TV Everywhere & OTT OTT 03-11-13v2.… · TV Everywhere & OTT Preserving the Pay TV Model March 2013. 2 Executive Summary ... “TV Everywhere Could Create $12BN in Annual Revenue

TV Everywhere & OTT

Preserving the Pay TV Model

March 2013

2

Executive Summary• Cable/pay TV remains one of the great cash cows of the modern media and communications

industries, but in a maturing market that faces a growing threat of disruption, real service

innovation is needed

• Innovation is coming as content is being repurposed to support a growing array of digital

services and parallel wireless and broadband networks are being synchronized to move content

freely among all devices

− Over-the-top (OTT) and TV Everywhere (TVE) services are now mainstream, and− The seamless movement of video between devices and turning the “second screen” into a useful adjunct of the

television is becoming more real as consumers demand control of their media experiences

• Software is fast becoming as important as content in determining the user experience, and there

is no shortage of tech companies working to unbundle the content that sits at the core of the

cable/pay TV business

• While Cable/pay TV have ample time to work on these issues, as evidenced by early advances, it

is apparent that real and meaningful innovation must take a higher priority than it has previously

• For SPT, a clear case can be made to support investment in our ‘digital’ infrastructure to ensure

that we remain competitive, can adapt multiscreen solutions and support pay TV operation

initiatives, thereby sustaining subscriber fees, keeping our brands cutting edge and offering what

consumers want

• The TVE platform appears to be the most effective multiscreen solution for developed markets

with high pay TV penetration rates. However, in less developed markets with relatively low pay

TV penetration, OTT platforms are well-positioned to take on a more dominant role than TVE

• Successful channels will be the ones with the agility, technical expertise and content rights

necessary to present their brand to consumers in a market- and platform-specific manner

3

Pay TV still Strong

• Pay TV satisfaction remains high among consumers− Reported 86% of U.S. pay TV consumers are satisfied with service(1)

• Despite rapid growth in OTT, pay TV still holds commanding revenue advantage− OTT revenues are just 3% compared to pay TV

• Cord cutting has not yet impacted the pay TV subscriber base

Global Pay TV Subscribers(2)

(1) “2nd Annual Online Video Survey,” Morgan Stanley Research February, 2012(2) SNL Screen Digest

'08 '09 '10 '11 '12 '13 '14 '15 '16 '170

100200300400500600700800900

1000

0%1%2%3%4%5%6%7%8%9%10%

Global Pay TV Subs Growth

Subs (MM) Annual Growth

• OTT: Services that ride on top of your Internet connection but have no relationship with an MVPD or the ISP that provides the connection

• Variations of OTT services:

− Standalone aggregators

• TV Everywhere: MVPD-controlled VOD on TV service

− MVPD-hosted through website or mobile/tablet application

4

Over-the-top (OTT) and TV Everywhere (TVE) Defined

5

• The U.S. OTT market continues to expand rapidly, with total revenues forecast to grow at a 24% CAGR through 2017

‒ Global OTT market expecting a 29% CAGR over the same period‒ Despite rapid growth, OTT represents low near-term risk to pay TV

− Total OTT revenues are just 3% of pay TV, expected to remain below 10% through 2016

• Subscriber levels are approaching Pay TV, but the majority are non-paying− Of Hulu’s total 31MM estimated U.S. subs, 28MM-29MM subscribe to the free service

− Over the long-term, with an appropriate mix of programming and pricing, OTT could pose a significant threat to traditional pay TV model

• In markets with relatively low pay TV penetration, where MVPDs do not have the same degree of leverage over programmers, there is increased potential for OTT to take a more dominant position than TVE

• Pay TV operators could avoid / lessen potential impact of OTT through improvements to and better marketing of TV Everywhere

− Higher adoption rates of TVE would increase value to consumers and support the pay TV pricing

OTT Market Continues to Expand

Global OTT Revenues 2012 to 2017(figures in $ millions)

