Just this month, I am proud to say we hit another major milestone that reflects as much on the entire digital video industry, as it does on Verimatrix. We celebrated reaching 500+ pay-TV operator customers and securing more than 20 million screens. (For additional milestones, read about our global number one ranking in Content Protection/DRM in MRG’s IPTV Market Leader report – for 5 1/2 consecutive  years!)

A large part of our tremendous growth has been due to the pay-TV planets colliding. Back in 2006, virtually all of our customers were delivering green field IPTV services over managed networks. Fast forward six years, our heritage in IP-based security techniques has placed Verimatrix in the center of this collision.

Cable and satellite providers are taking advantage of IP networks for two-way communication – over both managed and unmanaged (OTT) networks.  IPTV operators are also turning to Internet-based OTT video to enable a compelling multi-screen experience. And we are finding that increasingly even “pure play” OTT video providers need to meet the same content security requirements for premium video as the traditional operators do (see our latest white paper, Content Security Requirements for Multi-Screen Video Services.) Of course, there remain tens of thousands of analog operators that are still transitioning to digital (India’s Phase I digitization this year presents a wealth of opportunities.)

Our cable and satellite (DVB) customer base increased 100% in 2011, and we’ve had a 500% growth in secure OTT video services. Based on feedback from customers, particularly our DVB customers, they feel more confident that our VCAS solutions will help them extend into multi-network, multi-screen video services more efficiently.

Additional proof of our position in the market can be found in our 3-Dimensional Security approach, which we introduced more than three years ago: Flexible layers of protection techniques that address evolving business needs and revenue threats. In other words, any screen over any network to meet any threat. This clearly still rings true today.

Since celebrating this milestone was so much fun, everyone is focused on reaching the next one!

Steve Christian was recently featured on the increasingly popular Pay OTT TV Blog from Tvinici, which was highlighted at IBC 2011. 

Content security is one of the most complex issues associated with OTT TV.

We have asked Steve Christian, VP Marketing at Verimatrix, to give us the DRM / Conditional Access perspective of OTT TV (Verimatrix provides software-based security solutions for service providers).

Steve, What do you think are the main reasons behind pay TV operators expanding into the Over-the-Top Space?

A key driver is to be able to cover the bases of additional screens in the home, which from a defensive perspective would gather eyeballs of competitive or niche services. From a more positive standpoint this raises the competitive bar for other pay-TV operators in the same franchise area or region. Another reason is to be able to expand the geographic reach of the operator’s service brand beyond the existing subscriber pool, potentially to a worldwide audience.

What are the greatest challenges associated with content protection in the pay-OTT space?

The greatest challenge is awareness of content protection issues at a high level, and the details of how this must be supported at fine grain level.

To read the complete Q&A, please visit the Pay OTT Blog.

We’ve received an overwhelming response to the report and we feel that’s because it hits on some major issues operators are currently dealing with, such as the infrastructure challenge, how to ensure revenue security across multiple devices, and tackling universal content rights that appeal to both the consumer and the content owner.

Based on the feedback we’ve had so far, we thought it would be valuable for Steve Oetegenn to expand on some key points from the report.

• What were you hoping to elucidate with the recent Videonet report, “Making all TV multi-screen TV?”

This report is timely and is another indication of the maturing of the over-the-top (OTT) video marketplace. Consumer expectations have driven the need for multi-screen TV and we are at a point where the technologies and standards are catching up for operators to enable such services – and operate them in a way that complements their more established business streams.

Now we are talking about how to more effectively scale and monetize these services; how to combine on-demand content (which has dominated OTT video) with live content; and how to deliver it over different networks to different devices without sacrificing quality of experience.

This is an exciting time because progressive operators are setting the bar for what is possible. The technology and business decisions they are making are critical to meeting consumer expectations and long-term development of the market.

• How do you see subscription-based and ad-based TV models co-existing in multi-screen services?

Informal polling results from our recent Light Reading webinar illustrated what the market is also seeing – operators taking a mixed approach to revenue extension, just as they have done on more traditional delivery platforms. The more you look at pure online offers today, the more they look like subsets of traditional cable operator models.

• What type of standards will need to be established to secure multiplatform content across different network domains and native DRM schemes?

