CDN 2.0: Report and analysis of the event

CDN 2.0: Event Summary Analysis. A summary of the findings of the CDN 2.0 session, 10th November 2011, held in the Guoman Hotel, London

CDN 2.0: A Summary of Findings of the CDN 2.0 Session Presentation

Part of the New Digital Economics Executive Brainstorm
series, the CDN 2.0 session took place at the Guoman Hotel, London on the 10th
November and looked at the future of online video, both the star product telcos
rely on for much of their revenue and the main driver of their costs.

Using a widely acclaimed interactive format called ‘Mindshare’, the event enabled
specially-invited senior executives from across the communications, media,
banking and technology sectors to discuss the field of content delivery
networking and the digital logistics systems Netflix, YouTube and other online
video providers rely on.

This note summarises some of the high-level
findings and includes the verbatim output of the brainstorm.

More information: email contact@stlpartners.com, or phone: +44 (0) 207 247 5003.

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CDN 2.0: A Summary of Findings of the CDN 2.0 Session Presentation

Appstore 2.0: Amazon Vs Apple & Google

Summary: Amazon is probably the Internet’s best retailer. As it launches its own AppStore, we provide a detailed analysis of its digital media business and pick out the key opportunities it offers to content owners, network service providers and manufacturers.

Below is a major extract from this 18 page Telco 2.0 Analyst Note that can be downloaded in full in PDF format by members of the Telco 2.0 Executive Briefing service and the Telco 2.0 Dealing with Disruption Stream using the links below.

                            Read in Full (Members only)        To Subscribe

‘Growing the Mobile Internet’ and ‘Fostering Vibrant Ecosystems: Lessons from Apple’ are also key session themes at our upcoming ‘New Digital Economics’ Brainstorms (Palo Alto, 4-7 April and London, 11-13 May). Please use the links or email contact@telco2.net or call +44 (0) 207 247 5003 to find out more.

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Introduction

For Amazon, the world of downloading and streaming brings both threats and opportunities: threats in that a large proportion of its current business is at risk of being cannibalised; and opportunities in that a significant element of its cost base associated with the storing, shipping, picking and packing of physical goods could be automated and reduced further.

Amazon’s key strengths are the size of its customer base; its ongoing relationships with all the major content owners in all the key categories (Books, Music, Movies/TV and Games); and most importantly, Amazon is the most highly skilled retailer on the Internet. Amazon’s Achilles heel is that it has very little control over next generation devices, apart from the Kindle, whether Tablet or Mobile phone.

In this note, we examine:

  • Amazon’s current performance;
  • The rising costs of physical distribution;
  • The attraction of online distribution (streaming and downloading) to Amazon;
  • The success of the Kindle;
  • Why Amazon has failed to gain significant market share in music;
  • The rationale behind the move into movie streaming;
  • How Amazon will shake up the AppStore market;
  • Whether the success of the Kindle means a move into more own-brand devices;
  • Amazon’s potential impact on the digital value ecosystem and how content owners, networks and device manufacturers should interact with Amazon.

Amazon’s Current Performance

Amazon’s Operating Income in 2010 was $1.4bn with a typically low retail sector margin of 4.1%. This is a far lower margin than usually sought by the content industry, networks or the device industry and one of Amazon’s key strategic advantages – its investors do not expect huge margins. However, they do expect revenue growth and this it has delivered so far (see below) through the development of the most advanced retail platform on the Internet, fierce price competition, tight control over costs and increasing product diversification.

Figure 1: Amazon Operates with the Low Margins Typical of Retail

Source: Amazon, STL Partners

Amazon is now the world’s largest e-commerce site selling over US$34bn worth of goods and services in 2010. The Amazon main website attracts more unique visitors in a month than either eBay or Apple (see below).

Figure 2: Amazon is the busiest online store in the world

At the end of 2010, Amazon had over 130m ‘active’ customer accounts, a healthy increase of over 25 million in the year. In comparison Apple has over 200m accounts with credit cards stored – but does not break-out the percentage of these that are actually buying goods and services from it. It is therefore difficult to determine whether Amazon or Apple have the most paying customers passing through their stores. Whichever is the larger, Amazon’s retail prowess cannot be ignored, especially in entertainment media where its revenues continue to grow year-on-year.

Amazon’s Media Sales

Amazon’s roots are in selling books but over the years its portfolio has been extended successfully to other type of physical media so that its media category now comprises Books, Music, Movies, Video Games and Consoles, Software and Digital Downloads in most territories (USA, Canada, UK, Germany, France, Italy, Japan and China). The sales associated with its media business are still growing by over 10% per annum and, although declining as a percentage of total sales, still represented over 43% of total net sales in 2010. The reduction in percentage of total sales is therefore more a reflection of Amazon’s success in its diversified product range than any drop off in media.

Figure 3: Amazon’s media sales are still growing at over 10% per annum

Source: Amazon, STL Partners

It is noteworthy that Amazon doesn’t provide any further detail on the media category and therefore little is known outside of Amazon about how their customers’ habits are changing from physical media consumption to digital. However, Amazon has been very clear that it sees a future where media is consumed both physically and digitally. In short, it wants to grow the entire pie and Amazon is not abandoning the physical world in much the same way that Netflix is not abandoning the mailing of DVDs.

Amazon promotes itself to investors as growing the absolute level of Operating Income and therefore is less worried about margins than overall growth. This is important for content owners as it aligns with their priorities and means that Amazon is as concerned with cannibalisation of physical product revenues as they are. However, that does not mean Amazon is in anyway anti-online distribution.

Amazon is also highly focussed on growing Free Cash Flow per share which implies strict management of working capital and balance sheet expenditure and to understand the appeal of online business in this context, we first have to understand the costs and cost trends associated with physical products.

Counting the Cost of Physical Distribution

Amazon currently spends about US$1.4bn or 4% of revenues on the physical shipping of goods to its customers. Despite Amazon’s famed distribution efficiency, this percentage has increased over the last couple of years, eating ever further beyond the associated shipping revenues, as illustrated below.

Figure 4: Amazon’s Net Shipping Costs Continue to Rise Over and Above P&P Charges to Consumers

Source: Amazon, STL Partners

This is probably down to two factors:

  1. Amazon offers an annual “Prime” shipping service where for a fixed annual shipping commitment, customers receive “free” shipping for each purchase. It is estimated that 15% of Amazon customers are “Prime” subscribers. It is assumed that “Prime” customers are more loyal to Amazon and are their heavier spenders; and
  2. Amazon has moved into selling more bulky goods over the years, such as PCs, which are far more expensive to ship than books.