6

2012:$7,929

2017:$23,414

2012:$86

2017:$807

2012:$1,614

2017:$7,174

2012:$0

2017:$110

2012:$842

2017:$4,561

2012:$95

2017:$1,174

Source: Informa Telecoms & Media

$11BN Growing to $37BN by 2017

Global OTT Forecast

• Revenue is forecast to grow at a 29% CAGR through 2017• Advertising is expected to remain the largest revenue category for the

foreseeable future

Global OTT Revenue

7

2011 2012 2013 2014 2015 2016 20170

5

10

15

20

25

30

35

40

3.5 5.1 7.0 9.2 12.5

16.0 18.5

2.5 3.5

4.5 6.0

8.0

9.5

14.0

2.0 2.0

2.5

3.1

3.3

4.3

4.7

$8 $11

$14

$18

$24

$30

$37

Advertising Subscriptions Transactions Total

Source: Informa Telecoms & Media

($BN)

• Expected growth in the number of connected devices will continue to provide opportunities for multiscreen services

2011 2012 2013 2014 2015 2016

36 62 85 101 114 121

122

157

190209

226 238

16

36

65

93

119149

9

14

19

22

24

26

57

65

67

69

77

83

240

334

426

494

560

617

8

Connected device growth

Source: SNL Kagan, September 2012.(1) Western European Smartphone forecast assumes ‘U.S. ‘10 – ‘11 growth rate of 35% applied to 2010 installed base and ‘12 – ’16 growth rates per Saffron Digital.(2) Includes the subset of TVs and Blu-ray players that are connected to the Internet.(3) Includes installed base of Internet-connected standalone set-tops designed for online video viewing such as AppleTV, Roku, Google TV, Boxee, standalone TiVo and

other devices. (4) Includes the subset of game consoles that are connected to the Internet such as Sony PlayStation, Microsoft Xbox and Nintendo Wii.

U.S. (MM)

(2) (3) (4)Tablets Smartphone Owners TV’s/Blu-ray Players Standalone SetTops Game Consoles

Western Europe (MM)(1)

2011 – 2016 CAGR:

21%

2011 2012 2013 2014 2015 2016

9 22 4369

9913298

129

158

181

197

209

9

21

42

71

100

128

9

14

19

22

24

26

9

15

25

35

45

53

134

201

287

378

465

548

2011

– 2

016

CAGR:

33%

TV Everywhere Use in the U.S.

• All six major U.S. MSOs offer some form of TVE services as an extension of their existing linear pay TV service

• Current usage remains low, as less than half of U.S. pay TV subscribers have tried the service

• Despite low usage to date, analysts expect TVE revenues to catch up and pass OTT in the near future as operators improve the consumer experience and implement more comprehensive marketing campaigns

– In the next 2-4 years, U.S. TVE is expected to contribute an additional $12BN in annual revenue to U.S. TV ecosystem.(1) The majority (85%) of this amount is expected to result from additional advertising opportunities, while 15% will be from incremental pricing of new digital offerings

• To realize these new revenue streams, operators and programmers must work together to:

– Innovate their ecosystems and focus on the consumer experience

– Reward teamwork and preserve the symbiotic nature of the business model

– Consolidate nationally and internationally to effectively compete with the challenge of OTT(2)

9

(1) “TV Everywhere Could Create $12BN in Annual Revenue for TV Industry,” The Hollywood Reporter, Jan 20, 2012

(2) “TV Delivery Evolution: Hybrid TV, OTT and TVE,” September 2012

10

TVE is also Evolving

• 5MM+ mobile app downloads(1) (28MM subs)

• Defensive tactic against standalone svcs

• Testing web-only HBO GO svc in Nordics

• ~5MM active users (21MM subs)

• Aggressively securing rights from ntwks

• Offers Streampix up-sell / bundle(2)

• 36 operators in 20 int’l markets instituted TV Everywhere strategies by 2012

• Operators considering moving niche linear channels to captive SVOD platforms (e.g., Streampix) to combat pure-play OTT providers

• Debate surrounding financial contribution of various TV Everywhere initiatives and whether it will be incremental or cannibalistic

(1) Time Warner Q2 earnings call as of 8/11.(2) Streampix free to Comcast triple play and other select packages and includes +800 films and +1,500 TV episodes.(3) Source: Needham Research, January 2012.