Actually multiple DRMs and hand-offs during delivery seems like a highly unlikely scenario to us for the most part. The trend appears to be towards efficient and effective end to end models of cloud based services. The future development of these approaches seem likely to adopt “security neutral” forms of content distribution and service protection such as HLS, DECE/Ultraviolet CFF and YouView’s choice of Marlin. (Read more on this topic in ScreenPlays)

The use of DTCP-IP in the home is a counter example with a single “conversion” point in a home gateway, but one that is again vendor neutral in concept, enabling technology solutions to be created that add significant value to the underlying solution.

• What is Verimatrix’s strategy to ensure interoperability within a multiplatform world?

We have launched a strategy that offers two directions in support of optimizing and extending our customers service umbrella.

The first of these is certainly a focus on supporting a widely deployed standard for advanced adaptive streaming, which we believe is HTTP Live Streaming (HLS) at this point. Our value proposition here is to provide additional authentication and entitlement capabilities to existing device implementations and match more of what a commercial premium service is looking for. Clearly, this involves supporting many lightweight client implementations, but this is well rehearsed territory for us in the IP set-top box space.

The second is in response to a clear recognition that not all devices targeted by a given service operator will use a single protection mechanism or even similar file formats. However, it will remain important for operators to manage rights of all devices in concert and it will be vitally important that the consumer experiences a highly uniform and pervasive service offering. The Verimatrix MultiRights strategy provides an answer for this by licensing critical third party technologies and providing them under a common management umbrella.

• With operators facing major transition points for their network (e.g. analog to digital or MPEG 2 to MPEG 4), is there a common security consideration that will more easily enable multi-screen services?

Multi-screen services are just one aspect of an operator seeking to optimize commercial opportunities – and such network transitions are all a part of this kind of picture. Verimatrix provides a single security approach that addresses many aspects of the new commercial opportunities that our operator customers wish to exploit, which is in contrast to the highly siloed approaches of legacy conditional access (CA) providers.

• Where does digital watermarking come in?

Watermarking is a powerful tool that we bring to bear in a layered revenue security approach. The most interest in this extra layer has been for high value, early release content where high resolution video-on-demand (VOD) services offer a tempting point of interception for content pirates and we need to offer a multi-level, layered security approach.

It’s not obvious at present that the value of pirated video copies at mobile screen resolutions warrants the use of this additional security layer, but as screen sizes and service resolutions grow this will become significantly more important.

We will be launching our new server-based watermarking solution at CableNET. Stay tuned.

Click here to view the Videonet report.

Send us a comment or question that you feel hasn’t been addressed for the roll-out of multi-screen video services.

A very broad topic, indeed, but also a very timely and relevant one. With an increased number of tablets and smartphones driving consumer interest in video on the go, consumers are demanding access to preferred content across devices, anywhere and anytime. However, for service providers and content owners to be able to provide these services in a profitable manner, the content must first be secure. In addition, as new revenue models develop, the content protection must offer increased flexibility and the ability to follow complex rules.

We addressed these issues during the webinar and are pleased to note that there was a very productive and stimulating Q&A session at the conclusion of the presentation. Many excellent questions were asked, however, and time constraints did not permit us to answer every question. Therefore, we’ve taken a sampling of the unanswered questions, and provided our answers and guidance below.

Be sure to watch for the second installment of this series, where we’ll be answering more questions from the webinar participants.

How will operators profit from content delivery using adaptive rate streaming of various types of video content? What network operator capabilities, if any, could enhance the end user QoE for such services?

Modern pay-TV operators should embrace novel technologies, such as those utilizing adaptive rate streaming (ARS), which have been designed to effectively scale and solve many remaining IP video issues.  Operators will profit from ARS as long as they increase subscribers’ quality of experience (QoE) and leverage the associated subscriber data.

With ARS, subscribers can enjoy an uninterrupted experience with the highest quality possible, even as they roam from one network environment to another.

In addition to the optimum-quality viewing experience, ARS also scales effectively on global and local networks, makes highly effective use of today’s content distribution networks (CDNs), and ensures that true HD media experiences over the Internet can become a reality. All of this translates to a richer consumer experience, with more personalized choices with regard to content, time and place.

