We tackle the drivers behind whole home video, current definitions of “cloud-based TV” and the technical challenges that operators still need to overcome to meet consumers’ expectations.

You can find the first interview here. 

Do you feel that developing new revenue streams is the main issue driving operators to offer whole home video services?  

JM: The key requirement is to protect the revenue streams they already have. We are about to enter a very disruptive period in television because convergence is finally happening and the wall between Internet entertainment and television entertainment is starting to crumble. Pay TV operators have to keep their younger audiences fully engaged or risk losing them, and that means giving them the content they want, when they want it and where they want it.

For their customer base as a whole, surely the best way to counter the threat of disintermediation from OTT providers is for Pay TV operators to play to their strengths and deliver their great, compelling broadcast and on-demand services (including premium sports and the best kids and nature channels) on every television. If your teenage child can’t watch that content in their bedroom then they are probably watching a terrestrial free-to-air service instead, going to the web with their PC or playing on a games console. I suppose they might do some homework if things get really bad! The key is to keep them ‘on platform.’

There is evidence that people will pay for whole home video services like multiroom DVR. It is not so clear that people will pay extra to watch their Pay TV services on their PC and it seems to be generally accepted that ‘TV Everywhere’ type services will wrap the online viewing into a bundle with the television subscription. But we spoke to one analyst in the report – Jayant Dasari at Parks Associates – who felt operators could eventually monetize this additional distribution. The example he gave was allowing a customer to watch online free with two devices but charging for access onto a third device.

What is the current definition of “cloud-based” TV services?

JM: It is too early for there to be a defacto standard definition for cloud-based TV. Some commentators refer to the cloud as any network storage and therefore talk about a managed operator cloud (like the headend used to deliver a managed telco IPTV service) and about an unmanaged cloud, which is the Internet. 

The most accepted definition of ‘cloud TV’ today, based on our research, equates it to Internet delivered television services (which could be on-demand or linear). So it means services that harness OTT video infrastructure and protocols.

People are also starting to differentiate the unmanaged Internet from the managed Internet because potentially TV service providers can become CDNs and start providing themselves with some QoS guarantees between the web video servers and the consumer. But that all falls into ‘cloud-based TV’.  

What have you found to be the most significant recent technological developments in whole home video? What are the tough technical challenges that operators still need to overcome to support a satisfactory experience?

JM: We can’t ignore the impact that DLNA seems to be having. Almost anyone you talk to involved in customer premise equipment has this name on their lips. Consumers want their Pay TV services in multiple rooms, the Pay TV industry is looking for ways to achieve this at prices that appeal to the mass-market and there is an increasing emphasis on media gateways feeding thin clients. DLNA can enable different devices to work together, whether they are coming from the Pay TV or the retail CE world.

The reliability of the physical home network itself is crucial. Multimedia over Coax Alliance (MoCA) seems to be making strong progress with multiroom services and they claim this is because of their superior reliability compared to wireless or home power cable solutions. Once you start offering whole home video solutions, the Pay TV operator has to take responsibility for that video network so Quality of Service (QoS) is crucial. Some people think media gateways, like a DVR, have an important role to play in managing resources and assuring the customer experience across the home network.

You can view the “Supporting the ‘any screen, anywhere’ video consumer,” report in its entirety on the Videonet site.

• Flexibility in wiring infrastructure (CAT5/6, cable or telephone transmission)
• Fully digital quality distribution and display, including HD support
• Common components with in-room broadband access
• True interactive program guide and guest service utility displays
• Broad choice of middleware, video-on-demand (VOD) and in-room client technologies.  

When combined with earlier release windows that hotels enjoy, IPTV also allows network operators to take advantage of state-of-the-art digital TV security that enables licensing of on-demand content, including and most importantly HD.

Hotels must deal with more stringent content protection requirements to gain access and keep the rights to offer premium movie titles. In fact, the MPAA recently released its 57-page “Content Security Best Practices” document that provides 25 dimensions of content security across three areas. 

We have been developing hospitality security solutions and working with our broad partner ecosystem since 2004. In partnership with our hospitality resellers, including Guest-Tek, InfoValue and Tangerine Global, VCAS for IPTV is operational in many hospitality deployments around the world. 