Network hosted Multichannel Operator Controlled

Financial Contribution

International Roll-out

Next Generation Strategies

11

U.S. TVE Players

Source: Morgan Stanley Media and Cable/Satellite December 11th, 2012

Any Play, Streampix, Xfinity.com, HBO GO, Watch ESPN

TXC TV app, HBO Go, Watch ESPN

HBO GO, Turner App, epixhd.com

Optimum TV to GO, Turner App, HBO Go, Watch ESPN

Nomad, DirecTV Everywhere, HBO GO, Max GO

Dish remote Access, HBO GO, Max GO, Starz Play

Provider TVE Application / Website

12

UK TVE Players

Sky Go

Virgin TV Anywhere

SVOD and TVOD through BT Vision+

STB available; apps currently in development

Provider TVE Application / Website

53%

6%

13%

2%

0%

2%

11%

10%2%

ESPN Play Moviecity Play Muu HBO Go HotGo Telecine Play Fox Play DirecTV Sports

Premiere FC

13

Latin America TVE Players and Penetration

Source: “TV Everywhere in Latin America,” Dataxis, 2012

Subscribers Moviecity Telecine DirecTVCountry (in '000s) ESPN Play Play Muu HBO Go HotGo Play Fox Play Sports Premiere FC

Argentina 7,850 74.3% 12.3% --% --% 0.2% --% 28.4% 22.1% --%

Brazil 14,640 36.0% --% 35.6% 4.6% --% 6.1% --% --% 6.2%

Chile 2,130 55.3% 11.2% --% --% 0.2% --% 12.0% 12.0% --%

Colombia 4,110 39.6% 6.9% --% 2.1% 0.1% --% 13.8% 13.8% --%

Mexico 12,320 35.4% 5.3% --% --% 0.2% --% --% --% --%

Peru 1,250 78.5% 1.5% --% --% --% --% 10.1% 10.1% --%

Venezuela 2,950 72.9% 10.4% --% --% 0.1% --% 45.7% 45.7% --%

Total 45,250 47.3% 5.4% 11.5% 1.7% 0.1% 2.0% 10.0% 8.9% 2.0%

14

Case Study: HBO GO Nordic (OTT vs. TVE)

HBO Nordic launching in Denmark, Sweden, Norway and Finland this month

• First stand-alone HBO GO service that does not require MVPD subscription

• €10 per month for streaming only or as an add-on to standard pay TV subscriptions

• Will compete with Netflix's planned service

• Launch delayed, originally planned to go live in late 2012

15

Virtual MSOSky has launched a TVE service offering to non-pay TV subscribers

• Service does not require concurrent linear pay TV subscription first voluntary decoupling of TVE from traditional pay TV model

• Sky Go offers four TVE packages ranging from $23-$60 per month, with additional amounts for ESPN

• Content viewable on Android, iOS and PCs

Sky Entertainment5 live channelsAdditional channels on-demand£15 per month(additional £13 per month for ESPN)

Sky Movies & Entertainment11 movie channelsHundreds of movies on demand20 live channels£32 per month(additional £13 per month for ESPN)

Sky Sports & EntertainmentAll 6 Sky sports channels5 on-demand entertainment channels20 live channels£35 per month(additional £10 per month for ESPN)

Sky Movies, Sports & EntertainmentAll 6 Sky sports channels11 Sky movie channels5 on-demand entertainment channels20 live channels£40 per month(additional £10 per month for ESPN)

