OTT & Multiscreen • Digital Video Series • 12 • Turning Piratez into Consumers, V

Portfolio - OTT & Multiscreen (XII. Turning Piratez into Consumers, V, title, web)

A Subscriber’s Wish List

After sixty-plus years of healthy growth in the entertainment industry the internet has significantly disrupted this ecosystem. Broadcasters struggle to find their role in the digital generation as they continue to play catch up to rapidly changing user behavior. Even the film industry finally stopped manufacturing film cameras[i] in 2011. A notable victory for digital video. Regardless, the proliferation of video streaming over the past decade is still in relative infancy.

Modernizing the distribution of entertainment is still needed in order to reduce problems such as internet piracy. This has been extensively discussed in the first parts of the “Turning Piratez into Consumers” series: Part 1[ii], Part 2[iii], Part 3[iv], and Part 4[v]. This final paper in the five part series is an open letter to the industry on how to improve digital entertainment’s playground. It’s a subscriber wish-list outlining high level functionality that addresses the evolving needs of today’s consumer. Here we go:

Figure i - A Subscriber’s Wish List for Digital Entertainment

Figure i – A Subscriber’s Wish List for Digital Entertainment

Portability (Anytime, Anywhere, on Any Device)

Multiscreen accessibility is an industry goal, but it’s far from ubiquitous. The ability to access content is often discussed in the context of anytime, anywhere and on any device. Even though the industry continues to move in this direction there are glaring disconnects.

Consumers today are severely restricted in their ability to watch content on all of their devices. Apple has their own walled garden. There are several competing gardens, mostly represented by broadcasters – and none of them are connected. Google at least tries to promote a more open approach. Content portability should be about shifting from a content-centric entertainment culture to a consumer-centric one. Television adopted that vision, but internet entertainment seems to have taken one step backward.

UltraViolet’s Digital locker[vi] is a move in the right direction with support for multiple devices, operating systems, and allowing family members to share in the rights to purchased movies. The ability to purchase a title once and then play it on any device is still hindered by the content owners that wrap their arms around their assets, scowling at potential attackers. The digital world continues to be a new frontier where Hollywood is not completely comfortable[vii].

Figure ii - Multiscreen Portability, Cinema to Multiscreen

Figure ii – Multiscreen Portability, Cinema to Multiscreen

(Platinum) Accessibility

An actively debated approach is to significantly shorten release windows for movies. Entertainment libraries are often segmented by premium verses long-tail content. Retailers and Internet streaming providers should evolve their business models to offer a third category of “platinum content”. To better illustrate, the value proposition is based on segmenting the target audience:

  • Retailers would release a “platinum” Blu-Ray version to be sold at the same time as the theatrical movie. This would be a special 4K version (with the necessary digital rights protection developed specifically for 4K Blu-Rays). Shortly after the theatrical release the standard Blu-Ray disc would be available, including all bonus footage like behind the scenes, and deleted scenes.
  • OTT providers would offer standard Video on Demand (VoD) users the option to watch the 1080p movie immediately after the standard Blu-Ray release. “Platinum” subscribers, on the other hand, would have the option to watch the 4K version of the movie during the theatrical run. These subscribers could either pay a higher monthly subscription (SVoD) for the privilege of accessing 4K titles, or it could be translation based (TVoD).

Consumers open their wallets based on these clearly defined behaviors. Each target audience has unique wants and needs that does not cannibalize the other viewing choices:

  • Home theater enthusiasts want the satisfaction of ownership and the excitement of unwrapping their newly purchased Blu-Ray,
  • Internet subscribers are motivated by the flexibility of instant access from the comfort of their living room, computer screen, mobile or tablet, and
  • Movie-goers want a night out on the town. They want an immersive experience on a large thirty foot silver screen, with 22.2 THX sound, and a bucket of popcorn.
Figure iii – Collapsing the Release Window for Movie Titles

Figure iii – Collapsing the Release Window for Movie Titles

(International) Availability

There is little consistency in the release windows for movies after appearing in theaters. Delays are typically long for Blu-Ray and longer for Internet streaming services. And that’s just for US domestic markets where the most expensive movies originates. For some international markets the delay is much longer, or in some cases non-existent. This delay fuels an internet piracy market that has an insatiable appetite for entertainment and has little patience for delayed releases in their local city.

Hollywood often use a trickle-method approach to exposing international audiences is their movies. The mantra “Think global, act local”[viii] is poorly adopted by the entertainment industry, and applies to only a few blockbuster releases. Lack of content availability internationally has been identified as a key contributor to piracy[ix]. Consumers should be deciding how they wish to enjoy their entertainment, not content owners.

A programmatic[x] and synchronized global launch means that subtitles, dubbing services, and marketing can’t be an afterthought. In-scene advertising or product placements that accommodate international brands require planning at the pre-production stage.

There are early signs that OTT services – domestically and internationally – give consumers what they want, at a price point that is acceptable. A study by Ericsson (Figure iv) shows that services such as Netflix have resulted in a persistent reduction in P2P downloads in America. When comparing these figures to an earlier study in Spain, it’s clear that P2P downloading dominates in markets where an OTT service is absent. According to Ericsson, “those who turn to digital piracy do so because on-demand content is simply not available through legal sources”[xi]. A similar survey by Ericsson in the Nordics reported that, “over half the people who previously downloaded music illegally no longer do so after they [were] given access to a streaming service”. The borderless spirit of the internet needs to apply to entertainment as well.

Figure iv - Real Time Entertainment Usage, USA vs. Spain

Figure iv – Real Time Entertainment Usage, USA vs. Spain

(Technology) Longevity

There are three types of consumers today: those that want to own, those that want to rent, and those that want to license. In the ownership camp users should have the ability to pay for entertainment in the same way as software. When a better version is available – a 1080p version, 4K, or even 8K in the future – then just an “upgrade” cost should apply. In addition, ownership should be active through the title’s useful life. The frustration of buying the same movie over and over again should be relegated to the history books.

The future is cloud storage. We live in an age where millions of copies of movies and songs exist on individual hard drives, discs, or servers. It’s a waste of space. Today’s digital society has evolved to where cloud storage only needs a single instance of a movie to be accessible by millions of subscribers. A ‘title master’ paradigm needed for entertainment, where one ‘file’ containing all versions of a movie (eg. theatrical release, director’s cut, extended versions needed to meet various censorship requirements). This title master would accommodate all language tracks, subtitles, or additional commentary tracks (Figure v). Alternate cuts could be interleaved to accommodate geographically specific in-scene advertising.

