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Mike Grant
Founder & CEO12th May 2011
Connected TV: the storm approaches
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Introduction to Caru Ventures Caru Ventures helps telecoms and media companies prepare for and then delive
successful innovation to the benefit of the company and its shareholders The company provides consulting and interim management services to organisat
of all sizes within the telecoms and media space
Founder and CEO, Dr Mike Grant, has spent twenty years working at the leadingedge of technology and service developments within the sector: Four patents in new optical transmission technologies Led the development and deployment of 3D graphics technology within the mobile
phone industry Built one of the worlds largest mobile games publishers
Supported the creation and deployment of IPTV services by broadcasters and telecoperators
Advised media regulators on PayTV and TV Advertising policy
Provided business planning and finance support to mobile operators acquiring 3Gmobile network licences
Supported governments seeking to licence spectrum to the mobile phone industry
Mike is currently working with three start-ups developing image recognitiontechnology, innovative solutions for connected TV, and new content business mo
He is also raising a Venture Capital Fund to support innovative organisations in tIT, Telecoms and Media space.
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Agenda What is “Connected TV”?
1. Basic two way connectivity2. Home network connectivity3. New types of TV experiences
Market dynamics and changes in the value chain
Issues arising:1. Who owns the screen … and, hence, the consumer? 2. Can TV revenue levels be maintained?3. The impact on production and distribution costs4. Liability, privacy and consumer protection
5. What future linear TV?
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Agenda
What is “Connected TV”? Market dynamics and changes in the value chain
Issues arising:
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What is Connected TV?1: Basic two-way connectivity
Adding an IP
broadband link toyour TV receiver: provides direct,
enhanced interabetween viewer platform operato
Supports delivercatch-up TV, andtailored websites/services toyour TV
The receiver can TV, set top box,
console or any otdevice connecteda TV screen
INTERNET
BroadcastLinear TV
Catch-up TV Web Apps(apps store)
IP Broadbandservice
Ad server
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Accessibility of services on the device homepage is key
Indicative You View Home PageSource: YouView
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Where possible, customers are being led step step into new functionality
Sky HD/Anytime menu Sky Anytime+ VoD me
Broadcast Services Connected TV Servic
Source: BSkyB
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However, adding web apps makes the interfacissue much more complicated
How many apps can a customermanage on his TV?
How many different ways of accecontent can a customer cope w
Source: Samsung
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Manipulating content also becomes morechallenging
Manufacturers are providing solutionsfull qwerty keyboards
Source: Sony, Logitech
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What is Connected TV?2: Home network connectivity
Home networkingconnectivity allows
mobiles and tabletbe integrated into TV experience:
Eases manipulatimore complex comenus
Provides improvesearch capability
Supports morefunctional contenexperiences (e.g.media integrated
TV programs,synchronous conapps)
BroadcastLinear TV
INTERNETIP Broadband
service
Home network
Catch-up TV Web Apps(apps store)
Ad server
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Connected TV platforms are spec‟d to support
home networking
Source: Google
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What is Connected TV?3: New types of “TV” experiences
The introduction of IP changes the nature of TV content. Contenwill become time insensitive, interactive, and richer companion sites, made more relevant by dual/multi screen use social media components. multilayer program elements overlays leading to other content elements,
Content will become context sensitive Programs that present different content elements depending on
when or where you are watching, Program and application elements that change to match user valu
and preferences Program that are aware of more than one device in the hands of t
viewer Programs that are aware of the location of the consumer
Content will also be device sensitive
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New experiences will be based on a newrelationship between producer and consumer
Content producer/program maker and consumer wfor the first time be able to engage in a directconversation
That conversation will enrich still further the newexperiences connected TV will support
These new TV experiences can be classified intothree distinct categories : Standalone experiences
Asynchronous applications
Synchronous experiences
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Standalone apps provide new ways to interactwith and consume TV content on a single scre
Lovefilm app on Samsung Internet TV
NBA Game Time app demo on
Source: Lovefilm, NBA
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Asynchronous apps extend a franchise withouinteracting directly with live TV output
nchronous apps on companion screens are linked by themeto live/catch-up TV but are programatically unconnected
Source: ITV
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Synchronous apps enrich the programexperience in real time
Multiple camera and soundfeeds
Video archive overlays
Social media elementsembedded into the program
Additional program elementstorylines or data Forking playout
Second screen playout Program control or interacti
from second screen
Overlaid information feeds
Game extensions
etc…
Synchronous apps are connected by theme, time andapplication execution code with live/catch-up TV viewing
Football “app” on
AT&T Uverse
Social MediaX Factor “app”
Source: AT&T, ITV
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Content organisations of all types are developapps for connected TV
Broadcasters
TV producers
Film studios
Newspaper companies
Social mediacompanies
Government agencies
Games companies
Retailers
Telecoms operators
Web retailers
Music distributors
Premier sports rights
holders Weather agencies
Travel companies
Online auction
companies Etc…
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Agenda
What is “Connected TV”?
