• Welcome to our eighth web seminar. This presentation is also the first part of our “Entertainment Streaming Services – Challenges, Opportunities, Behaviors and Strategies” series. In this installment we focus on the Challenges of delivering OTT Services.
• Synopsis
• ?Check out other white papers, video presentations, and opinion pieces from my blog “Digital Video for a Digital Generation”: www.dusil.com • Building a new Video Streaming service starts from understanding the market landscape. We’re all familiar with the SWOT analysis: Strengths, Weaknesses, Opportunities & Threats. But dissecting the challenges in the Video streaming industry is about understanding problems, before a solution can be formulated. Creating a gap-analysis is the next step in recognizing opportunities in this rapidly changing market space. Then, examining subscriber behavior ensures that we look through the lens of the consumer. Once those steps are completed, we can formulate a strategy to build an innovative and competitive video streaming service. This presentation takes a modern market approach for video streaming through an assessment of Challenges, Opportunities, Behaviors, & Strategies (or COBS).
2nd Screen, Broadcast, COBS, Connected TV, Digital Rights, Digital Video, DRM, dusil.com, Entertainment Streaming Behaviors, Entertainment Streaming Challenges, Entertainment Streaming Opportunities, Entertainment Streaming Strategies, Gabriel Dusil, Internet Video, Linear TV, Multi-screen, Multiscreen, Online Video Platform, OTT, Over the Top Content, OVP, Recommendation Engine, Return On Investment, ROI, Search & Discovery, second screen, Smart TV, TCO, Television, total cost of ownership, TV Anywhere, TV Everywhere, Video Streaming
• I wanted to take this opportunity to thank all of you for reading my articles, and watching my videos. I love the creative process, presenting new ideas, and trying to look at the market in a unique light. Please stay tuned in 2015, as I have a lot of content planned for release, throughout the year. Here’s an excerpt:
In the big scheme of things 10,000 blog views isn’t that much. But it is still a milestone I am happy to achieve nonetheless, since starting my blog 18 month ago. I wanted to take this opportunity to provide a snapshot of how this social networking initiative is going. Thanks for reading my blog. It’s my creative outlet, digital resume, and portfolio – all wrapped in one. So here are some screen captures of my various social networking dashboards. Enjoy!
The observations in Part I of this article, “Developing OTT for the Emerging Markets“, outline specific challenges to entertainment providers in developing markets. But the weakness in capital in the emerging markets is somewhat offset by the strength in being able to peer into the future, by observing what the USA is doing today. This helps local players to assess what will come to their market several years from now and essentially creates a leap-frog effect for ambitious companies wanting to adopt the latest OTT solutions. Rather than wait 4+ years to adopt the latest OTT solutions, they can implement a service today, in parallel to their American counterparts.
Figure iii – Average Bandwidth Forecast by Region
Much of the adoption curve across the globe is driven by the behavior of local subscribers, as well as the adoption curve of new technologies in these regions. Here are a few areas where emerging markets differ from developed markets:
In the west, consumers are enticed by the introduction of 4K Ultra High Definition TV. But in developing markets, service providers just want to ensure that their standard definition content (SD @ 528 lines) is served to their consumers in the best quality possible. In some cases, an even lower resolution is offered, such as 288 lines or even 144 lines, requiring limited bandwidth transmissions and mobile devices (Figure iii).
2nd screen and TV everywhere continues to be a hot topic in the west. In many emerging markets the second screen is, in fact, their primary screen. Mobile devices in emerging markets are used as a primary screen for voice, messaging, video, music, content, news, and even banking.
In some emerging markets the penetration of smartphone devices is relatively low. A device such as the iPhone is considered a luxury item. With some markets lacking a well-established middle class, the iPhone becomes the Prada of the mobile market, left to the top percentile of society. In the west, the iPhone is another high-end smartphone, but in developing markets the iPhone helps define one’s identity. This has allowed some of the lower cost Android manufacturers to gain market share.
HTML5[ix] and responsive design[x] may be at the top of the agenda in web design, but the emerging markets’ focus on serving video content to a much wider range of feature phones does not support advanced web features. There are thousands of feature phones that have limited video capabilities. Smartphone penetration is low, although gaining market share rapidly, but there is a concerted effort to support video to a wider range of legacy devices.
In the west, pay TV providers concern themselves with a growing number of cord cutters and cord shavers. In fact, some emerging markets have a large population of cord-nevers, where the market penetration of pay-TV is much lower (Figure iv). For example, the sub-Saharan region has less than 8% market penetration in pay-TV. Even though this market is expected to double by 2020, their market penetration still won’t come close to many developed countries[xi]. It is also possible that if a country misses the adoption curve of pay-TV, then they may prefer to use the Internet as their primary source of entertainment[xii]. This will further limit the penetration of pay-TV subscribers.