  1. The user requests a specific version of a movie, the language track, subtitles, etc. Then the streaming platform prepares that version for streaming
  2. The service then identifies the type of device the subscriber has – formatting the video and the audio appropriately.
  3. The movie is then transcoded on-the-fly as it is served to them.
  4. Advertising is interleaved at the network or server level as per the service offering
  5. Adaptive bit rate then ensures smooth viewing experience based on the current networking conditions.

With an anticipated explosion of video content over the next decade, this title master would significantly help with the efficiency of content management. All titles would also be preserved in the cloud with enterprise level high availability and redundancy.

Figure v - Title Master, Future of Cloud Delivery

Figure v – Title Master, Future of Cloud Delivery

When content becomes “virtual”, then the line between ownership and licensing is blurred. The owning community just wants the flexibility to access their content anytime or anywhere and on any device. If a new mobile, tablet, or multiscreen device is purchased, then content rights can easily be extended in this family library.

(Library) Breadth

Offering a deep library of titles continues to be a challenge. Breadth of content is not only about having a sizable library; it’s about offering that library on a global audience. Geo-location restrictions limit the ability for subscribers to view content in remote markets. Such restrictions may also apply to the type of device they are using. In broadcast speak a ‘blackout’ screen is displayed when a user is out of the designated geographic region – or they may be served alternate content. In some cases these restrictions make little sense to consumers, but are likely implemented because they are outside of the advertiser’s border. For example, broadcaster’s will blackout their live news to international users. International users could be easily watch the same news broadcast by substituting international advertising – thus extending the broadcaster’s geographic reach. It’s a lingering reminder of the highly localized and segmented television from the past.

Restrictions also apply to OTT services. Video streaming services differentiate their offering through exclusive content. For example Netflix led the industry with their decision to become a content creator in 2011[xii]. They began with the Emmy award winning series House of Cards, recently renewed for a fourth season[xiii]. Now tech giants AOL, Microsoft, and Yahoo are hedging their bets on exclusive content, hoping that subscribers will be swayed towards their service[xiv]. But this further limits the internet consumer’s ability to access a single source in a way that resembles linear television. The entertainment industry has a long journey ahead to mimic the borderless and global nature of the internet.

(Immersive) Quality

As internet speeds increase, users around the globe want higher quality video. YouTube began supporting 720p in November 2008. One year later 1080p was announced[xv] while also switching their content to the more efficient H.264[xvi] codec. Ericsson reports that consumers are willing to pay for extreme quality 4K UHD video. These are early signs that consumers are willing to open their wallets for a more immersive experience beyond high definition.

Figure vi - Services Most Worthwhile Purchasing

Figure vi – Services Most Worthwhile Purchasing. Seven Markets: China, Germany, Spain, Sweden, Taiwan, UK & USA.

 

Demand for higher quality continues with 4K UHD (3840 x 2160 pixels) which will use the HEVC H.265[xvii] codec. Ubiquitous 4K won’t happen until H.265 is implemented in consumer electronics hardware. By the end of the decade subscribers should have the ability to stream 4K video at speeds ranging from 12 Mbps to 20 Mbps.

Price (Sensitivity)

Disc purchases typically cost significantly more that rentals – rental services cost more than subscriptions. Digital consumers have come to realize that ownership of premium content is no longer rational: What is the practical value of owning a movie when it is only watched once or twice in a lifetime? What is the practical value of a song if it’s listened to no more than 50 times in a lifetime? Subscription services target users that are aware of their entertainment’s useful life.

(Fun & Engaging) Experience

As content becomes more competitive on a global scale, entertainment providers need to attract subscribers through an exciting and fun user experience. Content is still king, but the interface where the user interacts is the kingdom. This is the playground where subscribers will stay and play. If the user is having fun, they will stay longer. If they stay longer there is a higher propensity for them to spend more money.

Figure vii - Search & Discovery, A User centric model for recommendation engines

Figure vii – Search & Discovery, A User centric model for recommendation engines

Social engagement is at the center of this playground. It’s where friends post suggestions, rate content, and show viewing statistics. The subscribers buying behavior, as well as their peers, are monitored and correlated so that different content could be suggested. These are titles that are otherwise undiscoverable though traditional means (Figure vii). This is only part of the virtual playground surrounding the world of entertainment. An environment where consumers enjoy themselves – before, during, and after content is consumed.

The value of social media in entertainment should not be underestimated. According to Ooyala, “Personal testimonials are one of the most powerful influences on all types of consumer action… By learning what their trusted friends have enjoyed, and by comparing that to their perception of how much they have in common with the recommender, viewers get a very personalized and motivating impression of what to check out.”[xviii]

It’s not just content that’s important. It’s about a bi-directional dialog and relationship with subscribers. The consumer is no longer an anonymous viewer to entertainment. Instead, the entertainment provider needs to facilitate a personal and engaging dialogue with each and every subscriber. A better understanding of the subscriber’s behavior needs, and buying habits results in better engagement. It’s always more fun going to a playground where people know who you are.

Read Additional Articles in this Series

I. Consumption is Personal

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.

II. Granularity of Choice

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.

III. Benchmarking the H.265 Video Experience

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.

VII. Are You Ready For Social TV?

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.

VIII. Turning Piratez into Consumers

IX. Turning Piratez into Consumers, I

IX. Turning Piratez into Consumers, II

X. Turning Piratez into Consumers, III

XI. Turning Piratez into Consumers, IV

XII. Turning Piratez into Consumers, V

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

Home - Signature, Gabriel Dusil ('12, shadow, teal)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).

All Rights Reserved

© 2015, All information in this document is the sole ownership of the author. This document and any of its parts should not be copied, stored in the document system or transferred in any way including, but not limited to electronic, mechanical, photographs, or any other record, or otherwise published or provided to the third party without previous express written consent of the author. Certain terms used in this document could be registered trademarks or business trademarks, which are in sole ownership of its owners.