Market dynamics and changes in the value chain
Issues arising:
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The media industry is moving from vertical silotowards horizontal structures
Traditional
Production
Distribution
Future evolution
G a m e s
Vertical silos withdedicated,
single format production
and distribution processes
N
e w s p a p e r s
B r o a d c a s t
T V
R a d i o
Increasingly integratedmultiplatform production,
aggregation, distribution andconsumption
Traditional content market IP-based content market
Rights holders Rights holders
Aggregation
ConsumptionConsumption
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audiences and intensify competition inaggregation
Production
Distribution
Rights holders
Aggregation
Consumption
UGC and low cost means of production will create an
abundance of content choice. Rights owners for scarce abranded content should benefit from broader distribution.Medium sized TV producers may well suffer.
Production costs will rise as the number of target device tincreases and the complexity of content rises
Distribution - wireless and wired – will become a commodposing few barriers to entry
Broadcasters, STB OEMs, TV manufacturers, platformoperators and web players will all seek to be the defaultscreen of choice. Branding, discoverability and usability wkey to success.
Multiple screens, devices, and content choices will fragmaudiences and drive down revenues
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Agenda
What is “Connected TV”?
Market dynamics and changes in the value chain
Issues arising
1. Who owns the screen … and, hence, the consum
2. Can TV revenue levels be maintained?3. The impact on production and distribution costs
4. Liability, privacy and consumer protection
5. What future linear TV?
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1: The number of connected TV platformproviders is proliferating
Independent VendorsFetch TV Source: IP Vision OEM TVs
Source: Sony
Source: theconnectedset.tv
A l h b l h h
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As a result, the battle to own the home screenwill intensify …
Retailers, TV and STB OEMs, and Broadcasters may
seek to become service providers alongside the existiplatform operators Who will control the default set up of the screen and, with
default choices for consumers? Will YouView, Google, Apple, Sky and Virgin be the key
power brokers? How will content owners ensure they have primary
placement on all platforms of interest? Will the BBC need to lobby every Google TV STB and
games console manufacturer to ensure iPlayer is one of nine apps on the front page?
Will EPG regulations on placement of PSB “apps” apply? How will smaller content aggregators afford the costs of
bein on all ma or latforms?
d th h ll f t t t d
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… and the challenge for content creators and
aggregators to capture audience share will rise
Presented with this level of choice, will audiences
coalesce around existing channel brands or fragmentacross multiple channels and device types? Who will be seen as the “TV providers” of the future?
The BBC, ITV, UK TV? Sky, Virgin, BT?
Apple, Samsung, Sony? Hulu, HBO, Disney, Endemol? Roku, Vudo, Fetch TV? Google/YouTube, Amazon/Lovefilm, Netflix? … other, yet to be invented, content aggregators?
2 C t d TV ill i
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2: Connected TV will increase pressure onindustry revenues Online distribution is already putting pressure on the indust
In the US, users are already switching away from DVD‟s ancable subscription services Comcast video subscribers fell 3% in Q1 2011 to 22.8m Netflix is now the equal largest US subscription TV service wit
22.8m customers Netflix charge $15 per month vs Comcast - $71 per month
US DVD sales fell 18% in Q1 2010 compared to a year ago In the UK, TV revenues have grown at only 2% per annum
the last five years Growth has been primarily in subscription revenues If connected TV propositions offer lower cost, richer TV
experiences, pay TV revenues will come under significant thre
“N d l ” lik l t l
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“New revenue models” are likely to see less
revenue flowing back to content creators In a connected TV, environment the opportunity to build an
deliver PayTV subscription packages will diminish The barriers to distribution that have sustained Sky and Virgin
falling, and competition from other device manufacturers (e.g.Apple, Google OEMs)will increase
Platform operators will have to work hard to justify premiums ttheir users
Platform owners/device vendors have the opportunity tocontrol on the consumer device how channels are composand presented, and how advertising is rendered on the dev This may result in advertising revenue being lost to broadcaste
and rights owners
With competition to deliver connected TV increasing, userscan expect more content for lower costs
i i l d i ifi t d it‟
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up services is already significant … and it‟s
rising
The BBC supports around 40 platforms on iPlayer Set up costs estimated at >£500k per stream
ReformatTranscode
Broadcast TV
Windows Explor
Sony PS3, Xbox, Safari, Firefox
iPhone/iTouch
Nokia N95, ..et
Multiple audio &video codecs and playout
environments
Multiplatform play-out
Re-purposeTranscode
Different screen sresolutions, brow
i/o controls, DRsystems etc.
