SUPPLEMENT SPONSORS VoD Leading IPTV ... - CSI MagazineSpain as among the IPTV operators well placed to take advantage of these opportunities. IPTV operators could also use t-commerce

These are trying times for IPTV

operators. Tough competition

from other broadcasters, and the

growing threat posed by online 'over the

top' content delivery services are forcing

them to re-examine business models,

particularly in relation to the delivery of

on-demand services. They need to exploit

IP technology in new ways to differentiate

themselves, allowing consumers to move

as far as they like away from schedule-

based, broadcaster-controlled linear TV to

a more personalised, content-based, user-

controlled experience. But it is likely that

those services can only be

supported through the

development of new

advertising and sponsorship

models.

As always, content is a key

factor. IPTV operators are finding it

hard to compete with other service

providers offering the latest premium

content, so are starting to focus more on

the 'long tail' of older content, including

catch-up TV services, instead. There may

also be commercial opportunities

associated with offering access to content

that relates to a subscriber's

local area. The provision of

services relating to user-generated

content (UGC) might also become a

significant on-demand revenue stream,

including community services, as well

as the sort of material that seems to be

proving so popular on YouTube.

“I think it would be interesting

for an IPTV operator to try and make

use of those concepts in their access

models, to index or categorise them,

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Visit us at Amsterdam7-11 September 2007Stand 1.171

Targeted advertising, with a few caveats, might just makeIPTV VoD business models work, finds David Adams

In VoD we trust

Leading IPTV solutions

or put together a 'best of' selection,”

says Werner Strydom, IPTV product

director at content security specialist

Irdeto. “You could sell a subscription service

there, based on public domain user

generated content. To make that viable,

you'd have to combine that with ommunity-

based services allowing users to discuss

content.” Among pre-existing examples of

this sort of service, MyOwn TV in Belgium

enables consumers to swap this kind of

home-made material. Technology providers

such as SeaChange now offer specialist

UGC solutions for IPTV.

There may also be significant

commercial gains to be made through on-

demand gaming applications and services,

and from social networking-type

services. Participation in TV game

shows, or in educational programming

are also likely to feature in future.

Long-tail advertisingBut perhaps most significantly of all,

interactivity enables development and

deployment of new advertising formats,

including longer form advertising content

to which users can switch from VoD

content or a PVR video stream without

missing any of what they're watching.

The way interactive capabilities could

be combined with a more detailed level

of targeted advertising than has been

available up to now is surely the most

important attribute of IPTV technology

operators can exploit to underpin

business models. “The two-way nature

of IPTV networks means you can monitor

what's being watched, and you can build

up profiles within the bounds of that

country's data protection legislation,”

says Werner Strydom's colleague,

Pierre Hunter, director for business

development of IPTV at Irdeto.

If operators can develop the necessary

commercial infrastructure, it will be

fascinating to see exactly how much

money they can make. “If you're able

to target a certain segment of the market,

and you could measure the delivery

of advertising by proving people haven't

switched over during the adverts, you

could probably charge about four times

as much, because the IP stream allows

you to prove something has been

wathched, that you've got through to

your target demographic,” says Alex Holt,

head of media at Cable & Wireless.

“You're building up a picture of what

customers' preferences are. If you could

offer a bank 100,000 individuals you

could be pretty sure you knew were

thinking about buying their first home,

how much value would they place on

that, rather than having to take a

scattergun approach with marketing?”

The ability to target such tightly

defined demographic segments could

be particularly potent in markets that

already have a well-established local

ad insertion market. One major two-year

trial of Dynamic On Demand Advertising

technology completed in March this year

in the US, in St Louis, Missouri, where

cable TV provider Charter Communications

collaborated with several advertising

technology specialists. C-COR's nABLE on-

demand ad insertion solution was used

alongside automated campaign

management technology provided by Atlas

On Demand, and TVN's advertising

distribution system.

“We placed a variety of different

video/audio spots, ranging from 15

seconds to two minutes, in with short

form VoD programming,” explains

Joe Matarese, senior vice-president

of advanced global technology at C-COR.

“We measured how subscribers interacted

with that content. We allowed full trickplay,

attempting to see which ads were least

susceptible to subscribers fast-forwarding

through them.” Although the trial involved

cable TV, the data it has produced

demonstrates the potential value of this

technology to IPTV operators.

Matarese believes on demand

advertising formats could easily take off in

Europe: he points to Telefonica and Ono in

Spain as among the IPTV operators well

placed to take advantage of these

opportunities. IPTV operators could also

use t-commerce (interactive TV-based

ecommerce) as a revenue stream, with TV

viewers buying goods following product

placements in programming, or accessing

content relating to a programme they have

been watching.

But IPTV operators seeking to

maximise the commercial potential of this

kind of interactivity will have to find the

correct balance between consumers'

willingness to watch advertising in order

to access free or inexpensive TV, and

their dislike of an overly complicated TV

experience.

“It will be interesting to see what level

of interactivity subscribers are willing

to bear,” says Matarese. “There are

people looking at applications that allow

of lot of information and graphics going

onto screens during the ad. That can be

very compelling on large screens used for

HD, but there's a fundamental question

as to whether you should get too fancy.

