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OTT and Smart TV strategies in the US Panel: Evolving business strategies for smart TV and smart phone: an international comparison EUN-A PARK, Ph.D. UNIVERSITY OF NEW HAVEN PACIFIC TELECOMMUNICATIONS COUNCIL ANNUAL CONFERENCE, 2015

Defining Over The Top (OTT) video   “online  video  from  services  and  operators  that  is  distributed  over  a  number  of  channels  including  fixed  (e.g.  to  computers,  connected  computer  equipment,  tablets)  and  mobile  (e.g.  smartphones  and  tablets)  broadband  -­‐  it  is  not  associated  with  a  pay  TV  service  provider  subscripBon”  (ABI  Research,  2014).    ◦  Streaming  video  services  (blip,  NeOlix,  Amazon  Prime,  vevo,  hulu)  

  All  use  the  consumers’  data  connecBon  to  bypass  and  replace  the  services  provided  by  the  ISP,  MSO  or  mobile  operator  

OTT Threats & Responses

Source:  Ovum,  2013,  cited  by  Song  (2013)  

Pay TV Providers: Response Strategies § MulBscreen  (N-­‐screen):  everywhere,  anywhere  § MoneBzing  content  beyond  the  subscripBon  § Online  pay  TV  packages:  a  fully  OTT  model  §  Cloud  pay  TV:  app  in  smart  TV  or  disrupBve  BM  § Hybrid  broadcast/broadband  services     Source:  Gartner,  July  25,  2013  

From Protecting to Partnering &Competing

Type   Subtypes   Target/Ra0onale   Examples  

MulBscreen  

TV  Everywhere   •  Match  consumer  behavior  viewing  pa_erns  

•  Defensive  strategy  against  OTT  service  providers  

•  Cablecom  •  Verizon  FiOS  •  Belgacom  TV  •  SingTel  mio  Play  TV  

TV  Anywhere   •  Match  consumer  behavior  viewing  pa_erns  

•  Defensive  strategy  against  OTT  service  providers  

•  Sky  Go  •  MEO  GO!  MulB  

MoneBzing  content  beyond  the  subscripBon  

Pay-­‐TV  Lite   •  Reach  free-­‐to-­‐air  only  households  •  Complement  content  to  other  pay  TV  

services  subscribed  to  by  households  

•  Now  TV  •  Viasat  

OTT  VOD  Services  on  Connected  Devices  

•  MoneBze  content  beyond  the  subscriber  base  through  partnerships  with  connected  devices  (mainly  with  smart  TV  vendors)  

•  Belgacom  MovieMe  •  Singtel  mio  Play  TV  

Type   Subtypes   Target/Ra0onale   Examples  

Online  pay  TV  packages  

Online  pay  TV  packages  (DomesBc)  

•  Reach  out-­‐of-­‐footprint  households  and  households  reluctant  or  unable  to  install  equipment  in  the  home  (a  satellite  dish  or  difficult  cabling,  for  example)  

•  Visasat  (Nordics)  •  YouSee’s  YouBio  

(Denmark)  •  Volia  (Ukraine)  

Online  pay  TV  packages  (Int’l)  

•  Facilitate  worldwide  distribuBon  of  pay  TV  operators’  local  channels  and  content  to  the  expats  

•  Viasat  •  Digturk  •  Di_o  TV  •  AerTV  

Cloud  Pay  TV   Pay  TV  as  an  App   •  Replace  physical  STBs  with  virtual  ones  reducing  operaBonal  expenditure  and  equipment  

•  Cut  out  pieces  of  the  value  chain  

•  Telia  Sonera  (Elion)  and  Samsung  (Estonia)  

•  Numericable  and  Loewe  (France)  

Cloud  based  TV   •  No  CPE  deployed  •  No  network  deployed    

•  Magine  (Sweden)  •  TotalChannel  (Spain)  •  Aereo  (USA)*  •  Weepee  TV  (Belgium)  •  aioTV  (InternaBonal)  

Hybrid  Broadcast/  Broadband  Services  

•  Economize  digital  traffic  over  the  access  network  

•  Provides  a  seamless  transiBon  from  pay  TV  to  OTT  services  

•  TalkTalk  TV,  BT  Vision  over  YouView  plaOorm  

Source:  Gartner,  2013,  cited  in  Song  (2013)  *  Since  Nov.  2014,  it  is  in  bankruptcy.    