Tags

ACTA, Adobe HDS, Apple HLS, Box Office Mojo, Broadcast, Connected TV, Copyright Infringement, cord cutters, cord nevers, cord shavers, cyber lockers, Digital Video, dusil.com, File Hosting Services, File Sharing, Gabriel Dusil, Global Internet Phenomena Report, IFPI, Informa, Informa Telecoms and Media, International Federation of the Phonographic Industry, Internet Governance, Internet Piracy, Internet Video, Microsoft Smooth Streaming, Multiscreen, Napster, Net Neutrality, New Media, Online Video, OTT, Over the Top Content, OVP, P2P, Peer to Peer, PIPA, piracy, Piratez, PricewaterhouseCoopers, PwC, Sandvine, Skype, Smart TV, SOPA, The Numbers

References

[i] “Side by Side”, Company Films, Directed by Christopher Kenneally, 2012, http://www.imdb.com/title/tt2014338/?ref_=nv_sr_1

[ii] OTT & Multiscreen • Digital Video Series • 8 • Turning Piratez into Consumers, I, by Gabriel Dusil, dusil.com, 25th of October 2013, https://dusil.com/2013/10/25/turning-piratez-into-consumers-i/

[iii] OTT & Multiscreen • Digital Video Series • 8 • Turning Piratez into Consumers, II, by Gabriel Dusil, dusil.com, 15th of June 2014, https://dusil.com/2014/07/15/turning-piratez-into-consumers-ii/

[iv] OTT & Multiscreen • Digital Video Series • 8 • Turning Piratez into Consumers, III, by Gabriel Dusil, dusil.com, 12th of May 2015, https://dusil.com/2015/05/12/ott-multiscreen-digital-video-series-10-turning-piratez-into-consumers-iii/

[v] OTT & Multiscreen • Digital Video Series • 8 • Turning Piratez into Consumers, IV, by Gabriel Dusil, dusil.com, 26th of May 2015, https://dusil.com/2015/05/26/ott-multiscreen-digital-video-series-11-turning-piratez-into-consumers-iv/

[vi] UltraViolet DRM, Wikipedia, http://en.wikipedia.org/wiki/UltraViolet_%28system%29

[vii] “Hollywood is still obsessed with breaking the internet”, by Russell Brandom, 15 December 2014, http://www.theverge.com/2014/12/15/7396639/hollywood-is-still-obsessed-with-breaking-the-internet

“MPAA Exec Admits: ‘We’re Not Comfortable With The Internet’”, techdirt.com, 27 January 2012, https://www.techdirt.com/articles/20120127/10005717568/mpaa-exec-admits-were-not-comfortable-with-internet.shtml

[viii] Think globally, act locally, Wikipedia, http://en.wikipedia.org/wiki/Think_globally,_act_locally

[ix] MPAA Foreign Trade Barriers Report, 29th October 2014, http://www.mpaa.org/wp-content/uploads/2014/10/MPAA-Foreign-Trade-Barriers-Report.pdf

[x] Programmatic, Wikipedia, http://en.wikipedia.org/wiki/Programmatic_media

[xi] “TV & Video, Changing the Game”, Ericsson, 2012, http://www.ericsson.com/res/docs/2012/consumerlab/consumerlab-tv-video-changing-the-game.pdf

[xii] “Netflix’s “House of Cards” secrets: The real story behind Kevin Spacey and Frank Underwood’s meteoric ascent”, by Donald Sull & Kathleen M. Eisenhardt, 26 April 2015, http://www.salon.com/2015/04/26/netflixs_house_of_cards_secrets_the_real_story_behind_kevin_spacey_and_frank_underwoods_meteoric_ascent/

[xiii] “‘House of Cards’ Renewed for Season 4 by Netflix”, by Todd Spangler, 2 April 2015, http://variety.com/2015/digital/news/house-of-cards-renewed-for-season-4-by-netflix-1201465561/

[xiv] “The Best Online-Original TV Shows 2015”, by Rebecca Jane Stokes, 11 February 2015, http://www.tomsguide.com/us/best-online-shows,review-2598.html

[xv] YouTube, Wikipedia, https://en.wikipedia.org/wiki/YouTube

[xvi] H.264, Wikipedia, https://en.wikipedia.org/wiki/H.264/MPEG-4_AVC

[xvii] H.265, Wikipedia, https://en.wikipedia.org/wiki/High_Efficiency_Video_Coding

[xviii] “Connecting Consumers with Content”, Ooyala http://go.ooyala.com/rs/OOYALA/images/ooyala-content-discovery-whitepaper.pdf

 

OTT & Multiscreen • Digital Video Series • 11 • Turning Piratez into Consumers, IV

Portfolio - OTT & Multiscreen (XI. Turning Piratez into Consumers, IV, title, web)

Is it Victory or Defeat for Entertainment?

The success of internet video is attributed to the culmination of several developments, thanks to the internet:

  • New protocols that were invented to stream video such as Apple’s HTTP Live Streaming (HLS), Adobe’s HTTP Dynamic Streaming (HDS), and Microsoft’s Smooth Streaming[i].
  • Internet bandwidth grew to the point where it was able to support streaming video.
  • Cloud platforms were established that enabled an end-to-end supply chain of entertainment – from creation to consumer delivery.
  • The evolution in consumer behavior: There has been a gradual move away from the ownership of physical media, in favor of licensing (or “borrowing”) content via the internet.

With these developments the global expansion of the world-wide-web has also had its share of blame from the entertainment community. For example, in the development of Peer to Peer networks[ii] (P2P), cyber lockers[iii], and more recently, illegal streaming services. This has resulted in the music and movie industry pointing fingers at copyright infringers, for their revenue underperformance. But is it really doom and gloom for the entertainment industry?

Figure i – USA Box office vs. Ticket Prices

Figure i – USA Box office vs. Ticket Prices

 

For starters, cinema goers in the USA have seen a steady rise in ticket sales over the years. When compared to attendance, it is clear that the U.S. market is attempting to maintain an increase in box-office sales against a modest 2% annual growth rate (Figure i, The Numbers and Box Office Mojo). But this doesn’t tell the whole story.

Figure ii – Global Box Office Ticket Revenue)

Figure ii – Global Box Office Ticket Revenue)

International box office figures in Figure ii show more promising growth. Revenue on a global basis is a healthier 8.3% per annum, to nearly 38 billion US$ in 2014 according to Box Office Mojo. Over 70% of global cinema revenue is generated from non-US releases. Notable markets include China at 3.6 billion US$ which has maintained 35% growth year-on-year, for the past decade[iv].

Figure iii – Top 10 Countries for Cinema revenue)

Figure iii – Top 10 Countries for Cinema revenue)

In broadcast, cord cutters (that are cancelling their pay-TV subscriptions), and cord shavers (those that are reducing their spending), continue to be a cause for concern. Nevertheless, this sector is expected to increase steadily at 5.6% on a global basis, according to PwC (PricewaterhouseCoopers, Figure iv).

