over the top video forecasts, set top box update, and ... video forecasts...copyright © 2013...

Copyright © 2013 Technology Futures, Inc.

Copyright © 2013, Technology Futures, Inc. 1

Over the Top Video Forecasts, Set Top Box Update, and Observations on UHDTVLawrence Vanston, Ph.D.President,Technology Futures, Inc.

TFI Communications Technology Asset Valuation Conference

[email protected]


Asset Valuation Conference

January 24-25, 2013

Marriott Courtyard DowntownAustin, Texas

13740 Research Blvd., Bldg. C-1 • Austin, Texas 78750 (512) 258-8898 • www.tfi.com


CTFG Sponsors – OTT and STB Industry Studies

• Charter

• Comcast

• Cox Communications

• Time Warner Cable

• Verizon Communications




Outine

• Chapter 1: Introduction

h h h k• Chapter 2: The Over the Top Market

• Chapter 3: Drivers and Constraints

• Chapter 4: Forecasts

• Chapter 5: Impacts on Network Assets


Key Distinctions

• OTT Users

d• “Cord Cutters”

• OTT Minutes

• OTT Peak Bandwidth Requirements

• Net Revenue



Digital Video Revenues



Source: A Big 2012.12/17/12, Jason Kilar CEOhttp://blog.hulu.com/2012/12/17/a-big-2012/


Hulu Unique Viewers

20

25

Nielsen Online Video Data

5

10

15

Mill

ion

s

Intern

et TV

Hulu Unique Viewers

Sep/Oct2012


0

2007 2008 2009 2010 2011 2012

Year Source: Technology Futures, Inc.

2012

Historical Data Source: Nielsen

Netflix Subscribers

30

Subscriptions

10

15

20

25

Mill

ion

s o

f S

ub

sc

rib

ers

Unique Viewers

(Streaming)(Source: Netflix)


0

5

Dec 2010 Mar 2011 Jun 2011 Sep 2011 Dec 2011 Mar 2012 Jun 2012 Sep 2012

Unique Viewers(Source: Nielsen)


U.S. Online Video Users(with new data)

90%

100%

2Q & 3Q 2012(T l t

20%

30%

40%

50%

60%

70%

80%

Pe

rcen

tag

e o

f TV

Vie

wer

s

Intern

et TV

OTT Users

Change in Nielsen Data Method

(Too early to detect trend)


0%

10%

2005 2010 2015 2020 2025


V2012b


Online Video Minutes (Note Scale) (with new data)

9%

10%

2%

3%

4%

5%

6%

7%

8%

Pe

rce

nta

ge

of

TV

Min

ute

s

Intern

et TV

OTT Minutes


2Q & 3Q 2012(Too early to detect trend)


0%

1%

2005 2010 2015 2020 2025


V2012b

OTT Minutes (OTT Users Only)



Balance of Drivers & Constraints for OTT Adoption Stakeholder Current Future

Consumers Technology Oriented ++ ++

Others - 0

Content Owners New ++ ++

and Distributers Established - 0

Television High Capacity - +

Access Providers Low Capacity - 0

Overall - +


Conclusion Regarding Drivers and Constraints

Over time constraints will be overcome and drivers will dominate Substitution especiallydrivers will dominate. Substitution, especially “cord cutting”, will be relatively slow, but significant.



F tForecasts


Scenarios

• Minimal Cord Cutting

i ifi d i• Significant Cord Cutting

• Provider Substitution



S i 1 Mi i l “C d C tti ”Scenario 1: Minimal “Cord Cutting”


U.S. Online Video Users – Minimal “Cord Cutting”

90%

100%

20%

30%

40%

50%

60%

70%

80%

Pe

rce

nta

ge

of

TV

Vie

we

rs

Intern

et T

OTT Users



0%

10%

2005 2010 2015 2020 2025


TV

2012



Online Video Minutes – Minimal “Cord Cutting”

90%

100%

20%

30%

40%

50%

60%

70%

80%

Pe

rce

nta

ge

of

TV

Min

ute

s

Intern

et TVOTT Minutes


0%

10%

2005 2010 2015 2020 2025


V2012



Online Video Minutes - Minimal “Cord Cutting” (Alternative Scale)

