TV Everywhere: Confronting Marketplace Challenges

SPECIAL REPORT TV Everywhere: Confronting Marketplace Challenges By Carl Weinschenk Sponsored by

Special Report TV Everywhere: Confronting Marketplace Challenges The cable industry s journey from a one-way source of entertainment video to one side in a bidirectional video conversation with devices of all shapes and descriptions will pivot this year more fully from purely technical concerns to seriously tackling the issues of generating revenue. It s not that the technology challenges of TV Everywhere (TVE) all are solved. It s that the time has come to seriously think about ways to make the whole thing worth the effort. The reality is that monetization is a complex topic and success is anything but guaranteed. It will be front and center in 2014. Monetization is the big trend, said Arnaud Perrier, the Senior Vice President for Solutions Marketing for Envivio. The industry needs to be a quick study. Over-thetop players such as Hulu and Netflix are creating a strong bond with the public and have a head start on marketing IP video. Netflix, for instance, said in late January that it expects to add 2.25 million subscribers in the first quarter of 2014 after adding 2.33 million during the fourth quarter of 2013. The company should have a total of 35.67 million customers by the end of March. The bottom line is that TVE creates a far more open playing field. Who is going to win is yet to be determined, said Mark Fisher, the Vice President for Business Development and Marketing for Qwilt. The counterbalance to the need to move quickly is the fact that building robust TVE platforms can run counter to operators short term goals, which still focus on the television set in dens and living rooms. In addition to continuing to solve technical issues, the industry must thread the needle with two goals in mind: Working effectively with content owners though they are competitors for TVE eyeballs and developing services that complement their current offerings. Monetization is the big trend [in 2014]. Arnaud Perrier, Senior Vice President for Solutions Marketing, Envivio. Before assessing the issues to lie ahead in 2014, it is worthwhile to mention areas in which progress was made in 2013. The broad technical ecosystem cable and other service providers, vendors and associated businesses made great progress in developing robust ways to deliver content to a variety of mobile devices. 2 BTR Special Report: TV Everywhere sponsored by

It s an achievement: Subscriber TVE devices are unknown to the operator and therefore present a host of variables, including screen size and the amount of onboard computing power and memory. These devices may run on Android, Apple s ios or Microsoft s Windows Phone. Adaptive bitrate streaming platforms can deal with the uncertainty. Though it isn t a simple process, observers say that operators and their vendors have developed extensible and increasingly robust platforms. The second major challenge that is on its way to being met is the creation of contracts that allow operators to deliver content to subscribers who are on the go. A lot of the content owners only allowed distribution in homes, not outside, said Cheng Wu, the CEO and co-founder of Azuki Systems. That has been the case for the past three or four years, until the past six months, he said. The barriers are going away, as noted by Time Warner, Comcast, Charter and others. It s a widespread trend. [Expansive] access no longer is a major issue. 2014: The Dawn of TVE 2.0 That made 2013 a very good year. The industry needs another: It is only beginning to seriously deal with monetization. That isn t a bad thing, however. The industry s finest hours such as Watch the video to see how Envivio s software-based solutions bring together all the functionalities required to deliver a nextgeneration video service for any screen Live Linear Streaming The TV Everywhere Accelerator for Pay TV Providers By Keith Wymbs Consumers of video have the power today. By and large, they decide when, where, and how they watch programming. Pay TV providers are accelerating their IP-based video services to compete more effectively with rapidly emerging over-the-top TV (OTT) providers. But there s an Achilles Heel in many operators TV Everywhere game plans: They offer few or no live channels. Live streamed linear feeds of sports, news and entertainment are becoming competitive necessities for pay TV operators. Recent studies show that consumers even cord cutters and cord nevers put a premium on having access to the live content they love. The Diffusion Group last year found that 64 percent of online viewers surveyed would be willing to pay higher monthly service fees to get content from their pay TV operators on devices beyond the TV set. To keep a competitive edge, pay TV operators need an offensive strategy that enables them to easily prepare their technology infrastructures for live linear streaming at the lowest possible total cost of ownership. Rapidly shifting consumer demand and a highly competitive market also are driving a need for the rapid evolution of systems that can be deployed in an increasingly volatile technology environment created by today s bring-yourown-device culture. continued on page 5 3 BTR Special Report: TV Everywhere sponsored by