ARS can also provide valuable subscriber intelligence. At Verimatrix, we believe that the more you measure, the more you can impact QoE. While the concept of gathering subscriber usage data is not new, operators need to think about subscriber behavior and usage data more intelligently. This data can be leveraged to generate new revenue streams, increase subscriber loyalty, as well as enhance QoE and subscriber satisfaction.

Technologies like ARS can provide a veritable treasure trove of data that can be analyzed for extremely useful metrics like performance trends and traffic patterns.   These metrics provide a robust foundation for enhancing QoE and turning it into a real competitive advantage.

What are the trends, now and in the next year or two, in stationary viewing vs. mobile (iPhone, iPad, etc.) viewing of video content?

This is a great question.  Without a doubt, the content landscape is rapidly evolving as a result of the increasing role of over-the top (OTT) services. Static information feeds from the Web today are joined by an ever richer vein of mainstream programming delivered directly from its owners – often for free and with minimal advertising interruptions.

While in the past this meant watching low-quality video on a PC monitor, today OTT services can be watched on the big screen connected to game consoles, Internet-enabled TVs, dedicated streaming devices such as Roku, and a variety of mobile devices, including the iPhone and iPad.

Consider these recent statistics (from a recent Nielsen report on smartphone usage), which represent a possible threat to traditional pay TV:

• Penetration of smartphone devices in the U.S. jumped from 23 percent of the market in the last quarter of 2009 to 31 percent in Q4 2010, representing a 35 percent increase
• The number of video viewers rose by 41 percent to 24.7 million over that timeframe
• Users spent an average of 4.2 hours per month consuming video at the end of 2010

Over the next couple of years, I think we can anticipate that this trend will continue. If you are looking for real time statistics, I suggest checking out the BBC Internet Blog, which posts a monthly snapshot of BBC iPlayer performance.  It’s a great resource and very helpful in identifying key trends and issues.

Do you think that ISO/MPEG’s DASH standard will become the dominant adaptive streaming protocol. If not, why not?

Yes, we do think that once it its finalized MPEG DASH is poised for widespread adoption.  In our opinion, device makers will want to preferentially support a single video stream type. That will tend to help the adherence of standard video support in both PC-type browsers and embedded browsers (which have been much more of a challenge in many cases), and starts us down the road of direct HTML page support for connected TVs etc. We think that MPEG DASH will become the obvious choice for embedded devices.

We are closely watching and participating in the standards development that will help enable and secure multiplatform content. For the latest standards developments and insights, read my article in the May 2011 issue of ScreensPlays,”Initiatives Promise Efficiency Gains for Multiscreen Service Operations.”

What questions do you have on this topic?

So, this time I was not sipping coffee at a foreign airport nor feeding my sweet tooth with poffertjes. This year I drove to NAB and it is hard to type while driving 320 miles back from Las Vegas to San Diego. I still can’t find a good app on my Android phone that would take my dictations and convert them to text.

But back to NAB. It seems like tablets were everywhere and if your booth didn’t have one, you were not cool (of course we had one or two as well). And it is all related to over-the-top (OTT) distribution of content, especially video. I can’t help but feel that the direction the industry is going is questionable: from HD video on a large screen TV to a low-bitrate, low-resolution video on a portable device.

I know, I get it, it is all about mobility and “on my time” and “wherever I am.” So it certainly has its benefits and the video quality is improving every day through better implementations of adaptive bit-rate streaming and ever increasing bandwidth.

The content quality is also improving as studios are getting more comfortable to release pay-TV movies and episodes when they are protected by conditional access (CA) or digital rights management (DRM). This was the point of our production-ready OTT demos streaming protected video to iPhones, Android phones, laptops and Macs, and yes, even iPads and Android tables (to make sure we fit right into the NAB buzz!).

Where did the quest for highest quality and best picture disappear? Actually, it did not.

As we discussed with Herve Utheza, president of our partner company RCDb, during a session on “Tapping into the Blu-ray Potential,” OTT is also coming to our living rooms bringing Hollywood content to a device that everybody is familiar with, is simple to use and always brought quality entertainment for the whole family.

Yes, you guessed it; the good ol’ Blu-ray player. It is the most deployed entertainment device (including BD-enabled game consoles) already connected to your living-room large screen TV. And now, when you connect it to your broadband and insert the RCDb-Verimatrix disc (or rather a disc branded with your OTT service), Eureka! You have access to potentially thousands of movie titles, TV episodes and even live content from the comfort of your sofa (and no, it does not serve beer yet – we need to leave some room for phase 2).

