Unlocking and Securing Multiscreen’s Monetization ... · Unlocking and Securing Multiscreen’s...

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Unlocking and Securing Multiscreen’s Monetization potential

• Howcanoperatorscapitalizeonchangingconsumerbehaviours,driverev-enues,anddeliverfreshvaluetosubscribers?

• WhatistheroleofDLNA,HTML5,andDRMinbuildingsensationalmultiscreenservices?

• Howcanoperatorspivottheirextensivecontentoffersbeyondtheset-topbox,andusemultiscreenvideotodrivesubscriberretention,subscriberacquisition,andsubscriptionpay-TVrevenuegrowth?

• Howcanoperatorsbestachieveaneconomically-sustainable,well-monetizedmultiscreenservice?

• Whattechnologiesdooperatorsneedtodeploytoachievethepromiseofcompelling,income-generatingmultiscreenservices?

IntroductionThe context in which operators now conduct business is changing. While consumer electronic (CE) devices have been a persistent feature of living rooms for some time, innovation over the past decade has upended devices’ capability. Far from the days where single-purpose hardware managed audio, physical video, and gaming, today’s CE is internet-connected, multi-purpose, and video-compliant.

The rise of internet-connected CE has allowed media to proliferate in unprecedented ways. Broadcasters now use IP-video to reach viewers more directly, across more device categories, and

INSIGHT REPORT

Merrick Kingston

IHS Screen Digest TV Technology Intelligence Service

Territories covered in this report

World

Contact

[email protected]

+44(0)2031593300

February 2013

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Content and device interoperability in the UK



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beyond the constraints of linear broadcast. Over-the-top (OTT) content aggregators are present across a wide range of CE equipment, and are beginning to invest in original programming. Stu-dios are attempting to establish more direct billing relationships with end-users, and are trying to rekindle interest in retail purchases in a digital age.

Nevertheless, these broader changes notwithstanding, operators still control an ensemble of lin-ear and on-demand content that other firms in the media space have trouble replicating. Moreo-ver, pay-TV subscribers have yet to show a willingness to jettison their pay-TV subscriptions en-masse.

Faced with the potential for subscriber loss in the future, and the necessity of safeguarding the subscription pay-TV income stream, operators are using multiscreen, IP-video services to drive subscription revenue generation. The challenge surrounding these services is that they require operators to invest in new infrastructure today, but promise an income stream – in the form of subscriber retention and acquisition – tomorrow.

Launching a profitable multiscreen service is difficult, and requires technology solutions that minimize deployment cost. This report will examine three technologies that will allow operators to deploy well-monetized, income-generating IP-video services

1. Operators face a device and operating-system landscape that is complex, and highly segmented; HTML5-based applications offer a credible means to address this landscape compre-hensively, and economically

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2. Provisioning unmanaged devices from an-home, transcode-capable home gateway or set-top box has discrete advantages; DLNA technologies are instrumental to bringing the net-worked home to fruition3. Studio-approved, widely-interoperable DRM solutions are critical to removing barriers to content rights acquisition, and minimizing the operational costs of backend security manage-ment

The future of the pay-TV audienceThere is little question that across a range of markets, consumers have a multitude of video outlets at their disposal. Microsoft’s Xbox360 platform, to take but a single example, is now home to 49 major IP-video services across North America and Western Europe alone. In the UK market – home to industry-advancing offers such as BBC’s iPlayer, and BSkyB’s Sky Go – the current mosaic of CE platforms and video services speaks to a content market that is diverse and relatively open. Pay-TV operators have expressed a degree of disquiet regarding OTT’s continued proliferation. An oft-heard assumption within the wider industry is that pay-TV multiscreen is meant to ad-dress imminent subscriber defection. This notion is worth examining in more detail, because it allows us to contextualize why operators really are interested in multiscreen.

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When churn occurs, it is hard to disentangle the effect that 3rd party OTT services have, relative to the effects that competing operator prices, HD channel loads, DVR services, triple-play bun-dles, channel packages, and customer service all have as well. To date, there is relatively limited evidence that OTT’s market entry is driving pay-TV churn in the present. Looking initially at digital subscriber counts by quarter for BSkyB, Comcast, TWC and Verizon, the launch of flagship OTT services from Amazon and Netflix does not appear to have had a major, detrimental effect on growth. Were these services catalyzing churn, and exerting substan-tial drag on net additions – or worse yet driving net losses – operators’ growth profiles would look different.