Figure iv – Global Pay-TV Forecast)

Figure iv – Global Pay-TV Forecast)

Informa Telecoms and Media forecast similar year-on-year growth of 3.8% through to 2017 (Figure v). This study looks at a much broader TV and Video market segment. Here the market is expected to exceed 400 billion US$ by the end of this decade. For comparison, OTT services are growing at a whopping 29% per annum. Even though the OTT market will reach 37 million US$ by 2017, it will still be just a fraction of linear television.

The music industry has gone through its own growing pains throughout the internet era. Napster[v] was blamed at the end of the 1990’s for the decline in CD sales. Music had a tough first decade in 2000. Physical media sales were 10.8 billion US$, down from 28.1 billion US$ ten years earlier. Digital sales had grown to 4.6 billion US$, but didn’t compensate for the loss in physical media revenue. In any case, the International Federation of the Phonographic Industry (IFPI[vi]) reported that the overall industry was worth 168 billion US$ at the end of 2010[vii]. This means that over 90% of music revenue was generated from other monetization baskets other than just disc and single sales.

Figure v – Global TV vs. OTT forecast ’11-‘17)

Figure v – Global TV vs. OTT forecast ’11-‘17)

Even more promising, the music industry is expected to growth at 5.3% per year through to 2017, according to PwC (Figure vi). There are now more than 450 licensed digital music services operating worldwide, offering 37 million tracks to consumers, in over 100 territories, according to IFPI’s Digital Music Report 2014[viii].

Figure vi – Global Music Industry Forecast)

Figure vi – Global Music Industry Forecast)

Looking at the music industry from the decline of CD sales may show an industry that is suffering, but that’s not the big picture. In the days of vinyl, the main profit center for artists was album sales. Concert tours were meant to promote the album, but alone didn’t generate much profit. These days’ musicians are accepting new business model where success is measured by the number of “followers” and “likes”, on Facebook, Twitter, and other social networking sites. Artists are refocusing their energy on live events and other monetization channels that reach fans directly[ix]. Some artists recognize that services such as YouTube[x], Dailymotion[xi], and Vimeo[xii], fuel social interaction and leads to extending their global reach. “Nine of the 10 most viewed videos on YouTube are music videos,” according to IFPI’s Digital Music Report 2013[xiii].

Business models in the music industry have been redefined by focusing on initiatives that drive multiple revenue streams. “There are over two dozen revenue streams available to US-based musicians,” according to Kristin Thomson, The Future of Music Coalition[xiv].

The global video gaming industry has also performed extremely well over the last decade. According to studies from PwC, Gartner, and Digi-Capital, this segment reached nearly 100 billion US$ in 2014, and expects double digit growth through most of this decade (Figure vii). Video gaming continues to expand, thanks in part to the success of the Android and Apple iOS platforms. Mobile app developers have a cost effective and relatively quick means to publish games. At the top end of the market, game development has rivaled movie production costs, with some budgets easily exceeding 20 million US$[xv].

Figure vii – Global Video Gaming Industry Forecast)

Figure vii – Global Video Gaming Industry Forecast)

Overall, the entertainment industry continues with healthy growth, whether it’s movies, television, music, or gaming. When all segments of entertainment are consolidated, the overall industry is expected to exceed 2 trillion US$ by 2017 (Figure viii).

Figure viii – Overall Global Entertainment Industry)

Figure viii – Overall Global Entertainment Industry)

Reality Check

The entertainment landscape has changed significantly over the past twenty years. We could thank the Internet for this global expansion, just as easily as point fingers at it for any revenue shortfall. Some will continue to blame internet piracy, but likely no one will thank the invention of P2P file sharing for their successes.

Even though these industries show healthy growth, there will always remain the argument that sales could be better if piracy was eliminated. The journey to reducing piracy will likely be long and arduous. Even if successful, measuring the end result will be controversial and unlikely to meet the entertainment industry’s expectations. A complete eradication of piracy is a lofty goal. Multiple factors must synchronize to minimize criminality, and maximize revenue potential for artists, studios, and those driving the supply chain.

There is no silver bullet. Even with established solutions in place, any measures won’t completely solve copyright infringement with one fell swoop. There will always be a select group that will take any means necessary to download poor quality content, just for the bragging rights of seeing it first. Not everyone is a candidate for the legitimate purchasing models.

A more reasonable approach may be to reduce theft levels down to those found in brick and mortar stores. If piracy levels were brought down to manageable levels, then any calculated loss will be relegated to the cost of doing business. Brick and mortar retailers have built this into their business models since commerce began.

Stay Tuned for Part V

  • In Part V of this series we will propose solutions to reduce internet piracy from the vantage point of a subscriber wish-list.

Read Additional Articles in this Series

I. Consumption is Personal

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.

II. Granularity of Choice

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.

III. Benchmarking the H.265 Video Experience

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.

VII. Are You Ready For Social TV?

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.

VIII. Turning Piratez into Consumers

IX. Turning Piratez into Consumers, I

IX. Turning Piratez into Consumers, II

X. Turning Piratez into Consumers, III

XI. Turning Piratez into Consumers, IV

XII. Turning Piratez into Consumers, V

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

Home - Signature, Gabriel Dusil ('12, shadow, teal)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).

All Rights Reserved

© 2015, All information in this document is the sole ownership of the author. This document and any of its parts should not be copied, stored in the document system or transferred in any way including, but not limited to electronic, mechanical, photographs, or any other record, or otherwise published or provided to the third party without previous express written consent of the author. Certain terms used in this document could be registered trademarks or business trademarks, which are in sole ownership of its owners.

Tags

ACTA, Adobe HDS, Apple HLS, Box Office Mojo, Broadcast, Connected TV, Copyright Infringement, cord cutters, cord nevers, cord shavers, cyber lockers, Digital Video, dusil.com, File Hosting Services, File Sharing, Gabriel Dusil, Global Internet Phenomena Report, IFPI, Informa, Informa Telecoms and Media, International Federation of the Phonographic Industry, Internet Governance, Internet Piracy, Internet Video, Microsoft Smooth Streaming, Multiscreen, Napster, Net Neutrality, New Media, Online Video, OTT, Over the Top Content, OVP, P2P, Peer to Peer, PIPA, piracy, Piratez, PricewaterhouseCoopers, PwC, Sandvine, Skype, Smart TV, SOPA, The Numbers

References

[i] Adaptive bitrate streaming, Wikipedia, http://en.wikipedia.org/wiki/Adaptive_bitrate_streaming

[ii] Peer to Peer networks, Wikipedia, http://en.wikipedia.org/wiki/Peer-to-peer

[iii] File Hosting Services, Wikipedia, http://en.wikipedia.org/wiki/File_hosting_service