We will have a team at HITEC, the world’s largest hospitality technology show, June 21-25 in Orlando to discuss how VCAS for IPTV can support a wide range of hospitality applications. Please contact us to schedule a meeting at the show so we can discuss how VCAS for IPTV can secure your:

• VOD Services
• Wholesale IP Broadcast Services
• DTH Broadcast Services 
• Additional Local Broadcast and VOD Encryption Services
• Expanded Capacity and Redundancy

Download a more detailed overview of our VCAS for IPTV has been optimized for a range of hospitality applications.

See you in Orlando!

The conversations were far removed from the hype that has been elsewhere, but rather focused on how service providers can capitalize on advanced OTT technologies to enable new streams of business. 

Steve Christian recently answered questions posed by CSI Editor Goran Nastic on monetizing video on demand (VoD) content that portrays Verimatrix’s perspective on the opportunity of OTT. For the resulting article, click here. 

Q. Monetisation issues of VoD have been around for a while now and given that all evidence suggests that consumers love the service and value it, why has this proved to be such a challenge?

A. The challenge is that some operators have created the consumer expectation of free content and now they are having a hard time putting the “genie back in the bottle” when it comes to charging a fee for that content. It really puts into question the first mover advantage efforts by OTT providers to offer free content, as it appears they have potentially cannibalized their own long-term revenue streams. The question is if they can successfully extract money from existing and/or new viewers.

History confirms that consumers are willing to pay for something that satisfies their threshold of quality, convenience and cost. At this year’s OTTcon, where we presented, the reoccurring theme was how operators can balance the quality-convenience-cost equation. 

• Quality – quality of the overall experience – not just picture quality – including responsiveness and reliability.
• Convenience – how easy is it to browse content, how to conduct channel up & down, how many clicks are required to start a video, how many channels are aggregated in a single location, etc.
• Costs – what is the right price point and fee model, how to price content consumed on different devices, etc. 

People have a high tolerance for intermittent quality if something is free. However if you start charging for the same content, the balance of these dimensions needs to be maintained at a higher level. People will expect an Internet service to function like a cable service – or perhaps better!

Q. Given the widespread availability of free VoD, is there now a risk that the window of opportunity for making money is quite small? 

A. I think it is important to debunk the assumption that content owners are not making money on the content shown on VoD sites. The revenue streams from more traditional viewing forms, like DVDs, are still in operation. 

I feel the availability of free content will actually shrink when operators start finding the right quality-convenience-cost ratio. 

Q. How big is the opportunity given the right strategies? (Parks Associates, for example, expects 38% of free VoD streams could potentially be monetised by 2012)

A. What’s the alternative? Total industry collapse?  I feel it is inevitable that this content will be more effectively monetized as time goes on. So, the opportunity is huge. 

Another common theory – that I believe is still very much only a theory – is that consumers are willing to cancel their pay-TV subscriptions and rely on fee online entertainment options. 

Goldman Sachs released an interesting report on online video (titled “Broadband 100″) that found while the consumption of online video is increasing steadily, it is not cutting into traditional pay-TV viewing. To put it in perspective, the report cites that consumer usage of online video is surging, with time spent currently growing over 60% yoy and at a 40% CAGR since 2007. This is set against a backdrop of more than 75% growth in online video traffic as measured in bits. Yet consumer usage of online video still represents only about five minutes per day for an average consumer.  The report goes on to say that professional long-form content is the fastest growing and most easily monetized. 

Q. What are, in your opinion, the top  ways that broadcasters and/or payTV operators can monetise VoD? 

A. For streaming – yes, the existing methods are advertising-based, subscription or transactional. 

For a download service, there is also the possibility of electronic sell-through – digital delivery of a file. Consumers may pay more for this option because it is potentially higher quality, they can own it forever, and view it in different ways and on different devices. Plus once it is downloaded, you do not need to be connected to the Internet each time you want to view it.

 Q. Assuming VoD is monetised, would you expect advertising, subscription or PPV models to dominate and why?

A. We expect the subscription or transaction model would be more successful than advertising, which we are already seeing with Hulu and Joost talking about a fee-based service. 