The west obsesses about BIG data. Many clients in the west have several years of experience in OTT services, so their focus changes from “We need to make sure the service works”, to “How do we increase our average revenue per user (ARPU)?” Reaching this goal results in focusing on collecting, correlating and analyzing more and more data. Emerging markets, on the other hand, don’t yet have a BIG data frenzy. It’s about basic reporting on what the service provider is selling, who is consuming their content, and which devices are displaying their video. Reporting is seen as providing the basic data needed to measure the success of an OTT service. It’s not yet treated as a complex analytics engine that will generate a higher ARPU[xiii]. Emerging markets are still building their first OTT service, or just investigating its commercial viability. OTT v2.0 features like complex analytics and recommendation engines will come in due course.
Figure iv – Pay-TV Average Revenue Per User (Bubble size represents the relative number of household with PayTV), Sources: iDate, Ofcom, & Wikipedia
Often conversations around entertainment and the Internet lead to, “trading analog dollars with digital pennies”, an analogy popularized by Jeff Zucker, head of NBC Universal[xv]. In the context of this discussion, however, a far closer truth would be broadcast dollars vs. OTT pennies. But in developing markets there are no dollars to be earned since their Average Revenue per User (ARPU) is a fraction of that in the west (Figure iv)[xvi]. On the other hand, OTT pennies can be generated by high subscriber volume since many developing regions have a sizable consumer market. The selling strategy in these regions is less about increasing ARPU and more about generating a subscriber footprint reflecting orders of magnitude higher than can be achieved in the west.Possibly the most challenging issue for emerging markets is the accessibility of premium western content. 90% of American premium content is owned by nine majors in the USA: Disney, Fox, Time Warner, Comcast/NBC Universal, CBS, Viacom, Discovery, Scripps and AMC. These companies spend over 45 billion US$ on this content per year according to Todd Juengerfrom Bernstein Research[xiv]. Service providers in developing markets simply don’t have the capital to purchase these libraries. At best they can afford a tiny fraction of titles for commercial availability to local subscribers. Plan B is to consolidate content from local studios and producers. This focuses their library of titles on entertainment from regional content owners and delivering culturally diverse content that is much more affordable.
As digital video continues to grow at a phenomenal rate, I’m inclined to believe that western companies are more educated about the cultural, political, and economic dynamics of international expansion. For the entertainment community, it may be the case of realizing that earning 100 pennies is far more practical than trying to generate every single dollar.
• Synopsis
In the digital era of the 21st century, ’emerging markets’ have evolved into what we now call ‘developing markets’. If companies in the west are considered the adults of the business world, then developing markets are still at the adolescent stage. A developing market at least acknowledges that the emerging markets have entered their next growth phase. As digital video and entertainment proliferates around the world, the tide is not rising for everyone at the same pace. Developing markets still have to overcome obstacles in adopting streaming solutions due to cultural, technological, and financial challenges. This article has taken a look at some of the differences between developed and developing markets in the adoption of Over the Top solutions (OTT) and digital streaming. By examining some of these, we can help them mature into healthy and robust teenagers.
• About Gabriel Dusil
?• Gabriel Dusil was recently the Chief Marketing & Corporate Strategy Officer at Visual Unity Global, and a member of the core management team that successfully secured 7.2m US$ in series “A” funding for the company in 2014. Before joining Visual Unity, Gabriel was the VP of Sales & Marketing at Cognitive Security, and Director of Alliances at SecureWorks, responsible for partners in Europe, Middle East, and Africa (EMEA). Previously, Gabriel worked at VeriSign & Motorola in a combination of senior marketing & sales roles. Gabriel obtained a degree in Engineering Physics from McMaster University in Canada and has advanced knowledge in Online Video Solutions, Cloud Computing, Security as a Service (SaaS), Identity & Access Management (IAM), and Managed Security Services (MSS).
?4K, Broadcast, Connected TV, Digital Rights, Digital Video, DRM, Gabriel Dusil, H.265, HEVC, Internet Piracy, Internet Video, Linear Broadcast, Linear TV, Multi-screen, Multiscreen, New Media, Online Video, Online Video Platform, OTT, Over the Top Content, OVP, Recommendation Engine, Search & Discovery, Search and Discovery, second screen, Smart TV, Social TV, TV Everywhere, Ultra HD, Ultra High Definition, Visual Unity, emerging markets, developing markets, developed markets, Digital Trends Video Opinions
[xii] A similar trend occurred in the payment industry over the years. Markets that introduced a check-based payment system in the 80’s migrated to credit cards in the 90’s and then to debit cards in the 00’s. In the USA, where checks were introduced, that method of payment is still used to this day. But markets in Europe that missed the boat with checks flourished with credit cards. Emerging markets, on the other hand, missed the boat with credit cards and went straight to debit cards. Furthermore, many of the smaller emerging markets still remain a cash-based purchasing society.