[iv] “Chinese Cinema Continues Fast Growth in 2013”, 16th August 2013, http://www.isuppli.com/China-Electronics-Supply-Chain/MarketWatch/Pages/Chinese-Cinema-Continues-Fast-Growth-in-2013.aspx

[v] Napster, Wikipedia, http://en.wikipedia.org/wiki/Napster

[vi] IFPI, Wikipedia, http://en.wikipedia.org/wiki/International_Federation_of_the_Phonographic_Industry

[vii] IFPI (International Federation of the Phonographic Industry). The broader music industry in this context includes:

  • Radio advertising music
  • Recorded music sales
  • Musical instrument sales
  • Live performance revenues
  • Portable digital music players
  • + a few other income categories

[viii] IFPI, Digital Music Report ’14, http://www.ifpi.org/downloads/Digital-Music-Report-2014.pdf

[ix] “Music Insiders Tell Us How Social Drives Album Sales and Revenue”, by Claire BeDell, 25th February 2013, http://sproutsocial.com/insights/2013/02/social-media-music-industry/

[x] YouTube, http://www.youtube.com/

[xi] Dailymotion, http://www.dailymotion.com/

[xii] Vimeo, https://vimeo.com/

[xiii] IFPI, Digital Music Report ’13,  http://www.ifpi.org/content/library/DMR2013.pdf

[xiv] “Are Musicians Making More or Less Money?”, by Kristin Thomson, 2nd July, 2012, http://money.futureofmusic.org/are-musicians-making-more-or-less-money/

[xv] Video game development, Wikipedia, http://en.wikipedia.org/wiki/Video_game_development

OTT & Multiscreen • Digital Video Series • 10 • Turning Piratez into Consumers, III

Portfolio - OTT & Multiscreen (X. Turning Piratez into Consumers, III, title, web)

 Freedom vs. Control

The Internet’s openness has resulted in its greatest success and arguably its darkest failures. The ideology of Internet Freedom[1] has its values routed in capitalism – where markets are free, and the government doesn’t have control over them[2]. On the flip side, a regulated Internet fuels fears of totalitarianism – where the state holds total authority over a society[3]. Needless to say, the issues surrounding net neutrality[4] verses internet governance[5] are sensitive, and have remained a heated topic for many years.

Proponents of net neutrality want to maintain the internet as “freedom of expression[6]. Their guiding principle is an internet where ISP’s or governments treat all data equal on the Internet.

Those that support internet governance want the ability to block, speed-up, or slow-down traffic at their own discretion. This would equalize the playing field of ISPs and entertainment providers, because ISPs would have more control over what is being sent over their network. Proponents of internet governance argue that data ‘control’ would guarantee quality of service, and would help to address the growing threat of piracy, because P2P protocols and other methods used to pirate content would be filtered (which is a politically correct way of saying “blocked”). In this scenario, a provider could drop all P2P packets, working off the assumption that all P2P traffic is pirated content. But this could adversely affect legitimate services such as Skype, which uses P2P technology[7].

Another concern is that if the internet became regulated, this could lead to a premium charges on content such as video streaming, communications, or gaming – services that either need a lot of bandwidth, or require minimum latency. An ISP could potentially discriminate against any communication protocol, user, or company, with full impunity. The danger is compounded when governance favors one user or competitor over another, or discriminates any combination of, content, websites, platforms, or applications. For these reasons internet governance is largely viewed as a hindrance to future innovation and competition. And that brings us full circle to capitalist ideals.

Several attempts to regulating the internet have been attempted in recent years. Notable initiatives include:

  • PIPA[8] – A bill introduced on the 12th of May 2011, designed to empower copyright owners to go after perpetrators which have infringed on copy written materials such as illegal sales, counterfeit goods, or anti-digital rights management. This is especially targeted to those registered outside of the USA.
  • SOPA[9] – This bill was introduced on the 26th of October 2011. It would allow the U.S. Department of Justice or copyright holders, to “seek court orders against websites outside U.S. jurisdiction accused of enabling or facilitating copyright infringement”
  • ACTA[10] – This agreement was signed by 31 states as well as the European Union on 4th of February 2013. The goal is to establish an international legal framework for targeting copyright infringement on the Internet, medicine and other counterfeit products.

There is a common thread in these initiatives. They all attempt to police the internet – mainly in jurisdictions outside of the USA. There is mounting pressure from the US government, the entertainment industry, and consumer goods companies to crack down on copyright infringement.

Entertainment vs. the Internet

Twenty years ago internet bandwidth wasn’t high enough to stream video in real time. But the 2000’s changed that. As throughput increased companies began to emerge and offer entertainment streaming services for music, video, and gaming. Initially this was for low quality content, but consumers didn’t seem to mind. By the end of the decade, high definition video could be streamed in many countries around the world. As the internet primed itself for high definition, ISPs began to argue with entertainment companies[11] running OTT. An OTT service effectively bypasses the traditional broadcast television transmission by offering content via the internet (Figure i and Figure ii). The center of this conflict was based on the sudden increase in bandwidth. Usage would increase ten-fold or even higher because of video. Because of this internet governance debate intensified. Network providers argued, “Your video is costing us a lot of money in upgrading our infrastructure. You need to pay extra for that content, or we’ll have to filter it.” These are known as paid-prioritization agreements or charging special fees for Internet fast lanes.

Figure i – TV Broadcast service

Figure i – TV Broadcast service

Figure ii – TV Broadcast compared to Over the Top services

Figure ii – TV Broadcast compared to Over the Top services

 

The ISP business model is disrupted directly by entertainment providers for the following reason: The entertainment providers running Over the Top Content[12] (OTT) services responded with, “You can’t govern the internet, and regulate our traffic. By filtering our traffic you discriminating against us, and that is against net neutrality.”

Subscribers of ISP services typically pay a flat monthly fee for their internet connection, regardless of how much they download. OTT providers also generate revenue through monthly subscriptions. The difference is in the infrastructure cost between these two business models: As subscriber counts increases, an OTT hosting platform has the luxury of expanding their back-end proportionally. For example, if the OTT provider doubles their subscriber base, they have the revenue surplus to justify doubling their infrastructure capacity. Imagine a community of 20 ISP subscribers using an average of 1Mbps of traffic per month (20Mbps in total for the community). If that community simultaneously signs up to an OTT service then each user increases their usage to 10Mbps per month, that’s 200Mbps that now needs to be supported by the ISP. In other words, the ISP needs their infrastructure to support ten times more capacity, but none of those subscribers are paying more for their internet connection.