Furthermore, there are additional costs associated with physical distribution.

Figure 5: Physical fulfilment costs Remain Stable as a Percentage of Net Sales

Source: Amazon, STL Partners

Amazon spent around US$2.9bn or 8.5% of revenues in 2010 on fulfilment costs (or the picking and packing) of goods. Amazon doesn’t break-out how much it spends on payment processing (included within cost of goods sold) or maintaining the technology (elements include Technology and Content, Depreciation and Amortisation) for its various e-commerce sites. 

The Attraction of Online Distribution

With Amazon’s ability to manage the combined physical costs of shipping and fulfilment to 12.5% of revenues in 2010, we believe that Amazon should be able to deliver online distribution for less than the 30% benchmark ‘agency fee’ revenue share typical in the online distribution model. And, that is before the additional efficiencies that Digital distribution offers over Physical. Therefore the margins offered up by the digital environment are highly attractive to Amazon.

Furthermore digital goods, in the main, fit perfectly into Amazon’s Operating Income growth model as the carrying cost of inventory is minimal and cash for goods is received immediately from customers, while the payment to content owners is typically dispersed 30-days after purchase. The major exception to this rule is when content owners demand large upfront fees for either access to content libraries or for exclusive deals. This is a major feature of both the Movies/TV and Music industry and may account at least in part for the differing levels of take up Amazon has experienced between these and e-books.

So, where does Amazon sit in online distribution – streaming and downloading? Is it a major player that needs to be actively worked with or against or can it be left out of the strategic thinking of the others in the digital online ecosystem – content owners, network service providers and device manufacturers? A closer examination of the position of Amazon in each of the major digital content categories – publishing, music, video and apps, provides valuable insight.

The success of the Kindle: more eBooks than Paperbacks

Amazon launched the Kindle in 2007 as an e-ink book reader for an introductory price of US$399, which in its first iteration had connectivity exclusively provided through the Sprint CDMA network. However, Amazon developed more than a hardware device with the Kindle, it built the whole surrounding ecosystem for sale, delivery and management of mainly electronic books but also other publishing media such as newspapers.

Figure 6: The Amazon Kindle

Today, the hardware price of the Kindle has come down to US$139 (WiFi only) to US$189 (WiFi+3G) and Amazon has launched Kindle readers across all the major platforms from Apple (Mac, iPhone and iPad), Google Android, RIM Blackberry and Microsoft (Windows and Windows Phone7). If a customer buys a book from the Kindle store, it can be read on most of the major platforms for a single fee.

Amazon doesn’t break out sales data for either Kindle or eBooks, but the following extract from Amazon’s 4Q 2010 earnings release provides just an indication of progress being made.

Amazon.com is now selling more Kindle books than paperback books. Since the beginning of the year, for every 100 paperback books Amazon has sold, the Company has sold 115 Kindle books. Additionally, during this same time period the Company has sold three times as many Kindle books as hardcover books. This is across Amazon.com’s entire U.S. book business and includes sales of books where there is no Kindle edition. Free Kindle books are excluded and if included would make the numbers even higher.

The Company sold millions of third-generation Kindle devices with the new advanced paper-like Pearl e-ink display in the fourth quarter and the third-generation Kindle eclipsed ―Harry Potter and the Deathly Hallows – as the best selling product in Amazon’s history.

The U.S. Kindle Store now has more than 810,000 books including New Releases and 107 of 112 New York Times Bestsellers. Over 670,000 of these books are $9.99 or less, including 74 New York Times Bestsellers. Millions of free, out-of-copyright, pre-1923 books are also available to read on Kindle.

January 2011’s sales figures from the American Association of Publishers also point to the growing success of eBooks – US$70m – a 116% increase year-on-year – despite a small, 1.8% (US$805m), fall in the overall market. eBook market share figures are hard to verify. Apple recently claimed 20% of the market, Barnes and Noble (US-only) also claimed 20% of the market and Amazon claims between 70% and 80% of the market – obviously not all can be true.

Wild market claims are to be expected in this high growth stage of the market development and there is uncertainty whether a 20% market share is by downloads or value and whether downloads include free, out of copyright eBooks which generate no revenue. All estimates that the STL team have seen indicate that Amazon is the market leader with a market share in the 50%-75% range. This CNET interview with Ian Freed, an Amazon vice president in charge of the Kindle, provides more detail on where Amazon sees itself in the market.

Although detailed data isn’t available about whether Amazon is yet making a contribution to operating profit from the Kindle and eBooks generally, all the indications are that Amazon is happy with the results and the continued investment speaks for itself.

The STL team believes Amazon’s success can be put down to five key factors:

  • Amazon probably has the highest concentration of book reader users as its customers;
  • Reading books on the Kindle is a very pleasurable experience and much better than some non-dedicated devices, especially the PC and the phone;
  • Amazon has developed a very easy-to-use platform which removes the friction of purchase and delivery of eBooks to a wide choice of platforms;
  • Amazon has tried to deliver great prices to its customers with new eBooks typically priced cheaper than their hardback alternatives. The Kindle Store has always included a wide selection of free out of copyright books; and
  • Amazon has built a store with access to material from the largest publishers to the smallest self-publishers. Self publishers are driving innovation with low-pricing for smaller episodic books.

The STL team believes that this last point is extremely important. Currently, Amazon has over two million sellers on its stores most of which are small businesses selling physical goods with the help of Amazon tools and services. This volume is far in excess of most developer schemes and almost certainly far larger than the combined total of content sellers across all developer platforms. Amazon will have little problem building and managing an even larger community as the developer community has largely adopted ‘Amazon Web Services’ as their cloud platform of choice, and sellers are already familiar and happy with Amazon tools and services. 

Amazon and Music: Downloads not moving the needle

In the UK for example, Amazon share of the overall music retail market was a healthy 13.4% in 2009. Overall, the internet players have the largest share of the music market with 39%, compared to specialist retailers, such as HMV, with 33% and Supermarkets, such as Tesco and Sainsbury’s, with 23.6%. In a decade, the internet as an e-commerce channel has overtaken all of the UK’s high street. The download only Apple iTunes service with share of 10.6% clearly dominates the online distribution market.

Figure 7: Amazon’s Music Share is Healthy but not Dominant

Source: BPI Yearbook 2009

In the USA, Billboard estimated that in 2009 iTunes had 26.7% retail market share, which translated into 65.5% online market share. For a la carte download sales, the iTunes U.S. presence is overwhelming, with an estimated 93% market share.