It is possible that a second effect is at work, and that the availability of OTT services deters sub-scribers from retaining or purchasing a higher-tier package, such as a multiroom subscription. Under this scenario, households choose to replace their secondary or tertiary set-tops with OTT services that are based around Smart TVs, connected Blu-ray players, consoles, or tablets.

We can check for the occurrence of this phenomenon using detailed, operator-level subscriber and set-top box metrics. Looking to the example of the UK’s BSKyB, we would first expect to find total net additions and net multiroom additions diverging – as consumers churn away from multiroom, and an operator’s total subscription base continues to grow, total net additions should vastly exceed multiroom additions, because the propensity to purchase or retain multi-room is depressed.

While BSkyB’s total net additions and multiroom additions fluctuate year to year, total additions have outweighed multiroom additions since 2006; in 2008, 2009 and 2010, this has emphati-

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cally been the case. However, if subscribers really are churning away from multiroom, there is a second effect we would expect to find. Net changes in the STB installed base, and net subscriber additions should converge – as fewer and fewer subscribers upgrade to multiroom, but total net additions remain robust, net changes in the STB installed base will increasingly be attributable to the addition of new, single-STB households. In BSkyB’s case, we do not observe this occurring. While total and multiroom additions vary, and do fluctuate relative to one another, the ratio of new STBs to new subscribers is stable, equates to 2.0 year to year, and does not converge on 1.

On the whole, it is hard to corroborate the notion that OTT services are catalyzing pay-TV churn. This does not mean that consumer media consumption is static, and is not changing in different ways.

Linear TV consumption, and non-linear TV consumption in particular is evolving markedly. Over the past four years, across the big five European markets, linear and non-linear viewing has been complementary; total TV viewing has risen, and non-linear viewing has had an additive ef-fect on total TV consumption. In 2012, this changed. While non-linear consumption continued to grow – and quite robustly – linear viewing fell, and total TV viewing grew by much less than it did in 2011 and 2010; total viewing grew by only 4.3 minutes more per month, relative to 10.1 and 8.8 minutes in 2011 and 2010. In an world where OTT content is widely available, where linear remains the predominant form of viewing, where consumers continue to value pay-TV subscriptions, and where non-linear viewing continues to grow strongly year-on-year, it is interesting to explore how consumer media spend is responding, and whether important sources of operator revenue are being threatened.

The evolution of leisure spend on mediaFor all of the changes that the media space has undergone, consumers still allocate the vast majority of their media spend to pay-TV subscriptions. Across the world’s two most developed media markets, North America and Western Europe, consumers in 2012 spent €97bn on sub-scription pay-TV packages; expenditures at the box office, in distant 2nd, accounted for only €14bn-worth of spend. Nonetheless, consumers have shown a willingness to spend on IP-delivered online VoD, even if this expenditure pales in comparison to pay-TV subscription spend. Set to continue growing through 2016, transactional and subscription online VoD revenues are accruing on roughly the same scale as transactional and subscription pay-TV VoD revenues; pay-TV VoD revenues are relatively stable, and online VoD has grown markedly since 2005. Although pay-TV VoD revenue is growing slowly, two components underlie this revenue stream. Near VoD (nVoD), where programming is distributed via a broadcast channel on a short, regular interval, is in decline. This is being offset by true VoD services, which are delivered in real-time, are increasing in value, and rely evermore on broadband distribution to an IP-enabled set-top box. True VoD services represent an instance of how broadband delivery, in conjunction with IP-enabled video hardware – a hybrid pay-TV STB in this case – can combine to create value, and sustain services that would otherwise be in decline.

Piecing it all togetherThe current state of the media space is characterized by six important elements – content is more accessible than ever; pay-TV audiences are stable in the present; consumers continue to watch more non-linear content; linear TV still commands the vast majority of viewing; pay-TV sub-scriptions command the vast majority of consumer media spend; consumers show a willingness to spend on IP-delivered online video.