With cord cutters[13] it gets even worse (i.e. those that have cancelled their pay-TV service). According to Sandvine’s Global Internet Phenomena Report[14], cord cutters “consume on average 212GB a month, more than seven times the usage of a typical ISP subscriber” (Figure iii).

This is further complicated by the fact that ISPs typically over-provision (or over-subscribe) their networks to save on infrastructure costs[15]. An often quoted figure is 20:1 for ADSL, and can be as high as 50:1 for satellite connections. In the first example, over-provisioning works on the premise that an average subscriber will only use 5% of their bandwidth over the course of one month. Even though all subscribers are told that they have 10Mbps of available bandwidth, the ISP will provision for the 0.5Mbps, which is the average. If 20 subscribers share that connection in a community, then the ISP only needs to accommodate for an average of 10Mbps for the entire community (0.5Mbps x 20 users). This saves tremendously on infrastructure costs. But if all of those subscribers sign up for OTT, then bandwidth usage skyrockets and bottlenecks results in a disappointing quality of service (QoS).

Figure iii – Internet Usage by Region

Figure iii – Internet Usage by Region

 

The OTT provider happily collects monthly revenue for 20 new subscribers, but the ISPs now has to accommodate for the increased capacity, without any incremental revenue. Since this is a subscription service, the annuity revenue model results in relatively predicable forecasting. OTT Infrastructure managers can track the trajectory of subscriber growth to their expanding back-end. ISPs don’t have that same transparency in terms of which subscribers who will sign up for an OTT service.

Subscribers that sign up for OTT can easily jump from single digit gigabytes one month, to double digit gigabytes the next (see Figure iii). On a grander scale, when hundreds of thousands of subscribers sign up for OTT, there is an exponential burden on the ISP’s backbone.

Internet providers have the inconvenience of upgrading their infrastructure as OTT providers become more successful. Canadian ISP’s anticipated this dilemma by implementing a bandwidth usage cap. In 2012, four months after Netflix launched services in Canada; several ISP’s capped their internet services between 15GB and 25GB per month, prompting complaints from Netflix executives[16]. These bandwidth caps restrict downloading to just a handful of movies per month – effectively neutering Netflix’s entry into the country.

Netflix users watched over 5.1 billion hours of video per month in Q4 2014, tripling their usage compared to three years ago.[17]

In February of 2015 the Federal Communications Commission (FCC)[18] voted in favor of a strong net neutrality rule. In other words paid-prioritization agreements are no longer allowed. This prevents ISPs from collecting payments from web companies from delivering their entertainment content using paid fast lanes.[19]

 

Stay Tuned for Part IV, & V

  • 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.

Read Additional Articles in this Series

I. Consumption is Personal

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.

II. Granularity of Choice

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.

III. Benchmarking the H.265 Video Experience

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.

VII. Are You Ready For Social TV?

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.

VIII. Turning Piratez into Consumers

IX. Turning Piratez into Consumers, I

IX. Turning Piratez into Consumers, II

X. Turning Piratez into Consumers, III

XI. Turning Piratez into Consumers, IV

XII. Turning Piratez into Consumers, V

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

Home - Signature, Gabriel Dusil ('12, shadow, teal)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).

All Rights Reserved

© 2015, All information in this document is the sole ownership of the author. This document and any of its parts should not be copied, stored in the document system or transferred in any way including, but not limited to electronic, mechanical, photographs, or any other record, or otherwise published or provided to the third party without previous express written consent of the author. Certain terms used in this document could be registered trademarks or business trademarks, which are in sole ownership of its owners.

Tags

ACTA, Adobe HDS, Apple HLS, Box Office Mojo, Broadcast, Connected TV, Copyright Infringement, cord cutters, cord nevers, cord shavers, cyber lockers, Digital Video, dusil.com, File Hosting Services, File Sharing, Gabriel Dusil, Global Internet Phenomena Report, IFPI, Informa, Informa Telecoms and Media, International Federation of the Phonographic Industry, Internet Governance, Internet Piracy, Internet Video, Microsoft Smooth Streaming, Multiscreen, Napster, Net Neutrality, New Media, Online Video, OTT, Over the Top Content, OVP, P2P, Peer to Peer, PIPA, piracy, Piratez, PricewaterhouseCoopers, PwC, Sandvine, Skype, Smart TV, SOPA, The Numbers

References

[1] Internet Freedom, U.S. State Department http://www.state.gov/e/eb/cip/netfreedom/index.htm

[2] Capitalism, Wikipedia, http://en.wikipedia.org/wiki/Capitalism

[3] Totalitarianism, Wikipedia, http://en.wikipedia.org/wiki/Totalitarianism

[4] net neutrality, Wikipedia, http://en.wikipedia.org/wiki/Net_neutrality

[5] Internet Governance, Wikipedia, http://en.wikipedia.org/wiki/Internet_governance

[6] Save the Internet, Wikipedia, http://en.wikipedia.org/wiki/Save_the_Internet

[7] “What is P2P communications, https://support.skype.com/en/faq/fa10983/what-are-p2p-communications

[8] Protect IP Act, Wikipedia, http://en.wikipedia.org/wiki/PROTECT_IP_Act

[9] Stop Online Piracy Act, Wikipedia, http://en.wikipedia.org/wiki/SOPA

[10] Anti-Counterfeiting Trade Agreement, Wikipedia, http://en.wikipedia.org/wiki/ACTA

[11] “Net Neutrality: A Catch 22?”, by Jyoti Pawar, 20 January 2015, Business World, http://www.businessworld.in/news/economy/net-neutrality-a-catch-22/1706892/page-1.html

[12] Over the Top Content, http://en.wikipedia.org/wiki/Over-the-top_content

[13] Cord Cutting, Techopedia, http://www.techopedia.com/definition/28547/cord-cutting

[14] Sandvine, Global Internet Phenomena Report 1H 2014, https://www.sandvine.com/downloads/general/global-internet-phenomena/2014/1h-2014-global-internet-phenomena-report.pdf

[15] “On Bandwidth and Backhaul Provisioning”, by by Mike Everest, 7 July 2009, Duxtel, http://shop.duxtel.com.au/article_info.php?articles_id=14

[16] “Netflix exec: Canada’s broadband caps “almost a human rights violation”, by Janko Roettgers, Gigaom, http://gigaom.com/2012/09/13/netflix-canada-caps-human-rights-violation/

[17] The Diffusion Group, tdg, http://tdgresearch.com/report/netflix-2014-domestic-dominance-international-escalation/

[18] FCC, Wikipedia, http://en.wikipedia.org/wiki/U.S._Federal_Communications_Commission

[19] “FCC Votes ‘Yes’ on Strongest Net-Neutrality Rules”, by Haley Sweetland Edwards, 26 February 2015, Time.com

OTT & Multiscreen • Developing OTT for the Emerging Markets, II

Graphic - Digital Trends Video Opinions (header #2, web)

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

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)

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

Ÿ• Home - Signature, Gabriel Dusil ('12, shadow, teal)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).