In contrast, Amazon’s MP3 store had an overall 1.3% market share, which translates into about 5% share for a la carte downloads. Amazon commenced digital downloads in 2007 and has been a constant innovator.
The service launched with DRM-free tracks which were therefore portable between devices and with higher bitrate encoding, providing higher quality to the discerning ear. In the USA, the catalogue has continually grown and from an initial 2m tracks have grown to today having 1.4m albums and 15.2m tracks. But, as befits its corporate strategy of “everyday low pricing”, Amazon has put most effort into price innovation.

Figure 8: Amazon’s Smart Targeting & Competitive Pricing

Normally, Amazon has the lowest price for its chosen Album of the week. For instance, The Strokes new album is currently available for £4 compared to iTunes pricing of £8 in the UK. This is typical behaviour of a master retailer driving customers to their stores through headline offers and promotions to their customers. Apple has a very different approach relying on an agency model where the content owner has limited choice in setting retail prices.

In the USA, Amazon’s Daily Deal launched in June 2008 and it became the subject of a Department of Justice (DOJ) inquiry in May 2010 after iTunes began grumbling about Amazon promotions to the major labels. No comment has been released by the DOJ, but it seems clear that with Apple’s huge iTunes share that any attempt to discourage labels from participating in the Amazon promotions might be construed as price fixing. Amazon has continued to play its strongest card – differentiation though price competition.

Amazon has built an MP3 application for Android phones which allows the immediate purchase and playing of songs. It is noticeable that they haven’t built the same tools for Apple. In fact, the Amazon WindowShop application for the iPad actually displays download prices (and the playing of short clips), but doesn’t allow the direct purchase or download. Given, Apple’s domination of the music download market and the fact that Apple have allowed the Kindle store to operate on the iPad/iPhone, the STL team predict it will not be long before the DOJ launch another inquiry into Apple’s music practices.

In contrast to eBooks, Amazon does not seem to have built significant music share and the STL team puts this down to three main reasons:

  • The Amazon experience of buying music is not as good as Apple iTunes. This is made especially difficult to match as Apple control the device – the mass market seems to prefer convenience over price on low unit price items;
  • Amazon is not associated with the music market in the same way as Apple is; and
  • There are plenty of alternatives to paid music downloads. Spotify in Europe and Rhapsody in the USA, although of questionable profitability, have achieved success on other platforms with different business models, providing both paid-for and advertiser funded unlimited music streaming.

The move into Movie streaming

Amazon has taken a different approach to Movies than to either Books or Music.

In the UK and Germany, Amazon has recently acquired full ownership of a DVD and streaming service, called LoveFilm. This operates primarily under a subscription model providing access to a library of films. It is the UK and German equivalent of Netflix.

A subscription business operates under a vastly model than a retailer. It requires a much larger investment in both customer acquisition and retention and in content libraries. There is also reasonable investment required in gaining access and building clients for the plethora of devices coming onto the market to connect TVs to the internet. It also starts to compete with powerful payTV companies that have very deep pockets, large customer bases and similar ambitions.

In the USA, Netflix has managed to build a strong base of customers, a large market capitalization and is currently a darling of both the press and the investor community. The STL team has written extensively in the past about Netflix, its business model and prospects (see: The Impact of Netflix: Can Telcos Help Hollywood; Entertainment 2.0: New Sources of Revenu for Telcos?)

Amazon has decided to enter the fray in the USA with its Instant Video service. This service offers a limited selection of free streaming movies to subscribers of the Amazon Prime service. The Amazon Prime service is priced at US$79/per annum, compared to the Netflix streaming cost of US$8/month ($96/annum). Although, the annual fee may put some off, Amazon seems to have solved the problem of expensive customer acquisition. However, it is questionable whether Amazon under a licensing structure can afford similar levels of investment in content as Netflix.

A key factor in deciding this will be the support of studios for its model and their willingness to provide premium content and in this Amazon is gaining traction.

Figure 9: New Releases are Going to Amazon First

It is noticeable in the USA that Amazon are heavily promoting download-to-rent and download-to-own options which brings new releases to the library and are favoured by the Movie Industry.

Amazon is also an UltraViolet member which again we have written extensively about (see Telcos Risk Missing the UltraViolet Online Opportunity) and it is likely in the near future that Amazon will sell physical DVDs with the right to stream to multiple devices.

In Movies, STL Partners believes Amazon is uncertain which of the options will win in the future and is willing to invest in a wide range of options; effectively, it’s hedging its bets. But as in Music, Amazon has a long way to catch up with early platforms, whether that’s Apple, which leads the download-to-rent and own market, or Netflix which leads the subscription business. Again, this makes it an interesting target for partnerships, particularly for content owners looking to establish models that work better for them than Apple or Netflix.

Amazon shaking up the AppStore market

Amazon also has a significant business selling both physical electronic games and consoles. It was therefore hardly surprising that it launched Android AppStore heavily populated with games and featuring Angry Birds Rio as its launch game.

Figure 10: Amazon’s Appstore

The Amazon AppStore offers some very interesting features, including:

  • The ability to sample the game on a PC before committing to a purchase;
  • Amazon setting the retail price of the game with the developer only suggesting a retail price;
  • Free Daily Promotions of leading applications; and
  • Amazon performing a limited curation role, checking the applications are free of viruses

There are also teething problems with the service. For example, the Amazon AppStore is impossible to install on some “locked-down” Android handsets.

But Amazon has entered the market and the STL team believes it will be a serious player for years to come. It is also our belief that Amazon will want to develop AppStores for all major platforms, which will bring them into considerable conflict with certain platform owners, not just Apple.

To read the report in full, including the conclusions and recommendations…

  • Lessons for other players in the Digital Entertainment Value Chain
  • Content Owners
  • Network Services Providers
  • Device Manufacturers

Members of the Telco 2.0TM Executive Briefing Subscription Service and the Dealing with Disruption Stream can access and download a PDF of the full report here. Non-Members, please see here for how to subscribe. Alternatively, please email contact@telco2.net or call +44 (0) 207 247 5003 for further details. ‘Growing the Mobile Internet’ and ‘Lessons from Apple: Fostering vibrant content ecosystems’ are also featured at our AMERICAS and EMEA Executive Brainstorms and Best Practice Live! virtual events.

Digital Entertainment 2.0: Telcos risk missing the UltraViolet online video opportunity

Summary: 2011 sees the introduction of the UltraViolet digital locker platform by DECE, a consortium led by 6 of the 7 top Hollywood studios and backed by 50 more cross-industry heavyweights. This anticipates and supports the transition of film and TV to online distribution. Here we analyse the opportunities telcos will miss out on if they fail to engage with DECE.

