content distribution conflicting models
recently found that as many as 13% of US pay-TV subscribers ‘intend’ to cancel their current subscription within the next year, and not switch to another pay TV provider. And about 47% of those mulling it over cited ‘poor value for money’ as the main reason. Whether Google TV is the enemy, the frenemy or a non-entity in the discussion remains to be seen, but we can be assured of ongoing dissection of the trend as the US cable market struggles to maintain its traditional revenue streams with TV Everywhere multi-screen strategies, premium $30 VoD and other pot-sweeteners. But, as always, there’s another view. Research outfit InStat said (November 2010) that while more than 53 million US broadband households currently view TV programmes over the Internet, 85% of these users already view online TV content on multiple devices, including personal computers, TVs, and mobile handsets. By 2014, there will be over 200 million web-enabled wireline consumer electronic (CE) devices in operation. When PCs and mobile devices are added in, the average US consumer will thus own between 5-10 web-enabled devices to choose from for viewing Internet- based digital entertainment. In other words the industry has little to worry about. Yes, some will ‘cut the cord’, but the market will grow, helped by new delivery methods. Indeed, a new product range is being developed to help bring certain of these elements together. IMS Research says simply that global shipments of so-called hybrid set-top boxes will grow to an annual rate of some 87 million units by 2015. Much of this strong growth in the next five years will be driven by pay-TV operators in Asia and Europe. Thanks to heavy satellite and cable shipments of advanced HD DVRs, the Americas region led with over 65% of global hybrid STB shipments in 2009, however IMS expects that the two other regions will surpass the Americas within a couple of years. Growth in Asia is expected to be heavily driven by hybrid deployments in China late in the period, and European growth is expected to come most significantly from France, Germany, Turkey, the UK, the Netherlands, and others with sizeable pay-TV markets. The pay-TV market is steadily shifting towards hybrid STBs due to demand and to some extent by default, notes Paul Erickson, senior analyst at IMS Research: “As major pay-TV operators worldwide become more competitive with content
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Research firm Strategy Analytics recently found that as many as 13% of US pay-TV
subscribers ‘intend’ to cancel their current subscription within the next year, and not switch to another pay TV provider. And about 47% of those mulling it over cited ‘poor value for money’ as the main reason.
offerings and advanced services, hybrid STBs become increasingly attractive as a way to utilise means other than an operator’s traditional infrastructure to deliver the most competitive experience possible. Additionally, virtually all advanced STBs shipping worldwide are expected to be hybrid by default within a few years.”
Erikson continued: “The shift of the pay-TV set-top box market towards hybrid STBs is notable for two main reasons. First, the near-ubiquitous inclusion of IP connectivity in current and future hybrid STBs enables continued innovation in the pay-TV experience. The IP-connected service enhancements of the future promise to bring substantially more to the viewing experience than today’s features like VoD, DVR, and media sharing. Second, the broader effects benefit both pay-TV operators and their customers. Hybrid STBs potentially allow operators to maximise the level of services they are able to competitively deliver within their market, despite limitations within their own infrastructure, regulatory issues, or content retransmission rights. As such, pay-TV customers will directly benefit in the long run as pay-TV services deliver ever-increasing amounts of content, interactivity, and innovative IP-driven applications into their living room.”
One supplier, very much with its finger on the pulse of future developments, is TV technology specialists Pace. In 2009 Pace bought the set-top box division of Philips, and more recently acquired ‘residential gateway’ vendor 2Wire for $475 million. Pace CEO Neil Gaydon says picking up 2Wire prepares Pace for a future in residential gateways, the all- embracing network in the home that will somehow or other manage a variety of incoming sources and demands: “It boosts our position in advanced residential gateways, especially in the US, gives us the relationship with AT&T and extra customers on top. We want to exploit those benefits.”
Pace looks at products like Apple TV not as a threat to its established pay- TV business but as an opportunity. “Apple TV, for example, is the same as a pay-TV operator,” continued Gaydon. “It is offering an end-to-end managed pay-TV system with a glorious user interface which in itself sets a new standard. And this for us is a great place to be in where we are seen as being wholly focused on the pay-TV
industry and can deliver the sort of products that can make our client proud. We are building the technologies. I am not claiming for a minute that we will match Apple nor is that my intention. Apple, one could say, is the Gucci of the computer world. We are in the mass market supply of devices so our investment in 2Wire plus the sort of technologies that we are pursuing are all done with the aim to deliver a wonderful
environment for our clients and at the end of the day, for people to sit and watch TV.”
Gaydon is also not too anxious about OTT services from electronics companies: “In my view, the way people consume television and computing and use their mobile phones is not going to change dramatically as we go forward. There are some key fundamentals at play here. Watching television is a ‘lean back’ experience. Think about it. People don’t go to the cinema and open their laptop or by and large use their mobile phone while they’re watching a movie. They’ve paid for something they want to be engrossed in. You want to be immersed in the entertainment. 3D will get there, and the more technology changes the more we like it. We are very, very interested in Internet TV. I just wonder how the stress on the bandwidth will resolve itself.”
Gaydon concluded: “Our view at Pace is that the mass market doesn’t see OTT as anything resembling a real service. There’s a loose collection of content that you have to hunt for, without recommendations or trust. Managed operators should offer iPlayer and similar services to our homes, even with the widgets bar. I’d love these services, although I’d turn the widgets bar off! But what I do know is that I want it managed. I don’t want to know whether I have the right software installed. I don’t want to know whether it’s MPEG4 or some other compression. I just want the content from a trusted, managed supplier and where it just works! Do consumers really want all this extra choice? They’ve already got 1000 channels, and yet typically only watch a handful. Who is inventing all this alleged demand? I know and understand that much of the hype is coming from the very community that usually steals its content anyway, and that’s not a business model! If there’s anything we have learned over the past 20 years is that managed services cope with this well.”
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