Taken together, these elements go right to the heart of multiscreen’s reason d’être. Pay-TV mul-tiscreen is not a reaction to eroding subscription bases, or revenue loss in the present. It is a form of insurance, and secures the future where consumers continue to purchase high-value pay-TV subscriptions. It is an opportunity to re-engage subscribers, and provide a cohesive, multi-device gateway to linear and non-linear content. It is, fundamentally, a monetisation opportunity. In pivoting their extensive content offers beyond the set-top, operators can protect the future of the subscription income stream, place subscriber acquisition on firm footing, and monetise wide-reaching content distribution in proactive, incremental fashion.



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Given that in 2012, the average digital pay-TV customer in the US was worth EUR 55 per month, and worth EUR 40 in the UK, using multiscreen to safeguard this revenue is critical to supporting and spurring the bottom-line.

Pay-TV’s exploration of multiscreen IP-videoPay-TV multiscreen is a recent occurrence. Beginning with BSkyB’s industry-advancing, 2006 launch of Sky Player in the UK, more widespread adoption has only begun to take place in the last two years. While many of the earliest deployments were driven by large, high-ARPU opera-tors in Western Europe and North America, 70 operators have now deployed multiscreen across the Americas, Europe, Asia and the Middle East. Across current deployments, the PC remains the single-most addressed device. This is for good reason – while machines from different manufacturers vary in terms of hardware, processing power, and even operating system, the standards-based browser has conferred software interop-erability upon the entire installed base. The existence of a common software layer has allowed operators to implement Flash or Silverlight-based video services that run in any browser, and effectively on any machine. Beyond the PC, operators have also been effective in addressing mobile devices and tablets. Mobiles and tablets represent the fastest growing category of device for many operators, both in terms of consumption time and numbers of unique users. By contrast, operators have been more conservative in addressing fixed devices such as consoles, Blu-ray players, Smart TVs, and standalone OTT boxes.

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In terms of business model, operators have overwhelmingly chosen to bundle multiscreen into their existing, subscription pay-TV tiers. Not only is this strategy sensible in a highly competitive pay-TV market, it also a monetisation strategy that explicitly positions multiscreen as a means to protect the existing subscription base, grow it in the future, and insure the very high value of subscription-generated income. Standalone multiscreen models, by contrast, generate direct income that is more easily measured, but risk alienating core pay-TV subscribers who may expect freely-bundled multiscreen services, and go looking for it from other operators.

Lastly, in terms of video processing strategies, operators have chosen to rely almost exclusively on the access network. When preparing multiscreen IP-video, operators can either process content centrally from the headend, or locally within the subscriber home. Content that is centrally processed is ingested, transcoded, checked, and secured in the headend, then streamed natively via IP over the operator’s broadband infrastructure, or over a 3rd party CDN. Locally processed content is broadcast to the subscriber home, transcoded and secured by the set-top box or home gateway, encapsulated locally as IP, and delivered over the home network.

Both methods of content processing have their respective merits and disadvantages. While cen-trally prepared services are quickly deployable, easily permit out-of-home viewing, and scale instantly across the CE devices that subscribers already own, local processing guarantees high-bitrate video, better quality of experience (QoE) assurance, and in most instances, the re-utiliza-tion of existing broadcast rights.

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To date, operators have near-universally chosen to rely on headend-processed, access-network-delivered video. Nevertheless, a few operators have launched multiscreen services that rely on the home network in a major way. In the US, Dish Network furnishes live and DVR-recorded content to PC, iOS and Android devices via its Sling technology; integrated directly into its newest HD DVR set-tops, Sling allows Dish to broadcast content to the set-top box, and once within the home, transcode this content and distribute it to supported devices. Comcast, for its part, relies on the access network to deliver catch-up TV and on-demand content, but delivers live TV to Android and iOS devices via Motorola’s Televation product; Televation serves as an external adapter to the set-top box, transcodes broadcast-delivered content into MPEG-4, and encapsulates it into IP for in-home distribution.

