Nouveau cycle de conférences de prospective numérique sur les enjeux de l’Internet, de la télévision et des télécoms à 2025
A l’occasion de la sortie de la nouvelle édition de son DigiWorld Yearbook, l’IDATE présente son nouveau cycle de conférences de prospective numérique sur les enjeux de l’Internet, de la télévision et des télécoms à 2025 !
A partir des analyses des experts de l’IDATE, les débats seront animés par Marjorie Paillon, Journaliste, Tech 24, Philippe Escande, Rédacteur en Chef, Le Monde et Gilles Babinet, avec les contributions exceptionnelles de :
Deputy Managing Director
Director of TV & Digital Content Business Unit
Three recent deals are reshaping the video distribution landscape in the United States. The first is Verizon’s takeover of Intel’s media division, after the latter decided not to launch its own OTT service. The carrier will use Intel technologies to better integrate OTT solutions into its own internet plans, but perhaps and above all to roll out its own internet TV service, which would be available even outside the carrier’s service area.
The second is US cable market leader Comcast’s acquisition of Time-Warner cable, which still needs to be approved by anti-trust authorities. The deal would increase the new entity’s market clout in both OTT services and with American studios. The third major deal is the agreement between Netflix and Comcast, whereby the cableco would be paid to guarantee high quality network access for Netflix customers.
These three deals are milestones in that:
• They take net neutrality debates to a commercial negotiation between services and network operators. If Netflix and Comcast managed to reach an agreement, there is no longer a need for specific regulation, provided network access is still supplied under non-discriminatory conditions.
• They attest to the pressure that triple play operators are under to protect their place in the video distribution chain. Cable TV customers in the United States are a shrinking population, whereas broadband cable customers constitute the majority. As a result, securing good terms from the TV networks has become vital to video distributors’ economic well-being.
• They reveal that size does matter when going head to head with increasingly globalised internet companies. A portion of competition in video distribution today is playing out in the realm of technological innovation. Comcast has been spending heavily on R&D on new video services for the past several years – investments that need to be amortised over a larger number of customers than what it has now.
• Ubiquitous online distribution heralds the disconnection, first between video access services and, second, the supply of premium services, and could augur a future split in the companies that currently supply them both.
Head of "Video Distribution" Practice
The market report entitled, “Hybrid TV: challenges and opportunities for telcos and cablecos” published as part of IDATE’s video distribution series, explores the biggest changes that wireline operators are facing today, and the options available to them. It details the three main strategic options that operators will need to choose from: strengthen their video service provision business, charge for OTT traffic or focus on internet connectivity.
Project Manager Jacques Bajon says that, “how telcos’ and cablos’ video strategy evolves is becoming an increasingly important issue, as the growth of OTT video and its impact on internet traffic will change the balance of power for video distribution on wired networks”.
Verizon recently announced its upcoming takeover of Intel’s Media Assets, a division devoted to developing cloud OTT video products and services, as part of the carrier’s bid to step up the rollout of new generation video services for all devices.
While the impact of these changes will vary depending on the region, the state of competition, the influence of the market leaders and the strategies adopted by operators, broad policies and choices are nevertheless becoming clear. Operators will be able to choose their positioning from, increasingly hybrid, strategies.
Strengthening the role of video service provider
Many telcos have joined cable operators in a providing 'traditional TV' services. The underlying reasons are varied and often non-exclusive, and include improved ARPU, triple-play subscriptions and reduced churn. This strategy can be extended, allowing operators to:
• provide new OTT services,
• become a publisher of TV services,
• go beyond their technical network coverage by relying on broadcast partner networks or 'public Internet'.
Charging for OTT video traffi
With the net neutrality debate still hanging over this option, where discrimination is being tolerated only for operators’ OTT services targeting their customer base:
• The first grey area agreements have been made between some service providers generating large volumes of traffic and telcos
• Development of operator or telco CDNs can help with internet traffic optimisation and can also become a traffic quality solution for third-party service providers.