Back in 1998, when I worked for Motorola, the company invited staff to join a corporate briefing on the status and future of the company. I was based in Prague at the time, and this was the first call of its type that I had the privilege of attending. There were literally thousands of people on this call, representing countries from around the world. After listening to our corporate executives talk about their vision of the future, one of the senior executives said something that caught my attention. He said (I’m paraphrasing as it’s been a while), “We plan to give special attention to emerging markets. We see a lot of opportunities in these regions and want to capitalize on their rapid growth potential. Specifically, we see states such as Idaho as an emerging market and we want to focus some of our efforts there…”
What? Idaho, an emerging market? Suddenly the reality of my role, working out of the humble Prague office located on the other side of the world, slapped me in the face. Even though I was responsible for marketing across over 25 countries in Central & Eastern Europe, it seemed that we weren’t even on HQ’s geographic radar.
I would like to provide some perspective on what are the true emerging markets in the entertainment industry – specifically in regards to video streaming. Fifteen years have passed since that call, and much of my time has been spent with one leg in western markets and the other in emerging markets. Holding dual citizenship as a Canadian and Slovak, I always felt I had solid footing in both cultures.
Figure i – Global Internet Traffic vs. Digital Video Milestones, Sources: Cisco & Wikipedia
Digital video has arrived in a big way and is maturing rapidly across the globe[i]. Figure i shows the accelerated growth of internet traffic, of which approximately 70% will be video by 2016 according to Cisco’s VNI[ii] report. For nearly a decade consumers have enjoyed video streaming on their computers and more recently on their mobile devices. Even though this change occurred quickly, it has also been taken for granted. We expect high quality video streaming; that our Skype calls will work; we even assume that video will be served to our mobile devices. So, here is a quick reminder of what we didn’t have ten years ago:
We didn’t have YouTube, which launched in February 2005[iii].
Consumers were still calling long distance – Skype launched on the 29th of August 2003[iv] and reached its first 10 million concurrent users in 2007[v]
Blu-Ray discs had yet to be introduced, with the first titles being released on the 20th of June 2006[vi]
Even the iPhone began shipping as early as six years ago, on the 29th of June 2007[vii]
These products and services have become so essential to our lives it’s as if we’ve had them forever. But not everyone around the world has been enjoying entertainment at an even pace.
Information Communication Technology (ICT) maturity varies greatly outside of the developed market. The availability and quality of video streaming, communications, and mobility fluctuates depending on a given developing region. For example, the past decade has shown that the USA leads in the adoption of streaming video solutions, including its offspring Over the Top Content (OTT). Several of the first movers in OTT services who entered the market include Brightcove (est. 2004), Ooyala (est. 2007), and Kaltura (est. 2006). In addition, western subscribers consume more digital video than any other region around the work – in excess of 45GB of traffic per month. In fact, according to the latest report from Sandvine[viii], 32% of downstream traffic in the USA in 2013 can be attributed to Netflix alone. But in Europe, Canada and parts of Asia, these second-tier regions trail several years behind the USA in the adoption of OTT and video streaming services (Figure ii). European consumers, for example, consume a third of traffic compared to their American counterparts: 13GB per month. This is partially attributed to the limited supply of OTT services outside the United States.
Figure ii – OTT Evolution – Geographic Distribution
The third tier in this assessment is that of emerging markets. These regions are at least four years behind the USA. This lag is significant on several fronts. First of all, from a competitive perspective, as the Internet is borderless, western companies are entering emerging markets before the local players have the knowledge, time or capital to build a service themselves. Secondly, early adopters from the west have first-move advantage to create an early footprint of global subscribers since they already have a platform and seed capital to expand to international markets. Western competitors wanting to establish a larger subscriber footprint in the east secure additional capital to buy expensive premium content. This footprint is easier to extend over the Internet where borders can be easily crossed. In contrast, broadcasters are typically restricted by geography due to regulation and the limitations of their physical infrastructure.
Stay Tuned for Part II
In the second part of this article we will look into several areas where OTT deployments in the emerging markets differ from developed markets.
• Synopsis
In the digital era of the 21st century, ’emerging markets’ have evolved into what we now call ‘developing markets’. If companies in the west are considered the adults of the business world, then developing markets are still at the adolescent stage. A developing market at least acknowledges that the emerging markets have entered their next growth phase. As digital video and entertainment proliferates around the world, the tide is not rising for everyone at the same pace. Developing markets still have to overcome obstacles in adopting streaming solutions due to cultural, technological, and financial challenges. This article has taken a look at some of the differences between developed and developing markets in the adoption of Over the Top solutions (OTT) and digital streaming. By examining some of these, we can help them mature into healthy and robust teenagers.