Sky Go Package Details

16

Second Screen Market Trends

• Second-screen activity is mainstream and here to stay

‒ More than 40% of U.S. viewers use a tablet / smartphone while watching TV

• Companion devices hold key to new revenue sources

U.S. Frequency of Use While Watching TV

Source: Informa Telecoms & Media & Nielsen data

Frequency Device

Tablet Smartphone

Daily 42% 40%

Several times a week 24% 28%

Several times a month 14% 11%

Once a month or less 10% 7%

Never 13% 12%

Most Common 2nd Screen Activities

Social Networking

Remote Control

Content Discovery / TV Guide

Video Playback

Content Push to Main Screen

E-commerce

Play-along Games

DVR Management

Second-Screen Initiatives - U.S. and UK

AT&T

Partnered with four app developers in Oct 2011 to make apps available on its U-verse IPTV platform. Additional 3rd party apps have since been added, with AT&T encouraging developers to design new companion experiences for U-verse TV customers. Also offers its own-branded apps for mobile devices and tablets

Comcast

The largest U.S. pay-TV operator is poised to introduce new services in a major second-screen play, after moving to patent new social-TV technology in Jan 2012. Already offers Xfinity-branded multiscreen services for tablets and smartphones and launched social-TV app Tunerfish in 2010

DirecTVPartnered with app providers Miso and GetGlue to make their second-screen and social-TV services available on its platform. Also offers its own basic social-TV app that provides access to Facebook and Twitter

Dish Network

Is preparing a new second-screen service, which will aim to provide the full companion experience, including advanced content-discovery, remote-control and social-TV features. Dish already has a strong presence on tablets and smartphones with its current app and multiscreen services

BSkyBWill implement new social and complementary-content functionality into existing apps following partnership with social-TV startup Zeebox in Jan 2012 (acquired 10% stake in the company)

Virgin MediaCable operator is readying a new Tivo app to provide content discovery, remote-control and social-TV functionality, among other features, for customers of its "next-generation" Tivo service

U.S.

UK

17

International TVE

• Pacing behind the U.S. but select companies are taking the lead

SPT ChannelCarrier

SPT Channel Carrier

SPT ChannelCarrier

SPT ChannelCarrier

18

North America90%

ROW18%

Western Europe66%

Asia /Pacific9%

Source: “TV Everywhere: Growth, Solutions and Strategies (2nd edition) – Europe and APAC,” Parks Associates, 2012

Current TV Everywhere Availability

Eastern Europe21%

• The availability of TVE in Western Europe is second only to that of North America

U.S.23%

Latin America11%

EMEA13%

India35%

Asia Excl India12%

FY14 Budget data as of February 2013

Does not include new launches/new opportunities

SPT Networks Revenue

• A Western Europe TVE initiative complements SPT Networks’ international revenue distribution

‒ India would be the logical choice based on revenue alone, but the higher level of technical

infrastructure and TVE players makes Western Europe a more attractive market for a TVE

initiative

19

20

UK India UK India0

10

20

30

40

50

60

70

32.7

1

62.3

1.9

Fixed Broadband

Mobile Broadband

Broadband Subscribers – Developed vs. Emerging Mkts

• The amount of infrastructure in place and broadband subscriber base makes the UK a more attractive market for a multiscreen initiative

Source: “The State of Broadband in 2012: Achieving Digital Inclusion for All,” United Nations Broadband Commission, 2012

Broadband Subscriptions per 100 People

21

Source: “TV Everywhere: Growth, Solutions and Strategies (2nd edition) – Europe and APAC,” Parks Associates, 2012

TV Everywhere Forecast – Europe & Asia Pacific

2011 2012 2013 2014 2015 20160

50

100

150

200

250

64 78 89 95 99 101

1119

2428 30 32

23

52

6475

8594

2011 2012 2013 2014 2015 20160

20

40

60

80

100

120

140

160

180

200

2850

6882 88 90

15

27

36

4248 52

14

23

28

34

4050

Western Europe Eastern Europe Asia Pacific

Pay TV Subscribers with TVE Access Operators offering TVE Services

• By 2016, more than 100MM pay TV subscribers in Western Europe will have access to TVE / multiscreen services offered by almost 100 MVPDs

