The role of Telcos in the new, app-enriched TV ecosystem

Fraunhofer Institut

Web Media Symposium November 5°, 2010

The role of Telcos in the new, Social App-EnrichedTV EcosystemAntonio PavoliniSenior Analyst, Media [email protected]

Fraunhofer InstitutWeb Media Symposium – Berlin, November 5th 2010

The Sofa Screen is under Siege

Millions of connected devices (TVs in the first place) make it possible for Web Videos, in all their forms, to be enjoyed on the sofa screens

As a consequence of that, a new OTT TV ecosystem – where biz models are still to be defined - emerges alongside the traditional ecosystem based on vertically integrated video distribution

Pure OTT players are therefore obliged to rethink their web applications, born as “social”, towards a Lean Back proposition…

…whilst traditional broadcasters , on the other hand, must find new value propositions able to compete in the new context (on demand, catch up TV, “deep” digital identity, social applications…)

Telcos, a.k.a. those who manage the infrastructure and distribution platforms, are looking for an “ideal role” in the new scenario


The Device-Related aspect tells only a part of the Story…

BB STB Apple TV

Game consoleEs: xBos 360, PS3

Lettori Blu-ray/DVD

Broadcast: Satellite, Cable

BroadBand Network

Internet IP(Unmanaged)

BB STB “Ibrido” (DTT, Sat, Cable, IP)Es: Tivo, CuboVision

Traditional Set Top Boxes: Cable, Sat, DTT ,

hybrid,IPTV

BB STB Open Es: Roku

TV set Internet-enabledEs: Sony Bravia, Philips Net TVTV set DTT

Embedded

TELCO IPTV

OTT TV BOXES

IP (Managed)

The traditional Pay Tv Set Top Box is only one of the many ways consumers can access rich video content on the sofa screen . A whole new set of devices are aimed at allowing Online Video consumption on TVs through the Broadband connection

“Over The Top TV Boxes” Internet Enabled Tv Sets


Backend players: Simple guys, Complex guys

After a first wave of free, best effort solutions, the web video market is increasingly populated by OTT “managed” solutions , that require a more complex distribution platform with the aim of keeping the pace with the increasing volumes and ensuring Quality of Service

Cost & Complexity of distribution solution

Audi

ence

x S

ingo

lo C

onte

nuto

Blockbusters

Managed Distribution

Video Sharing Platforms

Mainstream Web TV

Best effort

Independent Content Providers

IPTV

OTT Video Streaming Platforms UGC

Online Stores

Illustrative chart


The new kids on the block

“Cannibalizers”: Google TV

“Splinternet makers”: Apple Tv (Take 3)

Aggregators: (Mainstream & Independent)

1

2

3

5


Different Aims, Different Strategies

BroadcastersConsumer Electronics Telcos

Aim

Non duplicable

Assets

Strategy

Offer Diversification Better market

segmentation aimed at increasing its value

New Device Sales Defence of native

egemony on the home environment

Offering Diversification Incentive to broadband

subscription upgrades Finding new revenue sources

Premium Content Brand

User Experience Control

Brand

QoS 3 screens Client base and tools to manage it

(CRM, billing…)

Lock-in on exclusive content, keeping control on the user experience on online content (intermediation)

Lock-in on Devices, allowing selective openings to Widgets and OTT Applications

Partnership with Telcos, aimed at offering Quality of Service

Pay: two-side business model offrering differentiated QoS to Independent and/or not vertically integrated Content Providers

Free: Best Effort and Rev-Share from Context & Targeted Ads

App Store with OpenSDK User Experience as leverage

between Premium and Open Sea


The Role of Telcos

The Gap between TV and the Internet is narrowing

Content Owners endorse Web Distribution

New Advertising Technologies offer fresh opportunities (tracking, interactivity, targeting, tailoring, etc.)

Scenario

Service Providers enable

Multiplatform Video Content Distribution

From Walled Garden

ToOpen

Platform


Distribution solutions are increasingly getting taylored

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Distro solutions are increasingly taylored depending on the nature of the content

Biz models diversify on the basis of the upstream costumers carachteristics (in this case Content Owners)

Telco operators tend to offer wholesale solutions to vertically integrated players…

…and more complex solutions, where they can leverage their distinctive assets along the chain (QoS, CRM, Deep Digital Identity, recommendation, Billing, Context-based ADV…) to independent content providers

Broadcast

Wholesale CDN

Wholesale CDN+Custom solution

Different models, different revenue sources for every upstream segment

Distribution Platform: CDN + Digital Identity + CRM


There’s new room for business in the emerging user trendsLong Form/Short Form Lean Back/Lean Forward Discovery/Search Pay per View/Pay To Own

Audio/Video

Growing content interaction and consequent attention scarcity determine a crisis for log form content at the benefit of short form

Long form finds a safe haven in richer (and closed) UX environments (Blu-Ray, Theaters, 3D)

Mainstream TV and Radio mainstream suffer from time schedule fragmentation

Independent Content Providers, free from time schedule ties, take advantage of “daily spare time segments” that were not dedicated to media consumption

The challenge to turn desktop-born, high-interaction, lean-forward content into something “sofa friendly” and “lean back” is getting more important (Yankee Group, 2010)

Solution has nothing to do with ergonomics (remote control)…

…and has a lot to do with a better overall UX (OVEC, 2009)

From schedules to queues to personalized or reccomendation-based playlists

Desktop keeps being the ideal connected TV configuration environment , but…

…mobile application increase their role in social features

On the Sofa Screen (TV), or while driving a car (Radio) users still prefer to “Stumble Upon” interesting content, in the typical Discovery Mode that has been governed by traditional broadcasters for years...

