Monday, October 31, 2011

Connexus: Avvasi, BroadHop, CommProve and Spirent Communications

On October 11, Avvasi, BroadHop, CommProve and Spirent Communications announced the creation of Connexus in a press release, an ecosystem for monetizing OTT.

Personally, I am fairly skeptical about the capacity for anyone to monetize free OTT, besides the content owners and aggregators themselves, so I called up Mate Prgin, president and CEO of Avvasi to get a little detail on this new initiative.

"We are all familiar with the take off of video in wireless networks, and how OTT is a large part of this. Optimization techniques have been used today mostly in a defensive manner, to keep costs down and are necessary but really only a band aid.
Today's main issue is is to align revenues with costs. Operator's best asset is the last mile, ensuring connectivity and quality of experience (QOE). It should allow them to monetize this service to announcers and content providers" started Mate.  He agreed, when pressed that in the short term, monetization opportunities will be mostly around premium content and services.
Connexus is an initiative to catalyze and accelerate the process for the creation of a standard that would offer a framework between operators and content owners to trade content delivery revenue vs. QOE guarantees. Last-mile QOE, traffic management, QOE testing, Policy management are all in the scope."This is  not a co-marketing exercise", says Mate. Today, the initiative spearheaded by the 4 founding companies presents blueprint, use cases and roadmap for monetizing OTT, with planned trials and proof of concept early in 2012.

While these documents are available under NDA for these companies' prospects, Connexus is open to new members and is actively talking with 4 new applicants.

While I don't follow 100% some of the premises, I have been a vocal supporter of new standards to be created in the area of traffic management. In my mind, as video becomes business critical and demand outstrips capacity in mobile networks, we need a mechanism to relay congestion and capacity information from the RAN, to the core and the backhaul to enable some meaningful negotiation of network capacity. If in the meantime, it leads to some monetization of the delivery, good for the network operators, but I think we are still very far from the operators being able to guarantee strong SLA-backed QOE to content providers.

This initiative  will need a lot more support from larger names to be effective and provide relevance in the global ecosystem. I also doubt it can succeed without bringing the content owners and aggregators themselves into the discussion. It is a step in the right direction, though and it is good to see companies starting to talk about monetization, rather than savings when it comes to OTT. It will be interesting to follow how operators and large equipment vendors react to Connexus. I am hearing more announcements will follow at Mobile World Congress.

Friday, October 28, 2011

Ortiva Wireless raises $2M

In a SEC filing dated October 24, Ortiva Wireless raised $2 million in convertible debt.

Ortiva Wireless, who is a specialized video optimization shop has been growing substantially lately, due to a string of interesting deals. No doubt, this convertible debenture is to be used to finance the surge of operational expenses as projects need to be delivered before revenue can be recognized.
Ortiva had raised a $2.5M convertible debt in June.

Tuesday, October 25, 2011

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.

Monday, October 17, 2011

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.

Friday, October 14, 2011

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.

Wednesday, October 12, 2011

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.