Pay TV vs. OTT part V: appointment vs. on-demand

The recent emergence of LTE broadcast and eMBMS has prompted many companies to bet much R&D and marketing dollar on the resurgence of the mobile TV model. 

I have trouble believing that many mobile users will be tuning-in "en masse" at regular appointment to watch their favorite show on a mobile device. 

There is nothing wrong with Pay TV, its audience is stable-ish and while most would see OTT services compete for these eyeballs, I see them as a more complementary play. Pay TV is here to stay and I do not see cord cutting as a credible threat in the short term, more cord shaving or cord picking.

Many have been developing and promoting mobile TV models in the past either through broadcast or unicast technologies. The long defunct services from Qualcomm (MediaFLO) and DVB-H should serve as cautionary tales to those who are betting on the next generation of broadcast services. 

Many fail to understand that mobile TV is not attractive to most people in many circumstances. If you are like me, you will watch TV programs, by order of convenience:

1. When I want, at home, on my PVR (so I can skip the ads)
2. Live, at home, when it is time sensitive content ( news, sport event, ceremony...)
3. At a bar, live, when I want to watch sport live with friends or strangers
4. On a tablet at home (wifi) when I want to watch something else/more than the main screen
5. On a tablet at hotel /airport (wifi) ...etc... when I want to watch premium content catch up
6. On a phone / tablet (cellular) if there is no other choice

Don't get me wrong I watch a good amount of video on mobile, just not TV programs. I remember living in Switzerland some 10 years ago and having one of the first video phones

that would perform video calls and stream mobile TV. Past the novelty aspect, no one was watching TV on their phone then, and it wasn't due to network capacity or video quality. Having a video phone then was seriously cool but that did not take away the fact that the TV content I wanted to watch was not available when I wanted to watch it. My Sonyericsson K600 (remember?) joined my first Smartphone (Philips Ilium, I designed it at Philips) and my first MMS phone (ericsson T68i) in my private museum together with my first PDA (I sent the world's first picture message on a CDMA iPAQ in 2002). 

This is mostly due to the fact that TV is an appointment experience. I like to be comfortable watching TV because I watch only very specific programs. When I sit down to watch TV, I mostly know beforehand what I will watch. The videos I watch on mobile are not necessarily only short form content but I don't mind being interrupted as much because in my mind, it is mostly light entertainment that does not require concentration nor continuity. It is also mostly serendipitous in nature, I do not necessarily plan what I will watch in advance. 
I know that my children and their elder's behavior is similar. They might watch more long form content on their mobile than me but they are mostly not watching TV content. 

While some see broadcast as a means to considerably reduce video load on mobile networks, I think they are missing the point. TV by appointment is a very small portion of the preferred usage, for very specific content, in very specific circumstances. Broadcast TV on mobile makes very little sense apart from niche usage (stadiums,...). 

I don't think that because LTE offers  better network capacity, higher speeds, better quality pictures it will make a better mobile TV service. Don't think for a second that subscribers will pay more than a couple of bucks per month (if anything) to have a TV experience on mobile. People pay for quality, relevance and immediacy on mobile, not the best attributes for broadcast. So before you think about "monetizing" my mobile TV experience, think hard because I won't pay for TV broadcast on mobile.

If you haven't read the other posts in this series, you can find them here for context.
Pay TV vs. OTT:
Part I: The business models
Part II: Managed devices and services vs. OTT
Part III: CE vendors and companion screens
Part IV: Clash of the titans

Carrier strategy against OTT: vertical integration

In an interesting new development, Bell and Rogers, respectively 29 and 36% market share of the Canadian wireless market and fierce domestic competitors, join forces to acquire a majority share (75%) in Maple Leaf Sports and Entertainments (MLSE) for $1.32Bn.


Bell had already started vertical integration by acquiring the remaining 85% of CTV for $1.3 Bn last year and owns also  TSN, TSN2 and NHL Network Canada as well as a minority share of NHL's Montreal Canadien. Rogers owns the Toronto Blue jay baseball team and the broadcast network Sportsnet.


MLSE provides Bell and Rogers with co-ownership of Toronto Maple Leaf NHL team, Toronto Raptor NBA team, Toronto FC MLS team and the Air Canada center.


This is a very good example of vertical integration. The Canadian market is fairly mature, but with a high broadband penetration and a relatively low mobile broadband penetration (75%), growth is coming from smartphone and media consumption. Rogers, with 44% smartphone market share and a blended ARPU of 60$ and Bell with 26% market share and 53$ ARPU are among the most profitable carriers in North America.


At the same time, as competition increases with wireless new entrants (Videotron, Wind, ...) and OTT offers (BBC iPlayer, Netflix...), Rogers and Bell understand that the key to profitability is content. Buying these sport teams is a way for Bell and Rogers to secure premium attractive content for their domestic market, retaining control (duopoly?) of the most sought after premium content franchises in Canada.