• About Gabriel Dusil
?• Gabriel Dusil was recently the Chief Marketing & Corporate Strategy Officer at Visual Unity Global, and a member of the core management team that secured 7.2m US$ in series “A” funding for the company in 2014. Before joining Visual Unity, Gabriel was the VP of Sales & Marketing at Cognitive Security, and Director of Alliances at SecureWorks, responsible for partners in Europe, Middle East, and Africa (EMEA). Previously, Gabriel worked at VeriSign & Motorola in a combination of senior marketing & sales roles. Gabriel obtained a degree in Engineering Physics from McMaster University in Canada and has advanced knowledge in Online Video Solutions, Cloud Computing, Security as a Service (SaaS), Identity & Access Management (IAM), and Managed Security Services (MSS).
?4K, Broadcast, Connected TV, Digital Rights, Digital Video, DRM, Gabriel Dusil, H.265, HEVC, Internet Piracy, Internet Video, Linear Broadcast, Linear TV, Multi-screen, Multiscreen, New Media, Online Video, Online Video Platform, OTT, Over the Top Content, OVP, Recommendation Engine, Search & Discovery, Search and Discovery, second screen, Smart TV, Social TV, TV Everywhere, Ultra HD, Ultra High Definition, Visual Unity, emerging markets, developing markets, developed markets, Digital Trends Video Opinions
[xii] A similar trend occurred in the payment industry over the years. Markets that introduced a check-based payment system in the 80’s migrated to credit cards in the 90’s and then to debit cards in the 00’s. In the USA, where checks were introduced, that method of payment is still used to this day. But markets in Europe that missed the boat with checks flourished with credit cards. Emerging markets, on the other hand, missed the boat with credit cards and went straight to debit cards. Furthermore, many of the smaller emerging markets still remain a cash-based purchasing society.
• Here is the forth presentation from our ’14 seminar series.
• In this presentation we provide an overview of Visual Unity Global and our service portfolio. This year our marketing department stepped-up its game yet again, and completely redesigned our corporate presentation for 2014, to better communicate our stellar capabilities of the vuMedia™ platform, and adjacent services.
2nd Screen, Broadcast, BroadcastLinear, Connected TV, Digital Video, Dusil, dusil.com, Gabriel Dusil, Granularity of Choice, Linear Broadcast, Linear Television, Linear TV, linear tv + market, linear tv consumption vs ott, linear tv definition, linear tv rights, linear tv transmission rights, linear tv wiki, MSSMulti-screen, Multiscreen, Multiscreen System Integrator, Online Video Platform, OTT, Over the Top Content, OVP, OVPRecommendation, Search + Discovery, Smart TV, Social TV, TV Anywhere, TV Everywhere, Visual Unity, Visual Unity Global, vuClient, vuContent, vuEasy, vuIngest, vuMedia, vuMobile, vuMultiscreen, vuProtect, vuStats
Since cutting-the-cord over three years ago, I’ve been a huge fan of Geekbeat.tv. Cali Lewis and John Pozadzides definitely have their finger on the pulse of the geek community. So I was honored to recently sponsor their new house. Here is the link to the video where Cali acknowledges my contribution to the Wall of Fame Geeks! It’s my 6 seconds of fame… another 9 to go!
https://www.youtube.com/watch?v=oy-jI9OSOFA
Or you can find the posting on their web site here:
Figure i – Blame the Internet, or thank the Internet?
Many in the entertainment industry are quick to blame piracy for any revenue decline in their business. It’s valid to blame user behavior rather than the underlying technology that enabled change. But why not blame the Internet itself?Several marketplaces have had similar disruptions to their revenue streams thanks to the Internet. Figure i outlines just a few industries where consumer behavior was transformed and where the Internet upset classic business models:
In the communications industry, Skype essentially destroyed long-distance calling.
In the entertainment industry, the compact disc suffered due to the introduction of MP3[i] encoding for digital audio and the ability to “rip” music to a personal computer. The availability of larger and cheaper hard drives further accelerated the migration of music to computers. These capabilities created a perfect storm for moving music into the realm of computing[ii]. Then, services such as YouTube,[iii] as well as a plethora of subscription-based services such as Spotify[iv] and Rhapsody,[v] moved everything into the cloud. A recent study from IFPI[vi] shows that CD revenue and unit sales continued to decline after peaking in 1999. Incidentally, this decline began around the birth of Napster[vii] (launched in June 1999), so it’s easy to point fingers. In contrast, sales of music singles through online services have soared and are expected to continue doing so over the next several years[viii]. As shown in Figure ii, overall revenue generated from singles has not compensated for the decline in CD revenue. Consumer buying habits have demonstrated theneed and want for more granularity in purchasing songs rather than entire albums. This is further complicated by the fact that OTT services such as YouTube contain a sizable library of popular music for free.
