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OTT -WHERE DO WE GO FROM HERE?

JUAN RAMON ZARCO

SILICON VALLEY GROWTH PARTNERS

Hungary Media 2013 Conference

OUTLINE

Definitions

• Infrastructure and Content Providers• Importance of Content – Intellectual Property• The Economic and Operational Relationship among the MSOs, Content Providers, Networks• Comparative Original Content Business Models• Development of hybrid OTT/syndication model• Marriage between Silicon Valley and Hollywood• The new paradigm model for OTT

Over-The-Top Content (OTT) is defined as  broadband delivery of multimedia content without a multiple system operator (MSO) being involved in the control or distribution of the content itself. OTT in particular refers to content that arrives from a third party, such as  Netflix, Hulu or MyTV, and is delivered to an end user device, leaving the broadband internet provider responsible only for transporting the IP packets.

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DEFINITIONS

WHICH ARE THE MSO AND CONTENT PROVIDERS?

Billions of Dollars in Infrastructure Costs“Internet Provider”

Billions of Dollars Operational and Productions Costs

ABC, CBS, Fox and NBC account for 40 per cent of all primetime viewing.

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One needs Content in order to distribute through an IP network. And it is Content, Intellectual Property, that will drive the level of success of OTT.

+60 hours of video per minute>US$1 bill. Y/Y 2012

>net US$3.1 billion from 1998-2012 via syndication after initial production and broadcasting. Note syndication fees shared with regional broadcasters

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OPERATIONAL AND ECONOMIC RELATIONSHIP BETWEEN MSO, CONTENT ORIGINATORS, AND NETWORKS

• Content originators share ad revenue with Content Networks (ABC, NBC, FOX, and CBS)

• Infrastructure Networks such as Time-Warner Cable or DISH Network share 40/50% per monthly fee with Content Networks such as ABC

• MSOs as IP Network providers (Time-Warner, Verizon, AT&T, DISH Networks) charge monthly fees to end users for accessing infrastructure and can control IP distribution – Net Neutrality Dispute

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OTT IS FILLING UP THE PIPELINE! (2012)

• YouTube now accounts for 24 percent of global mobile traffic.• Facebook Chat consumes 22 percent of all instant message-

related mobile bandwidth.• WhatsApp carries 5 percent of global messaging traffic.• Netflix boasts nearly 30 million streaming subscribers.

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BUSINESS MODELS HAVE CHANGED IN MEDIA

TV NETWORK PRODUCTION• US$3-$7 mill. per pilot, 10-13 episodes

required

• Netflix (OTT) invested $100 million for 2 seasons, 13 episodes/season original production

• Smallville averaged 4.34 million viewers over 10 seasons

• Seinfeld generated $200 million of ad sales per annum

IP BASED/OTT CONTENT• US$ 0.0 to $50,000 per video

• US$2-$3 per 1,000 viewers for average video

• Modern Family (Network) US$33 per 1,000 (10 million weekly viewers)

• Netflix $7.9 per month, 33 mill. Subscribers, with 520,834 subscribers to cover $100 mill. production

• Dreamworks Animation $33 mill. acquisition of Awesomeness TV – Youtube channel

Hungary Media 2013 Conference

DEVELOPMENT OF HYBRID OTT/SYNDICATION MODEL

• OTT as “incubator for Show Treatment”• Placement of Consumer Products within Content• Migration to Syndication Model after sufficient traction• Metan Development Group – MetanMedia.com

MARRIAGE BETWEEN SILICON VALLEY AND HOLLYWOOD

• www.PlayBraindexplay.com with notable entertainment participants

• Growing number of Hollywood players, including Ben Stiller and Sarah Silverman, are focusing on creating original digital content that starts out, say, on YouTube, and then migrates downstream to TV or film.

• With over 1.5 million views Stoopid Monkey, Seth Green, actor

CONCLUSION: THE NEW REVENUE MODEL FOR HYBRID OTT• OTT - $/“x,000s” impressions advertising (Youtube)• Gamification (PlayBraindex)• Merchandising/Product Placements (Metan Development) • Paid Subscriptions (Hulu Plus, Netflix)• After Broadcasting,

Ad Revenues and Syndication Fees (Seinfeld)

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THANK YOU!KÖSZÖNÖM!

JUAN RAMON ZARCO

SILICON VALLEY GROWTH PARTNERS LLP

703-376-4893

JRZARCO2001@YAHOO.COM

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