Pay TV vs OTT part IV: clash of the titans

We have reviewed and discussed at length (here, here, and here) the fundamental changes that OTT is causing to the pay TV market. As consumer electronics vendors become content aggregators and as more screens get now directly connected to the internet, there is less and less value in a set top box that is an exclusive managed device from your MSO.

Service providers themselves are ambivalent about the box. It used to be the main tangible asset that MSOs marketed to "own" a subscriber relationship, with a safe environment allowing transactions, access control and digital rights management to monetize live and on demand programs.
Lately, it has looked increasingly like a ball and chain that MSOs have dragged, a costly installed base, slow to evolve and adapt to the latest technologies, incapable of competing against better services and cost structures evolved from OTT.

Microsoft, in the latest incarnation of its XBox Live service, has brokered deals with several dozens of content providers beyond existing Hulu and Netlix and  is launching today. More interestingly, Verizon FiOS, Comcast Xfinity and HBO are also part of the package... as OTT apps. The XBox is already a high-density, high-performance gaming and multimedia environment to play online games and stream video. Adding live TV and VOD makes sense and makes the set top box completely redundant. Microsoft innovates by integrating Bing, its search engine, the Kinect, its haptic motion recognition device and voice, with the EPG (Electronic Programming Guide) of the programmer. You can literally search y voice for a show, an actor, a director and see the results aggregated on your screen from various sources.

While you still have to be a Comcast or Verizon cable subscriber to avail of the services in the states, the writing (or rather the screen) is on the wall.

This experiment will no doubt cast a new light on the 35 million XBox live accounts, putting Microsoft firmly shoulder to shoulder with Google's TV efforts (and Motorola's set top boxes) and the next generation of Apple TV.


Soon will be a time when subscribers will buy access from their ISP independently from aggregation and content. Channels and MSOs will compete across new geographies on unmanaged devices, across unmanaged networks. New generation of apps will enable you to discover, access and curate content from your local media servers, the cloud and your traditional providers and present the result on the screen you elect. There is no technological or logistical barrier any longer. The business model of pay TV, subscription, advertising is undergoing changes of seismic proportions.

OTT wave hits Canada: BBC iPlayer launches

BBC iPlayer is a popular VOD platform from UK's BBC. It is based on subscription and features long form original and archive TV and radio content. iPAD users can download the free app from the app store and browse limited free content or have access to over 1,500 hours of content on day one with an additional 100 hours every month, updated regularly for $8.99 a month.

Canada is the 16th country invaded by the  iPlayer but the first one where Netflix is present. It is going to be interesting to see how both giants are going to react to each other's strategy, no doubt in a rehearsal of a BBC launch in the US. While Netflix is predominantly about films, BBC iPlayer is a TV content aggregator, spanning radio and TV shows, news , concerts, documentary, comedies and more undefinable British genres like Little Britain.

While the launch is currently limited to iPAD, it should not be longh before it spans iPhones, Android, Wii, PS3 and laptop, as in other markets. BBC iPlayer global is a subset of the UK selection, and will propose only TV content at the start. The genres proposed are Contemporary drama, classic comedy, family & kids, classic &period drama, entertainment, modern comedy, Science & Nature, Sci-Fi, Music & Culture, Crime &Thriler, Lifestyle and News Specials & Documentaries.

BBC does not see itself competing against Hulu or Netflix, arguing that they are specialist, providing carefully curated content, to reflect the "voice of BBC", while other aggregators are more generalist in nature. Netflix tends to agree, citing different demographic target for their users. In September this year, BBC iPlayer served 153 million requests in the UK only, with an average 1.7 million viewer a day and a monthly viewing average of 69 minutes for TV (excl. radio). Numbers for outside the UK are not yet available. Most of iPlayer usage is during TV viewing hours, hinting at strong companion screen trends.


I think it is a strong sign, to start and see niche offers transcend their geographical boundaries to go truly OTT. BBC has found a huge following and not only with Brit expats for its acclaimed shows such as Top gear, Little Britain, etc... The walled gardens are crumbling and consumers are the winners. This tidal wave has a tremendous impact on mobile networks (capacity to accommodate video traffic surge), MSOs and PayTV (where traditional service providers need to find a way to protect VOD revenues and remain relevant), and Consumer Electronics (where CE vendors see themselves becoming content aggregators through app stores and native apps enhancing content discovery and access).

Cisco to deliver "Wireless TV" to AT&T

In a press release dated Oct. 25, Cisco announced the newest addition to Videoscape product line:
the wireless TV solution, composed of a Cisco access point and wi-fi enabled receivers.

The solution is being rolled out first at AT&T Uverse customers and allows basically a centralized HD DVR operation distributed wirelessly to as many receivers and TVs in the house.