And the beauty is that it plays on all BD players with BD-Live 2.0 capability (virtually all recently manufactured players) and it has a standard built-in DRM called Advanced Access Content System (AACS) used to protect all Blu-ray titles today.

A popular device, standardized around the world, capable of delivering high value paid content and already purchased by the consumer. Sounds like a sweet spot to me.

Speaking of sweet spots – if you still don’t know what poffertjes are, let’s meet at IBC 2011 in Amsterdam.

But we would like to underscore the rationale, with all the current industry hype around OTT video and TV Everywhere, for why the leading IP revenue security company would be investing in DVB broadcast conditional access?

The answer is found in the global perspective we have gained in working with many different types of network operators and system integration partners around the globe. Today’s digital TV global landscape is still dominated by DVB broadcast systems – but these broadcast only networks of today are certainly the hybrid networks of the future.

Based on compiling a number of industry metrics and reports, we’ve identified 700+ operators, today with more than 160M subscribers, will switch the technology base of their network over the next couple of years – perhaps from analog to digital, or from MPEG2 to MPEG4 digital technologies. Operators that fit this description will grow to 220M subscribers in the same time frame.

And we feel all of these networks will use the transition point to consider new CA/DRM solutions that enable cost optimization and position the network service to grow into IP service delivery of one sort or another in the medium term.

Even during the next transitionary few years, the subscriber base of virtually all of these operators may well be dominated by broadcast-only technologies. But at the same time as adding a number of premium IP-based service options, operators will almost certainly want to explore a range of client options including cost-effective cardless security.

Therefore they will see a flexible DVB broadcast solution as a major component of an overall growth trajectory that includes broadcast, hybrid, and Internet network delivery. And that they will want to manage the rights for content across all these networks in a holistic manner.

Think of it this way: the operators that “only” need broadcast DVB security now, will need VCAS 3 later in their deployment. With this acquisition, not only do we maintain our focus as digital TV security specialists, but we can now offer a full security migration plan for DVB operators that want to move to a hybrid network – all under a single security architecture.

By adding Comvenient’s deep DVB expertise and hard-earned reputation for secure and reliable products, which are very complementary to Verimatrix’s, we will reach our goal to be the most successful and innovative CA/DRM company in the market.

To put a finer point on it, here is how our company profile has been enhanced with this acquisition:

Founded: 2000

Scope: Content and Revenue Security for multi-network, multi-screen applications: IPTV, DVB, hybrid & over-the-top to STBs, PCs, connected TVs, web tablets & mobile devices

Locations: San Diego, California, with European HQ in Munich, Germany; Sales offices in The Netherlands, France, Russia, China, Singapore and Argentina

Customers: 450+ operator customers in 50 countries, including 20 Tier 1s and 2s – protecting more than 18M screens for IPTV, DVB, PCs and other devices

Partners: More than 110 ecosystem channel & integration partners Ericsson, Huawei, Nokia Siemens Networks, Technicolor and ZTE

Investors: Goldman Sachs, Mission Ventures, Crescendo Ventures, Cipio Partners, JK&B Capital and SunAmerica Ventures

NAB is a great opportunity for us to continue to discuss the benefits of our broadened DVB capabilities. You will see the Verimatrix booth (#SU6207) and the Comvenient booth (SU3024) adopt the new “Expect More” messaging and an emphasis on combining smart card and cardless security, DVB migration strategies and multi-network/multi-device security options.

Please come by to hear more.

Things have certainly changed in the last six months.

• Cord-cutting may be still a much debated statistic, but is in fact a competitive threat to traditional pay-TV services, particularly with younger generations. This threat grows with the quality of services that can be delivered over unmanaged networks and the variety of devices that can be used to display high quality video services.

• Progressive operators are finding ways to add OTT services to their subscription packages. IMS Research forecasts that in 2016, OTT services delivered via pay-TV set-top boxes will generate $436 million in worldwide operator revenues.

• Innovation among television technology suppliers has far from run its course. New announcements from digital systems vendors appear every day, creating momentum for strong partner ecosystems that can provide operators with the advanced capability they seek, but with options and flexibility for deployment.