the initial winning of franchises and the move to offer Internet and phone services were the result of creative scrambling. The rollout of TVE to date parallels the earliest days of cable modems when the industry rushed out a generation of pre-standardized equipment before stepping back and establishing the DOCSIS program. The TVE 1.0 mission was to get something out there and, sometimes, it was as ugly as it had to be, said Clearleap CEO Braxton Jarratt. [The industry] figured out how to get content to Android, ios and PCs. Now they are stepping up with long term strategies [and other elements. ] Perhaps the greatest sea change brought by the use of IP to deliver entertainment video is the that apps are used to reach subscribers. This is a messy approach that tends to confuse and frustrate users. A particular network or program often is available both from the operator and the content owner. In many cases, subscribers must re-authenticate themselves as they switch from one family of programming services to another. The thinking now is that some sort of overall authentication procedure similar to the federated single sign-on approaches that Fixed Function, Hardwarebased Infrastructure Ain t What it Used to Be While many of the infrastructural underpinnings and video DNA are in place for successful live-linear streaming service roll outs, there are challenges. Most notable is the finite nature of the traditional, fixed hardwarebased infrastructure that has defined the video processing industry for decades. These dedicated infrastructures from incumbent video processing suppliers won t withstand the onslaught of innovation germinating from increasing consumer demand to get video on their terms. Nor will they be able to handle innovations driven by leading suppliers, research universities and industrial consortiums that will constantly up the ante for consumers of branded content. Innovations in audio processing, color depth, content protection and tracking and video encoding will no longer wait for generational swap outs of hardware. The industry moves too quickly now. Unfortunately, hardware-based approaches lack the agility and elasticity to get the job done. Watch the video to learn about IneoQuest s end-to-end, real-time monitoring and analysis solution for multiscreen and TV Everywhere networks A New Weapon for Pay TV Providers: Software Pay TV providers enriching their current services with premium live-linear streaming services can strengthen their competitive position and accelerate speed time to market by deploying software-defined video processing (SDVP) architectures as the core of their next-generation infrastructures. continued on page 6 5 BTR Special Report: TV Everywhere sponsored by

businesses use to provide access across corporate applications to employees, partners and even customers will be the answer. A number of operators are implementing social log-in such as through Facebook, to connect, said Marty Roberts, the Senior Vice President of Sales and Marketing for theplatform. That s a nice feature, but a better feature would be the ability of the system to recognize and authenticate the user. Advertising Grows Even More Complex Cable advertising always has been a tricky business, of course. The earlier days of complexity, however, will pale compared to what is coming. The goal is to harness the ability to identify individual users (or, at least, the registered owner of a machine) with big data number crunching to send unique advertisements to all screens. Operators, content owners and third parties all have direct access to viewers through apps and will want their share of the advertising pie. Thus, a way to divvy up the avails must be found. Who is going to win is yet to be determined. Mark Fisher, Vice President for Business Development and Marketing, Qwilt It s a playing field in which the over-the-top (OTT) players, who have been living the IP life for a few years, likely have the advantage. The networks are good at online video advertisements, Roberts said They get higher CPM online than the cable operators The idea of ad routing will come into play, in which they SDVP utilizes the most powerful general purpose programmable processers on the ground or in the cloud to meet the changing needs of live-linear pay TV services. An SDVP-enabled architecture is built to meet the flexibility, scalability and reliability needed to deploy live-linear pay TV services while extending the useful life of the infrastructure as the industry evolves. What is used to process MPEG-2 video today can migrate seamlessly to H.264 and HEVC/H.265 in the future. What is used to trial 8-bit 4K processing might evolve to 10- or 12-bit processing at real deployment. The possibilities are only constrained by the lines of code in the software not by chip designs within traditional hardware systems. Implicitly future-proofed, SDVP overcomes issues around legacy hardware encoders running out of roadmap. This lets operators quickly and flexibly create content in the new formats and resolutions needed for streaming to a rapidly expanding universe of consumer devices. And because SDVP architecture is built upon general processors that can be virtualized and reside in public cloud infrastructures, integrated platforms can ramp resources up and down depending on demand. Overinvestment in infrastructure will be avoided. Increased virtualization enabled by end-to-end SDVP architectures can reduce headaches of storage capacity, cost and bandwidth spikes related to catch-up and start-over functions. Key monetization capabilities such as just-in-time (JIT) packaging, ad insertion/replacement and continued on page 7 6 BTR Special Report: TV Everywhere sponsored by