This launch is advertised as the industry's first wireless IPTV deployment. While the innovation is minor (adding wifi to a DVR is hardly exceptional), the in-home close network deployed by Cisco with the dedicated access point can have interesting developments.

Surely, as connected TVs start appearing and accessing OTT content, whoever is going to control the home gateway, including the wifi access is going to be able to manage and in some cases enforce access within a walled garden.

I might be cynical here, but i would not be surprised if the access point and the home network delivered by AT&T was somewhat restrictive in term of the content it delivers. It is probably dedicated only to the broadcasting managed services offered by AT&T and does not offer OTT access.

In that case, it would mean another box to manage in your home (the access point), and potentially interesting issues when it comes to you selecting which wifi network to connect to with your connected TV, Bluray, net box or unmanaged DVR.
It will be interesting to see how this new offering fares with AT&T customers.

Pay TV vs. OTT part III: CE vendors and companion screens

CE vendors
It is not just the content owners that are going direct to customers, now connected devices vendors offer content directly on their platforms, over the internet.Game platforms have long offered OTT content and are the single major contributors to Hulu's success. Now CE vendors offer OTT apps on their connected TVs, blue ray players, projectors...Samsung, the market leader in TV shipments has created a complete ecosystem, with an app store, a catalogue of pre-integrated OTT apps, some complementary some competitive with service providers. This is offered on their Connected TVs, Blu Ray players, projectors, smart phones, tablets... LG, Panasonic, Philips, Sharp, Toshiba, Vizio have now a similar offering.
It will not be long before Google TV's second attempt brings a complete soup to nuts ecosystem as well with set top boxes and  connected TVs running android and a complete TV app store.
I am willing to bet as well that the next Apple TV will actually be a connected TV, not a net box that will be fully integrated with iCloud and iTunes store and Air.

Companion screens

Lastly, on the device front, there is a new trend developing that I will call companion screens. More and more people, while watching TV are  doing something on their tablet, smartphone or laptop that is related to what they are watching. Whether it is chatting, playing, texting, blogging, twitting or posting, these interactions have emerged spontaneously and  are still very much in a separate silo from the TV experience. Most vendors, and service providers are trying to figure out how social media, connected devices and OTT fit together.
I have seen many cross-screen applications and services at IBC last month and I will present a few in my next post about innovations in the Pay TV / OTT space.



In conclusion, the industry is transitioning from a model where Pay TV content was predominantly accessed through managed devices on managed networks, to a model where content and services will predominantly be accessed through unmanaged or hybrid devices, on unmanaged or hybrid networks. This, as you can imagine creates many threats and opportunities for content owners, service providers and device vendors that we will examine in the next post.

Pay TV vs. OTT part II: managed devices and networks vs. OTT

It is really interesting to me to see that as Google acquired Motorola, it has become the market leader in video head end and set top boxes overnight without many hardly noticing. It means in my mind that the previous attempt from Google to invade the pay-TV market will be much stronger the second time around when Google TV will be relaunched.

This market looks just like the mobile market 8 years ago, when device vendors all had proprietary operating systems (this is the case with set top boxes middleware and connected TVs, game consoles, net boxes...) and everyone wanted to "own" the customer.

Managed devices, Managed networks
Pay TV is traditionally delivered through a set top box to a home. Because the set top box has until recently been built upon a service provider specifications,because it was sold, rented or subsidized by the service provider, because the service provider decided what services (PVR, Electronic programming guide, search...) would go into that box, for all these reasons the set top box is seen as a managed device. A managed device runs on a managed network, as opposed to unmanaged network (e.g. the internet).
The network is called managed because the service provider controls the backbone, core and delivery, therefore guaranteeing digital rights integrity to content owners and quality of service to content aggregators and subscribers.

What happened in the last year is that managed devices such as set top boxes have become less and less managed and have offered access to OTT content via the internet. These devices are called hybrid, as they offer both cable/satellite managed services and internet access, together with OTT apps access (Hulu, Netfix...).


Unmanaged devices, OTT

Smartphones, tablets, laptops, game consoles, net boxes, connected TVs have made their appearance.These devices are by definition unmanaged or hybrid, since they are all connected to the internet.

Strategy Analytics predicts that over a billion connected devices will be shipped in the next three years, with managed devices being a very small 20% portion of the total.
This is without counting the billions of smartphone and tablets that will be sold at the same time.

OTT apps are flourishing, offering video content to consumers, without the need for a pay TV subscription, in some cases complementing the current offering (for instance, YouTube fills a need that wasn't properly served by PAY TV services) , in other cases, cannibalizing or replacing traditional Pay TV services (for instance, video on demand from the service provider is seriously threatened by Netflix, Hulu...).
Additionally, the content aggregators whose only channel was TV are now addressing directly the customer through OTT. For instance, HBO, a very successful payTV channel is now offering HBO Go, so that its subscriber can watch live, catch up and on demand programming from connected devices. For the moment, in the US, the consumers have to sign up with Comcast, Time Warner Cable... credentials to get access to the service, so the service provider revenues streams are protected, but nothing prevents HBO to go direct overnight, or to offer its programming outside the US directly to consumers...

