Media and entertainment Trends

A P R E V I E W O F C O M I N G A T T R A C T I O N S :

W h a t ’ s A h e a d f o r t h e M e d i a a n d E n t e r t a i n m e n t I n d u s t r y

Our industry is at a crossroads. Change has been constant over the last several years, providing consumers with more options to find and consume their preferred content than ever before. These changes have also brought with them many challenges when it comes to addressing those needs, including costs, security, content availability and much more. The media & entertainment industry needs to address these challenges head-on in order to continue to build our businesses. This eBook takes a look at the trends that will shape our industry in 2017. So what’s “coming soon” in the media & entertainment space?

Piracy has continued to grow exponentially over the last few years as a result of broadband penetration, and the rise of both social and technology-based global platforms. We have seen both sides of the aisle - content creators and distributors - step up their efforts to combat this illegal behavior. In 2017, I see content creators and distributors finding innovative ways to reach consumers and more collaboration across the entire market as each stakeholder understands that they play a vital role in the battle against piracy.

With industry cooperation becoming key to fighting piracy, we expect to see a 360-degree approach to anti-piracy strategy being embraced and adopted this year. In 2017, watermarking is becoming an essential technology to protect revenue and allow for further innovation in content creation.

As we look ahead, innovation will continue in both the IP video delivery space and 4K UHD as the industry provides new and better services and premium content to address consumer demand.

And speaking of consumers, the year ahead will see operators adopt services and business models that improve consumer choice in all the key dimensions: content, value and convenience. The ongoing shift in consumer viewing habits creates new challenges for content owners and operators, but also provides an opportunity to differentiate.

We expect disruptive technologies, platforms and trends to make an impact this year, including social platforms, blockchain technology, the cloud, virtual & augmented reality, big data and wireless local area network services. These trends are sure to play a big role in how content will be consumed and distributed moving forward.

Let’s take a deeper dive into these topics as we explore what’s ahead for the media & entertainment industry.

-Doug Lowther, CEO, Irdeto

A l l F o r O n e A n d O n e F o r A l l A g a i n s t P i r a c y

Over the past few years, we have seen piracy grow to become not just a nuisance plaguing the content creation industry, but a fully-fledged business. Recent data from Irdeto found that there are more than 2.7 million advertisements on e-commerce websites, including Amazon, eBay and Alibaba, for illicit streaming devices. These advertisements can also be found on social networks, including Facebook, Twitter and other prominent social media platforms. Pirates are becoming more business savvy, expanding their marketing of illicit streaming devices. The results speak for themselves, with data from SimilarWeb Indicating more than 16 million visits per month to the top 100 pirate Internet Protocol TV (IPTV) supplier websites (as of September 2016). Pirates are constantly expanding their operations to satisfy consumers, aiding in this growth. A battle for market share between licensed and illegal platforms is brewing, and we expect to see a more concerted effort across the industry to combat IP piracy in the coming year.

“Live premium content piracy is on the rise as pirates look to capitalize on the consumer desire for more live events and the ever-increasing cost of this type of content. With an increase in online platforms lacking the stringent security measures needed for live content, events can be easily reproduced and accessed across a multitude of social media channels and shown around the world within a matter of seconds,” said Peter Oggel, Vice President of Product Management and Marketing at Irdeto. “As the increase in popularity of services such as Facebook Live and Periscope grows, so will piracy issues. This will have a huge impact on the industry, as social media platforms are notoriously difficult to regulate. This lack of regulation will damage not only operator revenues, but also put content licensing at risk, especially for live sports.”

In an opinion piece in the Herald Sun, Peter Tonagh, CEO of Foxtel, said that piracy is “no less of a crime than stealing a loaf of bread from a supermarket or sneaking into a movie theatre or a concert without paying. At Foxtel, we have long focused on combating piracy. The first wave was the bloke at the pub selling pirated smart cards and set-top boxes. We worked hard to address that. The second wave was pirate sites such as The Pirate Bay and the bit torrent sites that encourage illegal sharing. We finally saw some progress with the recently passed site-blocking legislation having its first impact late last year. But now we are dealing with a third, and potentially most concerning, wave: illegally streaming video on social media platforms. Rest assured we will work even harder to address this piracy before it gets out of control.”

