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TV Everywhere & OTT OTT 03... · 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)

Jul 12, 2020

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  • 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

  • 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

    0%

    1%

    2%

    3%

    4%

    5%

    6%

    7%

    8%

    9%

    10%

    0

    100

    200

    300

    400

    500

    600

    700

    800

    900

    1,000

    '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

    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

    • 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

    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

    0

    5

    10

    15

    20

    25

    30

    35

    40

    2011 2012 2013 2014 2015 2016 2017

    Advertising Subscriptions Transactions

    Source: Informa Telecoms & Media

    ($BN)

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

    36 62

    85 101 114 121

    122

    157

    190 209

    226 238

    16

    36

    65

    93

    119

    149

    9

    14

    19

    22

    24

    26

    57

    65

    67

    69

    77

    83

    240

    334

    426

    494

    560

    617

    2011 2012 2013 2014 2015 2016

    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)

    9 22 43

    69 99

    132 98

    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 2012 2013 2014 2015 2016

  • 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

  • 47.3%

    5.4%

    11.5%

    1.7%

    0.1%

    2.0%

    10.0%

    8.9%

    2.0%

    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 DirecTV

    Country (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 MSO

    Sky 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 Entertainment 5 live channels Additional channels on-demand £15 per month (additional £13 per month for ESPN)

    Sky Movies & Entertainment 11 movie channels Hundreds of movies on demand 20 live channels £32 per month (additional £13 per month for ESPN)

    Sky Sports & Entertainment All 6 Sky sports channels 5 on-demand entertainment channels 20 live channels £35 per month (additional £10 per month for ESPN)

    Sky Movies, Sports & Entertainment All 6 Sky sports channels 11 Sky movie channels 5 on-demand entertainment channels 20 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

    DirecTV

    Partnered 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

    BSkyB

    Will 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 Media

    Cable 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 Channel Carrier

    SPT Channel Carrier

    SPT Channel Carrier

    SPT Channel Carrier

  • 18

    North America 90%

    ROW 18%

    Western Europe 66%

    Asia /Pacific 9%

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

    Current TV Everywhere Availability

    Eastern Europe 21%

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

  • U.S. 23%

    Latin America 11%

    EMEA 13%

    India 35%

    Asia Excl India 12%

    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

    32.7

    1

    62.3

    1.9

    0

    10

    20

    30

    40

    50

    60

    70

    UK India UK India

    Fixed Broadband Mobile Broadband

    Broadband Subscribers

    • 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

    64 78 89

    95 99 101

    11

    19 24

    28 30 32

    23

    52

    64

    75 85

    94

    0

    50

    100

    150

    200

    250

    2011 2012 2013 2014 2015 2016

    28 50

    68 82 88 90

    15

    27

    36

    42 48 52

    14

    23

    28

    34

    40 50

    0

    20

    40

    60

    80

    100

    120

    140

    160

    180

    200

    2011 2012 2013 2014 2015 2016

    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

    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

    • 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

    • After North America, Western Europe is by far the most attractive region for a TVE initiative, with advanced

    infrastructure, high broadband utilization, 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 for both consumers and advertisers

    ‒ Supporting the pay TV pricing model

    ‒ Preserving the relationship between programmers and MVPDs

    ‒ Slowing the growth of OTT and still securing a place for SVOD

  • 23

    Appendix

    • Major Competitor TV Everywhere Presence

    • TVE initiatives by country – Western Europe

    • TVE initiatives by country – Asia Pacific

    • CDN Platforms

  • 24

    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

  • 25

    TV Everywhere Initiatives – Western Europe (1/6)

  • 26

    TV Everywhere Initiatives – Western Europe (2/6)

  • 27

    TV Everywhere Initiatives – Western Europe (3/6)

  • 28

    TV Everywhere Initiatives – Western Europe (4/6)

  • 29

    TV Everywhere Initiatives – Western Europe (5/6)

  • 30

    TV Everywhere Initiatives – Western Europe (6/6)

  • 31

    TV Everywhere Initiatives – Asia Pacific (1/4)

  • 32

    TV Everywhere Initiatives – Asia Pacific (2/4)

  • 33

    TV Everywhere Initiatives – Asia Pacific (3/4)

  • 34

    TV Everywhere Initiatives – Asia Pacific (4/4)

  • 35

    CDN Platforms (1/2)

    Company CDT/OTT Platform Devices Notable 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

    35

  • 36

    CDN Platforms (2/2)

    Company CDT/OTT Platform Devices Notable 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 platforms HTC 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

    Orange

    36

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