Logged-in members can download this 19 page Analyst Note in PDF format. Non-members need to subscribe to read it

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Alternatively, please email contact@telco2.net or call +44 (0) 207 247 5003 for further details. There’s also more on DECE UltraViolet strategies at our AMERICAS, EMEA and APAC Executive Brainstorms and Best Practice Live! virtual events.

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In our Executive Briefing entitled, Entertainment 2.0: New Sources of Revenue for Telcos we laid out a series of trends that are changing the video market and the opportunities and challenges this poses for telcos. In this Analyst Note, we examine the ways in which DECE’s UltraViolet will impact the market and explain why telcos can’t afford to adopt a ‘wait, see and proctect approach to its introduction.

DECE UltraViolet explained

DECE UltraViolet has been created in anticipation and support of the switch-over of video content from physical to online distribution. It aims to offer consumers an ultimate level of flexibility as they can not only own, store and manage their content through a digital locker but also share it with family members and view it anywhere through a wide range of devices from TVs and PCs to tablets and mobile phones.

Figure 1 – The UltraViolet proposition: buy once, play everywhere, forever, for the whole family 

Source: Telco 2.0

Furthermore, it provides the video industry with a real alternative to piracy based on an open platform with licensable specifications, not a proprietary system such as Apple’s. The platform is set up to support multiple business models and rentals are expected to follow relatively quickly, which explains the interest of Netflix and LoveFilm (now part of Amazon) in the initiative, but at launch it will offer only online purchase.

Finally, the digital locker meta-data will provide a single view of customer buying and viewing preferences on which future planning can be based.

It is not surprising therefore that the initiative has attracted a powerful and active membership comprising in excess of 50 companies including 6 of the 7 major studios, network equipment and consumer electronics vendors, service providers and retailers. Notable exceptions to the current membership are Disney, which has its own digital locker, and WalMart, which has a deal with Apple. Both, however, are free to join at a later date as it is an open platform.

UltraViolet is due to launch in the US in the middle of 2011, with Canada and the UK following towards the end of the year before a full international rollout begins in 2012.

Virtually all the players involved in the video distribution ecosystem from content owners to retailers have their own plays in online video distribution but they are still heavily involved in DECE because they understand that it has the potential to impact on their existing and future business plans. This is not the case with telcos, with a few notable exceptions such as BT which is a member of DECE.

Telco’s adopt a “wait, see and protect my network” strategy

Most telcos seem to be cautious and sceptical about UltraViolet and digital content lockers in general. Rightly or wrongly, they perceive that UltraViolet faces major challenges and represents a headache for them rather than an opportunity.

They appear to doubt that they need digital locker content to drive use of their services and see little margin in retailing movies. Furthermore, mobile network operators in particular are concerned about the impact of video streaming on network congestion and will not hesitate to institute network policy rules that will curtail this perceived “damage”.

Without a clear opportunity for “delivery” income for telcos (for x-plan MBs, QoS, guaranteed bandwidth), or clear business models for moving to this, there is limited incentive for them to step up their interest. We have therefore observed three general telco responses to DECE. For clarity, we have described these as three discreet positions but, in reality, telcos can and do pursue combinations of these.

Telco2.0 believes that there is a potential opportunity for telcos to adopt a more pro-active approach to DECE through an early-adopter strategy as:

  • The entertainment market is large and premium entertainment key
  • Entertainment plays a key role in securing consumer attention
  • DECE UltraViolet has the ingredients for success
  • UltraViolet represents an opportunity for telcos as suppliers to the ecosystem
  • Telcos share a common interest with DECE

Each of these reasons is discussed in detail in the sections that follow.

Entertainment: A market too large and valuable to ignore

The global entertainment market is huge and as such is obviously attractive to telcos looking to counter falling ARPUs. It accounts for a considerable share of disposable income and overall entertainment spending is much higher than that on telecoms.

In the UK, which as the leading western European market is to a degree indicative of most developed markets, the average household monthly spend on entertainment is more than double that for communications. Furthermore, the decline in communications spend has been faster than that for entertainment over the last five years and this is despite the rapid decline in music sales revenues.

Figure 2 – Comparative monthly spend on telecoms and entertainment in the UK

  

Source: STL Partners Estimates, OFCOM – UK Regulator

Of course UltraViolet is not yet targeting entertainment in its entirety or even all of the home entertainment video market. Instead it is initially setting its sights on the retail market through online sell-through and that is currently very small, accounting for a mere $590 million in 2009 and the lowest contributor of all entertainment sectors to online revenues.

Figure 3 – Digital film downloads are so far the lowest revenue generators in online entertainment

 

Source: Telco 2.0

It is perhaps not surprising therefore, that telcos have not seen this as a particularly inspiring target segment. However, online sell-through is a nascent market and one we believe has exponential growth potential.

This is certainly proving the case for online rentals. According to Bain’s figures presented at the 9th Telco 2.0 Executive Brainstorm in Santa Monica, 80% of US consumers already view video online and Netflix streaming services now account for 20% of total US internet traffic, twice YouTube’s share. Furthermore, by 2014, 60% of TVs will be connected to the Internet, addressing the major remaining barrier to take up by connecting the primary viewing device to online video content.

Sizing the market

Attempts to accurately size future markets are always fraught with inaccuracy, and none more so than punts on film and TV entertainment, as the outcome will always be dependent on the quality and appeal of the content as well as many other factors.

That aside, we are convinced that the market can grow much faster than currently predicted. In fact, we see DECE UltraViolet as capable of stimulating market growth for digital sell-through similar to that of Apple (depicted below). We expect it to grow its share of the home entertainment market from 1% to 13.5%, providing a sizable target market and one that will continue to grow for some time.

Figure 4 – An Apple-style growth is possible for online sell through with UltraViolet

 

Source: PriceWaterhouseCoopers, Apple, Netflix, Telco 2.0

UltraViolet’s growth potential should at least put it on telco’s ‘strategic interest radar’, especially as it has been designed to accommodate multiple business models, including the rental models in the future.

However, we would argue that waiting for the growth to happen is missing more than one opportunity. The first is to influence in the platform’s development and, perhaps even more importantly, the second is to fit it into and around other strategies that are currently developing in silos, namely video services, customer retention and digital shopping malls.

Low margins put off telcos – but they miss its attention value

There is a set of telcos that believe that TV and film content neither offers the kind of margins they require, nor differentiation, as content owners have proven that they are unwilling to negotiate exclusive deals with telcos that can usually only reach a minority proportion of any national market.