• Tags

Ÿ4K, 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

• References

[i] Internet Traffic, Wikipedia, http://en.wikipedia.org/wiki/Internet_traffic & Cisco’s Visual Networking Index Forecast (’13)

[ii] Cisco, Visual Networking Index (VNI), http://www.cisco.com/c/en/us/solutions/service-provider/visual-networking-index-vni/index.html

[iii] YouTube, Wikipedia, http://en.wikipedia.org/wiki/Youtube

[iv] Skype, Wikipedia, http://en.wikipedia.org/wiki/Skype

[v] 50 million concurrent users online!, by Jean Mercier, http://skypenumerology.blogspot.cz/2013/01/50-million-concurrent-users-online.html

[vi] Blu-Ray, Wikipedia, http://en.wikipedia.org/wiki/Blu-ray

[vii] Apple iPhone, Wikipedia, http://en.wikipedia.org/wiki/IPhone

[viii] Sandvine – Global Internet Phenomena Report (1H ‘13)

[ix] HTML5, Wikipedia, http://en.wikipedia.org/wiki/HTML5

[x] Responsive Web Design, Wikipedia, http://en.wikipedia.org/wiki/Responsive_web_design

[xi] “Sub-Saharan Africa pay-TV numbers to double by 2020”, by Jim O’Neill, Ooyala VideoMind, http://videomind.ooyala.com/blog/sub-saharan-africa-pay-tv-numbers-double-2020

[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.

[xiii] Average revenue per user, Wikipedia, http://en.wikipedia.org/wiki/Average_revenue_per_user

[xiv] “Pay-TV Prices Are at the Breaking Point — And They’re Only Going to Get Worse”, by Todd Spangler, Variety.com, http://variety.com/2013/biz/news/pay-tv-prices-are-at-the-breaking-point-and-theyre-only-going-to-get-worse-1200886691/

[xv] Trading Analog Dollars For Digital Pennies, by Zemanta, http://avc.com/2008/11/trading-analog/

[xvi] Consolidated figures for Wikipedia, http://en.wikipedia.org/wiki/List_of_countries_by_number_of_households, Ofcom, and iDate, http://stakeholders.ofcom.org.uk/market-data-research/market-data/communications-market-reports/cmr13/international/icmr-3.23

OTT & Multiscreen • Developing OTT for the Emerging Markets, I

Graphic - Digital Trends Video Opinions (header #2, web)

 

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

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

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

Ÿ• Home - Signature, Gabriel Dusil ('12, shadow, teal)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).

• Tags

Ÿ4K, 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

• References

[i] Internet Traffic, Wikipedia, http://en.wikipedia.org/wiki/Internet_traffic & Cisco’s Visual Networking Index Forecast (’13)

[ii] Cisco, Visual Networking Index (VNI), http://www.cisco.com/c/en/us/solutions/service-provider/visual-networking-index-vni/index.html

[iii] YouTube, Wikipedia, http://en.wikipedia.org/wiki/Youtube

[iv] Skype, Wikipedia, http://en.wikipedia.org/wiki/Skype

[v] 50 million concurrent users online!, by Jean Mercier, http://skypenumerology.blogspot.cz/2013/01/50-million-concurrent-users-online.html

[vi] Blu-Ray, Wikipedia, http://en.wikipedia.org/wiki/Blu-ray

[vii] Apple iPhone, Wikipedia, http://en.wikipedia.org/wiki/IPhone

[viii] Sandvine – Global Internet Phenomena Report (1H ‘13)

[ix] HTML5, Wikipedia, http://en.wikipedia.org/wiki/HTML5

[x] Responsive Web Design, Wikipedia, http://en.wikipedia.org/wiki/Responsive_web_design

[xi] “Sub-Saharan Africa pay-TV numbers to double by 2020”, by Jim O’Neill, Ooyala VideoMind, http://videomind.ooyala.com/blog/sub-saharan-africa-pay-tv-numbers-double-2020

[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.

[xiii] Average revenue per user, Wikipedia, http://en.wikipedia.org/wiki/Average_revenue_per_user

[xiv] “Pay-TV Prices Are at the Breaking Point — And They’re Only Going to Get Worse”, by Todd Spangler, Variety.com, http://variety.com/2013/biz/news/pay-tv-prices-are-at-the-breaking-point-and-theyre-only-going-to-get-worse-1200886691/

[xv] Trading Analog Dollars For Digital Pennies, by Zemanta, http://avc.com/2008/11/trading-analog/

[xvi] Consolidated figures for Wikipedia, http://en.wikipedia.org/wiki/List_of_countries_by_number_of_households, Ofcom, and iDate, http://stakeholders.ofcom.org.uk/market-data-research/market-data/communications-market-reports/cmr13/international/icmr-3.23

OTT & Multiscreen • Digital Video Series • 9 • Turning Piratez into Consumers, II

 

Portfolio - OTT & Multiscreen (IX. Turning Piratez into Consumers, II, title, web)

Blame the Internet?

i. Blame the Internet, Thank the Internet)

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 the need 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.

ib. SMS estimated to be generally $30,000 per GB)

  • 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.
ii. Global CD & Single Shipments & Revenue ’98-‘11)

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.

iiib. As the Internet proliferates, consumer propensity for choice increases)

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

iii. Internet Traffic split by file types that violate copyright)

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

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 •Ÿ 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]Graphic - Buffering (spinner 4)

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 •Ÿ Owning •Ÿ Licensing

Figure v – Evolution of Entertainment Consumption

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.

 

Read Additional Articles in this Series

I. Consumption is Personal

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.

II. Granularity of Choice

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.

III. Benchmarking the H.265 Video Experience

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.

VII. Are You Ready For Social TV?

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.