Technology enablement and monetisation in a multiscreen worldOn the whole, the pay-TV segment has begun to embrace multiscreen video, and is well on its way to addressing consumer demand for linear and non-linear, and broadcast and online content. In pivoting their extensive content offers beyond the set-top box, operators nonetheless find themselves making a large bet. Multiscreen services require massive investments today, but are predicated on securing and growing the subscription pay-TV income stream tomorrow. In order to monetize multiscreen effectively, and launch economically sustainable IP-video services, operators must keep roll-out costs low, extend their reach to as many devices as possible, and launch services that allow incremental revenue generation to occur at the margin. Achieving this requires the right technology.

In terms of CE strategy, operators have been prolific in writing applications for PCs, iOS and Android devices; on the whole, operators have chosen not to develop services for fixed console, Smart TV and Blu-ray devices. Over the long-term, current approaches risk falling out of sync with evolving consumption habits. In the case of BBC’s iPlayer –one of the few IP-video services in the world to have achieved truly extensive CE compatibility – PCs are responsible for fewer than 50% of views, tablets and smartphones have grown to account for 31% of views, and fixed devices such as consoles and Smart TVs now account for approximately 10% of views. It is true that in the pay-TV space, TV sets are reasonably well-covered by operator-provided STBs, and that operators – to date – have been able to ship STBs at rate that exceeds the growth rate of the TV installed base. Nonetheless, the steady-state is upon us. In the US in 2012, opera-tors were unable to reach 24% of TV sets in pay-TV households via the set-top box, and through 2014, 2015 and 2016, IHS expects 18% of TV sets to be beyond pay-TV’s grasp.

Operators’ ability to reach further into homes via the set-top box is pushing up against the diminishing returns of additional set-top procurement. Multiscreen services that address more than PCs and portables offer a huge opportunity to close this gap, and successfully monetize ad-ditional sets in the home. Unfortunately, reaching fixed devices such as consoles, Smart TVs and Blu-ray players has proven uneconomical. Unlike PC, iOS, and Android ecosystems, fixed devices tend to be less widely installed, and suffer from installed bases that are highly segmented across different operating systems and soft-

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ware platforms. While bringing IP-video to the large TV screen represents a clear monetisation opportunity, operators have struggled to justify writing native code, optimizing user interfaces, testing, and debugging applications in this complex area of the CE space.

The HTML5 specification represents operators’ best hope for mitigating these externalities. Giv-en that HTML5 is now supported across many software platforms and browsers, operators can address a very broad set of devices by developing a single codebase in the backend. Moreover, HTML5 has the potential to reduce application lifecycles costs. Video services and their applica-tions are not static, and because business models, content, and user interfaces evolve over time, operators have little choice but to issue application updates. The ability to edit a single codebase, and not require users to physically re-download each iteration is a major boon to development time, development cost, and user ease-of-use.

Naturally, HTML5 continues to have select drawbacks. Across platforms and browsers, support for the specification is not binary, and occurs to varying degrees – HTML5 defines a complex set of web behaviours, contains many parts, and is not implemented in precisely the same fashion on every browser. Moreover, the HTML5 specification does not natively include support for DRM. It is also the case that few pure, exclusively HTML5-based video services exist in the pay-TV space, or for that matter, in the media space at large. A few signs nonetheless point to what is likely to be the specification’s future prominence. While Google’s YouTube continues to rely on Flash for PC playback, YouTube has been trialling an HTML5-based version of the video service on an opt-in basis since 2010. In the US, national broadcaster ABC relies extensively on HTML5– bound within a native wrapper – for implementing the common, ABC Player UI that is shared across PC and iOS devices. Perhaps more significantly, Comcast-owned thePlatform – which provides content management, transcode, and video-player development services to operators, broadcasters, and publishers – recently announced that its reference player will now default to HTML5 playback on iOS, Android, and Windows 8 devices. While HTML5 will not be adopted instantaneously, and while it will continue to face teething issues in the interim, the specification remains a highly compelling option to help operators broaden their CE strategies, and monetise as wide a swath of devices as economically as possible.