Again, we believe this is missing a point for any telco looking to develop a significant retail play. Certainly it is true that margins are low. Tesco, the world’s third largest retailer by revenue, has revealed that it is currently making next to no margin on its physical video business and there is no reason to assume it will be significantly better online. However, the business case for entertainment products developed by what we consider a ‘master retailer’ is not based on sales but instead on footfall and the overall size of the shopping basket. Indeed, it is going all out to develop the same relationship online between entertainment product sales and fuller baskets.

Tesco is developing a digital Locker platform that works across multiple devices to deliver a joined up experience and drive impulse buying. It is a staunch supporter of DECE/Ultraviolet and plans on using it, rebranded as InvisiDisc, as a central part of its entertainment platform.

Figure 5 – Tesco puts digital locker at heart of portal proposition

 

Source: Tesco Presentation, 11th Telco 2.0 Brainstorm, EMEA

As the Tesco example proves, while margins on the products themselves can be small or non-existant, there may be significant other benefits. Tesco see that the overall basket spend is significantly higher when it involves an entertainment product, and entertainment is a both an impulse buy and an attention draw.

Furthermore, the investments that have been made in infrastructure by the DECE group means the entry costs are lower. For the few telcos that don’t have an entertainment platform, UltraViolet offers an opportunity to join the party and use that infrastructure to access what is expected to be premium content which they can offer to customers through their own retail portals. For the majority that already have their own platforms consideration should be given to adding UntraViolet into the mix for what is lost in duplicating infrastructures could be gained with premium content.

Entertainment’s primary role in securing consumer attention

Many upstream services rely on the ability to secure consumer attention and sell this on to third parties in some form. This is the basis of the advertising-based business models, including the one that dominates the Internet. Entertainment is a major tool in attracting and maintaining consumer attention as it has such a high profile in the minds and lives of consumers (as exemplified by the UK figures in the chart below).

Figure 6 – Comparative daily usage of entertainment and telecoms in the UK (2009)

Source: STL Partners Estimates, OFCOM – UK Regulator

The difference in the time spent by consumers on communications services and entertainment is stark and reflects the fact that while communication is a vital part of everyday life, entertainment holds their attention more. This is particularly important and valuable when developing portal and other upstream strategies. as exemplified by the value retailers such as Tesco that are using it as a key part of their online strategy.

DECE UltraViolet has a recipe for success

The ability of online entertainment delivery platforms to move the needle should not be in question. Netflix and LoveFilm have already made an impact with online rentals, while Apple’s success is indisputable. To do this they have introduced services that have a utility value combined with innovative and disruptive business and pricing models. Using these experiences as a base reference, we have identified the following as important success factors for online distribution platforms:

  • Offering new and premium content in a timely way and from many owners;
  • Creating a substantial back catalogue quickly;
  • Delivering to all devices that consumers wish to use and that are in the market;
  • Supporting the legal transfer of content between devices and people;
  • Creating a differentiated value proposition;
  • Introducing services with a disruptive model and pricing;
  • Creating multiple channels to market;
  • Future-proofing so that consumers don’t lose their content as devices and technologies develop;
  • Providing links between physical and online products to ease the transition.

In theory at least, UltraViolet has strengths across all these.

UltraViolet is getting the proposition right

UltraViolet’s basic proposition of ‘buy once, play everywhere, forever, for the whole family’ is a new and valuable one that overcomes many of the frustrations consumers have with online video content as it offers:

  • A single point of access to content from multiple content owners;
  • The ability to buy once and view content on up to 12 devices;
  • The ability for up to 6 family members to view the same content.

This creates a new and differentiated value proposition and supports the legal transfer of content between people and devices, as well as the capability to view on a full range of devices now and in the future.

It is an open platform based on interoperable standards and licensable technology specifications. So far DECE has laid out some the technical framework for a Common File Format which means video files are encoded and encrypted just once, as well as the technical design specifications for each of the six major categories of company – content providers, retailers, streaming service providers, device and application providers and digital distribution infrastructure providers. These ensure that all players are working in the same way and services will be interoperable. (See Can Telcos Help Save the Video Distribution Industry for more details).

All the right backers…

This is a unique and highly valuable proposition and one that has attracted a great deal of support and attention from those currently active in the value chain with the exception of telcos. All the major Hollywood studios bar Disney, which has its own digital locker solution, are behind the initiative which should ensure high quality and desirable content from the start and gives potential access to a huge back catalogue. Indeed, it is widely accepted that the studios will promote new content through UltraViolet first, providing an online alternative to the DVD/Blu-ray sales window.

This is highly significant for telcos that have so far been satisfied to stick to delivering their own content services through VoD, IPTV and mobile believing they have an advantage in providing a multi-screen service as they have the potential to control the delivery quality and have understanding of the user’s device.

However, they are still reliant on content deals with studios to secure the types of films and TV programmes that consumers want. These are usually based around the fourth pay TV window, meaning that consumers would get to new content earlier through UltraViolet than telco VoD services. For this reason we believe that telcos ignoring DECE as part of their downstream consumer entertainment services are missing an important plank in their strategic portfolio.

Furthermore, online service providers are well represented, as are device manufacturers, while traditional retailers, with the notable exception of WalMart which has an existing relationship with Apple, are also putting their weight behind it, providing multiple channels to market.

…with a common and urgent motivation

Beyond the appeal of the consumer proposition, DECE UltraViolet is also appealing because it offers a credible alternative to both piracy and Apple that have dominated the transition of music content distribution online.

As we’ve previously discussed in Digital Hollywood: How to out-Apple Apple, Apple dominates online music and is constantly adding more TV and film content. With over 150 million account holders it is the biggest music retailer in the world and has created the first and so far the dominant business model for digital online retail with its 30/70 revenue share deals. It no longer includes optical drives in any of its current product portfolio as it hopes to drive more film and TV content to its digital store, expanding its content range and reinforcing its existing business model.

To read the Analyst Note in full, including in addition to the above analysis of:

  • Apple, piracy and the motivations of the DECE membership
  • The continuing importance of the physical product
  • UltraViolet’s upstream potential
  • Recommendations for telco entertainment strategy development to include DECE/UltraViolet

…and additional figures…

  • Figure 7 – Apple’s 5-screen Strategy
  • Figure 8 – BD Live proposition provides link between physical and online
  • Figure 9 – Generic 2-sided model for entertainment
  • Figure 10 – US: Traditional video distributors and cable companies are most under threat, as online viewing continues to increase
  • Figure 11 – Potential roles for telcos in digital lockers

Members of the Telco 2.0TM Executive Briefing Subscription Service can download the full 19 page report in PDF format here. Non-Members, please see here for how to subscribe. Please email contact@telco2.net or call +44 (0) 207 247 5003 for further details. There’s also more on DECE UltraViolet strategies at our AMERICAS, EMEA and APAC Executive Brainstorms and Best Practice Live! virtual events.