…but linear TV and Radio are not anymore the only ones who decide “What’s in the Discovery”; recommendation engines and friends lists gain a growing mole in creating the User’s playlists

Search still remain the preferred access approach to content on Desktop and Mobile devices.

Italy is the Country where PTO is the less preferred pay model for digital content (OVUM)

Italy has an high willingness to pay for enjoying the content regardless of owning it:therefore PPV and rentals can be successful(Yankee Group 2010)

Italians accept pre-roll advertising , due to their long standing exposure to commercial television (OVUM)

Italy presents good opportunities in offering OTT TV features as a premium service, in cluded in a tiered offering with a premium price to be paid for accessing the application store. (“all you can eat”)

Text/Still Pics

Digitization moves text content towards connected devices

Devices are specialized for content nature : ebook (long) tablet (short + medium) others (short)

Tablets create new “consumption areas” in the home environment (fourth screen)

Both in mobility and on the “home fourth screen”, text-based long form content basically remain “Lean Back”, as they don’t require frequent user interaction

Short/medium form (newspapers, blogs, magazines, pics) are more engaging , and are more friendly to targeted/context based adv

Text based content is still governed by the search access approach, better if integrated with a powerful reccomendation engine (Kindle Amazon, iTunes) aimed at increasing the purchase decision rate

Ebook publishers are reluctant to introduce “all you can eat “, subscription based, access to their online stores, as it happened with some music offerings

Newspapers and magazines, instead, are distributed as “applications”, paid a monthly basis.

Short form content (blog, online paper versions, etc.) are ad funded and rely on the blogger’s self marketing needs


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1

Three Possibile Scenarios

OTT TV: “Open” WebApps Public APIs are called by all devices, on device-based

applications

Users and developers get full control of the opportunity that lies behind diversification of apps and content

OTT-TV: “CE-driven/Splinternet” Hardware manufacturers “taylor” online content and services in order to

optimize them for selected devices, taking full control of UX

Users and developers lose control of the “long tail” opportunity; in exchange, they obtain a more affordable UX environment

OTT-TV Open/Telco Driven: Telco operators create an open environment for Users and Developers,

(where content and apps choice is free) ,but offer differentiated services on a two-sided platform for content owners and downstream customers

2

Three roads to OTT TV

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Fraunhofer Institut


Thank You!

Antonio PavoliniSenior Analyst, Media [email protected]

Fraunhofer Institut


Backup


No need of an App Store, if you don’t crowdsource in an open way

As the iPhone case widely demonstrated, an open

Application Store that can leverage on crowdsourcing,

with an SDK open to third party developers (keeping control on

what apps are phisically distributed on the official store) is key

to reaching a critical mass not only on “service” applications

but also on “content applications” that offer CPs a personalized

environment for distributing their “signed” library

This solution is ideal to generate value from free content with

public APIs, as it transfers the effort of building the

application to the developer’s community

At the same time, it gives users access to the widest possible

free catalogue (a problem for broadcasters, not for telcos).

When Premium (Pay) Content is involved, the developement

of an application (that leverages on the high powered telco

backend), can be part of the Telco’s proposition to Content

Providers

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App Stores and Willingness to Pay: Tiered Offers a Winner?

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“Uptake of internet TV will probably result in a hike in broadband prices in the UK.“When services such as YouView and Apple TV arrive on the scene, it won’t be long before there is considerable consumer demand for Internet TV. Thompson suggests that while it might give ISPs ‘the excuse they’ve been looking for’ to shift broadband prices away from the ‘all you can eat’ model, it will potentially also necessitate the investment in next-generation broadband services which the country needs.”Mark Thompson, Director General BBC


Cross Device Experience

In the OTT-TV arena a Telco can develop a cross-device proposition aimed at getting benefit from its exclusive capability to offer a seamless experience in any place at any time, on any device

At Home

Far from Home

Third party STBDedicated Set Top Box Connected TV

Mobile Devices Any Web Access

Strategy on width of User Base

Widgets on connected devices, selecting those with the most open platform

Total control of Digital Identity

Focus on “dead time maximization” for “lean forward” interaction activities


Playing with Flexibility and Scarcity

As the current Broadband network cannot sustain the growing demand for online video consumption, the value of managed distribution solutions grows