We are seeing this support largely for the standard of HTTP Live Streaming (as opposed to the proprietary HTTP Dynamic Streaming from Adobe and Microsoft’s Smooth Streaming) mainly because of its open standards-based approach, including the definition of a standardized stream encryption mechanism for live and on-demand content.

The natural effect of a standards-based protocol and growing technology support is of course a more cost-efficient platform, making HTTP Live Streaming ideal for the kind of large-scale services that these progressive operators want to add to their line up.

However, we recognize that we are still in the early days of developing the business environment for adaptive rate streaming and OTT video services – which is why we are organizing the Capitalizing on OTT Breakfast Forum the morning of March 22 just down from the IP&TV World Forum conference that starts that same day.

We are bringing together industry leaders from Harmonic, RealNetworks, AwoX, Minerva Networks and Heavy Reading to discuss revenue optimization strategies for OTT services to multiple devices.

These companies are far from the only strong contributors to the momentum in this space, but do represent distinct elements of the overall value chain. And as such are able to illustrate very effectively the growing body of both product and expertise that can be brought to bear on this new market.

The point here is not to talk about where the industry is currently positioned in regards to OTT video, but to illustrate a vital and growing phenomenon that will shape the next phase of industry development – the integration of these new delivery mechanisms within an existing managed network service. The presenters will be discussing specific technology decisions operators need to make when building an integrated OTT platform.

With the ability to secure OTT video, operators are also provided a platform to deliver – and more directly monetize – their existing and future premium content.

This event is for broadcasters and network operators that are evaluating adaptive rate streaming technology in order to expand their service umbrella. Not only will you have access to these industry leaders, they will provide a preview and focus of what’s most important at the IP&TV World Forum conference.

Skip the queue the morning of the show and attend our free OTT breakfast forum. You won’t be disappointed. Plus you can enjoy delicious bacon sarnies to start your day!

RealNetworks

Harmonic

Minerva Networks

AwoX

I’d argue the biggest impediment to perfecting these apps is content. The biggest impediment to gaining the rights to content is content security. And who already has access to high-quality content and conditional access (CA) / digital rights management (DRM) systems in place? Digital TV operators. We believe the cable, satellite and IPTV operators that already have the rights to broadcast premium content are in the cat bird seat to offer the best live mobile TV experience.

The demand is clear. According to Sandvine, real-time entertainment, including video streaming, now accounts for about 43% of North American Internet traffic, up from 10% in 2008! And for the first time in history, the number of households paying for TV subscriptions is falling, in part due to the rise of Internet TV and over-the-top (OTT) services.

The technology is finally catching up to this demand when you consider what adaptive rate streaming can now enable.

Now, in this new OTT world, the issue of content rights is complicated. Take companies like Ivi and FilmOn.com for example. They have developed technology that captures over-the-air broadcast signals and streams them to mobile devices – without consent from the networks.

Clearly these broadcasters are not thrilled with the so-called loophole that they found in the U.S. Copyright Act. Both of these companies are already in an embattled legal fight with content owners to see if they have the right to do this. According to some attorneys, the law is on the side of the networks.

We recently launched our ViewRight LIVE app in iTunes, which enables secure distribution of premium pay-TV services via WiFi and mobile wireless networks – of live TV. The app provides subscriber/device registration and device-level authentication. ViewRight LIVE also allows operators to customize and brand their mobile TV channel to match the look and feel of their traditional channels.

So with the content rights, technology infrastructure and now the security available to enable a superior live mobile TV experience, digital TV operators have a tremendous opportunity. I’d say it is better to beat fledging online TV operators in the marketplace rather than the courtroom.

What are your thoughts?

You’ll notice that OTT has been a common theme throughout our blog posts this year – we have tackled issues ranging from the likelihood of traditional TV operators embracing OTT video as a service to how service providers can capitalize on advanced OTT technologies to enable new streams of business to the growing support for HTTP Live Streaming.

In addition to helping operators maximize the effectiveness of their existing bandwidth, ARS also
offers many advantages over previous video delivery techniques over the Internet. For instance, it naturally supports home firewall transparency, and a wide variety of use cases — it can deliver video across a combination of wired and wireless networks, through any combination of home broadband devices and firewall devices.