Full Article – ESPN: Making ‘pay-for-content’ work – a telco opportunity

Summary: The sports network ESPN is a master of the paid content business model, building platform scale and success using premium content. What are the lessons from ESPN’s US and UK strategies for other service providers and content distributors?

Internet Video is a booming business in its own right, a key driver of broadband volumes and costs, and increasingly an important component of telcos and other broadband service provider’s (BSPs) packaged broadband offerings (see our recent Strategy Report “Online Video Market Study: The impact of video on broadband business models). The Goliath US Sports network, ESPN, has just entered the UK market, and we analyse here their history, strategy, and lessons for BSPs and other content aggregators both here in the UK and elsewhere.

Introduction

In the rush to find a working model for monetizing internet video, the most obvious solution is often overlooked – the payTV model. Since 1979, when the Entertainment and Sports Programming Network (ESPN) secured an exclusive deal with the USA colleges (NCAA) to screen their sporting contests, the model has proven resilient to both the advertiser-funded free model and economic climates. The model has also delivered both steady profits and growth to all players in the value chain – rights holders (e.g. sports bodies), content aggregators (e.g. channels) and distributors (e.g. cable systems). In the payTV model the money flows from the consumer to the distributor to the rights holders via the aggregator. 

In the internet world, we are starting to see hybrids of the payTV model emerge. In this note, we analyse two of the more adventurous services: ESPN360 (USA) and SkyPlayer (UK). We also put these services into the context of both incumbent video distributors (Comcast and BSkyB) and challengers (Verizon and BT). We focus upon the elements that historically have driven success for aggregators and distributors and place those elements into the more complex internet-era.

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ESPN’s History

ESPN actually started life as an ad-funded network. It only started charging the cable distributors in 1984, only once it had built an audience and had been  purchased by ABC – a parent with deep pockets. The rate card seems meagre these days: US$0.25 per subscriber per month in the first year rising to US$0.30 per sub in the second. However, it was enough for the legendary John Malone and his TCI cable system to refuse to pay and threaten to set up a rival network. The battleground has always been the same: the relative value of controlling the home versus controlling the content.

By the mid-1990s ESPN, now owned by Walt Disney, had lucrative contracts for major league baseball and the National Football League. It perennially asked for and got double-digit rate increases from the cable networks. When ESPN wanted carriage of a sister channel ESPN2, for extreme sports, they got it gratis. This was at a time when new and unproven channels such as FoxNews were actually paying the cable networks for carriage. As Malone said at the time “Little Mickey had us by the throat”. Of course, the cable companies passed on the charges to homeowners and took most of the flack. Again, very little has changed over the years with aggregators leveraging popular content to expand into new areas.

ESPN now offers much more than “live sports” channels for the distributors. Two key channels are ESPN Classics which shows replays of historical matches, and ESPN News which provides highlights, commentary and analysis of past and upcoming events. ESPN offers its core audience a menu served up 24/7. As at Sept 2008, ESPN had 93.7m subscribers to its main channel, 97.3m to ESPN, 63.2m to ESPN classic and 67.4m to ESPN News.

The main competitor in the USA is Fox Sports Net which launched in 1996. Fox Sports takes a regional approach to broadcasting tailoring output to local markets.  For example, Fox shows the local Chicago Bulls (NBA) and Cubs (MLB) matches in competition to the ESPN national games. However, Fox Sports has never achieved the scale of ESPN and caters for a niche audience. The lesson is that there is a first mover advantage and scale matters both for negotiating for exclusive content and in determining the share of the distribution pie.

ESPN on the Internet

ESPNet.SportsZone.com launched in 1995 and has since grown to become #2 sports site in the USA (now ESPN.com) with 24m unique views in August 29009 (comscore – http://thebiglead.com/?p=21595) after Yahoo! Sports! 

The primary focus of ESPN.com is highlights, interviews, statistics and analysis. The site offers ad-funded video, but is relatively small in scale compared to YouTube and Hulu. In 2008, it served an average of 120 million videos per month, a 32 percent increase from 2007. The real ESPN innovation is the ESPN360 website which offers live streaming of broadcast events. In the USA, this is only available to “affiliated ISPs” – those which have signed wholesale carriage deals with ESPN. The major ISPs, such as Verizon and Comcast, have already signed-up. (http://espn.go.com/broadband/espn360/affList). ESPN has once again left the billing and customer care relationship with the distributor. 

ESPN360 is effectively a mirroring the original payTV strategy – people will indirectly pay for live streaming of exclusive sports events. There are a few subtle differences for the internet era: a remote viewer option which enables people to watch the events from hotels and work; a free offer to the college networks; and a free offer to the military networks. Outside of the USA, ESPN offer subscription and pay-as-you-go packages direct to the end-consumer.

ESPN do not publically disclose the rate card for ESPN360 affiliates, but no doubt it will favour the distributors offering a traditional broadcast payTV service. Single-play broadband pipe only providers are likely to suffer as they don’t have the negotiating power of the likes of Comcast. For telephony incumbents, such as Verizon and AT&T, the case for offering a TV service becomes ever more compelling. Similarly, distributors offering payTV via satellite are likely to suffer. ESPN360 effectively adds the option of watching events on PC at home or on the go as well as on the TV.

The Rights Holders’ side of the equation is similarly shifted towards incumbent channels and away from new entrants. ESPN leverages not only its investment in acquisition, but also in production to effectively push the same product through multiple means of distribution. The marginal costs are limited compared to a new entrant. A new entrant streaming internet-only content faces a limited future. In effect, the Rights Holders will end up licensing live broadcast rights as a bundle regardless of transmission medium (broadcast, internet or mobile).

The UK landscape

The payTV market in the UK followed a different evolution path to the USA. When the cable networks started to be built in the mid-to-late 1980s the industry was very fragmented; the original networks spent the majority of their capex on infrastructure and rather than investing in content bought in most TV programming from the USA. Also, telephony capabilities were built into the network from day one and therefore they had BTs lucrative monopoly on home telephony revenues to target.

In 1992, the nascent satellite industry starting investing heavily in sports programming by securing the exclusive right to the UK’s Football Premier League. BSkyB effectively played both the Content Aggregator and Distributor. Investment was balanced between programming and customer acquisition. BSkyB wholesaled their channels to cable companies in much the same way as ESPN did and had similar periodic fights over the value chain. Playing a dual role in content aggregation and distribution was, and still is, nothing new. Warner Communications invested in the earliest USA cable franchises and began investing in channels such as Nickelodeon. Distributors such as TCI and Comcast have also invested in channels, and Ted Turner’s CNN was initially financed from ownership of a local TV station.