N-Screen Strategies

TV  Networks Service Start  Date Contents Technology Revenue  Model No.  Of  

Subscribers NBC,  FOX,  ABC

Hulu March,  2007  >6,500  movie  and  TV  series  

   VOD  (streaming)

ads  based 4  mil.  (Dec.,  2012) Hulu  Plus June,  2010 Monthly  

subscripBon  ($7.99  a  month)

TV broadcasters

Providers   service   Start  date  

contents   Business  model   Real  0me  channels  

Comcast   Xfinity  TV  online   09/2012   >  280,000  contents   •  Free  for  Comcast  subscribers  •  online  subscripBon    

10  Stream  Pix   02/2012   >2,000  movies  &  TV  programs  (NBCU,  Disney,  Sony,  etc.)  

•  $4.99  per  month    •  free  for  Xfinity  HD  triple  service  

subscribers  

TWC   Time  Warner  Cable  app.  

10/2010   4,000  hours  VOD  indoor  1,100  hours  VOD  outdoor  

•  Free  for  TWC  cable  subscribers    270  

Cox   Cox  Advanced  TV  

3/2011   >5,400  movie  &b  TV  programs  

•  Ads  based    •  Free  for  Cox  subscribers   49  

Charter   Charter.net   12/2012   >50,000  movie,  >220,000  TV  contents  

•  Ads  based  •  Free  for  Charter  subscribers  •  Paid  Contents  apps    

-­‐  

Cable  vision  

OpBmum  TV  2  Go  

02/2012   Accessing  on  40  individual  contents  apps  

•  Free  for  Cablevision  TV  subscribers   300+  

Bright  House  

Bright  House  app.  

11/2010   Accessing  on  Individual  contents  sites    

•  Free  for  Bright  House  subscribers   234  

Sudden  Link  

Suddenlink2GO   06/2011   >2,300  movie,  >38,000  TV  contents  

•  Ads  based  •  Free  for  Charter  subscribers   -­‐  

Cable TV– TV Everywhere/TV Anywhere

Providers   service   Start  date   contents   Business  model   Real  0me  channels  

DirecTV   DirecTV  Cinema   2012   >  2,800  movies,  >3,700  TV  contents  

•  Free  for  DirecTV  subscribers  •  Pay  per  view   61  

DiSH  Network  

DiSH  Anywhere  

08/2010   >7,400  movies,  3,400  TV  contents  

•  Free  for  DiSH  subscribers    

-­‐  Blockbuster  @Home  

09/2011   >5,600  movies,  >400  TV  contents  streaming  

•  $10  per  month  

Satellite TV

IPTV Providers   service   Start  date   contents   Business  model   Real  0me  

channels  

Verizon   Flex  View   11/2010   >5,400  movies,  >11,200  TV  contents  

•  Charging  individual  contents   75  

AT&T   U-­‐verse  Online   05/2010   >3,000  movies,  >9,600  TV  contents  

•  Free  (1,772  movies  &  8,229  TV  contents)   -­‐  

Questions   Why  have  OTT  services  not  been  deployed  by  US  mainstream  audiovisual  providers,  compared  to  those  in  Japan  and  Korea?    

Reason 1. Differences b/w public TV dominant & commercial TV dominant nations.

§ Public  broadcasters  have  less  incenBve  to  avoid/oppose  disrupBve  innovaBons  since  their  business  models  does  not  involve  profit  moBve  to  the  same  extent  as  the  commercial  broadcasters  in  the  US.    