negotiate a policy in which, for instance, one out of every four avails goes to the programmer and they negotiate a split. Dynamic ad insertion is one of the key negotiating levers moving forward. Technical ecosystems have emerged that are capable of providing avails to ad decision software controlled by either the content owner or the operator based on negotiated settlements. The program content providers are using the ability to take content on the go and negotiate ownership of some inventory, said Denise MacDonell, the Vice President of Product Management for This Technology. It leaves the cable operator with trying to determine what the inventory split looks like. It is a complicated thing to do. expanded CDN are seamlessly integrated within the ecosystem all in software. In many ways, SDVP is the promise of a limitless roadmap for the pay TV operator. By committing to an SDVP architecture as the basis for their next generation video processing infrastructure, pay TV providers can more confidently pursue live linear streaming offers, enhance them with innovative new functionality and explore new delivery models such as HbbTV (hybrid broadcast-broadband TV). They can do all this while lowering the cost of entry into new projects, markets, and applications. The days of swapping out video processing systems every three years to reboot to the current state-of-the art are history. Consumers no longer wait. Neither should innovation. Keith Wymbs is the Vice President of Marketing at Elemental Technologies. Figure 1. RAMP Found that only one-third of viewers accessed programming through an app or The bottom line is that the nature of IP-delivered video puts everything in the relationship between the content owner and the operator on the table. Negotiating chips include the contractual right for operators subscribers to take programming outside of the home, the division of avails across the various players and even the size and prominence of the networks icons in the operator s user interface, according to observers. This is happening as the amount of programming formatted for TV Everywhere proliferates. Agreements differ in complexity. The main point, however, is similar to status of the purely technical issues: The experts engineers and the people to whom they report in one case, contract negotiators and their bosses in the other see that a path forward is available. Contract blueprints have been created. Now we are in a very active rollout phase, said Bill Niemeyer, a Senior Analyst for The Diffusion Group. There are business agreements that still 7 BTR Special Report: TV Everywhere sponsored by

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remain to be negotiated, but there is a template because enough of them have been done. Big Data, Big Opportunities In cable operators legacy world, programming is delivered to televisions in homes. Assumptions can be made, but there is no clarity about who watches what. In the IP environment, however, there is far more certainty: Very specific information is collected on each device. It quickly becomes apparent if the device is being used by a youngster, a teen or a grown up. Specific information about the likes and dislikes of that person become clear as well. The year ahead is going to be spent dealing with the challenges of how to deliver content, how to fulfill SLAs, how to wisely make capital investments and how to make money. Kirk George, Director of Marketing and Strategy, IneoQuest The Way Forward Cable operators still must make very fundamental decisions on what they want to be in the age of TVE. Though the terrain is very different than a decade ago, at its core the drama that will play out in this new world is similar to one that has played over and over: The cable industry owns the infrastructure and robust back offices, while the outsiders are faster, have no legacy to defend and can use cable infrastructure to reach potential customers. On the other hand, cable operators can far more effectively consolidate and organize content from a variety of players. The gatekeeper role is a powerful one. TVE 2.0 may see operators play to a strength and focus on aggregation. There is an opportunity here for service providers to provide these platforms, said Mike Earle, the CEO of aiotv. That s a big opportunity for cable. Finally, operators must decide where they best fit into the picture: As a resource for the Hulus and Netflix of the world or as a competitor. Sam Big data a buzzword denoting the ability to analyze huge amounts of information and draw out previously hidden trends, often in real time will enable operators to target much more effectively. For example, an operator may notice that on these [TVE] platforms in the northeast there are more subscribers watching three specific sports channels just these three, said Kirk George, the Director of Marketing and Strategy at IneoQuest. So why not create packages around those three for a certain price, instead of what they have now which may be 12 channels for [a higher price]? Figure 2. Twelve of the top 14 cable networks are available as a TVE offering by Cox and Comcast, but in many cases programming can t leave the home. Source: The Diffusion Group 9 BTR Special Report: TV Everywhere sponsored by

Figure 3. The growth of set-top box deployments will be far outpaced by tablets and IP-streaming devices during the next several years. Source: Frost & Sullivan Rosen, a practice director with ABI Research, pointed out that set-top boxes are kept in the field for a half-decade or more, while people trade in their smartphones on average every other year. That inequality will may make the task of keeping up with the pace of innovation prohibitive for the relatively small payoff, at least initially. MSO s bread-and-butter will remain the television set and living room for years. For those guys, the big thing is to keep the eyes focused on the TV in the home. People shuffling away is a problem, Earle said. The bottom line is that TVE still is a work in progress and that 2014 will be key. IneoQuest s George sees a full agenda ahead: The year ahead is going to be spent dealing with the challenges of how to deliver content, how to fulfill SLAs and how to wisely make capital investments and how to make money. Carl Weinschenk is the Senior Editor of Broadband Technology Report. Contact him at carlw@pennwell.com. 10 BTR Special Report: TV Everywhere sponsored by