Ad-based content has been quite successful for Hulu, but remember that they reach less than 1% of the total broadcast audience, and insert less than one-quarter of the ad time compared to a regular broadcast (in fact, they’ve promised to only show 4-5 ads for an hour show). Even though they can charge a respectable amount for each ad, the total amount of revenue is much lower than traditional broadcast. The overall pot is substantially smaller. This points the way to fee-based revenue models.

 Q. Are there any significant differences between cable, satellite and IPTV platforms that might favour one over another in monetising VoD? 

A. We strongly feel that all operators are headed towards a hybrid network of some description and IP-based technologies are the common thread, which creates an interactive, two-way environment. 

IPTV providers should therefore have an advantage because their networks are intrinsically based on IP-based networks. The case can also be made for the cable operators that own both the broadband and TV pipes into a subscriber’s home, which provide more control over quality of experience. Satellite operators on the other hand need to have a broadband partner to offer the connectivity to take full advantage of a rich VoD service. 

Q. Can on-demand content available on the Web be brought to the living-room TV set in such a way as to complement payTV operators’ VoD offerings rather than bypass them?

A. The Holy Grail seems to be the capability to offer OTT content into the living room – to take center stage for family entertainment. The Verimatrix view is that traditional operators are well positioned to achieve this goal. They clearly already have the premier position on the living room TV and are now experimenting with how to take their TV services beyond the living room and capture viewer’s attention on other devices – PC, mobile, etc. 

Other approaches we’ve seen are to truly blend the TV and Web experiences together. Operators can choose to make this happen on the main TV (such as calling up an actor’s Twitter feed while watching his program) or bring in other devices to provide interactivity (it is become more normal for viewers to watch TV while working on their connected laptop). The market is so wide open at this point that there’s no 100% right answer.

What struck me, though, was a feeling that this characteristic phenomenon of a capitalist economy, which is usually associated with innovation, may actually stifle innovation to some extent. What I mean is that if one company has a good idea and tries to add a new feature, new service or a new business model to its system, it is very likely that they need to line up too many of the proverbial ducks in a row. A service provider ordering the end-to-end system may have enough power (or money) to make this happen. Most of the individual players may not have the time and resources to incorporate a speculative feature. 

Case in point, a service provider wants to repackage a set of episodes on a network DVR to a season and offer it again for purchase or rent; it may require cooperation of the storefront vendor, middleware, CA/DRM to re-encrypt the content, content management to keep track of a new asset, user interface, billing system, etc. Not to mention extending the distribution rights obtained from the studio. How can we optimize this process, make it more agile and responsive? 

The Paths to OTT

Another aspect of the conference that perked up my mind was the concept of over-the-top or OTT. What is it, really? When you ask the consumer, it may mean getting content from any source rather than a single TV service provider. It may also mean watching the content on a PC or even more importantly, getting it for free.

 A service provider may be thinking about reaching its subscribers on any device whether the user may be at home, traveling or even outside the provider’s managed network. Or even about reaching a new customer beyond the reach of his fixed network. And the studio may even be thinking about bypassing the service or network operator altogether. A very interesting and intellectually stimulating puzzle, indeed. 

But the bottom line is how is anybody going to make any money and who is going to benefit at the end. Is it like the buzz of the “long tail” content from several years ago? I did not hear it mentioned a single time at the conference. So what are the enablers of a successful OTT strategy? How does one monetize this new opportunity? I personally don’t want to go to too many web sites to get my content, set up numerous accounts, receive multiple bills, learn different user interfaces, set up my preference over and over … you get my point. 

Seems to me that a relatively easy way to deliver OTT is to extend an existing service to new devices and reach existing subscribers wherever they happen to be. This approach represents only incremental cost, reuse of existing content, adding value to the existing brand, extending the current relationship with the subscriber and ultimately increasing or at least maintaining revenue. 

Don’t take me wrong; there will be successful OTT services outside of the traditional service providers. As an example, my family enjoys the Netflix on-line service. But even this one started as an extension of another business strategy rather than a pure OTT, even though it may end up eliminating the mailing of physical DVDs altogether. (By the way, I did end up signing up for a higher tier broadband service indirectly paying for the Netflix service to my DSL provider.) 