Email replaced faxing and helped progress the notion of the paperless office[ix].
Short Message Service[x] (aka. SMS or text messaging) suffered as mobile phones began to support WiFi and subscribers realized they could send messages to their friends over significantly cheaper data plans. Services such as Viber[xi], WhatsApp[xii], and eventually Apple’s iMessage[xiii] are all examples of Over the Top (OTT) Internet applications that bypassed traditional incumbent services.
In print media, newspapers continue to suffer in favor of online posts. When news is delayed by anything greater than real time, users migrate to online services. Live news broadcasts are still the flagship of linear television, but even that is changing. The consumption of news is broader than that of broadcast journalism seeing as blog posts and social networking sites have made it possible for everyone to be a potential reporter. And thanks to smartphones having the ability to record video, a wider audience of bystanders now have the opportunity to capture breaking news long before professional journalists have a chance to arrive at the scene. Twitter[xv] and Facebook have also established themselves as sources for breaking news.
Figure ii – Global CD & Single Shipments & Revenue ’98-‘11
Thank the Internet?
As much as the Internet has disrupted long-established business models, it has also spawned new and creative applications:
Facebook and many other social networks offer consumers a fresh platform to fuel humanity’s desire to communicate. But it hasn’t replaced face to face communications. It has only complemented our need for human interaction.
Online shopping did not replace brick and mortar[xvi] shopping – consumers still enjoy visiting the local mall to try on a new pair of jeans.
Email didn’t replace the postal service either – consumers are just sending and receiving packages, rather than handwritten letters.
Likewise, mobile phones did not entirely replace landlines.
The Internet may be viewed as destroying legacy business models, or it could be viewed as the catalyst to helping reshape consumer behavior. For every business that closes its doors, countless other Internet businesses open. Ultimately, consumers now have more choice in how they consume entertainment. Thanks to choice and content ubiquity, users are treating the cloud as their personal entertainment library.
Giving Consumers What They Want
Figure iii – Internet Traffic split by file types that violate copyright.
Internet piracy revolves around a risk to reward balance. Essentially, this is an assessment of the likelihood of being caught weighed against the ease of downloading content illegally. Within this balance, there are both inhibitors and motivations to stealing content. Some of those who infringe upon copyright laws feel vindicated because they cannot obtain content by legitimate means. Other motivations include the ability to completely circumvent the restrictions imposed by digital rights management (DRM[xix]) – measures that restrict the portability of the content. Once absent of DRM, content is easily transcoded into various formats, screen sizes, and bitrates. The ubiquity of content has also come at a cost. A study from Envisional shows that nearly a quarter of Internet traffic violates copyright laws[xviii]. BitTorrent traffic represents the largest chunk of such offences. A related study from PublicBT showed that out of the top 10,000 torrents, nearly half of them consisted of movies and television programs (Figure iii). Furthermore, less than one percent of posts were innocent of copyright infringement.
There are also several inhibitors that make illegal downloading quite cumbersome. To begin with, there is the issue of content management. Titles need to be downloaded, stored, and organized. Storage costs and database management can become a nightmare. Even with declining hardware costs, a 4TB hard drive can fill up quickly. Additional headaches include inconsistency in quality – it may take days to get a file, only to find it’s unwatchable. Malware infections that propagate through P2P networks can also wreak havoc on a home network and affect innocent family members. Finally, websites such as The Pirate Bay[xx] are sophisticated search applications at best, and cannot compare to a personalized OTT entertainment platform.
Figure iv – Illegal and Legal Drives & Inhibitors for Entertainment Consumption
For subscribers that side with the law and use a legitimate OTT video service, content management is a non-issue as everything is streamed from the cloud. Consequently, there is no need to organize files or allocate hard drive space. Additional benefits include a pleasant and compelling user interface and user experience (UI/UX). This may include social interaction with friends, family, and communities of similar interests. Many OTT services also offer sophisticated search and discovery and recommendation engines that are personalized in order to satisfy each subscriber’s unique viewing behavior. The inclusion of reviews, trailers, rating statistics, and comprehensive metadata adds to an engaging interactive experience that attracts loyal subscribers. These platforms also offer a much more consistent level of entertainment quality.
Whether legitimate or illegal, consuming entertainment has radically changed over the past decade. Digital video is in a constant state of flux and consumer behavior is changing at an unprecedented pace – both in how people purchase and enjoy their entertainment. Bandwidth speeds have increased significantly in both the home and mobile environments, thereby disrupting the entire entertainment industry. Understanding consumer behavior in terms of their frustrations and motivations helps bring clarity to how this industry has shaped itself. A better understanding of the enemy may help content owners and distributors mitigate Internet piracy.