“This lack of regulation will damage not only operator revenues, but also put content licensing at risk, especially for live sports.”- Peter Oggel, Irdeto

Tonagh concluded his opinion piece by stating, “If we are to sustain our business, maintain great sport and continue to invest in other great Australian content, we must continue to educate the public on the consequences of piracy and be willing to enforce our legal rights. We remain fully prepared to do so in the future.”

What is perhaps most concerning regarding this growth is the damage that piracy has caused the industry. This damage extends well beyond revenue loss from content theft, impacting legitimate services and offerings.

“While legitimate OTT/IPTV services are growing in subscriber popularity, they have not elevated to the levels originally predicted a few years ago. This is mainly due to the increase in pirated content,” said Bengt Jonsson, Senior Vice President of Global Sales at Irdeto. “Last year, an increasing number of industry players looked to tackle the pirates head on. With this in mind, industry standards were reviewed in order to help achieve anti-piracy goals. These new standards help enable more organizations to pull together in the fight against piracy, meaning more investment will flow into the segment. Industry collaboration and more money will see an increase in the development of pioneering technological innovations, helping to significantly grow the market share of legal content offerings as opposed to illegal alternatives.”

Mark Mulready, ‎Senior Director of Cyber Services and Investigations at Irdeto, added, “In the year ahead, we may see at least one premium sports rights licensee lose their rights as a result of not doing enough to address piracy. This will act as a catalyst to other licensees of the same content, resulting in Hollywood studios and sports rights owners to contractually mandate that licensees implement strong content protection, watermarking and anti-piracy measures for premium content.”

By empowering the industry with real-time analysis of piracy incidents, each player in the pay media ecosystem will play an important part in battling this global problem together.

“Understanding the complete business of piracy is critical, because these criminal enterprises have a profound effect not only on content creators but also consumers,” said Jan van Voorn, Senior Vice President and Deputy Chief, Global Content Protection, MPAA. “Better analysis can provide critical information that content providers will use to understand IPTV piracy and develop means to reduce it.”

Richard Frankland, Regional Vice President of Sales, EMEA, Irdeto, added, “Companies should gather extra information from data mining and viewing habits to leverage additional expertise to track down pirates.

This data collection helps providers to understand what their consumers are watching, and provides an understanding of what kinds of content is typically stolen. This insight allows content owners to change their distribution strategies or delay releases; both of which help them protect their revenue.”

While information sharing is a key component to address piracy, education is a critical element that must not be overlooked. As pirates continue to develop offerings that mirror their legal counterparts, it is becoming increasingly important for operators and movie studios to educate consumers on the tactics employed by pirates.

“Online streaming pirate services are growing exponentially year-over-year, content owners and operators must work together with stricter security requirements and with educational campaigns for the end user,” said Gabriel Hahmann, Sales Director, Brazil and Southern Cone, Irdeto. “We know that countering piracy requires a mix of education, legal content availability, ease of access, right price and security measures, each one of them has to be addressed.”

The wheels for the evolution of fighting piracy have well and truly been put in motion. And its impact could be felt across the market as the industry bands together to combat this growing problem.

“While legitimate OTT/IPTV services are growing in subscriber popularity, they have not elevated to the levels originally predicted a few years ago. This is mainly due to the increase in pirated content”- Bengt Jonsson, Irdeto

T h e P i r a c y S t r a t e g y T h a t W i l l L e a v e I t s M a r k i n t h e Ye a r A h e a d

This past year, we have seen more and more organizations implement watermarking as a critical component of their 360-degree anti-piracy strategy. To combat content theft and redistribution, we expect watermarking in conjunction with a multi-DRM strategy, detection and enforcement to develop into a preferred security technique by major industry players. Not only will this technology help protect revenue, but it will also foster further innovation in the content creation space, providing consumers with premium content that they desire.

“It is becoming even clearer that content protection is just as important as the content itself,” said Lawrence Low, Vice President of Business Development and Sales, Irdeto. “Protection has always been essential to ensure that an operator’s business runs smoothly, and over the next 12 months, we expect to see experimentation with methods of protection. More sophisticated watermarking, especially for premium content such as Hollywood movies and Live Sports, and stricter regulations enforced by multiple global governing bodies, will provide content creators and distributors with new tools and strategies to tackle piracy head on.”