This is why Verimatrix has extended content protection services to PCs and smart phones, added support for adaptive rate streaming and provides a multi-rights head-end, shielding the service operator from the complexity of multiple device types, each possibly requiring a different CA or DRM system. These are all necessary enablers of a successful OTT strategy. 

Home Networking Standards and Psychology

Home networking and sharing content among devices in the home in particular is another topic that excites me. It started as sharing content between a DVR and one or more set-top boxes or PCs, sometimes called whole-home DVR or multi-room DVR. This scenario was partially driven by the fact that content is already present in the home on the DVR and the destination devices are compatible as far content format and resolution are concerned. 

Such architecture has been standardized to some extent by UPnP and DLNA and even OCAP-HN. But as one starts adding devices requiring different file formats, video codecs and resolutions, this architecture may no longer be sufficient. The lack of remote access to home content is another serious limitation. As bandwidth is becoming ubiquitous, it will become easier to stream transcoded content in the appropriate format, optimized for the destination device directly from the head-end. 

DLNA may still be used to discover the content in the home but the rights and the device-optimized content may be reacquired for the best user experience. Thus DTCP-IP may not be the only way to protect content in the home. By taking advantage of the more flexible way of signaling content protection and other content attributes using UPnP content discovery services, allows the destination device to copy the content locally, request its own rights and access keys or request a more suitable instance of the content altogether from the service provider. 

Psychology of ownership plays a role here as well, but I believe that over time consumers will become comfortable with the idea of owning rights to content rather than owning the content itself in the DVD form or the digital form. The ultimate challenge is to make this complexity completely transparent to the end user – “search, select and play” nothing more.   

I look forward to continuing these conversations at NAB. See you in Vegas.

Gotta go – last call for boarding!

What our work with ABS-CBN most profoundly represents is the nature of the transitions underway in the pay-TV world globally. Not everyone may know of the global diaspora and intense viewer loyalty that makes Filipino TV content a hot product.

Set against the background of a transition to digital TV standards even in developing markets, ABS-CBN has taken on the challenge of global multi-network content availability that optimizes revenue sources through a single security head-end.  And they have chosen VCAS cardless solutions to address this challenge – emphasizing that the choice is driven by a shared vision of how operators must address revenue security not only for IP delivery, but also in the traditional satellite and cable broadcast world as well.

Congratulations to everyone that made this landmark deployment a success!

Please come see us this week at the Philippines Cable Television Show (PCTA), where we will have VCAS for DVB and VCAS for IPTV security solutions on display.

Now, we’ve all complained about tradeshows – they are costly, require a large amount of company resources to make them successful and can be murder if you don’t have the right footwear.

But at the end of the day, it provides us with a great opportunity to meet with customers, partners and prospects and have meaningful conversations about their conditional access and content security plans. In speaking with service providers – cable, satellite, IPTV – we have picked up on a major theme. They are all contemplating landmark updates to their network to improve their competitive profile, capture additional revenue or simply better serve current subscribers.

More specifically, we are seeing four main trigger points for operators to transition their network and upgrade their content security platform.

• Analog-to-digital transition
• Digital cable-to-IPTV migration
• Cable switch-out to all IP
• Hybrid digital terrestrial/IPTV
• The adoption of IP for video delivery of satellite

Fortunately for us, these transition scenarios take advantage of proven IP-based standards and technologies. It also reinforces our position that eventually all pay-TV networks will be categorized as simply digital TV. Two-way interactivity of IP will underpin almost every aspect regardless if it is a telco TV network or a hybrid satellite/broadband combination. 

Based on strategy sessions with customers, we have identified a unique set of complex issues operators need to consider when upgrading their content security. Namely, they need to make decisions around their long-term “revenue security” strategy.

 Our team has developed a white paper that explores these issues and provides common migration approaches that can be downloaded from our site, “New Content Security Strategies Transform Pay-TV Service Migration: What Operators Should Consider when Upgrading their Networks.”

We have received positive feedback on the paper so far. Please let us know what you think.

And we’ll see you at our next tradeshows: Philippines Cable Television Show (Mar 16-19), IPTV World Forum in London (Mar 23-25) and Convergence India (Mar 23-25), with comfy shoes! 