In our opinion, this is extremely important because the protocols that we’ve been using for IPTV, in particular, don’t have those properties, and as a result they don’t work very well around the home.  In comparison with previous video techniques used on the Internet, such as progressive download, we see both improvements in operational cost savings for the service provider and in the quality of consumer experience.

And the improvements to the quality of the consumer experience are tremendous.  This is so important because user experience is perhaps the most important determinant of success for businesses that rely on video delivery.  People don’t expect their video material to stop and start and for the audio to drop; they expect a very seamless, continuous experience, and they are not very forgiving of delivery issues.  ARS provides that seamless experience even when conditions deteriorate sharply or if sharing of bandwidth occurs.

In partnership with Harmonic, we worked with Ben Schwarz to author a primer talking about the impact of ARS. You will find a high-level technical description that leads to the technology trade-offs of the different flavors of ARS (from Apple, Microsoft and Adobe). It is written as a guide to help operators make sound selection parameters and consider business implications based on those decisions. You can download the primer at www.verimatrix.com/HLS

We think ARS is one of the year’s most significant enabling technologies, and we’re excited to see what’s in store for 2011.  What ARS advancements do you think we will see in 2011?

Sign up for our Authorized Access newsletters to stay informed on the latest news on revenue security, conditional access and digital TV developments.

But when you get to hear some apparently “non-company line” remarks from senior speakers at broadcasting organizations, content providers and consumer electronics giants some of the grind just seems to pay-off. Here are a few:

Nugget #1: Studios and other content creators seem still all at sea about licensing rules for over-the-top (OTT)  content. All the rules seem continuously in flux and any sense of strategy really fails to make its presence felt. Perhaps the digital mavens live in a different office block to those folks who grind out the day to day legal agreements bringing in the bucks? An especially telling question was asked at one point – what kind of a video platform is an iPad from a licensing standpoint? Everyone hedged on the answer, leaving the crowd wondering about devices seemingly sported by about 50% of the attendees.

Nugget #2: The frequent assumption of past years’ discussions was that the video industry has to avoid the death spiral that music entered when broadband penetration started to accelerate. This year it seems that music industry insiders wanted to trumpet that reports of its demise have been greatly exaggerated. Several speakers observed sincerely that the world of music has entered a golden age, has never been so healthy and that innovation abounds.

Let’s hope that this sentiment is echoed elsewhere, because, apart from continuing to enjoy new music, discrediting the music industry myth would be a source of some satisfaction. It would be good to come across other validation that demonstrates music is truly in a golden age. I think we should continue to question the health of the music industry based on facts and not simply positive repetition.

Nugget #3: From the attendee’s perspective, the show seems to reinforce the perception that Hollywood is the center of L.A., L.A. is the center of the U.S. and the U.S. is the center of the world.

This comes across most strongly when everyone tries to identify and jump on the newest and definitively revolutionary “big thing.”

You would think this smart bunch of folks would be a teeny bit suspect of the undiluted Kool-Aid by now, but scarcely a critical word is heard from the audience, for instance, as a new service or a new cool box rolls into town. It would be great to see the discussion diversified a little to recognize the continuing importance to the industry of Middle America (where I was reminded by one attendee that an iPhone is still somewhat of a novelty). Never mind the billion or so avid TV consuming households that lie beyond the shores of the US.

In most places in the world content is also digital, Hollywood still rules and making a buck or two from information and entertainment is still a compelling issue – even though pervasive wireless broadband supporting the latest gadgets seems like it might be technology from a different galaxy. Would it be so hard to ground the debate by representing some of these interests?

Nugget #4: Digital Hollywood’s new unsponsored “rubber chicken” dinners do seem to attract some great panelists with something to say. I attended the Video Dinner, which was rather dominated by the theme of Google TV – with an early demonstration from Sony and a string reinforcing cast of execs from more or less involved companies – YouTube, NBC, DISH network, LG and Akamai. But there is a feeling from more than one corner that OTT and Connected TVs are like Columbus’s voyage into the unknown – half cheering on progress and half wondering if the intrepid will simply sail off the edge of the edge of the world.

We’d love to hear why you attend Digital Hollywood events and what nuggets you found at the Fall event last week.

I am looking forward to speaking at Digital Hollywood New York event in November. See you there!