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CONTENT STRATEGIES


TOP SLICING OVER-THE-TOP CONTENT


Operators are starting to embrace over-the-top content as a way to expand services and reach out to new audiences, developing new business models. By Ingrid Lunden


that hogged network and stole customers from their own paid-for services. But now we are starting to see an evolution in that relationship as OTT companies and service providers look to bridge the gap between their two business models: huge audiences but


O limited revenues on the


one hand; and ARPU-uplifting network subscriptions but threatening commodi- tisation on the other. “Two years ago most telcos delivering


video were perceiving OTT as a threat, but there has been a huge mindshift. Now it is viewed as an added feature to the service offering,” says Steve McCaffery, general manager and VP of home busi- ness, EMEA, at Motorola. He says the BBC iPlayer—which in July finally made its debut as an international, paid-for product—is the third most-watched channel on service provider Virgin Media’s network in the UK, for example. There is no doubt that OTT


perators traditionally have viewed over-the-top (OTT) content players as adversaries


services—defined as content and services delivered over networks not owned by content/services companies themselves— still are encroaching on the IPTV offerings telcos are trying to grow to offset other declining areas of their busi- ness. Analysts at Informa Telecoms and Media forecast that by 2015 some 380 million people worldwide will be consum- ing OTT content—more than double the 163 million IPTV subscribers by that time—with growth driven by providers such as streaming service Netflix (see pie chart) and the BBC’s iPlayer. OTT content will be accessed via connected TVs, games consoles and set-top boxes , as well as through PCs, tablets and smartphones, says Informa. ARPU for OTT service providers


currently is low compared to cable and IPTV customers. AD Little, for example, estimates that ARPU for Netflix custom- ers is around US$12 per month while IMS Research says ARPU for Comcast video customers is about US$133.Yet the oppor- tunity is growing: US online video service


‘Telcos now view over-the-top content as an added feature to the service offering’


25,000 20,000 15,000 10,000 5,000 0


— Subscribers — Net additions


3,500 3,000 2,500 2,000 1,500 1,000 500 0


-500


180 160 140 120 100 80 60 40 20 0


Hulu has forecast revenues of $500 million this year, having launched in 2008. Telcos are also starting to accept that


in order to target users who increasingly are watching content on different screens, they need to partner with those providers that have carved out new audiences . “We see that the TV is no longer the only outlet. It’s becoming a more open ecosys- tem,” says Paul-Francois Fournier, executive director, Technocentre, at France Telecom. The operator recently launched a new TV service for tablets— currently only available on the iPad—and has invested in France’s most popular online video company, Dailymotion . France Telecom, which has its own


branded TV content business, also has been positioning itself as an OTT player of sorts. It has signed deals with LG and Samsung to preload its Orange portal on their connected TVs, including content from DailyMotion as well as VoD services and other Orange TV content. The idea is to use it to drive new users to the service, as well as make it easier for exist- ing customers to get extra content. “The portal is available to everyone,


but when you are an Orange customer you get access to more services—for


Netfl ix subscribers in thousands (left) and BBC iPlayer monthly requests in millions (right) n Online, radio n Online, TV n Virgin Media TV


Source: Arthur D Little / Exane BNP Paribas estimates 16 www.totaltele.com September 2011


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