9%

10%

2%

3%

4%

5%

6%

7%

8%

Pe

rcen

tag

e o

f T

V M

inu

tes

Intern

et T



0%

1%

2005 2010 2015 2020 2025


TV

2012




Impact on Traditional TV - Minimal “Cord Cutting”

10000

12000w

er

MINIMAL CORD CUTTING SCENARIO

2000

4000

6000

8000

10000

nu

tes

pe

r M

on

th p

er

TV

Vie

w

Intern

et TV

Traditional TV Minutes

Total TV Minutes


0

2000

2005 2010 2015 2020 2025 2030

Year

Min

Source: Technology Futures, Inc.

2012OTT Minutes


S i 2 Si ifi t “C d C tti ”Scenario 2: Significant “Cord Cutting”



Online Video Users and “Cord Cutters”

90%

100%

20%

30%

40%

50%

60%

70%

80%

Per

cen

tag

e o

f T

V V

iew

ers

Intern

et TV

OTT Users

Cord Cutters


0%

10%

2005 2010 2015 2020 2025


V2012


Online Video Minutes – Significant “Cord Cutting”

90%

100%

20%

30%

40%

50%

60%

70%

80%

Pe

rce

nta

ge

of

TV

Min

ute

s

Intern

et TV

Significant Cord Cutting Scenario


0%

10%

2005 2010 2015 2020 2025


V2012OTT Minutes


Minimal Cord Cutting Scenario


Impact on Traditional TV - Significant “Cord Cutting”

10000

12000w

er

SIGNIFICANT CORD CUTTING SCENARIO

Total TV Minutes

2000

4000

6000

8000

10000

nu

tes

pe

r M

on

th p

er

TV

Vie

w

Intern

et TV


Total TV Minutes


0

2000

2005 2010 2015 2020 2025 2030

Year

Min


2012OTT Minutes


S i 3 P id S b tit tiScenario 3: Provider Substitution



Online Video Users with Provider Substitution

90%

100%

With Provider Substitution

20%

30%

40%

50%

60%

70%

80%

Pe

rce

nta

ge

of

TV

Vie

we

rs

Intern

et TV

OTT Video Users

"Cord Cutters"


0%

10%

2005 2010 2015 2020 2025


V2012


Online Video Minutes – with Provider Substitution

90%

100%

ProviderS b tit ti S i

20%

30%

40%

50%

60%

70%

80%

Pe

rce

nta

ge

of T

V M

inu

tes

Intern

et TV


Substitution Scenario


0%

10%

2005 2010 2015 2020 2025


V2012OTT Minutes




Impact on Traditional TV – Provider Substitution

10000

12000w

er

PROVIDER SUBSTITUTION SCENARIO

Total TV Minutes

2000

4000

6000

8000

10000

nu

tes

pe

r M

on

th p

er

TV

Vie

w

Intern

et TV



0

2000

2005 2010 2015 2020 2025 2030

Year

Min

V2012OTT Minutes

Impact on Traditional TV Users–Comparison of Scenarios

90%

100%

20%

30%

40%

50%

60%

70%

80%

Pe

rce

nta

ge

of

TV

Vie

we

rsIn

ternet T

V

With "Cord Cutting"

With Provider Substitution


0%

10%

2010 2015 2020 2025 2030


V2012



Impact on Traditional TV Minutes –Comparison of Scenarios

10000

12000w

er

2000

4000

6000

8000

0000

nu

tes

pe

r M

on

th p

er

TV

Vie

w

Intern

et TV

20With Minimal

"Cord Cutting"Traditional TV

Minutes

With Significant "Cord Cutting"With Provider

Substitution


0

000

2005 2010 2015 2020 2025 2030

Year

Mi


012


I li ti f N t k AImplications for Network Access Providers



Impact on Telco Low Speed Broadband Assets (i.e. DSL)

• Average Netflix HD Movie Coded at 2 Mb/s Top Speed 4 8 Mb/sMb/s, Top Speed 4.8 Mb/s