“Redistribution piracy is a constant threat that has the potential to negatively impact the content creation industry,” Hanno Basse, Chief Technical Officer, Twentieth Century Fox Film. “As content creators continue to innovate, protecting that premium content becomes even more vital. By implementing watermarking as a part of a comprehensive anti-piracy strategy, we can ensure our content has the best possible protection, which allows us to more readily release the premium content that consumers crave.”

Ultimately, watermarking not only helps content owners protect their valuable assets, it helps service providers avoid revenue loss from illegal re-streaming, giving them much better access to premium content by meeting the studios’ increased security requirements.

“Head-end watermarking solutions are notoriously difficult to tamper with and the content has the benefit of being watermarked before reaching the viewing device. This ensures that all consumers receive watermarked content, not just those with watermark-enabled devices,” said Peter Oggel, Vice President of Product Management and Marketing at Irdeto. “As we move forward this year, anti-piracy techniques such as watermarking will use state-of-the-art forensic marking technologies to identify the source of pirated content and allow for its immediate shutdown.”

As pirates increase the deployment of sophisticated technologies to address consumer needs, we expect to see watermarking become an industry standard to combat the threat of content redistribution. Incorporating watermarking as a security measure into a complete, all-encompassing anti-piracy approach could pay dividends in the year ahead.

“Redistribution piracy is a constant threat that has the potential to negatively impact the content creation industry”- Hanno Basse, Twentieth Century Fox Film

O T T : A H i t w i t h C o n s u m e r s a n d A H o t B e d f o r I n n o v a t i o n

We have seen a tremendous shift in the market as OTT services become a preferred media channel. As the popularity of services such as Netflix and Amazon Prime continues to grow, we expect to see OTT providers expanding beyond just subscription video on demand (SVOD) and transactional video on demand (TVOD) services into linear TV. For example, Hulu, Playstation Vue and YouTube Unplugged.

“Traditional packaged TV viewing will continue to decline in our industry, whilst the big four; Google, Facebook, Apple and Amazon begin to seriously disrupt the market,” said Mark Mulready, Senior Director of Cyber Services and Investigations, Irdeto. “These providers will push to leverage the network effect of their platforms to gather an increased number of viewers. Rights owners and operators will rapidly accelerate their shift to OTT delivery, to allow themselves to compete for the millennials and Gen Z markets. This will result in a natural disintermediation between consumer and provider, not only in the media industry, but also in retail banking, travel, transportation and many other segments.”

Alongside this expansion, to capitalize on popularity and increase revenue, we expect to see OTT providers to innovate even further by adding catch-up, start-over and ‘download and go’ to services, something we have seen recently introduced by Netflix and Amazon Prime. This innovation is something that operators are devoting even more resources to in the coming year.

“Having an OTT service as a value-added service for our subscribers, who are increasingly viewing content through multiple connected devices, is imperative.” Jacques Aymar de Roquefeuil, Deputy General Director, Vietnam Satellite Digital Television Company, LTD. “In the future, we want to continue to deliver premium OTT entertainment to our customers on their screen of choice regardless of DRM and streaming format. Our number one priority is to offer the best possible OTT service, to serve our customers in a safe and secure manner.”

The launch of these new innovations also increases the importance of securing those offerings to prevent theft of valuable content. This industry innovation will require a higher investment in time, budget and resources by operators and content providers to protect content and improve the user experience.

Marco Xie, Regional Director and General Manager for China, Irdeto, comments, “Over recent years, the media landscape has changed drastically. IPTV and OTT services are the easiest they have ever been to access and also have quickly reduced the cost of service or subscription, without a doubt we will see IPTV and OTT user numbers exceed cable and DTH in China. As these services grow in prominence, operators will devote more capital and investment on content protection, protecting over 50% of this audience who by the end of 2017 will actively use SVOD and TVOD services.”

“Rights owners and operators will rapidly accelerate their shift to OTT delivery, to allow themselves to compete for the millennials and Gen Z markets.”- Mark Mulready, Irdeto

4 K U H D : C o m i n g t o a H o m e N e a r Yo u

As consumer demand for 4K UHD content grows, it is no surprise that providers and content producers expect 4K UHD to be a key revenue driver in the years ahead. In fact, a recent Irdeto survey found that 64% of video service providers and 73% of content producers believe that consumers are willing to pay 10-30% more on their subscription for access to 4K UHD content. However, while the 4K UHD future may be bright, the pay media industry faces many challenges to deliver this valuable content to the masses.