Without dwelling on the negative impression given by statistics, Mark underscored the promise of a more comprehensive transition to digital distribution where operators across the region can recapture a significant revenue base. The potential is even more dramatic when the new opportunity for Internet distribution makes content available to those subscribers who live away from their home country.

This hits a trend that we’ve been observing– Internet video is completely changing the way expats consume pay TV. Operators see an opportunity to broadcast local programming to expats all over the world. As you can imagine, this is both a huge revenue opportunity and potentially a devastating piracy challenge.

While some of these operators are rebroadcasting signals illegally, legitimate operators have the opportunity to enhance the subscriber experience with better quality and better selections of content. Asian operators have a special opportunity to service migrant populations and communities of temporary workers.

To reinforce another point in the article, Asia represents a lucrative market for content security providers. Cost is clearly an issue in this often low ARPU region; however technology and rising awareness of service theft are changing security dynamics. Operators upgrading to digital have a more compelling desire to protect their programming assets, and more advanced layered security approaches are making revenue protection way more cost effective.

Software-based content security is catching the attention of operators that are weary of the millions of cloned smart cards in the region. Software provides the flexibility to stay ahead of the hackers with renewable security and layered techniques like watermarking or fingerprinting. Even legacy smart card vendors are getting serious about software-based security.

We are certainly excited about the opportunities in Asia as hybrid networks, enabled by IP technologies, are on the agenda of most major operators.

Read Mark’s article where he breaks out some figures on piracy type and estimated costs per country.

Their most recent paper, published this  week, on the Common Scrambling Algorithm (CSA) mandate that many pay-TV deployments must accommodate illustrates very succinctly how technical decisions that once were wholly supportable now hobble the transition of traditional pay-TV players to the new competitive world. My only misgiving here is for any sense in which the specifics of this issue might reflect on the reputation as a whole of the DVB. The guidance of the DVB and its contributors has been instrumental  to organize and commercialize digital pay-TV around the globe, and continues to do so. 

The timely critique of a single technical standard should only be a cause to celebrate open debate – and legacy CA players who rush to the defense of this particularly sacred cow should see it as such. Rather, like scientists who see a grand theory smashed on the rocks of experimental evidence, we should recognize that the changing landscape does require a new assessment of the relevance of certain standards and grasp the challenge that this brings.

Compare that with IPTV operators. In the early days, theft of service was never a forefront requirement when building their networks – for two main reasons. They felt they had more control with fixed networks where the end device was a set-top box, so the threat of theft of service was potentially lower. In addition, content owners saw the emerging Internet Protocol Television (IPTV) as a potential threat and imposed much higher security requirements in order to gain rights to premium programming. Despite claims to the contrary from smart card vendors, software-based security was deemed acceptable in a two-way network and content protection was key to a full channel lineup to attract subscribers.

With the appeal of hybrid networks and novel OTT (over-the-top) services, all types of pay-TV operators find themselves in new revenue security territory. Cable and satellite providers are making strategic decisions to add more interactive services, many of which are delivered over IP-based networks. They are finding that software-only security solutions offer a more economical alternative, which are far easier to deploy, compared with smart cards that simply do not translate in the two-way environment, in particular in the case of mobile devices. 

IPTV providers are now looking into OTT services that deliver content outside their controlled, managed network. They need layered security solutions to take advantage of different delivery mechanisms outside of the living room. Plus IPTV operators with rights to exclusive content have become an attractive target for hackers, so theft of service prevention is a higher priority.

You can now put revenue security on the list of how these pay-TV services are converging. Operators require a flexible protection solution that can handle different networks, delivery formats, multiple end devices and the addition of new services – the ultimate goal is help monetize content, increase ARPU and reduce churn.

Come see me at Digital Hollywood Fall where we will tackle the latest DRM standards and actual technology implementations – today at 12:30!

An alternate reality like this might well be considered alongside  those of recent times in which house prices don’t go on rising without limit, Iraq had no hidden nerve gas or nuclear weapons and revenue-free Internet companies were unworthy of billion dollar IPOs. What would a content security company be doing if it did not help its customers extend their businesses and find ways to monetize OTT? Follow the herd, avoid the issue and jump into the middleware quagmire?

I am happy to continue this relevant industry discussion.