• Growing at 20% implies 4 Mb/s average by 2015

• With multiple users per HH, DSL is already non-competitive


• 10 Mb/s is practical minimum to remain competitive

U.S. Broadband Households by Nominal Data Rate

90%

100%

s

20%

30%

40%

50%

60%

70%

80%

Per

cen

tag

e o

f H

ou

seh

old

s

1.5Mb/s

6 Mb/s

24 Mb/s50 Mb/s

All Broadband Households

Broadband A

ccess

100 Mb/s& Above


0%

10%

1995 2000 2005 2010 2015 2020 2025

Year

P


2012

Data Source: FCC. Speeds are based on DSL & FTTL data. Data excludes mobile w ireless broadband


Very Highspeed (VHS) Broadband: Minimum Availability vs Subscribers

90%

100%

20%

30%

40%

50%

60%

70%

80%

Pc

t o

f H

ou

se

ho

lds Minimum

RequiredAvailability

Very-High-SpeedBroadbandSubscribers

Broadband A

ccess


0%

10%

2005 2010 2015 2020 2025

YearSource: Technology Futures, Inc.

2012

VHS = 10 Mb/s and above (sum of the nominal 24 Mb/s, 50 Mb/s and 100 Mb/s and above curves)

Deployment of Telco VHS Broadband Technologies – Middle Scenario

90%

100%

es

All ILECs Middle Scenario

20%

30%

40%

50%

60%

70%

80%

Pe

rce

nta

ge

of

Ac

ce

ss

Lin

e

Broadband A

ccess Fiber


0%

10%

2005 2010 2015 2020Year

P


2011

Source: Transforming the Local Exchange Network: Fifth Edition, Lawrence K. Vanston and Ray L. Hodges (2011).


Impact on Cable TV and Telco VHS Broadband Assets

• OTT will increase the peak bandwidth that providers will have to engineer throughoutproviders will have to engineer throughout their networks.

• With video, meeting peak demand is critical

• Example: HFC Cable Run


HFC Cable Example: Assumptions, Part 1

• 250 Homes Passed, 125 Broadband Subscribers 2 5 TV Viewers per HHSubscribers, 2.5 TV Viewers per HH

• 58% OTT Users (YE2011) = 181 OTT Users

• 3.4% of OTT User TV minutes on OTT (YE2011) ~ Prob OTT User active at Peak

• >> Six OTT users likely active at Peak >>


>> Six OTT users likely active at Peak >> Design for 11 (YE2011)

• All very approximate!


Peak Active OTT Users per Node, Significant Cord Cutting Scenario

300

350

TV Viewers

50

100

150

200

250

300

Nu

mb

er

pe

r N

od

e

Intern

et TV

OTT Users

Simultaneous Active OTT Users at Peak

TV Viewers

Subscribers (HHs)

Design


0

50

2010 2015 2020 2025


V2012

Peak Active OTT Users per Node, All Scenarios

300

350

100

150

200

250

300

Nu

mb

er

pe

r N

od

e

Intern

et TV


Provider Substitution Scenario

Mi i l C d


0

50

2010 2015 2020 2025


V2012



HFC Cable Example: Assumptions, Part 2

• Six OTT users likely active at Peak >> Design for 11 (YE2011)Design for 11 (YE2011)

• 2 Mb/s streaming per OTT user (YE2011) growing at 20% annually

• Non-OTT Broadband growing at 30%

• Add 50% for Overhead and Headroom


Add 50% for Overhead and Headroom

Design Mb/s per 250 Homes Passed

12,000

14,000

2 000

4,000

6,000

8,000

10,000

Mb

/s

Intern

et TV

2

Provider Substitution ScenarioSignificant Cord

Cutting Scenario

Mi i l C d


0

2,000

2010 2015 2020 2025


2012



Design Equivalent DOCSYS 3.0 Channels per 250 Homes Passed

300

350

50

100

150

200

250

Ch

an

nel

s

Intern

et TV


Minimal Cord

Provider Substitution Scenario


0

2010 2015 2020 2025


2012


38 Mb/s per DOCSYS 3.0 Channel

Implications for HFC

• More DOCSYS 3.0 Channels per Node

d li i• More node splitting

• Fiber closer to the home



Impacts on Net Revenue

• Too early to tell and very complex

i b i i ld b ff b• Losses in subscriptions could be offset by savings in programming fees, increases in broadband compensation and provider OTT programming revenues