The cable industry in the UK has consolidated and restructured over the years to leave just one remaining network, Virgin Media, serving 3.4m homes and covering around 50% of UK homes. Unlike the USA, satellite penetration is much higher than cable penetration with BSkyB serving 9.4m homes in the UK & Ireland. BT, a relative latecomer to the TV market compared to Verizon and AT&T, serves only 0.5m homes.

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The broadband market has also evolved differently to the USA with BT being forced to open its access network to third parties by the regulator. This enabled BSkyB to launch a broadband (and telephony) service in 2006 which has grown to serve 2.2m homes. This compares to Virgin Media which serves 4m homes and BT which serves 4.8m. There are also other players such as TalkTalk (4.3m homes) and Orange (1m homes) which currently do not offer a significant TV offering. 

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In 2009, ESPN acquired some rights for UK Premier League football and launched a series of channels around this content. ESPN have mirrored their USA model in the UK. The previous holder of the rights, Setanta, adopted a very different model with Setanta using an end-to-end service model – hence carrying all the operating costs of subscriber management. Setanta’s model ultimately failed. The ESPN model is simpler and provides incentives for distributors and in our opinion has a much higher probability for success.

BT’s own label TV service has not yet taken off in the UK, with only 400k customers at July 2009. The lack of momentum in this service has many causes, not least the strength and established position of competitive offerings from BSkyB, but most fundamentally because of BT’s unwillingness to invest in the premium video content (e.g. live Premier League football) needed to establish a truly competitive video platform. 

The ESPN PayTV internet product, ESPN360 is not yet available in the UK – but it is in our view a likely market development, and one that presents attractive possibilities for the Telcos and cable companies alike. Despite being a huge brand in the US, ESPN is a comparative newcomer in the UK, but we expect it to grow significantly over time, and for ESPN’s internet video strategy to be a key component of that growth.

SkySports on the Internet

Sky is taking a very different initial approach to ESPN to distributing its sports programming on the internet. It is selling the content direct to end-consumers. Live sports streaming is available through SkyPlayer without any additional cost if the consumer is a Sky Broadband or Sky Multi-room customer and subscribes to the Sports channels, otherwise the service costs around £10/month. The service streams other channels apart from Sports and includes some video-on-demand content. The service is available on both PC and Xbox. Effectively, Sky is using its streamed Sports content in its broadband packages to add value and competitive differentiation and thereby drive broadband subscriptions. This is an innovative approach but potentially arouses all kinds of regulatory questions through the combination of broadband access and content in one package.

Elsewhere in Europe, we have seen the reverse situation with dominant distribution networks (e.g. Orange in France) winning exclusive rights for content (some French Football games) and exclusively showing them on their networks. Whether in the USA or Europe, we believe that premium video will slowly but surely disappear behind some type of walled garden. 

The current situation is a regulatory nightmare and a lawyer’s dream. It will be quite a few years before regulatory clarity emerges.

Conclusion

Access to premium video content is becoming an increasingly important feature of broadband access packages, and the PayTV model, where it can be included for an additional fee, is a very attractive model for Telcos and other service providers particularly those without premium content.

There is a large window of opportunity for incumbent video players to leverage exclusivity on live popular streaming events to either strengthen content aggregation, distribution or both. New entrants in aggregation will struggle to gain scale without the must-have content. New entrants or incumbents in distribution will only struggle to gain scale in video without significant investment in content.

We expect ESPN to launch a UK version of the ESPN PayTV internet service ESPN360. This will present an opportunity for all broadband service providers, particularly those currently without any premium video content.  However, Virgin Media and Sky with existing relationships with ESPN may be able to negotiate a better initial wholesale price. This presents an opportunity both for ESPN as it builds its brand and reach, and to broadband service providers seeking to improve attractiveness and margins by selling extra services, and reach by acquiring more customers.

For telcos and other broadband service providers in markets outside the UK, ESPN’s varying market entry strategies present useful case studies, and a potential indicator of opportunities – or threats – to come.

Lessons for Telcos

    • Premium Video is both popular and expensive – do expect to need it as part of your offering, but don’t expect to be able to give free access for your broadband consumers

    • Traditional PayTV operators will try to leverage their scale and bundling ability to differentiate their broadband offerings

    • Traditional Content Aggregators are used to Distributors billing and maintaining the customer relationship – so there is both an opportunity for distributors like telcos and other BSPs to build new service offerings and margins as well as a threat if by-passed.

    • There is also a potentially controversial role in helping content aggregators minimise piracy.

  • Define carefully your role in the value chain and be prepared to invest in content – and if you do invest, make sure you acquire the premium content.

Online Video Distribution Market Study

Options and Opportunities for Distributors in a time of massive disruption


Summary:
As online video challenges traditional distribution models, both old and new suppliers are pushing into the value chain in the hope of grabbing a share of the emerging global market. But how will the market develop and which companies will be the ultimate winners?

STL Partners has analysed the potential of online video, identified possible market winners and losers, and set out three interlocking scenarios depicting the evolution of the market. In each scenario, the role of distributors is examined, possible threats and opportunities revealed, and strategic options are discussed. (March 2009)

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This report is now availalable to members of our Telco 2.0 Research Executive Briefing Service. Below is an introductory extract and list of contents from this strategy Report that can be downloaded in full in PDF format by members of the executive Briefing Service here. 

For more on any of these services, please email contact@telco2.net/ call +44 (0) 207 247 5003 

Key Points

  • Market background, size and dynamics
  • Differences in, and lessons from, different geographies
  • Analysis of prospects by content type: movies, sport, music, adult and user-generated
  • Hulu Vs YouTube: Comparative business model analysis
  • Market forecasts for revenues related to online and mobile video
  • Evolving market scenarios
  • Positioning to maintain / develop advantages in scenarios
  • Recommends specific short, medium and long term actions for moving forward

Who is this report for?

The study is an invaluable guide to managers across the TV and video value chain who are seeking insight into how the online market will develop and the opportunities and threats it presents.

CxOs, Strategists, Product Managers, Investors, Operational Managers in Telecom’s Operators, Broadband Service Providers and ISPs, Media Companies, Content Aggregators and Creators.

Key Questions Answered

  • How will the online video market develop and what are the implications for value chain players?
  • Are there historical lessons (from cinema and TV) from which to learn?
  • Which content categories will be most affected by the shift online?
  • What is the best strategy for distributors and aggregators to maximise chances of success?

