’t talk to each other, or anyonemedia and telcos don’t talk to each other, or anyone else, because few trusted intermediaries emergedelse, because few trusted intermediaries emerged
  12. 12. Plucking the goose: regulatory orPlucking the goose: regulatory or market solutions?market solutions? – Regulators confused, slow, incompetentRegulators confused, slow, incompetent – Dominance of BSkyB (DGFT), BBC (Magill-DG4),Dominance of BSkyB (DGFT), BBC (Magill-DG4), ONDigital (ITC) and BT (Oftel) shows limits ofONDigital (ITC) and BT (Oftel) shows limits of litigation, even with 1998 Competition Actlitigation, even with 1998 Competition Act – Dominant actors get their gander upDominant actors get their gander up – Competition complaint is commercial suicideCompetition complaint is commercial suicide – Cableco complaints against BSkyB and BT fromCableco complaints against BSkyB and BT from 19911991 – Solutions must involve:Solutions must involve: trust and competence: relationship buildingtrust and competence: relationship building financial inducementsfinancial inducements targeted primary rights holders:targeted primary rights holders: – anchor tenant model on Yahoo! And AOLanchor tenant model on Yahoo! And AOL
  13. 13. Intermediaries’ PartnersIntermediaries’ Partners – Carriage with ‘closed but open’ BSPs:Carriage with ‘closed but open’ BSPs: – Telco-cableMSO:Telco-cableMSO: Dominant monopolyDominant monopoly Content-neutralContent-neutral Bandwidth-hungry applications neededBandwidth-hungry applications needed Sweat equity?Sweat equity? – offer maximum exclusivityoffer maximum exclusivity – Content from ‘open but closed’ VRHs:Content from ‘open but closed’ VRHs: pubservice, huge archive of legacy contentpubservice, huge archive of legacy content Rationed accessRationed access Sweat equity - why?Sweat equity - why? – TV route - PC carriage neutral?TV route - PC carriage neutral? – minimal exclusivityminimal exclusivity – short term narrow format rights market
  14. 14. Future Research QuestionsFuture Research Questions Infrastructure development?Infrastructure development? – Europe late adopter modelEurope late adopter model – European fixed line telcos in crisis:European fixed line telcos in crisis: KPN, Telia, Telenor, Telefonica, BTKPN, Telia, Telenor, Telefonica, BT ‘‘Open access’?Open access’? – current US concerns regarding BSPscurrent US concerns regarding BSPs – US content market relatively competitiveUS content market relatively competitive query: Time Warner and Disney fightquery: Time Warner and Disney fight Video bottlenecks:Video bottlenecks: – European pubservices lock-hold - EBUEuropean pubservices lock-hold - EBU Market entry in Europe?Market entry in Europe? – Let’s get cable separated from telcos firstLet’s get cable separated from telcos first

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