• Savings from a more efficient network


under the Provider Substitution Scenario

Conclusions regarding Net Revenue

• Over the long run, net revenue attributable to the network is not going to increaseto the network is not going to increase much, if at all, and more likely will fall.

• Increased network investment will be required to keep up with the demands for OTT and other broadband services.


• Thus, less future net revenue assignable to existing assets.

• OTT has increased the economic risk to television access provider assets.


Conclusions

• Online video and traditional models will co-exist for yearsexist for years

• More bandwidth (especially peak bandwidth) will be needed

• Provider substitution could accelerate matters very significantly


• Major risk factors

• Major impacts on network assets



Table of Contents

• Chapter 1 Introduction

h h k• Chapter 2 The Set Top Box Market

• Chapter 3 Technology Substitution and Physical Mortality

• Chapter 4 Set Top Box Cost and Performance Trends


Performance Trends

Traditional Set Top Box Types

• Basic - Standard definition boxes without DVR capability (43%)DVR capability (43%)

• SD DVR - Standard definition boxes with DVR capability (3%)

• HD Non-DVR - High definition boxes without DVR capability (26%)


• HD DVRs - High definition boxes with DVR capability (28%)


Set Top Box or Computer?


HD vs non-HD Set Top Boxes(U.S. Industry)

90%

100%

gy

20%

30%

40%

50%

60%

70%

80%

erc

en

tag

e N

ew

Te

ch

no

log

HD vs non-HD S

et Top B

ox


0%

10%

2000 2005 2010 2015 2020

Year

P 2011



Conventional DVR vs non-DVR Set Top Boxes (U.S. Industry)

80%

90%

100%g

y

20%

30%

40%

50%

60%

70%

80%

rce

nta

ge

Ne

w T

ec

hn

olo

g

Set T

op Box

C


0%

10%

2000 2005 2010 2015 2020

Year

Pe

r

2011


x

Conventional DVRvs non-DVR

Impact of Next Generation Set Top Boxes

80%

90%

100%

20%

30%

40%

50%

60%

70%

e N

ew

Te

ch

no

log

y HD vs non-HD

2S

et Top B

ox

All DVR Next Generation vs


0%

10%

2000 2005 2010 2015 2020

Year

Pe

rce

nta

g

2011


All DVRvs non-DVR

Next Generation vsConventional STB


Life Cycle Curves for Set Top Box Generations

90%

100%

30%

40%

50%

60%

70%

80%

90%

ce

nta

ge

of

Se

t T

op

Bo

xe

s

HD Non-DVR ConventioanalHD DVR

Basic

Set T

op

Next Generation


0%

10%

20%

2005 2010 2015 2020Year

Pe

rc

2011


p Box

SD DVR

Historic Set Top Box Price Trends(Industry Average)

$450

$500

ConventionalHD DVR

$100

$150

$200

$250

$300

$350

$400

Pe

rce

nta

ge

Set T

op B

HD DVR

SD DVR

HD Non-DVR

Basic

- 8%

- 7%

-7%

-13%


$0

$50

$

2005 2006 2007 2008 2009 2010 2011

Year

2011


Box

13%


Recent Developments

• Media Server Set Top BoxesV i M di S N d l– Verizon Media Server – Now expected early 2013

• Streaming IPTV Services– AT&T U-VERSE (2006)

– Verizon XBox (Dec 2011)


( )

– Time Warner Cable TWC TV for PCs (2012)

– Windstream Merge for Roku (2012)



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• Standard Approved by ITU in August 2012

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‘Tis time to forecast...


over the top video forecasts, set top box update, and ... video forecasts...copyright © 2013...

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