Background – Online Video: the Growing Bulge in the Fat Pipe

All recent data point towards video being the fastest growing segment of all internet traffic and the trend looks set to continue for the foreseeable future. This is true whichever metric is used: absolute number of viewers, total time spent viewing, data traffic volumes.

Growth is not limited to a content category: adult, sports, movies and music are all rapidly moving online. The internet has also led to a completely new category: User Generated Content – home movies have moved out of the privacy of the living room and are becoming more and more professional.

Growth is also not limited to a specific geography: the movement online is a worldwide phenomenon. The internet has no respect for traditional geographies and boundaries.

Overall, the evidence points towards a future where the internet will be a critical distribution channel for all forms of video.

The New Distribution is disruptive and no longer centrally controlled

Innovation in Video Distribution is nothing new and over the last century we have seen cinema, broadcast networks and physical media creating temporary shocks to older methods of distributing content – but the older methods survive.

However, there is only a certain amount of time in the day available for entertainment in general and watching video specifically. Legacy distribution channels are understandably worried about whether video online will be additive to or cannibalise their audiences, and our survey respondents largely share this view.

More Growth + Less Control = More Unpredictability

Positively, individuals have generated their own content and made it available to the world. Negatively, some individuals have used interactivity to distribute content without regard of the rights of the copyright holders. Copyright holders have struggled to enforce their rights. Illegal distribution of content not only threatens the absolute value of content, but has lead to unpopular and complicated mechanisms to protect content.

The absolute volume growth has also placed the internet access providers under severe strain: attempting to increase prices to compensate for the growth in traffic and gain extra revenue through developing additional services is proving very difficult.

These forces have generated a considerable amount of experimentation in the market especially in the area of pricing models: subscription, pay-as-you-go, advertising funded, bundles with other distribution channels and offset/subsidy – all exist in a variety of forms.

How & why is the current model broken?

The net result is the video market is in a state of flux and increasing tension as key players explore their positions. Will order emerge from the chaos? In what form will this new order take? What will be impact on the existing players in the video value chain? And, will powerful new players emerge?

How can it be fixed?

We believe that Video Distribution on the internet will reshape the value chain and the current forces point towards great uncertainty in the short term. In these circumstances, the key step is to explore possible future scenarios to assess their viability and robustness in the face of change.

Case Studies, Companies and Services, and Technologies & Applications Covered

Case Studies: Apple, Hulu, Phreadz, YouTube.

Companies and Organisations Covered: 3 UK, AllOfMP3.com, Amazon, AOL Music, Apple, Babelgum, Barnes & Noble, BBC, BBC iPlayer, Bebo, Bit Torrent, Black Arrow, BlipTV, Blockbuster, BT, BT Openreach, BT Vision, Comscore, Del.icio.us, Deutsche Telecom, Deutsches Forschungsnetz (DFN), Diggnation, Digital Entertainment Content Ecosystem (DECE), eMarketer, EMI, European Union, Eurosat, Facebook, Flickr, Flickr, Forbes, Frost & Sullivan, Gartner, Google, Hanaro, Hitwise, Hulu, iBall, IBM, Imagenio, International Movie Database (IMDB), Joost, KDDI, Korea Times, KT+A94, Lenovo, London Business School, MGM, Mobilkom Austria, Mobuzz, MP3Sparks, MSN Music, MTV, MySpace, Napster, National Information Society Agency (NISA), NBC, Net Asia Research, Netflix, NewTeeVee, NicoNicoDouga, Nielsen SoundScan, Nintendo, Now, NTT DoCoMo, Ofcom, Orange, Phorm, Phreadz, Powercomm, Qik, Recording Industry Association of America (RIAA), Revision 3, Screen Digest, Seesmic, Seskimo, Silicon Valley Insider, Sky, Softbank, Sony, The Guardian, T-Mobile, Tremor Media, UK Football Premier League, Verizon, Video Egg, Virgin Media, Vivid, Walmart, Web Marketing Guide, Wikipedia, World Intellectual Property Organisation (WIPO), Yahoo, YouPorn, YouTube.

Technologies & Applications Covered: 3G, 3GP, AAC, Adobe Flash, AMR, Android, Apple Quicktime, Apple TV, AVI, Batrest, BBC iPlayer, Beacon, Betamax, Broadband, CD, Cinema, DivX, DOCSIS 2.0, DOCSIS 3.0, DRM, DSL, DVD, Ethernet to the home, Fibre to the home, Final Cut HD/Pro/Studio, FLV, FON WLAN, Fring, GIF, H.264, H.264/AVC, HSDPA, iDVD, iMovie, Iobi, IP, iPhone, iPod, IPTV, iTunes, JPEG, Linux, MOV, MP3, MP4, MPEG, MPEG-2 SD, MPEG4, MPEG-4, NVOD, OGG, P2P, PAL, PNG, PopTab, P2P, RM, RMVB, Scopitones, Sky +, Slingbox, Soundies, TiVo, TV, VCR, VHS, Video over IP, VOB, VOD, WiFi, W-LAN, WMV, XviD.

Markets Covered and Forecasts Included

Markets Covered: Global, US, Canada, UK, France, Germany, Italy, Hungary, Spain, Sweden, Finland, Japan, South Korea.

Forecasts Included: Online Video Vs Cinema & TV 2012, Global TV, Video and Cinema to 2018, Online Video Subscription and Advertising Revenues, Pro-Tail content advertising forecasts, Mobile TV and Video 2013.

Summary of Contents

  • Introduction
  • Executive summary
  • Part 1: Online video – the situation today
  • Part 2: Future scenarios
  • Part 3: Evolution of specific media genres
  • Part 4: Mobile evolution
  • Part 5: Geographical differences

The Research Process

The research evaluates the likelihood of three scenarios: Old Order Restored, Pirate World and New Players Emerge. Each of which paints a picture of the future entertainment industry in terms of: technology developments; consumer behaviour; service uptake and usage.

The research is based on comprehensive literature reviews, industry research and interviews with key staff from relevant organizations that shed insight on the needs and dynamics of the key players. Key Case Studies bring the story to life and provide a context for both successes and failures. An economic model of the resultant value chain is produced for each of the scenarios with analytical commentary.

Research Format
  • 130+ page manuscript document

This report is now availalable to members of our Telco 2.0 Research Executive Briefing Service. Below is an introductory extract and list of contents from this strategy Report that can be downloaded in full in PDF format by members of the executive Briefing Service here.  To order or find out more please email contact@telco2.net, call +44 (0) 207 247 5003.