A Telco road to OTT TVAntonio Pavolini - Senior Strategic Analyst, Media IndustryStrategy and Innovation – Telecom ItaliaTelco 2.0 Executive Brainstorm London - April 29th, 2010

The role of Prosumer Content in the emerging online video consumption trends

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The creation/consumption of online video content is emerging as one of the primary activities on the Web, due to the increasing reduction of traditional barriers:

Creators can now produce high quality material with much lower production costs. Moreover, the fast growing prosumer segment can rely on an affordable distribution platform

On the consumer side, video sharing web application and video streaming sites are now part of our daily desktop experience and they seem ready to turn into a mainstream phenomenon on the sofa and mobile screens

Rights protected videos captured and published on YouTube and TV series shared on P2P networks are one of the highest sources of traffic and eyeballs

UGC and Prosumer content creators are not motivated by direct monetization, as a solid business model for the long tail is still to be outlined; rather, the main emerging drivers are sharing (for UGCs) and self marketing /visibility (for prosumers).

Traditional broadcasters (Mainstream TV) look at web distribution as an opportunity to diversify their offering and a chance to extend their public beyond the time schedule physical limits but....

...at the same time they perceive it as a strong threat to their usuale business models

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Internet on the Sofa Screen - Tech Enablers

BB STB Apple TV

Game consoleEs: xBos 360, PS3

Lettori Blu-ray/DVD

Broadcast: Satellite, Cable

BroadBand Network

Internet IP(Unmanaged)

BB STB “Ibrido” (DTT, Sat, Cable, IP)Es: Tivo, CuboVision

Traditional Set Top Boxes: Cable, Sat, DTT ,

hybrid,IPTV

BB STB Open Es: Roku

TV set Internet-enabledEs: Sony Bravia, Philips Net TVTV set DTT

Embedded

TELCO IPTV

OTT TV BOXES

IP (Managed)

The traditional Pay Tv Set Top Box is only one of the many ways consumers can access rich video content on the sofa screen . A whole new set of devices are aimed at allowing Online Video consumption on TVs through the Broadband connection

“Over The Top TV Boxes” Internet Enabled Tv Sets

Managed OTT-TV solutions is stealing eyeballs and market to IPTV

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After a first wave of free, best effort solutions, the web video market is increasingly populated by OTT “managed” solutions , that require a more complex distribution platform with the aim of keeping the pace with the increasing volumes and ensuring Quality of Service

Cost & Complexity of distribution solution

Audi

ence

x S

ingo

lo C

onte

nuto

Blockbusters

Managed Distribution

Video Sharing Platforms

Mainstream Web TV

Best effort

Independent Content Providers

IPTV

OTT Video Streaming Platforms UGC

Online Stores

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The next big thing in OTT TV: Google TV

Within Q2 2010 Google is to launch its own OTT TV software-based proposition (Google TV)

Based on Chrome, this software will allow navigation on the sofa screen among all the video content that is normally available via desktop browser, as Open Source Applications like Boxee have already made possible

Google TV will also provide a TV-friendly interface for popular Social Media apps like Facebook or Twitter

A SDK will help independent content providers develop widgets to access their content, and – most important – participation in the advertising rev- sharing program, the real core of the biz model as already happens with AdSense on desktop apps

Google announced Partnerships with Sony (Connected TVs) and Intel (chipset for a future dedicated STB)

*Source: The New York Times*Source: The New York Times

The road of Telcos towards Net Enabled TVs

Broadcasters Consumer Electronics Telcos

Aim Aim

Non duplicable Assets

Non duplicable Assets

StrategyStrategy

Offer Diversification Better market

segmentation aimed at increasing its value

New Device Sales Defence of native

egemony on the home environment

Offering Diversification Incentive to broadband

subscription upgrades Finding new revenue sources

Premium Content Brand

User Experience Control

Brand

QoS 3 screens Client base and tools to manage it

(CRM, billing…)

Lock-in on exclusive content, keeping control on the user experience on online content (intermediation)

Lock-in on Devices, allowing selective openings to Widgets and OTT Applications

Partnership with Telcos, aimed at offering Quality of Service

Pay: two-side business model offrering differentiated QoS to Independent and/or not vertically integrated Content Providers

Free: Best Effort and Rev-Share from Context & Targeted Ads

App Store with OpenSDK User Experience as leverage

between Premium and Open Sea

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The Gap between TV and the Internet is narrowing

Content Owners endorse Web Distribution

New Advertising Technologies offer fresh opportunities (tracking, interactivity, targeting, tailoring, etc.)

Scenario

Service Providers enable

Multiplatform Video Content Distribution

From Walled Garden

ToOpen Platform

The role of the Technology Enabler in the Web Distribution (Enhanced Technology Platform)

The managed OTT-TV Opportunity

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As the current Broadband network cannot sustain the growing demand for online video consumption, the value of managed distribution solutions grows

Managed OTT efficiently addresses the subset of online video content on which the building of new biz models for the sofa screen is possible

These are the editorial quality contents that are not bound with the traditional distribution chains, that have always been controlled by vertically integrated broadcasters

In a new Ecosystem centered on editorial quality prosumer content (Independent Content Providers) there is no “One size fits all” business model, just because it’s not anymore the distributor to set all the chain rules

Multiplatform Managed OTT-TV is a very promising opportunity for a Telco operator to build a Two-Sided Business Model

Many Content Provider that are currently integrated in the traditional chains may be willing to migrate towards online distribution, with the aim of getting more independence

The telcos own the only business elements that are horizontal to all online distribution business models:

Quality of Service 3 Screens Digital Identity Management CRM and Billing Management

Telcos can expose these assets to Independent Content Providers in order to maximize the business models that THEY build

TWO GOOD NEWS

Service Enabler OTT TV Business Models

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PAY: Mainstream Content ProvidersFREE: Independent Pro Content Providers

Content Category

If the Content Provider is also the Content Owner (ex. PGA or Formula 1) it’s the sponsor who subsidize the QoS, Billing and Caring Platform provided by the Telco Operator. As the user directly pays the Content Owner, the traditional Media chain is disintermediated

Telcos can provide CPs with a white label platform allowing content to natively reach three screens

Free content can be made available through a “Pay Just Once” application (iPhone/BBC model) in rev-share with Content Providers

Model Description

Two-sided: il Content Provider pays the Telco for a Platform ensuring QoS…

...while users pay a fee that can be shared by Telco and Content Provider

Online Video Free Services, natively released on public APIs for desktop use, can be redistributed on OTT TV with third party apps written by Content Providers themselves. Telcos can expose their digital identity platform and their recommendation engine to return value to the application and offer context-based advertising (preroll, display)

Variables

Rev. Share Fee + Quality of ServiceRevenue Share from Advertising

Online Distribution increases demand for the Middle Area of the Long Tail (Prosumers)

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2012?

• When Netflix gave up physical distribution (2001) embracing the Whole Digital Online Store Model the demand for blockbusters decreased at the advantage of the central area of the Long Tail (Prosumers/Independent Content Providers).

• OTT TV has to develop a proposition that drags value from this growing market area

One Kind of Content = One Kind of Biz Model

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A new paradigm

As OTT TV is a distribution platform open to all Content Providers (with no cultural obstacles, as broadcasters have, aimed at defending mainstream/premium content ) business models primarily depend on Content Owners

This means that Service Providers have to build a Business Model around the nature of the content alongside with the Content Owner, looking for “shareable” sources of revenue

If a Service provider has the ambition to place itself at the center of the new Ecosystem , new engagement rules with Content and Application providers have to be set

These rules go far beyond the traditional negotiation process with majors/publishers

What the Telcos can Offer What the Telco are looking for

Quality of Service and Quality of Experience even in condition of Traffic Congestion

Reach of a big multiplatform customer base multipiattaforma (ADSL on fixed lines, 3G for mobile lines)

Anytime, Anywhere, Cross-Device Parental Control and DRM Billing, CRM e Tech Support Mass Market Proof Marketing /Communication

Resources Digital Identity Management (recommendation

engine, context based adv) aimed at maximizing Client Contact AND Application Value

Content : Professional Rights Cleared Strongly differentiated by mainstream TV able to reach a wide public individually, or a

critical mass of niches, able generate significant revenue

That does not require a strong localization effort (dubbed/subtitled) o language-neutral (ex: Music, Vimeo, Arte Live Web)

Applications: That do not create discontinuity in the UX That do not set new knots for the Ecosystem

One Kind of Content = One Distro Solution

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Distribution Solutions are specialized based on the “weight” of the audience reached by a certain category of content

The most complex Net-enabled solution are well positioned to conquer the growing “Middle” area of Prosumer Content , enabling the new business models

Broadcast

Peer-2-PeerClient/Server

Hi-End CDN

Low-End CDN

As the iPhone case widely demonstrated, an open Application Store that can leverage on crowdsourcing, with an SDK open to third party developers (keeping control on what apps are phisically distributed on the official store) is key to reaching a critical mass not only on “service” applications but also on “content applications” that offer CPs a personalized environment for distributing their “signed” library

This solution is ideal to generate value from free content with public APIs, as it transfers the effort of building the application to the developer’s community

At the same time, it gives users access to the widest possible free catalogue (a problem for broadcasters, not for telcos).

When Premium (Pay) Content is involved, the developement of an application (that leverages on the high powered telco backend), can be part of the Telco’s proposition to Content Providers

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The need of an App Store open to Third Parties

A Seamless User Experience

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In the OTT-TV arena a Telco can develop a cross-device proposition aimed at getting benefit from its exclusive capability to offer a seamless experience in any place at any time, on any device

At Home

Far from Home

Third party STBDedicated Set Top Box Connected TV

Mobile Devices Any Web Access

Strategy on width of User Base

Widgets on connected devices, selecting those with the most open platform

Total control of Digital Identity

Focus on “dead time maximization” for “lean forward” interaction activities

Digital Identity Management on OTT TV

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Generating value from User Generated Data

In the most favourable regulatory scenario, Telcos can take advantage of the quality/quantity of data generated by Users while consuming online video, in the perspective of an accurate management of their Digital Identity on three screens (Desktop, Mobile, TV)

Telcos can rely on a wide consumer base and a pervasive set of capabilities:3- screens IP ProfilingPresence LocationBilling

Business Impact

Integrating these capabilities in the User Experience Management on the main TV Screen means: Maximizing video ADV returns, on a degree hardly allowed by other video distribution platforms

(context based, behavioural based) Returning Value To Services and Applications through User Generated Data Maximizing personalized offering value (Ex: Pay VOD) Chance to expose User Data as part of Upstream offering to Third parties (Content Providers but also

Merchants) This kind of strategy is possible only if:

Privacy-related regulation allows User Data Management (User Opt-in on selected Services) IP profiling is validated by the two key markets involved (Advertising e Marketing Services)

Antonio Pavolini, Senior Strategic Analyst, Media Industry

Strategy and Innovation – Telecom Italia

antonio.pavolini@telecomitalia.it

Thank you