  Seven-­‐day  Catch-­‐up  TV  >  OTT  VoD:  UK                                                                  OTT  VoD  >  Catch-­‐up  TV:  USA  

    OTT  VoD  >  Catch-­‐up  TV:  USA  

  Seven-­‐day  Catch-­‐up  TV  >  OTT  VoD:  UK                                                                            OTT  VoD  >  Catch-­‐up  TV:  USA    

Source:  OVUM  Jan.  21,  2013,  cited  in  Song  (2013)  

Reason 2. Much Higher Production Costs in the US § The  per  capita  audience  cost  has  been  increasing  in  the  US  as  the  primeBme  audience  has  shrunk.  

§ The  lower  cost  implies  that  the  risks  in  alternaBve  distribuBon  plaOorms  is  lower.  For  risk  averse  distributors,  it  is  less  a_racBve  to  distribute  more  expensive  content  over  untried  channels,  where  the  revenue  models  are  not  well-­‐established.    

§ TV  Cost  &  CPM  Trends-­‐  Network  TV  Prime0me  (M-­‐Su)  

Reason 3. The US has lower proliferation of 3G and 4G mobile devices on which OTT content can be accessed, compared to Japan and Korea   Global  mobile  4G  and  3G  subscribers  in  Q2  2013:  Informa  

  Share  of  popula0on  that  owned  and  used  connected/smart  TVs  in  2012,  by  country    

  Share  of  mobile  phone  users  in  Japan,  the  U.S.  and  Europe,  who  use  the  following  features  of  their  mobile  phone    

Country  4G  

subscribers   4G  PenetraBon   Launch  date   Country  

3G  subscribers   3G  

PenetraBon  Q2  2013   Q2  2013  

Global   126  million   1.77%   Q4  2009   Global   1,750.3  million   24.55%  

USA   62.5  million   19.61%   Q4  2010   China   325.5  million   24%  

Japan   26.1  million   20.67%   Q4  2010   USA   225.0  million   70.60%  

South  Korea   23.0  million   47.17%   Q3  2011   Japan   111.5  million   88.30%  

Reason 4. The pricing models for mobile content   Percentage  of  mobile  audiences  that  watched  TV  or  video  on  their  mobile  device  in  Japan,  the  U.S.  and  Europe  in  June  2010    

  First  is  the  subscripBon  to  the  OTT  service  itself  (e.g.,  NeOlix),  and  of  course  this  is  free  if  the  OTT  service  is  adverBsing  based.  The  second  payment  is  to  the  network  provider  that  provides  the  connecBvity  for  the  service.  For  example,  the  mobile  carrier  (Verizon  Wireless)  that  delivers  the  content  to  the  mobile  device.  While  the  former  payment  might  be  the  same  in  US  and  Japan/Korea,  US  users  have  much  higher  payments  for  the  la_er  since  they  have  (a)  slower  connecBon  speeds  on  mobile  networks,  (b)  lower  data  caps  and  (c)  higher  prices  for  data.    

CONT.   US  mobile  data  prices  are  the  highest  in  the  world  

  h_p://www.maximumpc.com/arBcle/features/how_bad_do_we_really_have_it_bandwidth_caps_around_world  

  h_p://www.androidcentral.com/us-­‐mobile-­‐data-­‐prices-­‐among-­‐most-­‐expensive-­‐world  

  US  users  get  lower  speeds     h_p://www.crtc.gc.ca/eng/publicaBons/reports/policymonitoring/2013/cmr7.htm  

  h_p://www.neBndex.com/download/map    

  In  addiBon,  US  broadband  providers  have  been  proposing  data  caps  –       h_p://arstechnica.com/business/2014/05/comcast-­‐plans-­‐data-­‐caps-­‐for-­‐all-­‐customers-­‐in-­‐5-­‐years-­‐could-­‐be-­‐500gb/  

Conclusion §   OTT  services  in  US  face  both  supply  side  and  demand  side  bo_lenecks  compared  to  the  market  in  Japan  and  Korea