Turning CE into a viable consumption platform depends not only on the economics of applica-tion development, but on operators’ ability to provision devices with high-quality content. The fact is that operators command an ensemble of linear and on-demand content whose breadth is largely unrivalled by any other type of firm in the media space. Pivoting this content offer beyond the set-top, building a compelling IP-video service, and securing the future growth of the pay-TV subscription base all hinges on content security.

Regardless of whether content is processed in the headend, or broadcast to a home gateway and locally transcoded, a successfully-monetizeable multiscreen service must be secure. Whether gov-erning the acquisition of broadband streaming rights, or furnishing operators with indemnifica-tion against content breach, conditional access and digital rights management (DRM) systems are what allow an IP-video service to flourish.

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Unfortunately, securely addressing many different CE platforms remains costly and difficult. Two issues are at work here. First, true cross-device DRM interoperability does not exist, and as a result, operators must bear the cost of supporting multiple, independent DRM systems for the different devices they choose to support. Second, given that HTML5 now provides a means for operators to scale their device support, the ensemble of DRMs that operators will have to man-age is potentially set to grow.

To date the pay-TV industry has muddled through, and has grappled with multi-DRM integra-tion. Long-term, continuing in this fashion is uneconomical, and will go a long way towards eroding the favourable economics that HTML5 has introduced. If operators wish to broaden their device reach, they will require security solutions that are cost-effective, and that do not impede the process of obtaining broadband distribution rights from content-owners and stu-dios. The technology and service provider market has responded, and we are beginning to see 3rd party, integrated DRM solutions enter the market. The expectation is that with these tools, operators will be able to extend their content portfolios into the CE space at minimal technical cost, and without adding overhead to the rights acquisition process itself.

Lastly, even if operators have the means to securely provision a host of CE platforms with con-tent, they still must determine where that content should be processed and how it should be transported to the subscriber. No silver bullet exists here; it is clear that processing content in the headend or locally within the home gateway offer different but viable options.

Most operators have opted to eschew the home network entirely, choosing to rely on the access network instead, and have managed this type of transport without issue. The overwhelming support that the access network receives as an IP-video distribution medium may nevertheless be motivated by externalities.

Historically, proprietary conditional access technologies rendered media sharing and distribution over the home network near-impossible. Content decode and content decryption had to take place within each individual video device, and therefore required devices to interface directly with the access network.

Three advances have the potential to turn this historically-entrenched practice on its head. First, the advent of home-networking technologies such as MoCa, HomePlug, and HomePNA, to-gether with advances in the 802.11x standard, have made it possible to network devices in the home without installing new cabling. Second, the advent of DRM protocols – aforementioned interoperability issues aside – has rendered secure sharing of media over the home network a reality. Lastly, the advent of the DLNA specification – and its wide certification across consoles, TV sets, Blu-ray players, and portables – has standardized and simplified how clients and servers can communicate, and exchange media over a local network.

DLNA-based solutions in particular regroup three advantages that provide a path to well-mone-tized, financially sustainable multiscreen offerings.

First, DLNA-based solutions can shuttle consumers’ privately-owned, privately-produced media into the operator’s multiscreen UI. While DLNA-compliant devices can communicate and share media on their own, an operator-furnished, DLNA-based service allows viewers to consume their media on the primary screen in the home without exiting the curated environment of the operator UI. There is value in creating an operator-provided service where consumers feel able and encouraged to contribute content that is of intrinsic worth.

Second, DLNA-based solutions obviate the need to transcode content in the headend. The dif-ference between central and local processing is of legal import, and is directly tied to multiscreen monetisation opportunities. In one world, operators bear responsibility for reproducing copy-righted works; in another, private individuals generate copies themselves under the auspices of fair-use. In principle, an in-home DLNA solution does not burden operators with securing distribution rights beyond those already associated with the broadcast set-top box. While a DL-NA-based offering cannot categorically or necessarily preclude content-owners from demanding further remuneration, the benefit is potentially very large: operators can extend their rich content line-up into the CE space, drive subscriber retention and acquisition, and do so without incur-ring the cost of broadband rights re-negotiation.