“Pay TV operators and content producers expect 4K UHD content to be a key revenue driver in the coming years. 4K UHD content brings new opportunities for video service providers and content producers,” said Godert Burghard, Vice President of Global Marketing, Irdeto. “However, alongside these opportunities, there are a number of challenges associated with costs, compatibility and security of 4K UHD. The industry also faces an ongoing problem of piracy, and 4K UHD is the next logical type of content that criminals will aim to steal. As a result, it will be important to combat these challenges by implementing a holistic 4K UHD security strategy.”

Marco Xie, Regional Director and General Manager for China, added, “4K TV has gone from being the distant future of TV to today’s reality. 4K UHD content is massively on the rise, and content providers are not missing out on their slice of the pie or revenue streams. I expect connected TV with 4K UHD capacity to reach 60% household coverage in China, with over 180 million homes having access to this premium content. As demand for 4K UHD grows, and prices are driven down by popularity, we expect to see growth of over 100% year on year. In addition to the rise of 4K UHD in Chinese households, we expect cable operators to react accordingly and accelerate migration from the Standard Definition Set-Top-box (SD STB) to High Definition Set-Top-Box (HD STB) to defend their existing position in the market place, to ensure this ongoing innovation does not leave them out in the cold.”

A key element of providing consumers with a quality 4K UHD experience will be the availability of content they desire. Live sports are the most obvious fit and as major sporting events adopt this technology, we will see an increase in consumer interest in the next-generation TV.

“The main trend that we will see over the next year will be 4K as Russia prepares for the FIFA World Cup 2018, which consumers will expect to be broadcast in rich color and in high definition,” said Alexander Shatalov, Chief Expert, Department of Fixed Networks, MTS. “As the demand for 4K grows, TV networks will face challenges in expanding their services. Operators will have to incorporate hybrid delivery solutions (including smart CDN and just-in-time packaging) to combine broadcast and multicast technologies to meet quality and cost expectations for delivery on all platforms. Integration of services will be another focus for the next year as operators look to combine live TV with a wide range of additional services and access to a wide range of existing on-demand services. Dongle and STB combinations will assist in the implementation of integrated offerings, which will also be useful for the future delivery of UHD services.”

“4K TV has gone from being the distant future of TV to today’s reality. 4K UHD content is massively on the rise, and content providers are not missing out on their slice of the pie or revenue streams. I expect connected TV with 4K UHD capacity to reach 60% household coverage in China”- Marco Xie, Irdeto

C o n s u m e r s H a v e a H a b i t o f C h a n g i n g

Consumer habits are changing… constantly. The three elements of consumer choice – content, value and convenience – are key influences causing many of these changes in consumer habits. This ongoing shift in user behavior, coupled with an increase in the amount of viewing options, creates many challenges for content owners and operators to navigate this muddled landscape.

“Last year we saw consumer viewer habits evolve and this will be no different in the future,” said Kerstin Köder, Head of freenet TV. “As consumer viewer habits change and keep the industry on its toes, it is essential for companies like us to always innovate and offer compelling services that meet their needs, such as full HD and the best programs at the best price. Robust security is essential for us to offer both live and on-demand premium content to consumers across devices and channels and this will be a huge priority for us.”

Bengt Jonsson, Senior Vice President of Global Sales at Irdeto, added, “Consumer behavior is constantly shifting as audiences seek out services and packages to satisfy their viewing appetite. However, consumers are finding it difficult to obtain all the content they desire. Consumers need to sign up for multiple providers to get the content they want and while cross-platform discovery is improving, it still isn’t as effective as it could be. The current market of many smaller OTT players in each region, several very large global players, coupled with content owners and sport rights holders providing content directly to the consumer is not sustainable in the long run. As a result, we will see the growth of a few platforms that will consolidate the smaller OTT platforms. These platforms may be global (like Amazon, iTunes, Google, etc.), content owners and sport rights holders joining forces, or regional pay TV operators becoming platform aggregators rather than solely content aggregators. This shift would revolutionize the media landscape, offering consumers with platforms to easily provide them with the content they desire.”