We will see in the next post that CE vendors are also joining the fray, and we will examine an interesting new trend: companion screens.

Pay TV vs. OTT part I: the business models

I have been working for the last few months on the Pay TV, OTT and connected TV market. It is a space I find fascinating, with a lot of new trends and activities, very similar to the mobile handset market before the mobile broadband revolution. I figured I would share with you some of my findings about its dynamics and challenges.


Market size and dynamics
 Pay TV

Pay TV is defined as the market space where service providers (Time Warner Cable, Comcast, BBC, Canal Plus, Sky...) sell subscription access to TV content (channels) and services (pay per view, video on demand, electronic programming guide, catch up TV...) to subscribers and advertising to announcers.


TV content is created by studios and content creators and sold to channels and content aggregators.
In 2010, according to Strategy Analytics, it is a market that generated nearly 400 billion dollars globally, about half from advertising and half from subscription and services in 2010. These $400B were split approximately 1/3 to service providers, 1/3 to content aggregators and 1/3 to content owners.


 Over -The-Top

Recently, many content owners and aggregators have surfed on the wave of technological advance spurred by the increase in fixed broadband, mobile consoles, web boxes and connected devices penetration.
These content owners distribute their content on the web, directly to the consumer. Netflix, Hulu, Youtube,  HBO, BBC, NFL, etc... are the better known brands but there are new global and local players diving in every day. 


The fundamental difference in this model, is that the content owner just needs the consumer to have a screen (TV, mobile or PC), a connection (mobile or fixed broadband) and if the screen is not connected, an access gateway (set top box, router, net box, game console) to sell its content and services.
While this market is much smaller  (only about $8 billion in 2010), it is growing fast and threatens the revenue model of Pay TV in the sense that in this model, revenues are split approximately 60/40 respectively between content owners and aggregators. Nothing for service providers!


As you can imagine, the fear from service providers is that OTT starts cannibalizing their legacy revenue, as their current suppliers turn into fierce competition. In the next posts, I will look at the dynamics and competitive field in the ecosystem (devices, operating systems, app stores), as well as new trends in standards and consumer behaviors together with a few vendors and service provider strategies to take advantage of or mitigate these new threats and opportunities.

Google / Moto: your TV is the next battlefield

Goodbye Moto!

many out there look at Google`s acquisition of Motorola as a defensive step to ward off patent trolls and competitors aggressively pursuing Google and Android licensees. With 17,500 granted patents and another 7,500 filed, there has to be some value from Motorola`s pioneering technology in wireless networks. Whether this is worth $10.5B after the cash retained by Motorola remains to be seen.

While this is undoubtedly a key aspect of the transaction, I would like to look at the impact of this acquisition on the mobile and TV market.

Would Google entertain a rebirth of their handset strategy? While the attractiveness of the Android ecosystem is largely as a means to have a more open alternative to Apple`s iStore, nothing prevents Google to look at a more vertical, better experience on Google devices than on the OEMs. Lets not forget additionally, that part of the transaction is Motorola Set-top-box and connected devices business. Motorola, according to a study published by The Multimedia Research Group is ranked worldwide market leader in Video head-end and set top boxes shipments.

Why is that important? The next battle room for video is your TV screen. According to Strategy Analytics, TV industry generates $392Bn per year in revenue, half from advertising, half from subscription, payTV...
These revenue flows back approximately 1/3 to content owners, 1/3 to aggregators and channels, 1/3 to service providers.

The next frontier in TV, is OTT (Over The Top). In an OTT model, content providers and aggregators share the revenues 50/50, with nothing left for the operators. As Samsung, connected TV market leader, has created their vertical environment, with SmartTV, creating essentially an app store and a suite of apps that can run on their connected TVs, set-top-boxes, tablets and phones, I am willing to bet that we will see an Apple TV pretty soon (not the little box that connects your TV to iTunes, an actual Apple branded TV).

From then on, it is not difficult to see that the next OS and app store battlefield will be in your leaving room.

Will Google revive GoogleTV, with a new Android environment that can be ported by Consumer Electronics (CE) giants on their connected TVs, set-top-boxes, tablets and phones?
Will CE vendors choose to use Android, now that Google is also a competitor, with Moto`s acquisition? Or will they try to emulate Samsung and create their closed ecosystem?


I will examine in future posts some of the defensive strategies operators are putting in place to retain some value in this changing ecosystem.
I don`t know you, but for me, it spells interesting times for the future. Let me know your thoughts....