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Third, in-home, DLNA-based approaches to multiscreen allow operators to deliver IP-video experiences that are difficult to replicate over the access network. Regardless of whether media is delivered via a CDN, or over a private data channel within an operator’s broadband network, controlling video quality of service (QoS) within the home network is simpler in nearly any cir-cumstance. Although adaptive streaming protocols have come a long way towards ameliorating QoS, and although managed data channels typically provide a dedicated level of bandwidth, IP networks invariably face congestion, and video quality can suffer as a consequence. Operators can deliver IP video of consistent, high quality by relying on DLNA-based distribution and the abundance of dedicated in-home bandwidth.

Assured QoS fundamentally sets the stage for two things. First and foremost, a multiscreen service that is able to drive subscription revenue depends not only on the content that opera-tors expose to viewers, but on the experience of consuming this content. Without high QoS, multiscreen is of little value. Second, high QoS allows operators to explore business models that extend the current practice of bundling. While subscription revenues will continue to be the life-blood of operator income, and while multiscreen will continue to aim to protect these revenues, transactional models and bundled access to do not have to mutually exclude one another. Even if bundling consists of the primary strategy to ensure the future of pay-TV subscription base, transactional models such as VoD rentals can be implemented in a multiscreen environment, and can generate incremental revenues beyond the value of viewer retention. Ultimately, the ability to charge directly for content is predicated on the ability to deliver a seamless, high-quality video experience. DLNA-based solutions offer an attractive means of achieving this high quality.

ConclusionOperators have a broad ensemble of content at their disposal, and have the opportunity to ex-tend this content far beyond the set-top box. In provisioning subscriber CE devices with high quality programming, operators are using their multiscreen services to secure future revenues, and insure the critically-important value of the pay-TV subscription base.

However, given that multiscreen services require heavy investment today on the promise of in-come tomorrow, successful, well-monetized, financially-sustainable services will require solutions that minimize deployment costs, maximize device reach, and simplify incremental revenue gen-eration. Three sets of technology have coalesced to allow operators to achieve this.

The HTML5 specification will allow operators to develop a single backend code base, reach across the CE landscape broadly and economically, and manage application lifecycle costs with relative ease. Widely-interoperable DRM solutions will help to eliminate the operational costs of managing multiple, independent DRM schemes, and will remove barriers to content rights acquisition. Finally, DLNA-based, in-home multiscreen solutions will allow operators to ensure high quality of service, deliver a seamless multi-device experience, potentially minimize the cost of incremental rights acquisition, and implement paid-for business models that can be used to generate additional revenues at the margin.



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ShanghaiRoom 1401, BaoAn TowerDongfang Road 800Shanghai, P.R. China 200122Contact: Raymond HanEmail: [email protected]: +86 21-5831-5606

ShenzhenRoom 1805, Block A, World Trade Plaza, 9 Fuhong Road, Futian DistrictShenzhen, P.R. China 518033Contact: Irene LiuEmail: [email protected]: +86.755.8364.3145

JapanTokyoBUREX Kyobashi, 2-7-14 KyobashiChuo-ku, Tokyo 104-0031, JapanContact: Mayuko KataokaEmail: [email protected]:+ 81.0.3.3562.1580

KyotoKyotoResearchParkBuilding4-3F 1 Awata-cho Chudoji Shimogyo-kuKyoto 600-8815Contact: Junzo (Jim) MasudaEmail: [email protected]: +81.075.315.8930www.iSuppli.co.jp

KoreaSeoul2003 Suseo-Hyundai-Venturebil713 Suseo-dong, Kangnam-guSeoul, Korea 135-884Contact: J.H. SonEmail: [email protected]: 82.2.2040.611

TaiwanTaiwanRoom 618, 6 Floor,No. 1 Industry E. 2nd RoadScience Park, Hsin-Chu, TaiwanROCContact: Mavis WangEmail: [email protected]: +886.3.578.3538

EuropeUK133 HoundsditchLondonEC3A 7BX+44 (0) 203 159 3300

Sales&Products:+44 (0) 203 159 [email protected]

France16/18 rue du Quatre Septembre75002 ParisFranceContact: Jacques NoirbentEmail: [email protected]: +33.1.7676.3064

GermanySpiegelstrasse 281241 MunichGermanyContact: Manfred ThielEmail: [email protected]: +49.89.2070.260.5



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