With the expectation that additional change is on the horizon, service providers will need to dedicate time and resources to ensure that they are providing a positive user experience. To accomplish this goal, both cable providers and OTT operators must innovate in the year ahead to keep consumers from looking into alternative viewing options.

“As consumer viewer habits change and keep the industry on its toes, it is essential for companies like us to always innovate and offer compelling services that meet their needs”- Kerstin Köder, freenet TV

Richard Frankland, Regional Vice President of Sales, EMEA, Irdeto, commented, “In order to gain, and retain, customer loyalty, pure OTT providers like Netflix and Amazon continue to improve the user experience by creating and delivering excellent original content. Programs like ‘Stranger Things’ and ‘Man in the High Castle’ are unique to these two OTT providers respectively, and are expected to increase in viewership and reduce churn. As a consequence, we are likely to see a marked increase in acquisitions of traditional content producers by large pay TV and high speed internet providers. Industry acquisitions such as AT&T and Time Warner and Comcast’s acquisition of NBCU sparked this trend which looks set to continue as pay TV operators try and stay in-line with OTT providers.”

As the industry sees its share of both innovation and acquisition, service providers will look into new ways to deliver content to consumers. While operators will continue to improve upon devices in the field, they will also have to balance improving upon traditional devices with consumer choice.

“For the better part of a decade, technologists have been predicting the demise of the ubiquitous cable set-top box (STB),” said Dave Belt, Product Marketing Director, Irdeto. “The evolution and sometimes passing of various technologies, including the Home Media Center, Smart TV and ultimately OTT services, leads to this inevitable conclusion. Yet, the box persists. In lieu of a boxless world, we’re seeing the evolution of the STB with the features and functionality customers have come to expect in other CE devices. Moving forward we will continue to see a trend to transition managed boxes into the IP domain. Additionally, we will see a blending of features from the unmanaged realm into the CPE space and vice versa. Evolution will continue, but in the near term, news of the STBs death is greatly exaggerated.”

Rodrigo Fernandes, Product Marketing Director, Irdeto, added “Over the past year we have seen a market shift as consumers move toward viewing content on unmanaged, connected devices and it is safe to say over-the-top content is most definitely on the rise. The millennial demographic is disrupting the market. Their unpredictable nature to consuming media, is leaving providers scratching their heads as to what they will want next. To understand the elusive millennial demographic and also identify growing markets, providers should utilize data to analyze behaviors and propose new offerings and services to reflect consumer wants and needs and mirror these with their services. The use of data to understand different demographics and adjust services accordingly is something we expect to see more of in the next year.”

While Innovation and managing consumer habits will be on the minds of content owners and distributors alike, a key element of success will come down to building and maintaining consumer trust.

“This year, we expect to see consumers, creators and distributors look at alternate ways to restore trust in the industry,” said Lawrence Low, Vice President of Business Development and Sales, Irdeto. “In an age where it is hard to distinguish between what is true and what is fake, the search for authenticity is more important than ever. Fake distributors are dispensing an increased amount of pirated content into the market which consumers believe to be legitimate. It is up to the industry to educate consumers on what is pirated and what is legal. This will be critical in clearing out this illegal content to make way for legitimate programming.”

“The millennial demographic is disrupting the market.”- Rodrigo Fernandes, Irdeto

K e y D i s r u p t o r s P o i s e d t o S h a k e U p t h e M a r k e t

Change is inevitable for any industry. However, disruptors have the potential to alter a market, change business models and the ways that consumers interact with organizations. The media industry is facing a few disruptors, including blockchain, the cloud, virtual reality, big data and wireless local area network services.

“Blockchain is just one of the recent trends we saw disrupting the media industry; and a number of companies worked collaboratively to set up standards around the use of blockchain systems,” said Rodrigo Fernandes, Product Marketing Director, Irdeto. “Blockchain as proof of ownership could tackle the ongoing issue with OTT piracy as well as securing intellectual property. In the next year, we expect to see this technology transpire within to the industry as a legitimate proof of ownership, alongside implementing future methods to tackle OTT piracy such as virtual bounty on movies that are pirated. The development of this technology dramatically increases transparency in the industry, as the blockchain acts on a public ledger so information cannot be altered or destroyed and is recorded indefinitely.”