Maybe you're best off just putting on an

ad that produces more of the lean back

experience people expect on TV.”

Other issuesThe other key factors IPTV operators will

need to consider as they construct new

business models are subscription

revenues and infrastructure costs. “I don't

know how long these new IPTV operators

have got to build up a core group of

customers for triple play,” says Andrew

Wilding, managing director at Internet TV

company Vividas. “They've had to

invest significant amounts of

money to build IPTV

networks. They've got

to build up a huge

number

of customers

to get a

return on their investment.

Voice services are effectively

moving towards being free, data

services also, so where do I make

money? At the moment, IPTV isn't

necessarily giving that compelling

drive to consumers to switch from

what they're doing. Even when

you look at subscriptions, a lot of

it is price-based, and when

markets go like that they have

a tendency to come down to

a contest between the

people with the best

financial clout.”

At the same time, IPTV

operators have to

recognise the threat

from online, over-the-

top content

providers. Some

observers think

both Internet TV

page eight

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and IPTV can co-exist peacefully for the

foreseeable future, particularly as there are

so many potential benefits from some of

these companies working together.

But some Internet TV companies are

bullish about the prospects of putting

IPTV operators under pressure. “Our

viewpoint is that an IPTV VOD

service is not going to give the

choice and flexibility that users

want,” says Wilding.

“A cable and satellite user

has a couple of hundred channels to surf

through, or people are going to Bittorrent,

because they're not prepared to wait for

programmes to get to the UK. The

challenge for traditional broadcasters and

IPTV providers is that more users are

demanding greater choice and

interoperability than they can provide.

They will have to embrace greater

interactivity and the ability to watch on

other devices.”

IPTV operators have long argued

against this, claiming that they can offer a

controlled, high quality TV experience

Internet TV can't match, because

of the variable quality offered by

broadband ISPs. “Over the top Internet

delivery is becoming a concern to every

single operator out there, but the

infrastructure challenges remain high,”

says Tom Rosenstein, vice-president

of product marketing and alliances at

digital video server specialist SeaChange.

“You now have even people like Google

saying the Internet infrastructure won't

be able to scale.”

Wilding responds by pointing

to the rapid improvements being made

by Internet TV players like Vividas.

“The argument is that you can't rely

on the Internet to deliver, but in many

respects the Internet is coping very well,”

he claims. “YouTube and Joost are

delivering content in an open environment.

People have always said you need an 8MB

connection for quality HD delivery, but we

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Visit us at Amsterdam7-11 September 2007Stand 1.171

“We placed a variety of differentvideo/audio spots, ranging from 15seconds to two minutes, in with shortform VoD programming.”

Leading IPTV solutions

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can do HD at 1.2MBps over a 2MB

broadband line. More and more people are

saying about Internet TV that this is a way

they can go to market cost-effectively.”

As he points out, Internet TV companies

may also have more flexibility in their

business models than IPTV operators

weighed down by distribution

infrastructures and STB deployments.

After all, Internet TV companies have

already had to explore a variety of ways

of making money, including collaboration

with IPTV and non-IPTV operators,

and the provision of online broadcast

services for corporate, and other one-off

events. Wilding believes IPTV operators

will eventually be forced to knock down

their garden walls and embrace open

technological standards, particularly

as more CE devices that allow content

to be viewed outside the home

and on the move become available.

Content is still kingThat argument may become

more compelling in the longer term,

but in the meantime there's still plenty

of evidence to suggest that the desire

to just sit back and watch almost

certainly still dominates consumer

behaviour. “The bulk of the TV viewing

populations just want to be entertained,”

says Irdeto's Hunter. “They want a good

quality picture, they want fast channel

change times, and they don't want things

to be too complicated.”

Even so, Internet TV players are

themselves facing a serious challenge

in attracting adequate viewers to win

advertisers; and there's no sign of

advertising revenue losing its pre-

eminence as a business driver. That gives

IPTV operators a good chance of success

if they continue to offer a high quality

experience and content viewers want

to watch.

As far as content is concerned,

it's not a question of exactly what

you've got, but what you can allow

the consumer to do with it. “Historically,

content has always been king, but the

future is around the customer being

king,” says C&W's Holt.

“Content is still really important,

but each individual has a different view

of what content they find exciting.

If you're truly customer-focused

and you know what they're after

and how much they will pay for it

then you could make money.”

In the end, for all the technical innovation

on show in this market, it comes down

to some TV industry basics: putting

together creative, attractive consumer

and advertiser propositions. SeaChange's

Rosenstein sums up the three key elements

to a successful IPTV strategy as: putting

together a truly competitive offering,

reducing churn, and using targeted

advertising. Advertising and sponsorship

models will be all-important if subscription

revenues are unreliable (even if subscriber

numbers are healthy). A simple pricing

model and a high quality, user-friendly TV

experience are the best tools they can use

to keep subscribers, and thus advertisers

happy. In one sense, it's not very

complicated stuff, but it's not going

to be easy, either. CSI

Audio70%

Software2%

Images3%

Other video5%

TV Shows5%

Movies7%

Adult video8%

Source: Canalys estimates, IPTV Analysis, April 2007

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