Knowing What to Fix •? Fixing What We Know
Some would argue that the entertainment industry hasn’t been able to keep up with the disruptions the Internet has created. Even with sizable improvements in digital video quality and Internet streaming, there are still shortcomings to address. These frustrations are summarized as follows:
Lack of Portability
Content owners are largely concerned that the digital delivery of their content will cannibalize lucrative cinema and broadcast TV revenue streams. This is partially the reason why entertainment portability is restricted across televisions, computer screens, smartphones and tablets. This is further complicated by the fact that content purchased on one operating system cannot be played on another platform. But consumers want universal flexibility and ease-of-portability of their purchases. Consumers want the flexibility to stream shorter content on their mobile devices and enjoy longer viewing experiences on larger screens. Cinema goers are willing to pay higher fees for an immersive experience on a 30-foot theater screen with THX[xxi] surround sound. The point is that one consumption method does not necessarily steal revenue from another. Audiences simply take different paths while consuming different types of content on different devices.
Lack of Upgradability
This issue centers around the irritating aspect of repurchasing movies as technology continues to improve. Content owners enjoy a resurgence of revenue for long-tail content[xxii] when new technology is introduced to the market. To be fair, this is mainly an issue for collectors rather than the average consumer. Movies purchased on VHS (240 horizontal lines) in the 80’s or DVD (480 lines NTSC or 576 lines PAL) in the 90’s required a new purchase on Blu-Ray (1080 lines) in the 00’s, and will eventually require a repeat purchase when 4K versions (2160 lines) are introduced by the end of this decade. “By 2020 there will be over 200 Ultra HD channels worldwide, rising to over 1,000 by 2025. The availability of Ultra HD TVs in the home and Ultra HD services by pay TV operators with advanced set-top boxes will drive the commercial opportunity for channel launches and content production,” says Tom Morrod of IHS Electronics & Media[xxiii].
Each new format makes the one it succeeded obsolete. Sizable video libraries turn out to be worthless virtually overnight. Interestingly enough, consumers have acclimated to the fact that a repurchase is expected when a new format is introduced. Content distributors attempt to entice collectors to repurchase content by packaging old titles into box-sets, director’s cuts, collectors’ editions, and other creative packaging strategies. The entertainment industry unfortunately never took a software upgrade approach to offering consumers an incremental purchase path as movies were released in a better resolution. The computing industry established this expectation from its inception. Now that entertainment and computing are converging into OTT services, this may provide a platform to offer the same level of granularity.
Lack of Breadth
Most online video services have relatively limited libraries, especially on a global stage. One of the main challenges is that content rights are costly to obtain across international borders. This poses a challenge for smaller OTT providers that simply don’t have the capital to purchase expensive premium content such as Hollywood movies. Geo-location restrictions are used to prevent accessing content outside of specific jurisdictions. This applies to live broadcasts such as news or sports events, but is also an issue for video on demand (VoD) services that offer movies or television shows. Shows such as HBO’s “Game of Thrones” or Netflix’s “House of Cards”[xxiv] further complicate the issue by being offered exclusively in their home platform. This certainly helps OTT providers to differentiate themselves from the competition, but it doesn’t help consumers who want a central repository for their entertainment content.
Lack of Accessibility
The lack of accessibility of content on a global stage may be the single most important limitation of entertainment today. This arguably leads to the main motivations behind Internet piracy. Global theatrical and home releases are not available simultaneously. There are legitimate reasons for this delay: the negotiation of distribution rights, modifying or creating new promotional materials for each foreign market, dubbing services, and censorship approval – to name just a few. Even with these challenges, it may take years for some content to reach a foreign destination, if at all. Some passionate movie goers don’t have the patience to wait for a legal means to obtain what they want.
Lack of Quality
Some consumers are willing to watch a poor quality bootleg cam[xxv] for the bragging rights of being the first. But studies show that subscribers lean toward better quality video if it’s available[xxvi]. According to Ericsson research of over 400 million viewers around the globe, “High video quality is very important to consumers, and they are prepared to pay for it.” Anders Erlandsson, Senior Advisor, Consumer Insights, Ericsson Consumer Lab.[xxvii]
As video resolutions improve for Internet streaming, so does bandwidth. But problems still persist. No one likes the buffer symbol when streaming video on the Internet. Even though the technology has improved considerably over the past decade, many regions around the world lack the bandwidth and latency to stream a respectable level of video quality. This is further complicated by consumers wanting to watch content on their mobile devices where bandwidth is further restricted, and even comes at a higher cost.