In addition to wider adoption of blockchain, we expect many organizations to fully embrace the benefits that the cloud offers.

“While some companies are still a bit reluctant to adopt cloud services, I believe that with the right security and compliance in place there is the possibility to get a grip to this,” said Godert Burghard, Vice President of Global Marketing, Irdeto. “The benefits are many in terms of bandwidth usage and distribution of computing power and services beyond a company’s datacenter. New services in the IoT space are introduced daily and this will drive the adoption. Businesses, however, will need to shift their security efforts focus from client devices to a more holistic 360-degree approach where cloud, applications, devices and the data and content are secured.”

Virtual reality (VR) and augmented reality (AR) are topics that have been on the minds of the industry for a few years. However, the key to wide adoption of both VR and AR is understanding what consumers hope to get out of these unique experiences.

“As VR and AR become ingrained in consumers’ consciousness, it is important to both understand what viewer’s desire from VR and AR content, and the opportunities that these technologies provide operators,” said Peter Oggel, Vice President of Product Management and Marketing at Irdeto. “VR provides an alternate

reality for consumers to live in while 360 video presents the opportunity to enhance the personalization of how a consumer experiences the content. Similarly, with personalized data and analytics, AR could enrich the content that operators are providing to deliver an experience tailored to each user’s unique preferences. In the coming months, we will see more operators tap into the personalized data and analytics that go hand-in-hand with an AR experience as well as an amalgamation of 360 video and gaming VR to create a hybrid offering. By harnessing these capabilities, AR and VR will allow operators to take personalization to the next level to meet a broad range of consumer demands.”

In order for this trend to find success in the coming year, security for VR and AR content will also improve. A greater investment in developing more encryption technologies will occur, in order to efficiently protect content from piracy, and to ensure the authenticity and integrity of transmitted data. A concerted effort will be made in the AR industry to protect consumer’s privacy and data that goes into creating a personalized experience. The VR industry will become increasingly high profile, as more money goes into both content development and security strategies. Being able to securely develop content that allows viewers to not only see the main event, but also interact with the surroundings, will be crucial to gaining and retaining customers.

Eduardo Henrique, Co-Founder and Head of Global Expansion, PlayKids, added, “As we look to the year ahead, our top priority, as always, is ensuring children around the world are enjoying content from PlayKids that is downloadable, streamable and of high quality. Having the ability to stream and download premium content via the app across multiple devices is essential for our audience and their parents. For PlayKids, VR will play a huge role in how our content is consumed. While it is still to be seen if VR will be as mature as expected in the years ahead, it will certainly change the entertainment and games space greatly in the next five years. As for big data, this continues to transform how people consume content as it is used more and more to inform and deliver personalized content to each individual consumer.”

Big data is one trend we have seen in recent years become increasingly more popular to not only analyze and identify patterns to detect vulnerabilities and aid in developing a robust security strategy, but also help companies better understand their customers. By having additional information about consumer behavior, big data can help drive content consumption.

“Big data provides companies with the ability to provide tailored and personalized experiences to their customers,” said Gabriel Hahmann, Sales Director, Brazil and Southern Cone, Irdeto. “By giving more efficient and accurate recommendations, this reduces the stress and time for choosing content on any OTT platform for consumers, leading to the ability to provide targeted advertising, an increase in viewing time and a more positive customer experience.”

Much like big data insights will help provide a better user experience, wireless local area network (WLAN) services will play a big part in delivering a true anytime and anywhere experience that consumers are looking for from service providers.

“Thanks to the high costs and unreliability associated with wireless broadband networks on transport, the next year will see transport operators forced to find solutions to reduce the cost and improve customer experience,” said Simon Dore, Chief Operating Officer, GoMedia. “Transport operators will seek to provide high quality wireless local area network (WLAN) services to passengers in order to mitigate these shortfalls in wireless provision. This is particularly crucial as the next 12 months will see an exponential growth of in-vehicle Wi-Fi provision thanks to commercial and operator license pressures. Only those operators that deploy ‘best in class’ Digital Rights Management (DRM) products will be able to provide the standard of content provided. With the help of the technical solutions being developed by Irdeto, we aim to become the first company to provide a truly cross-platform app-less, studio-approved DRM solution.”