Relying on online connectivity
With this option, operators can rely primarily on internet subscription revenues by assuming the role of neutral distributor of IP services, including video. For telcos, this is a case of returning to their incumbent business, but is a change of role for cable operators.
• More information on Hybrid TV market insight : Challenges and opportunities for telcos and cable operators
Lead Analyst, IDATE
Opportunities for Telcos around VoD, SVOD and Telco CDN
IDATE delivers its analyses and conclusions on OTT Video in its recently published market report. Our experts spotlighted the different opportunities for telcos and examined the drivers and hurdles for video delivery over-the-top.
Synthesis of selected player strategies
Source: IDATE, market report "OTT Video", December 2013
Consumer OTT video already represented an impressive worldwide market of almost 7.4 billion EUR in 2012, with revenues well-balanced between advertising and paid videos (pay-per-view or subscriptions). Nevertheless, VoD still generates more revenue on managed services, captured mostly by telcos and cablecos, at around 60% of total VoD sales in 2012. On-demand paid services over managed services represents for VoD and SVoD together around 45% of these service sales on both managed and OTT services. Video is therefore also a key market for telcos, and not just a traffic issue with significant impacts on telcos networks.
Video is indeed clearly gaining traction. It now represents a large part of Internet traffic and requires even more investment with no direct revenues, at least for those telcos offering unlimited flat rate plans -- the extra consumption of bandwidth is obviously charged in metered plans. This video traffic is nonetheless indirectly paid by broadband access. With the explosion of traffic, however, it is becoming harder for telcos to cover costs. Thanks to the abundance of free content, online video is indeed a mainstream service on the Web, as is search or social networking. It is typically still focused on short YouTube-like formats but with a growing consumption of free premium programming, specifically TV series from both legal services (catch-up TV), and low-cost paid solutions, as with SVoD from Netflix. The general strategy of content providers for both ad-funded and paid services is to differentiate their offering from others. To achieve this goal, they are adopting both quantitative (larger catalogue) and qualitative approaches by acquiring exclusive content through, for example, sports and partnerships with studios.
The delivery strategy of the content providers really depends on the video traffic delivered and therefore on the size of their own architecture for the largest content providers (Google/YouTube and Netflix overall) and more and more third-party CDN solutions for intermediate players. Some players, premium and ad-based platforms and especially those trying to better monetise their content, are looking at multi-CDN approaches to increase QoS as well as to benefit from price competition. Others are waiting for the deployment of telco CDN for better QoS.
The major operators are also involved in the TV/video delivery on their own account but, increasingly, also for third parties. Video has been part of triple-play solutions from most telcos for about 10 years, first with linear TV (delivered through multicast) and then video-on-demand solutions. It is even the prime business for cablecos – they have also generally been considered as telcos since their triple-play developments. Non-linear service strategies depend on the ISP, ranging from total control of distribution with rights acquisition, billing, and packaging to pure pipe solution with costs savings and total externalisation. All the major operators, essentially the incumbent operators, have implemented telco CDN solutions.
Telcos still have real opportunities around paid content in leveraging managed services, i.e. a combination including the customer base, the network with QoS, the billing service and set-top boxes, which remains necessary for now for mass market access to the TV set. The retail option (i.e. reseller or packager) has clearly more potential, as the world market for on-demand video will be close to 6.2 billion EUR in 2017 on managed networks (mainly telcos/cablecos) or 44% of the total video market. The big challenge remains the capacity of telcos to develop further the SVoD market (which may grab some market shares from the VoD market) for which they are only capturing 25% of revenues. For telcos not ready to invest into managed services (network and CPE costs), telco CDN still represents an option, especially as it can be developed in combination with transparent caching, allowing a similar efficient result without deals with content providers but also without the revenues. The short-term opportunity is rather small, even though telco CDN can also be used for managed services. In the long-term, i.e. by 2020, with heavy traffic from mobile, the opportunities will be even greater (telco CDN could benefit from mobile to reach about 15% of the market by 2020, at more than
2 billion EUR).
Read more: Discover OTT Video Market insight contents