VIII. Turning Piratez into Consumers

IX. Turning Piratez into Consumers, I

IX. Turning Piratez into Consumers, II

X. Turning Piratez into Consumers, III

XI. Turning Piratez into Consumers, IV

XII. Turning Piratez into Consumers, V

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

Home - Signature, Gabriel Dusil ('12, shadow, teal)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).

All Rights Reserved

© 2014, All information in this document is the sole ownership of the author. This document and any of its parts should not be copied, stored in the document system or transferred in any way including, but not limited to electronic, mechanical, photographs, or any other record, or otherwise published or provided to the third party without previous express written consent of the author. Certain terms used in this document could be registered trademarks or business trademarks, which are in sole ownership of its owners.

Tags

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

References

[i] MP3, Wikipedia, http://en.wikipedia.org/wiki/MP3

[ii] “Entertainment vs. The Internet, Turning Threats into Opportunities”, by Gabriel Dusil, https://dusil.com/2014/01/27/entertainment-vs-the-internet-turning-threats-into-opportunities/

[iii] YouTube, www.youtube.com

[iv] Spotify, www.spotify.com

[v] Rhapsody, www.rhapsody.com/

[vi] IFPI, International Federation of the Phonographic Industry, Wikipedia, http://en.wikipedia.org/wiki/International_Federation_of_the_Phonographic_Industry

[vii] Napster, Wikipedia, http://en.wikipedia.org/wiki/Napster

[viii] “Building the $100 Billion Music Business”, by Tom Silverman, Billboard, http://www.billboard.com/biz/articles/news/digital-and-mobile/1521562/building-the-100-billion-music-business-guest-post-by

[ix] Paperless office, Wikipedia, http://en.wikipedia.org/wiki/Paperless_office

[x] SMS, Wikipedia, http://en.wikipedia.org/wiki/Short_Message_Service

[xi] Viber, http://www.viber.com/

[xii] WhatsApp, http://www.whatsapp.com/

[xiii] iMessage, Wikipedia, http://en.wikipedia.org/wiki/IMessage

[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)

[xv] Tweets, Wikipedia, http://en.wikipedia.org/wiki/Tweet

[xvi] brink and mortar, Wikipedia, http://en.wikipedia.org/wiki/Brick_and_mortar

[xvii] “As the Internet proliferates, consumer propensity for choice increases.”

[xviii] Envisional – An Estimate of Infringing Use of the Internet (11.Jan), http://documents.envisional.com/docs/Envisional-Internet_Usage-Jan2011.pdf

[xix] DRM, Wikipedia, http://en.wikipedia.org/wiki/Digital_rights_management

[xx] The Pirate Bay, Wikipedia, http://en.wikipedia.org/wiki/The_Pirate_Bay

[xxi] THX, Wikipedia, http://en.wikipedia.org/wiki/THX

[xxii] long tail content, Wikipedia, http://en.wikipedia.org/wiki/Long_tail

[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/

[xxiv] “Netflix plans to bull ahead with original content strategy after House of Cards success”, by Ken Yeung, 22nd April, 2013, http://thenextweb.com/insider/2013/04/22/netflix-plans-to-bull-ahead-with-original-content-strategy-after-house-of-cards-success/

[xxv] Bootleg Cam, Wikipedia, http://en.wikipedia.org/wiki/Cam_(bootleg)

[xxvi] “Video Stream Quality Impacts Viewer Behavior: Inferring Causality Using Quasi-Experimental Designs”, by S. Shunmuga Krishnan, Akamai Technologies, & Ramesh K. Sitaraman, University of Massachusetts, http://people.cs.umass.edu/~ramesh/Site/HOME_files/imc208-krishnan.pdf

[xxvii] Ericsson – TV & Video Consumer Trend Report ‘11

[xxviii] Netflix, www.netflix.com/

[xxix] EPG, Wikipedia, http://en.wikipedia.org/wiki/EPG

[xxx] “On average, Americans get 189 cable TV channels and only watch 17”, by Megan Geuss – May 6 2014. Ars technical, http://arstechnica.com/business/2014/05/on-average-americans-get-189-cable-tv-channels-and-only-watch-17/

[xxxi] IMDB, http://www.imdb.com/

[xxxii] Rotten Tomatoes, http://www.rottentomatoes.com/

[xxxiii] Movie theater, Wikipedia, http://en.wikipedia.org/wiki/Movie_theater

[xxxiv] Vinyl, Wikipedia, http://en.wikipedia.org/wiki/Gramophone_record

[xxxv] VHS, Wikipedia, http://en.wikipedia.org/wiki/VHS

OTT & Multiscreen • Turning Internet Threats into Entertainment Opportunities

Portfolio - Visual Unity, Turning Internet Threats into Entertainment Opportunities (title)

• Synopsis

• The entertainment landscape has changed more in the last decade, than in the 60+ years of broadcast. Much of this disruption can be attributed to the growth of the internet. From this infrastructure, several battles are raging under the feet of consumers; Broadcast has a new adversary called OTT (Over the Top Video); ISPs are struggling to keep up with bandwidth demands of video; mobile infrastructures have also witnessed significant changes in consumer behavior as applications overshadow handset features. This presentation explores the various battles taking place between the communication, computing and entertainment industries. The global landscape in subscriber behavior continues to change rapidly, and OTT has the potential to be at the center of it all.

• View the recorded video presentation from Visual Unity’s Web Seminar Series

• 36 minutes 49 seconds

• Download the Original Presentation here

Portfolio – Visual Unity, Turning Internet Threats into Entertainment Opportunities (v3.2).pptx

• View the PDF version here

 

OTT & Multiscreen • Entertainment vs. The Internet, Turning Threats into Opportunities

Portfolio - Visual Unity, Entertainment vs. The Internet, Turning Threats into Opportunities (v2.9)

• Synopsis

• The entertainment landscape has changed more in the last decade, than in the 60+ years of broadcast. Much of this disruption can be attributed to the growth of the internet. From this infrastructure, several battles are raging under the feet of consumers; Broadcast has a new adversary called OTT (Over the Top Video); ISPs are struggling to keep up with bandwidth demands of video; mobile infrastructures have also witnessed significant changes in consumer behavior as applications overshadow handset features. This presentation explores the various battles taking place between the communication, computing and entertainment industries. The global landscape in subscriber behavior continues to change rapidly, and OTT has the potential to be at the center of it all.

• View the recorded video presentation from Visual Unity’s Digital Forum ’13:

• 23 minutes 50 seconds

• Download the Original Presentation here:

• Portfolio – Visual Unity, Entertainment vs. The Internet, Turning Threats into Opportunities (v3.0).pptx

• View the PDF version here: