GLGi: Broadband Video Content

Greg Fawson
President and Principal Analyst
X Media Research
Council Member Biography

Greg Fawson is the President and Principal Analyst at X Media

Research, a technology research company focusing on
emerging consumer electronic platforms and services. He has
been responsible for the development of market intelligence
services, launching international operations and creation of
numerous industry forums and events. Greg has been a
consultant to semiconductor device manufacturers and
original equipment manufacturers. He has also published
numerous reports on computing, communications and
consumer electronics platform architectures and the
associated semiconductor device technologies. He has worked
on projects such as: Telecom TV (IPTV), Portable Media Players,
Digital Video Broadcasting (DVB-T, DVB-H, ISDB-T), and Video
Codec’s. Mr. Fawson has also published reports on Mobile
Digital TV Broadcast technologies such as DVB-H, MediaFLO,
DMB and ISDB-T. His latest work includes analysis of the Digital
TV market and the integration of DMA (Digital Media Adapter)
functionality.
Topics

 How will broadband video and the inherent social

networking aspect impact traditional broadcast /
subscriber TV services?
 What is the outlook for CE devices and gaming
platforms that deliver broadband video content?
 What do consumers look for most from broadband video
and what are potential business models?
 How will operator-deployed CPE (customer premises
equipment) evolve to take advantage of IP video
delivery?
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About X Media Research

• Industry analyst veteran with 10+ years

experience
• Areas of focus:
– Consumer Electronics
– IPTV Services
– Home Networking Technologies
– Operator Deployed Customer Premises
Equipment
Questions
• What iTV delivery models are working?
• Impact on traditional broadcast / cable TV
• What is the outlook for CE devices such as
AppleTV, TiVO and Gaming platforms that
deliver Internet Video content?
• How will operator-deployed CPE (Customer
Premises Equipment) evolve to take
advantage of IP video delivery?
• What companies will benefit most from the
Broadband Video explosion?
• Is the Internet ready for HD streaming?
What is Internet Video?

• Video delivered over open Internet

infrastructure or via dedicated streaming
video servers
• Can be managed or unmanaged video
content
• Can be streamed or downloaded
• Internet Video is not IPTV
• Internet Video is delivered to multiple
devices, not just the PC
• Internet Video is NOT only UGC (user-
generated content)
Types of Internet Video
Offerings
• Movie Streaming
– Cinemanow, MovieLink (now Blockbuster),
Netflix
• Movie Download / Rental
– VUDU, Akimbo, Amazon Unbox
• Video Clips / UGC
– YouTube, Revver, Veoh
• Premium Content
– ABC, Fox, Hulu, NBC, HBO
• Web-Only Content and Channels
– Prom Queen, Lady Wasteland, NoGood.TV
Internet Video Complexity
Many Moving Parts – Everyone Has a
Stake

Content Content
Owners Aggregators

Cable, DBS, Internet

Telco, ISP Internet Video Infrastructur
Operators e

Device
Manufacture Advertisers
rs
Massive Changes Means
Opportunity
• Emergence of digital media and Internet
TV places owners and distributors of video
at the epicenter of change
• Despite changes, content is still king
• New opportunities exist for companies that
can provide the right mix of premium,
niche and long-tail content to the TV
• Search and Discovery will be key
Business Models Still Largely
Experimental
• Mix of free, subscription, rental, download
to own, advertising supported. Some are
proven, some are not
• Each model is constantly changing and
nothing is set in stone
• Just look at AppleTV and NBC
– All paid content pulled and moved to an
advertising model on Hulu.com
User-generated content is coming
to TV

Current TV MTV Flux

Internet Video as a Business has
been Negatively Impacted by:
• LOW Quality of Experience (QoE)
• HIGH Total Cost of Delivery (TCoD)
• NO scalability to millions of simultaneous
viewers
• HIGH demand and LOW availability of more
than “snack” video – Demand for long form,
“live,” and HD
Consumer Expectations
Increasing
• Improvements in streaming delivery
– ABC, FOX, CW, and others now streaming long-form
video with few negative events
– Larger video sizes, higher quality encodes
• Online video reaching maturity
• Real market
– Broadcasters recognized for moving online streaming
from “interesting marketing experiment” to rational
business
– Crowded space with vendors and integrators
• Recognized convergence
– Consumers want TV-like experience as measured by
responsive, quality video
– Consumers want source and device interoperability
– Promise of lifestyle viewing delivered through substitute
technologies
Phenomenal Growth
• Consumers are spending more time online
and watching more video online. Has become
a more accepted medium
• In 6 months from about 2 hours per month to
almost 3 hours
• In 2007 almost a billion more videos were
viewed in November than in June
• Veoh grows from 2.5 million users per month
at beginning of year to 21.5 million unique by
end of year. Growth of over 760%
• Pick any stat…it all points toward massive
growth of online video content and viewership
Predictions
Prediction #1

• Internet TV / Broadband video will evolve

away from PC-centric model. Video to the
TV is where its at!
Prediction #2

• Internet video will not kill broadcast / cable

TV
• It will force content owners and operators
to evolve to new realities and embrace
broadband video
Prediction #3

• Non-PC devices will account for almost

20% of all Internet Video accesses by 2012
– Networked Digital TVs, Game Consoles and
Operator-deployed STBs and Mobile Devices
will lead the way
Prediction #4

• Standalone DMA / STBs like AppleTV and

VUDU will remain niche players
Prediction #5

• Over 30% of streaming Internet video

traffic will be at HD resolution (720p) by
2012
Prediction #6

• TiVO will be the comeback kid

Prediction #7

• Internet Video will command a growing

portion of overall ad revenue. Will pull
dollars away from traditional TV
advertising as audiences fragment
Prediction Analysis
Prediction #1: Internet Will Evolve
Away From PC-Centric Model
• First let’s do the reality check – still will be
100’s of millions of users
• But as an experience it is
• solitary
• single user
• lean forward
• To progress it must become
• social
• friends and family
• lean-back
Not the Right Experience
The Right Experience
Consumer Want TV Connected
to Internet

“Would you like to have your

HDTV connected to the
Internet?”

Yes No
92.4% 7.60%
Source: S2 Data Corporation
Everyone Wants to Get to the
TV
• Media Center Extenders

• Digital Media Adapters

• Broadband Set-top Box

• Broadband-Enabled Game Console

• Networked Television
Why Do People View iTV on
the PC?
• Because the vast majority of the content
they can get on the PC is not available on
the TV
Consumer’s View of TV is
Changing
Video 1.0 Video 2.0
• Linear Broadcast • Personalized, On
Demand
• Limited content
• Unlimited content
• Few streams
• Time and Place
• Single device
shifting
• One size fits all • Multiple devices
content
• Interactive content
• Scheduled viewing
Prediction #2: Internet TV Will Not
Kill Broadcast TV
Pay-TV and FTA Subscribers
are Growing

Source: X Media Research

Internet Enhances TV, Does
Not Replace
• Wasn’t eCommerce supposed to kill off the whole
retail sector once and for all?
• The Internet fosters closer ties with audience
• Broadcast is how we discover new programming
and how we discover new Internet sites
• Major network TV shows marketed as events
– Lost or Heroes direct to Internet would have
much smaller audience
• Broadcast (cable, satellite, OTA) is far more
efficient means to reach large audiences
– 30M concurrent viewers of American Idol over
the Internet hasn’t been possible
 Internet Video Helps Re-
Discover TV
29.2 million views within first
month
3 of the top 25 YouTube videos
Now there are now over 62
million Subscribers to the CBS
Channel on YouTube

“CBS is learning about its audience as never

before”
Quincy Smith, President, CBS Interactive
So What’s the Problem?
Internet Video is Cannibalizing
Some TV
• In the United Kingdom traditional broadcasters
have seen their share of television viewing
sliding. Channel 4 has seen its share of viewing
fall by almost 12% over the year, while Five has
fallen by nearly 10%. BBC One and Two are also
down by 3%, while ITV dropped nearly 2%.
• Veoh reports that 40% of viewing occurs during
‘Prime-time’
• If we continue to do business assuming people
will watch television as they always have," said
NBC's Wurtzel, "it's a dead-end game."
TV Ad Dollars Are Under Threat

• Fragmented audiences
• Time-shifting reduces relevance
• Fast-forward button
• New media stealing eyeballs
Ad Market Breakdown 2007

Source: X Media Research

Prediction #3: Non-PC Devices Will
Account for Almost 20% of all
Internet Video Accessed by 2012

• Networked Digital TVs, Game Consoles

and Operator-deployed STBs and Mobile
Devices will lead the way
Gating Factors
• Accessing Internet Video on the TV has not
been without problems
– Few devices have been flexible for both
“walled garden” & “open” services
• Able to upload new software and codec technology
• And have massive power
• Disparate applications and technologies
– The format wars…
• WM9, Flash, DivX and so on
– DRM (Digital Rights Management) issues
• Content wasn’t available on other
platforms
Key Factors and Trends Bearing
on Internet Video on the TV

• Broadband penetration
• Home networking penetration
• New compression standard: H.264/AVC
• Internet connected set-top-boxes and game
consoles
• Changes in perspective of content rights
holders
• TV Quality experience becoming possible
• Device manufacturers becoming content
aggregators…or partnering directly
• Middleware getting better – Greater synergy
between PC and CE for configuration of
services
• What about OCAP and CableCARD?
nDTVs Already on the Market
acTVila.com – Big in Japan!
Internet Video on the TV – Its
What Consumers Want!

“Question: If your TV were connected to the

Internet, what would be the most important
content?”

Answers High Interest

Pictures / Images 57.3%
Music 38.0%
Video 73.6%
Source: S2 Data Corporation
Will Consumers Pay For
nDTVs?
• Over 55% of consumers surveyed would
pay more to have their digital TVs
connected directly to the Internet
 nDTV Market Forecast
Millions of Units

Source: X Media Research

Key Stats

• By 2012 Networked DTVs will account for

over 15% of total TVs sold
• By 2012 more than 70 million TVs will be
directly connected to the Internet
Gaming Consoles

• Game consoles fit all the profiles of a

successful Internet video delivery platform
– Powerful processor
– Storage
– Location
– Connectivity
– Broadband Content Services
– Social Media Platform
• High broadband attach rate
Gaming Consoles Mix Premium
and UGC
Connected Consoles on the
Rise
• Over 141 Million connected consoles by
2012
The Mobile Phone
Mobile Handset Factors

• Non-Messaging data usage is over 50%

now…approaching 60%
• Storage capacity rising – could be up to 5
GB soon
• Screen resolution and processing getting
better
• Application/Media Processors
• Mobile TV (Unicast and Broadcast) gaining
traction
– At very least it is generating awareness
– Over 160 million subscribers by 2012
Mobile Internet Usage
Increasing
• Adding at least 1 billion more subscribers
by 2012
• Almost 10% of all mobile subscribers will
subscribe to high speed data plans like
EVDO / UMTS
• Developing a Better Web Browsing
Experience Matters
• Anecdotal evidence that iPhone owners
browse more
– Combination of better experience, type of user,
device capabilities
The Set Top Box - The Right
Platform?
• In the right place
– Next to the TV, where people need their media
• Always on, always available
– Doesn’t get turned off like a PC
– Doesn’t leave the house like a mobile phone
• Has both storage and a display
• Service Providers offer installation and
maintenance
• Better for long-form content than PC
Synergies Between iTV and
Pay TV?
• Cable / Sat have a weakness in
interactivity
• Consumers will place a premium on
convenience
• Internet TV content complements Channel
lineup
– Particularly FTA / DTT countries like Europe
– Already retail and hybrid STB model
• Quality of service
• Niche and long-tail availability
• Comprehensive search and discovery
Partnering Makes Sense

• Cable and IPTV providers typically have VoD

libraries in the dozens or hundreds of Titles…
getting bigger
• They can benefit by partnering with content
aggregators to offer more niche / long-tail
• Content is already going over their network
anyway
• Additional ARPU?
– Certainly on VoD
– Maybe on ads (already being done with some VoD
content)
– Pay model for Internet TV?
What Will STBs Need To Have?

• Interfaces to Multiple Content Providers

– Multiple players
• Support for Multiple Media Formats
– Ability to update
• Transcoding
• Intuitive Content Management
• Quality of Service
• Networking technology built in
What Does Sling Acquisition
Mean?
• EchoStar purchases Sling for $380 Million
• Anyone else think that was for the
installed base of a couple hundred
thousand Sling users?
• Technology will be integrated in EchoStar
STB business
– Brings place-shifting to mainstream
– Adds social media element with Clip and Sling
• Time-Shifting wasn’t mainstream until
operator adoption
Retail and OCAP

• CableCARD impact is minimal

• Retail markets differ across geographies
– US vs. Europe vs. Asia
• Can OCAP save the day?
Enter The Hybrid STB

• Hybrid solutions let operators deliver best

of both worlds
– Live linear programming over cable / sat / telco
network
– Content over IP broadband connection
• Increased content
• Community / Social networking component
• Greater personalization
 Connected / Hybrid STB
Forecast
Millions of Units

Source: X Media Research

Prediction #4: Standalone STBs
Like Apple TV, VUDU and DMAs
Will Remain Niche Players
• DMAs have been around for years, but
have never broken the 1 million unit
mark…not even close
– Lack of marketing
– Lack of big players
• Plagued by lack of consumer awareness
• No real functionality for access to Internet
video without PC
• Despite proliferation of home networks still
difficult to set up for most users
What About Apple TV?
Apple TV Market Will Remain
Small
• Huge buzz surrounding Apple TV launch.
Now Steve Jobs describes it as a “hobby”
• Content remains relatively limited
• High barrier to entrance - $299 - $399
• Pay for the privilege of paying does not
resonate with consumers
• NBC pulls content…comprised about 40%
of iTunes video sales
• Media companies seem unwilling to let any
one company dominate video market like
iTunes in music
What About VUDU?
 Digital Media Adapter/iSTB
Forecast
Millions of Units

Source: X Media Research

CE Devices

• Important to stay realistic about CE

• Unless you are the iPOD, market share and
audience are relatively small
• Whole hosts of new hybrid device
categories are going to be created…
– IP connectivity and mix of functionality
changes device classification
– CE manufacturers will experiment with
Frankenstein devices
– What is a DVDDMAVODSTB?
Everyone Wants to Be in CE

• The global CE market is huge

• Wireless more frequently integrated
• IP connectivity becoming key for content
and social media / content sharing
• Greater integration of third party
applications such as players and services
in to CE
– At least that’s the goal of almost every content
aggregator
 Internet Video Access Forecast
Millions of Units

Source: X Media Research

Prediction #5: Over 30% of
Internet Video Traffic Will Be at
HD Resolution
• What is HD streaming?
• Do we need HD streaming?
• Are we ready for HD streaming?
• Real-world examples of HD Streaming
What is an HD Stream?

• Difference between HD broadcast and HD

streaming
• HD is determined by the resolution – 1280
x 768
• Compression required for Internet delivery
• Minimum HD reached at 750kbps to
1.5mbps
• Requires hardware acceleration to render
video
• Requires decision making by the player
client
Are we ready for HD
streaming?
• Compression technologies are improving
rapidly
• Costs and Economics are improving
– HD streaming is not practical using standard
CDNs
– New approaches are using standard HTTP web
servers
• Broadband speeds are increasing
Broadband Subscriber and
Speed Growth
• By 2012 over 500 million broadband
subscribers
• By 2012 over 80% of total Internet users
will have download speeds greater than 3
Mbps
• By 2012 over 30% of total Internet users
will have download speeds approaching 10
Mbps
Is There a Business
Justification?
• Increasing audience by unique viewing
experience in addition to unique premium
content
• Provide a premium venue for advertisers
in a rapidly growing delivery channel
• Deliver improved metrics and
accountability to advertisers
– Replace sampling with actual viewing statistics
– Longer viewing times delivers more data
• Measurable and instrumented delivery
environment
– What impact does HD have on my bottom line?
 With Video, Quality Matters:
NTT trial
• Two month Set Top Box trial
– Now in production deployment
• 300 subscribers in the Tokyo area
• FTTH (48%), ADSL (52%)
• Service: Live & VOD
• Format:MPEG2 (6 Mbps / 3 Mbps)
• 100 titles: movies, music, animation (30 - 120
mins)
• Blind test
– 50% DF Raptor FEC
– 50% No-FEC
• User access definition
– Watched for at least 3 minutes
 With Video, Quality Matters:
NTT Results
Viewing Minutes
per Access

Source: NTT Trials. Blind test over wired IP infrastructure.

Averaged over user accesses of more than 3 minutes
The Move Networks Solution
• Create compelling and innovative online
video experiences
– Place focus on customer content by putting it in the
best light
• HD or high quality, no stalling and buffering, advanced
controls
– Provide an adaptive delivery protocol capable of HD
streaming
• Deliver video at low costs
– No specialized media servers
– Leverage traditional Web server architecture,
caching, and other cost-saving technologies
• Provide a scaleable solution
– Deliver millions of concurrent streams
Move is Working

• Adding over 1 million unique downloads of

the Move Networks player each month
– Even with writers strike still getting more than
a million new a week of Move Player.
• Over 30 Million deployed by end of 2007
• Average viewing time of more than 50
minutes per session
• ABC is streaming 4 of their shows in HD
• YouTube is jumping on board the quality
bandwagon
Required Platform Elements
• Quality
– Quick start times, continuous viewing, high perceived
resolution
– Control at point of delivery to provide QoE (Quality of
Experience)
– Provide aggregate QoS (Quality of Service) over open
Internet
• Scalability
– Leverage Web standards for infrastructure and protocol
– Ease of network expansion
– Scale to millions of simultaneous viewers
• Profitability
– Increase revenue opportunities (viewing time and
viewing sessions)
– Lower costs associated with delivery
–
SD vs HD Streaming Forecast

Source: X Media Research

HD Streaming Enables New
Business Models
• Well known fact that number of HDTVs is
increasing
• Highly compressed and low resolution web
video is not going to play well on the TV
unless quality improves
• HD enables more long-form content to be
streamed to multiple devices enabling new
business models
• Intelligent players will be embedded into
more devices
• HD or high-quality enables better user
experience with live events
Live Streaming in 2008

• 2008 things will shake out...Live events

will be the true test
• This month in January ESPN is going to be
live streaming some X Games content
• Live streaming of the Olympics will
happen.
– Move will be working with several partners and
streaming to over 16 countries
Prediction #6: TiVo Will Be The
Comeback Kid
• Pop Quiz: How many of us had written
TiVO’s epitaph?
• Hardware sales have not been outstanding
• Virtually any pay-TV subscriber can get
“TiVO”
– The TiVO concept has been cloned to a degree
• Silver lining is: Cable / Sat / Telco
homegrown DVR software and EPG are
dismal
Why TiVO Will Make a
Comeback
• Like AppleTV, VUDU and all other standalone
STB’s TiVO has been limited by hardware
costs and additional dollars for service
• TiVO interface, content search and discovery
and content partnerships are compelling
• Software model and partnerships with
operators will yield profits and scale more
quickly than hardware + service model
• TiVO is really the first to combine premium
content access with Internet content…direct
to the TV
• Moving beyond STB to PC and CE devices
• “Unbreaking” TV Advertising
Content Integration

• Newer TiVOs support popular video

formats including MPEG4 (H.264),
QuickTime and WMV
• Has the advantage of providing a single
method of search and discovery of
network television and content on the
Internet
• People just want content…don’t really care
how it is delivered
 Demographics

45% 41%
40%

Female 35%

30% 30%

25%
23%
19%
20%
16%
Male 15%

70% 10%

5%
0% 1%
0%
under 15 15 to 25 25 to 35 35 to 45 45 to 55 more than 55
years old years old years old years old years old years old

Source: exclusive consumer survey conducted by Orb Networks for iTVCon on the general population in June and July 2007 – basis of 231 respondents
 TV TODAY
When you think “TV Today”, what is most important to you:

TV image quality
24%

Programming choices
(thousand channels
vs. a dozen…)

76%

TV image quality Programming choices

 The promise of TOMORROW’s
TV
ith TV being available on many, many screens tomorrow (i.e. in
coming few years), what will be most important to you:
Watching top notch
quality TV, all the
11% time but only from a
choice of TV
programs packaged
by you cable or
satellite company?

Being able to pick only

what you want – even if
the quality is not HD, or
top notch 89%
How Does a TiVO Comeback
Impact iTV?
• Rhapsody and Unbox are just the
beginning
• TiVO has a number of content partners
lined up
• Will provide ‘proof-of-concept’ for
operators integrating Internet TV into
mainstream services
Prediction #7: Internet Video Will
Command an Increasing Portion of
Ad Revenue.

• Overall Internet advertising dollars will

grow
• However…will also pull away some ad
dollars from Television
Internet Video is Fragmenting
Viewing Audiences
• More content choices = more audience
and content fragmentation = more
targeted advertising
• Advertisers will sacrifice greater reach for
more targeted audiences
• Used to pay premium for reach…now will
pay premium for target audiences
• Increased relevance of ads is the result
Ad Skipping is Leading Advertisers
to Change
• TiVO / PVR have demonstrated that
consumers will skip ads…(reports are in
the 70% range)
• Advertisers are losing trust in television
advertising because they do not know who
watches ads and who the audience really
is
• Complete lack of interactivity with
advertising on TV
• Ad skipping measurement is getting
better, but still does not compare to the
Broadband Video Changing
Traditional Models
• Online video offerings increase media
fragmentation
• Consumers have more choices
– Consumer can choose from millions of videos rather
than dozens of linear channels
• Broadband video is changing the way
consumers view content
– Video mashups, etc.
• Online video advertising will look more like
online advertising than broadcast video
advertising
– Based on true delivered CPM
– Detailed reporting on ad delivery with
corresponding interaction metrics and demographic
information (where available)
iTV Advertising is Good For
Advertisers and Consumers
• TV audiences are evolving
• Still growing, but data shows younger
generation is spending less time on TV
• Advertisers can show fewer ads…they can
not be skipped
• Measurement is instantaneous
• Advertisers can adapt quickly
Fewer Ads Can Generate More
Revenue
“We are showing fewer ads per search on a much
higher quality and much better monetization. The
targeting and the technical work that we are
doing is producing a better return for advertisers,
better revenue for us and even fewer
advertisements on a comparison basis.”
Eric Schmidt
Google CEO
Earnings Analyst Call
January, 2007
Internet Video Advertising
Growth
• From under $1 Billion in 2007
• To over $5.5 Billion in 2012
Where to Invest? What is
Needed?
What Will Make TV Better
Experience?
• Personalization
• Interactivity
• Content Search and Discovery
• Social networking
• Targeted advertising
• Enabling technologies
Conclusions