Production
Producing multi-platform catch-up TV
Virgin STB
BT Vision
5 – 10 base variants approx 40 device
Flash
WMVH.264
MPEG2/4… V i d e o
Quicktime
Silverlight
Source: Caru Ventures
Introducing web technology into programs
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Introducing web technology into programsdramatically increases production complexity
While content producer costs rise with device variations,
manufacturers secure volume growth through innovation in devicfeature set
Port, QA, test,repurpose
Sky,Virgin TiVo
YouView (BT,TalkT
Connected TVsPCs
Mobile phones
TabletsIntermediate
Archive
Rework
As previous plus prperformance varia
memory variations, version “evoluti
Creation
Producing TV apps
OEM STBs
Companion box
Tens of base variantsacross manufacturers
Hundreds of devmodels/software va
Multiple code execution environments
Video variants
JavaJavaScript
Flash A p p s
HTML3/4/5
C++
iOSMeego
Android
Msoft Media
etc
Distributionserver
Source: Caru Ventures
challenge for program makers and TV app
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challenge for program makers and TV appdevelopers
2008 2009 2010
October „08:
Android OSS Project,v1.0 launch,G1 on sale
February ‟09: v1.1
April „09: v1.5
September „09: v1.6
October „09: v2.0
December „09: v2.0.1
January „10: v2.1
May „10: v2.2
Android OS releases (to Dec „10)
Dec ‟10
Source: Google
Content producers are likely to be particularly
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Content producers are likely to be particularlyhard hit
In the last five years, original content spend by the top fivenetworks has fallen 23% from £3.1bn to £2.4bn (5% p.a.) Spending is likely to continue to decline as industry revenues com
under pressure
Distribution costs will rise in absolute terms and aggregatolook to service an increasing range of device types
As a result, profitability will fall as distribution costs consum
an increasing proportion of falling production budgets
Commissioning, schedulingand production
Deploymentcosts
Shrinking production budgets
4: A range of liability privacy and consumer
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4: A range of liability, privacy and consumerprotection issues will arise How will rights owners ensure the integrity of their content when
played out over connected TV? Overlay of third-party content or commercial communications is possible the same time as the television broadcast without the broadcaster's cons
The broadcast playout signal (video and sound) could be altered intransmission or on the device itself without an active decision by the viewor rights owners.
How will platform owners/device manufacturers: Protect against viruses, malware or copyright infringement? Prevent access to applications or sites that link viewers to pirate websites Prevent exploitation of the broadcasters„ programmes and audiences by
parties? Protect children from exposure to inappropriate content?
What procedures will be put in place for removal of those widget
applications that appear to facilitate access to pirated content? Who will gather customer data and how will that data be protecte
It is not clear how existing legal and regulatory
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It is not clear how existing legal and regulatoryframeworks apply to connected TV
Rights owners and platform operators are seeking to
ensure protection for their content in this ecosystem Compliance with the EU Audio Visual Media Services
directive and enforcement of contractual obligations byrights-holders
Protection against illegal distribution of content
Protection of the integrity of the “broadcast signal”,including the right to commercialise the screen
Clarity over data ownership and liability should a third papartner or independent vendor breach data protectionregulation.
The ability or otherwise to secure those legalprotections/clarifications will in large part dictate the
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5: What future linear TV? Broadcasters have confidently predicted that linear TV as w
know it will be with us for some time The key issue, however, is that control over content
presentation is moving from the broadcaster to the user‟sdevice Platform owners have the power to control how broadcasters' line
and non-linear programmes and services are presented on EPG‟
and in search results The implications of this are:
EPGs will go backwards as well as forwards in time “+1” channels will disappear Channels presented on EPGs will be “virtual” channels where
programs are streamed on demand when selected by the user eit
from the cloud or a local cache Within ten years, we expect that only the PSBs and major (top 3)
commercial channels will still be broadcast real time in the mann
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Conclusions [1/2] Connected TV represents a major revolution in the TV
experience for users Integrated TV + catch-up + web Mobile devices working in concert with your TV New content experiences and a new relationship betwee
viewers and producers
Power in the value chain is migrating to devicemanufacturers and platform owners Increasing competition at the device/platform level is
likely to drive costs up and depress revenues forplatform owners and content producers
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Conclusions [2/2]
Securing content rights and protecting consumers
this new environment appears challenging Significant uncertainty exists as to how existing lega
and regulatory frameworks can be both applied andenforced in a trans-national connected TV
environment The underlying economics of IP and local storage
suggests linear broadcast TV as we know it willhave a limited role in the future
The storm is coming – be prepared
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For advice on Connected TV issues impactingyour business, contact
[email protected] +44 7785 227475
Sign up for my blog atwww.caruventures.com/Caru/Blog/Blog.html
Follow me on Twitter @caruventures
Join my panel discussions on Connected TV themes at:The Open Mobile Summit, London, 8th-9th June 2011
www.openmobilesummit.com International Broadcasting Conference, Amsterdam, 8th – 13th Septembe
www.ibc.org
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