22

(1) Informa Telecoms & Media, 2012(2) “TV Everywhere in Latin America, Dataxis Reports 2012Data additionally assumes total pay TV subscriber base grows at 3% per year 2012-2017 and no new TVE initiatives are launched over forecast period

TV Everywhere Forecast – Latin America

• Using OTT as a proxy for overall multiscreen initiative growth;

• If TVE is able to achieve a relatively conservative 25% CAGR through 2017, availability would increase to more than 100MM homes by 2017(1)

2012 20170

20

40

60

80

100

120

40.25

114.95

Total Venezuela Peru Mexico Colombia Chile Argentina Brazil

Lat Am TVE Availability – 20012 to 2017(2)

(Sub

s M

Ms)

23

Conclusion• Multiscreen services, including TVE and OTT, have become mainstream and are here to stay

• Thus far OTT growth has outpaced TVE, as MVPDs have not felt sufficient pressure from cord-cutting

consumers to aggressively develop and market TVE ecosystems. However, increased consumer demand for

control over content will continue to drive higher growth for both multiscreen solutions

• Successful channels will be the ones with the agility necessary to present their brand to consumers in a

market- and platform-specific manner

• The ability of TVE to integrate concurrent and independent use of platforms with traditional viewing and offer

advertisers cross-platform campaign capabilities adds an amount of value that OTT cannot replicate, and

gives TVE a significant competitive advantage

• However, TVE’s advantages over OTT are diminished in markets with relatively low pay TV penetration. In

these regions, with fewer benefits from a programmers-MVPD TVE partnership, there is a higher chance that

direct-to-consumer (OTT) will become the principal multiscreen platform

• Outside North America, West Europe is the most attractive region for a TVE initiative, with advanced

infrastructure, high broadband use, more than 60% TVE penetration and a strong forecast for TVE availability

• Programmers will need to be participatory in MVPD TVE campaigns and leverage the existing relationships to

avoid deterioration of subscribers, fees and ad revenue. A strong, well-marketed TVE presence is the best

way for programmers and operators to provide consumers with a multiscreen solution, while also adding

value to both consumers and advertisers, supporting the pay TV pricing model and preserving the

programmer-MVPD relationship

• Potential multiscreen initiatives will require thoughtful analyses of the existing multichannel marketplace,

content availability and opportunity costs, technical infrastructure, resource requirements and delivery costs

to measure the comparative attractiveness of any particular platform

24

Appendix

• Major Competitor TV Everywhere Presence

• TVE initiatives by country – Western Europe

• TVE initiatives by country – Asia Pacific

• CDN Platforms

25

Major Competitor TV Everywhere Presence

• SPT’s major competitors have made significant progress with their multiscreen initiatives and have launched TVE offerings in Latin America, Western Europe, and Asia-Pacific region

26

TV Everywhere Initiatives – Western Europe (1/6)

27


28


29


30


31


32

TV Everywhere Initiatives – Asia Pacific (1/4)

33


34


35


36

CDN Platforms (1/2)

Company CDT/OTT Platform DevicesNotable Customers

• CloudTV is a cloud-based solution that includes a dynamic authoring platform (CASS™) and stitchable MPEG streaming technology

• Offers a customizable portal that combines broadcast and online video streams• Content is rendered as an MPEG video stream

Internet connected devices such as PCs, game consoles, and smart TVs

Cablevision, Time Warner Cable, Grande Comm., HBO, Showtime, CNN, Fox

• ARRIS Advanced Video Processing Solutions provide transcoding capabilities enabling multi-profile video encoding for mobile, PC and TV

• Acquired BigBand Networks in 2011 ;Company has over 200 clients around the world

Mobile, PC, TV Comcast, Time Warner

• Offers a TVE Solution Pack in partnership with Ping Identity, including authentication, content management, delivery, advertising, UI, and client player software