Managed OTT efficiently addresses the subset of online video content on which the building of new biz models for the sofa screen is possible

These are the editorial quality contents that are not bound with the traditional distribution chains, that have always been controlled by vertically integrated broadcasters

In a new Ecosystem centered on editorial quality prosumer content (Independent Content Providers) there is no “One size fits all” business model, just because it’s not anymore the distributor to set all the chain rules

Multiplatform Managed OTT-TV is a very promising opportunity for a Telco operator to build a Two-Sided Business Model

Many Content Provider that are currently integrated in the traditional chains may be willing to migrate towards online distribution, with the aim of getting more independence

The telcos own the only business elements that are horizontal to all online distribution business models:

Quality of Service 3 Screens Digital Identity Management CRM and Billing Management

Telcos can expose these assets to Independent Content Providers in order to maximize the business models that THEY build

TWO GOOD NEWS


The Era of Polarized Models

PAY: Mainstream Content ProvidersFREE: Independent Pro Content Providers

Content Category

If the Content Provider is also the Content Owner (ex. PGA or Formula 1) it’s the sponsor who subsidize the QoS, Billing and Caring Platform provided by the Telco Operator. As the user directly pays the Content Owner, the traditional Media chain is disintermediated

Telcos can provide CPs with a white label platform allowing content to natively reach three screens

Free content can be made available through a “Pay Just Once” application (iPhone/BBC model) in rev-share with Content Providers

Model Description

Two-sided: il Content Provider pays the Telco for a Platform ensuring QoS…

...while users pay a fee that can be shared by Telco and Content Provider

Online Video Free Services, natively released on public APIs for desktop use, can be redistributed on OTT TV with third party apps written by Content Providers themselves. Telcos can expose their digital identity platform and their recommendation engine to return value to the application and offer context-based advertising (preroll, display)

Variables

Rev. Share Fee + Quality of ServiceRevenue Share from Advertising


The new engagement rules with content providers

A new paradigm

As OTT TV is a distribution platform open to all Content Providers (with no cultural obstacles, as broadcasters have, aimed at defending mainstream/premium content ) business models primarily depend on Content Owners

This means that Service Providers have to build a Business Model around the nature of the content alongside with the Content Owner, looking for “shareable” sources of revenue

If a Service provider has the ambition to place itself at the center of the new Ecosystem , new engagement rules with Content and Application providers have to be set

These rules go far beyond the traditional negotiation process with majors/publishers

What the Telcos can Offer What the Telco are looking for

Quality of Service and Quality of Experience even in condition of Traffic Congestion

Reach of a big multiplatform customer base multipiattaforma (ADSL on fixed lines, 3G for mobile lines)

Anytime, Anywhere, Cross-Device Parental Control and DRM Billing, CRM e Tech Support Mass Market Proof Marketing /Communication

Resources Digital Identity Management (recommendation

engine, context based adv) aimed at maximizing Client Contact AND Application Value

Content : Professional Rights Cleared Strongly differentiated by mainstream TV able to reach a wide public individually, or a

critical mass of niches, able generate significant revenue

That does not require a strong localization effort (dubbed/subtitled) o language-neutral (ex: Music, Vimeo, Arte Live Web)

Applications: That do not create discontinuity in the UX That do not set new knots for the Ecosystem


Focus: Google TV: cannibalizing all biz models?

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► Google is to launch its own OTT TV software-

based proposition (Google TV)

► Based on Chrome, this software will allow

navigation on the sofa screen among all the video

content that is normally available via desktop

browser, as Open Source Applications like Boxee

have already made possible

► Google TV will also provide a TV-friendly interface for

popular Social Media apps like Facebook or Twitter

► A SDK will help independent content providers

develop widgets to access their content, and –

most important – participation in the advertising rev-

sharing program, the real core of the biz model as

already happens with AdSense on desktop apps

► Google announced Partnerships with Sony

(Connected TVs) and Intel (chipset for a future

dedicated STB)

► The big 4 broadcasters (NBC, ABC, CBS and FOX)

seem reluctant to sign a distro agreement with

Google

*Source: The New York Times

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Focus on Blip.tv: Platform Provider is an OTT thing?

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“We are not an internet company: we are a media company. Our competitors are not the likes of internet startups. Our competitors are NBC or CBS. Our business model is not complex: we sell advertising and retain a revenue share”.Dina Kaplan, CEO & Co-founder Blip.tv 48.000 Prosumer shows Best shows receive 100.000$ +

of rev share every year Top prosumer show received

1.000.000$ in 2010

Distribution agreements with Sony Bravia, iTunes, AOL, Boxee, Roku, Vimeo, TiVo. Myspace TV, YouTube…

“Aggregators and audience multipliers”

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The role of Telcos in the new, app-enriched TV ecosystem

Business

web applications

new ott tv ecosystem

web video market

distribution solutions

web videos

tv boxes internet enabled

new context

traditional pay tv