Finding the Right Price
Online services such as Netflix[xxviii] have shaken the ownership vs. licensing business models. Owning an expensive Blu-Ray disc typically meant a sizable investment for the adrenaline rush of opening the package and the pleasure of watching it for the first time. The disc was then relegated to a living room shelf or drawer for the rest of its existence. Consumers are in the process of trading their need for ownership with accessing that content in the cloud at a much lower cost. As consumers opt for a more granular approach to their content, the industry continues to struggle to find the right balance between price, value, and flexibility.
Building the Right Playground
Comparing the user experience of yesterday’s TV’s electronic programming guide (EPG[xxix]) to today’s modern OTT service may not seem fair. But it’s a reasonable comparison in the context of fulfilling the subscriber’s hunger to find what they want. In the early days of television, the broadcaster would say, “Don’t change the channel, we’ll be right back” just before a commercial break. This approach was easier in the days when only 16 channels existed. As broadcast services moved to hundreds of channels, the EPG was created to help consumers find new and interesting content. But navigating TV menus was cumbersome. As we move to today’s digital era, consumers are accustomed to web surfing, clicking on applications, social networking, and googling. This level of interaction began in computing and is now integral to entertainment. Even with hundreds of channels available on a typical pay-TV service, consumers are still drawn toward less than 20 of them[xxx]. Websites such as IMDB[xxxi] and Rotten Tomatoes[xxxii] enable quick access to statistics, reviews, and metadata surrounding movies and television shows. Users have the ability to navigate scheduled release dates, user ratings, peer suggestions, trivia, frequently asked questions, and message boards. OTT services add recommendation engines, personalized advertising, favorite lists, and much more. This virtual treasure trove of information, offered at a granular level, increases consumer excitement and converges on the desire for a compelling environment where subscribers will stay longer simply because they are having fun. Quite a bit of developmental effort needs to focus on improving these virtual environments.
Viewing •? Owning •? Licensing
Figure v – Evolution of Entertainment Consumption
The origins of entertainment began with live performances in theaters and concert halls. At the turn of the 19th century, the motion picture industry began[xxxiii]. But the ability to sell music to consumers wasn’t possible on a grand scale until the second half of the 20th century. The vinyl record[xxxiv], and eventually VHS[xxxv] tapes for movies, allowed consumers to take their entertainment home with them. Many technologies changed hands over the decades: Vinyl ð cassette tapes ð CD’s for music, and VHS ð laser discs ð DVD ð Blu-Ray for movies. This century has evolved the buy-to-ownparadigm to a license-and-view business model. Some view today’s ubiquitous 12cm discs as the last physical technology for music and movies. In the future, everything will live in the cloud (Figure v). The desire to own entertainment is in the process of being replaced by the ability to easily access it.
Outlining the limitations of digital video and streaming services is only the first step in the journey to personalizing the consumer experience, recognizing Internet threats as entertainment opportunities, and uncovering new revenue streams.
Stay Tuned for Part III, IV, & V
Part III will look into the Net Neutrality and Internet Governance debate, and the , and the debate between the ISP’s and OTT Entertainment providers
In Part IV we will gauge the health of the entertainment industry by breaking down the revenue forecasts of the music, film, TV, and gaming industries, in light of internet piracy.
In Part V of this series we will propose solutions to reduce internet piracy from the vantage point of a subscriber wish-list.
In the days of linear television, broadcasters had a difficult task in understanding their audience. Without a direct broadcasting and feedback mechanism like the Internet, gauging subscriber behavior was slow. Today, online video providers have the ability to conduct a one-to-one conversation with their audience. Viewing habits of consumers will continue to rapidly change in the next ten years. This will require changes in advertising expenditure and tactics.
The evolution from traditional TV viewing to online video has been swift. This has significantly disrupted disc sales such as DVD and Blu-Ray, as well as cable and satellite TV subscriptions. With the newfound ability to consume content anytime, anywhere, and on any device, consumers are re-evaluating their spending habits. In this paper we will discuss these changes in buying behavior, and identify the turning point of these changes.
Transcoding large video libraries is a time consuming and expensive process. Maintaining consistency in video quality helps to ensure that storage costs and bandwidth are used efficiently. It is also important for video administrators to understand the types of devices receiving the video so that subscribers can enjoy an optimal viewing experience. This paper discusses the differences in quality in popular video codecs, including the recently ratified H.265 specification.
IV. Search & Discovery Is a Journey, not a Destination
Television subscribers have come a long way from the days of channel hopping. The arduous days of struggling to find something entertaining to watch are now behind us. As consumers look to the future, the ability to search for related interests and discover new interests is now established as common practice. This paper discusses the challenges that search and discovery engines face in refining their services in order to serve a truly global audience.