• Includes support for transcoding, multi-bitrate streaming, DVR features, HTML 5, and social media

• Provides a range of analytics tools

PC, Smart TVs, Apple iOS, Google Android, Symbian S60, Palm webOS, Windows Mobile, and BBRY

BSkyB, Sky Deutschland, Sky Italia, Rogers

• Content delivery solution supports mobile devices for both Live TV as well as VOD

• The company offers a wholesale CDN solution for carriers• Software-based solution that uses off-the-shelf hardware (IBM is hardware

partner)

Internet connected devices and mobile devices

Telecom Argentina, Bouygues Telecom, Iceland Telecom

• Cloud-based solution that handles content ingest, management, transcoding, and publishing for multiscreen delivery via VOD or linear TV

• Includes advertising and social networking support

Smart TVs, Roku players, gaming consoles, STBs, mobile devices, tablets and laptops

Verizon, Mediacom, and Bresnan

• CDN hardware and software solution• The D-VDN framework provides a full range of multiscreen capabilities, including

on-demand TV and video functions such as nPVR, timeshift TV and VOD• Focus on QoE (Quality of Experience)

STBs, smart TVs, PCs, game consoles and mobile devices

Caiway, Comstar, Maxisat, Iskon, KPN, Telekom Slovenije, Telia Sonera

• Irdeto MediaManager ingests content from any source, manages associated metadata and usage rules, and delivers it to any screen connected to the Internet

• Irdeto ActiveCloak for Media handles DRM for multiscreen

PC, tablets, smartphones, smart TVs

Al Jazeera, BSkyB, Netflix, Telia, Telecom Italia 36

37

CDN Platforms (2/2)

Company CDT/OTT Platform DevicesNotable Customers

• The Kit Platform provides end-to-end video management capabilities• KIT Connected Device Framework enables the creation of a broad range of

experiences that run natively across multiple devices

Smart TVs, STBs, game consoles, tablets, and smartphones

ABC, AP, AT&T, CNN, Microsoft, MTV, NBC, Sky, Vodafone, TWC

• The Limelight Video Platform automatically detects the right device format and delivers transcoded video based on its specific player requirements

• Integrates with existing publishing, content management, and advertising systems

Smartphones,tablets

Dreamworks, IFILM, MSNBC

• Massivision Suite™ tools enable build-out of multi-device video entertainment services, manage and schedule content and get User Interfaces in place quickly as new consumer devices become available

PCs, STBs, Xbox, smartphones, tablets, in-flight video

BBC, Foxtel, Ch 5, Emirates & Virgin Air

• Ooyala Everywhere offers a modular approach with capabilities that include content ingestion, management, transcoding, adaptive streaming

• With Personal Playback™, viewers can start watching a video on a TV and then switch to a laptop or mobile on the go

Smart TVs, PCs, mobile devices, Roku, Boxee, Google TV and PlayStation3

ESPN, MovieTicketscom, TVGuide, Yahoo Japan, Virgin Media

• Provides authentication and design of web portals for TV Everywhere offerings• Provides design services, servers, and technologies to deliver video to multiple

screens• Offers single sign-on/integration to allow subs with access to multiple content

providers

PCs and mobile devices

Charter, Verizon

• SyncTV cloud-based service can stream video over the Internet to a variety of platformsHTC recently acquired 20% of SyncTV

iOS, Android, Windows Phone, Xbox, and smart TVs

NBC Universal

• Includes content collection, managing partner relationships, managing subscribers, and enabling the business model

Any connected device

Comcast, Time Warner Cable, Rogers Cable, Cox, Cablevision

• Tvinci MediaHub capabilities include ingestion, setup of management and business rules, analysis of content consumption, and end-user management

Smart TVs, mobile devices, game consoles

Orange37

TV Everywhere & OTT OTT 03-11-13v2.… · TV Everywhere & OTT Preserving the Pay TV Model March 2013. 2 Executive Summary ... “TV Everywhere Could Create $12BN in Annual Revenue

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