V. Multiscreen Solutions for the Digital Generation
Broadcasting, as a whole, is becoming less about big powerful hardware and more about software and services. As these players move to online video services, subscribers will benefit from the breadth of content they will provide to subscribers. As the world’s video content moves online, solution providers will contribute to the success of Internet video deployments. Support for future technologies such as 4K video, advancements in behavioral analytics, and accompanying processing and networking demands will follow. Migration to a multiscreen world requires thought leadership and forward-thinking partnerships to help clients keep pace with the rapid march of technology. This paper explores the challenges that solution providers will face in assisting curators of content to address their subscriber’s needs and changing market demands.
VI. Building a Case for 4K, Ultra High Definition Video
Ultra High Definition technology (UHD), or 4K, is the latest focus in the ecosystem of video consumption. For most consumers this advanced technology is considered out of their reach, if at all necessary. In actual fact, 4K is right around the corner and will be on consumer wish lists by the end of this decade. From movies filmed in 4K, to archive titles scanned in UHD, there is a tremendous library of content waiting to be released. Furthermore, today’s infrastructure is evolving and converging to meet the demands of 4K, including Internet bandwidth speeds, processing power, connectivity standards, and screen resolutions. This paper explores the next generation in video consumption and how 4K will stimulate the entertainment industry.
Social TV brings viewers to content via effective brand management and social networking. Users recommend content as they consume it, consumers actively follow what others are watching, and trends drive viewers to subject matters of related interests. The integration of Facebook, Twitter, Tumblr and other social networks has become a natural part of program creation and the engagement of the viewing community. Social networks create an environment where broadcasters have unlimited power to work with niche groups without geographic limits. The only limitations are those dictated by content owners and their associated content rights, as well as those entrenched in corporate culture who are preventing broadcasters from evolving into a New Media world.
Content Protection is a risk-to-cost balance. At the moment, the cost of piracy is low and the risk is low. There are no silver bullets to solving piracy, but steps can be taken to reduce levels to something more acceptable. It is untrue that everyone who pirates would be unwilling to buy the product legally. It is equally evident that every pirated copy does not represent a lost sale. If the risk is too high and the cost is set correctly, then fewer people will steal content. This paper explores how piracy has evolved over the past decades, and investigates issues surrounding copyright infringement in the entertainment industry.
About the Author
Gabriel Dusil was recently the Chief Marketing & Corporate Strategy Officer at Visual Unity, with a mandate to advance the company’s portfolio into next generation solutions and expand the company’s global presence. Before joining Visual Unity, Gabriel was the VP of Sales & Marketing at Cognitive Security, and Director of Alliances at SecureWorks, responsible for partners in Europe, Middle East, and Africa (EMEA). Previously, Gabriel worked at VeriSign & Motorola in a combination of senior marketing & sales roles. Gabriel obtained a degree in Engineering Physics from McMaster University, in Canada and has advanced knowledge in Online Video Solutions, Cloud Computing, Security as a Service (SaaS), Identity & Access Management (IAM), and Managed Security Services (MSS).
AACS, AnyDVD, Apple, BitTorrent, Blu-Ray, Broadcast, Cisco, Connected TV, Copyright Infringement, CSS, DeCSS, Digital Millennium Copyright Act, Digital Rights, Digital Video, DMCA, DRM, FairPlay, File Sharing, Gabriel Dusil, Infringement, Internet Piracy, Internet Video, KaZaA, Megaupload, Megauploader, Motion Picture Association of America, MPAA, Multi-screen, Multiscreen, Napster, New Media, Online Video, OTT, Over the Top Content, OVP, P2P, Peer to Peer, piracy, Piratez, PlayReady DRM, Recording Industry Association of America, RIAA, Ripping, SlySoft, Smart TV, The Pirate Bay, TPB, Ultraviolet DRM, Visual Unity
[xiv] “SMS estimated to be generally $30,000 per GB, is being replaced by OTT that deliver approximately $10 per GB”, Sandvine – Global Internet Phenomena (13.1H)
[xxiii] “1000 Ultra HD channels by 2025”, by Chris Forrester, Advanced Television, http://advanced-television.com/2013/10/17/1000-ultra-hd-channels-by-2025/
Gabriel Dusil was recently the Chief Marketing & Corporate Strategy Officer at Visual Unity Global, and a member of the core management team that successfully secured 7.2m US$ in series “A” funding for the company in 2014. Before joining Visual Unity, Gabriel was the VP of Sales & Marketing at Cognitive Security, and Director of Alliances at SecureWorks, responsible for partners in Europe, Middle East, and Africa (EMEA). Previously, Gabriel worked at VeriSign & Motorola in a combination of senior marketing & sales roles. Gabriel obtained a degree in Engineering Physics from McMaster University in Canada and has advanced knowledge in Online Video Solutions, Cloud Computing, Security as a Service (SaaS), Identity & Access Management (IAM), and Managed Security Services (MSS).
