Digital TV Successes and Failures

Issue 1

www.alanquayle.com/blog

© 2011 Alan Quayle Business and Service Development

Outline

• Telco: Verizon FiOS and Orange TV

• Over The Top: Netflix

• Traditional Broadcaster Online: BBC iPlayer

• Latest US market stats

• The Future

2© 2011 Alan Quayle Business and Service Development

3

© 2011 Alan Quayle Business and Service Development

Mapping the Hybrid Landscape

Network-CentricBroadcast

Network-Agnostic

One way Cable

DVB-T / DTT

DVB-S / DTH

Over The Top /

Internet TV

Telco IPTV

Hybrid Telco

(DVB-T+IPTV)

Hybrid Cable

(DVB-C + IPTV)

Hybrid Satellite

(DVB-S+IPTV)

DVB-T/S

+OTT Telco/Cable

+OTT

DVB-T / DTT: Digital Terrestrial TV

DVB-C: Cable TV

DVB-S / DTH: Direct to Home (Satellite)

OTT: Over The Top (Internet)

4 2011 Alan Quayle Business and Service Development

Verizon FiOS• Verizon FiOS is consider a HybridTV service because it uses the traditional cable TV digital multiplex for

delivering broadcast services, and MoCA (Multimedia over Cable) for interactive services such as VoD and

widgets

• Verizon chose a hybrid approach purely to avoid technology risk, the plan is to move to full IP with all services

delivered over MoCA by 2015

5 © 2011 Alan Quayle Business and Service Development

Learning from Verizon FiOS

• FiOS TV customers are currently at 3.2M (2010), FiOS internet at 3.8M

• STB are Motorola’s series of Hybrid QAM/IP SD/HD Set-Top (with optional DVR)

• Hybrid TV is purely a technology decision to minimize risk

o They were not prepare to risk deploying a full IPTV service

o Instead used a traditional Cable TV solution

o Completely transparent to the customer, and its possible for Verizon to transition to all IP,

without changing the STBs or the customers experience

• Though next generation MoCA may be required for some homes

• Hybrid TV is an interim solution, VZ see the move to all IP by 2015

o However existing deployments are unlikely to be transitioned out, will run a heterogeneous

network for the foreseeable future

• Verizon’s solution addresses the simplicity issues

o Simplicity with one STB connection, one purchase, and one customer support number

o Interactive services are available at no charge, and premium movies can be rented at the same

price as the cable providers

• Easy for customers to understand and use

6 2011 Alan Quayle Business and Service Development

Verizon FiOS TV Subscriber Growth

Verizon has achieved remarkable growth in a saturated market. It is likely to account for between 8-10% of the PayTV market in the US by 2015. Its HybridTV approach allows low

technology risk for the core service, while providing a future-proof growth strategy.

7© 2011 Alan Quayle Business and Service Development

Orange TV History Part 1

• France Telecom's IPTV service requires 5 Mbps of sustained bandwidth, which, according to the

company's data, means that around half of all broadband subscribers in France can't receive IPTV.

• Having invested in premium football and movie rights, France Telecom needed to increase the reach of its

TV services, so, in July 2008, it launched a hybrid service combining satellite and broadband delivery to

achieve 98% coverage, see below

• This provides access to broadcast channels via satellite, and to VOD via the Internet. In fact, the STB

contains direct-to-home (DTH) and DTT tuners, so if subscribers are in an area where they can't receive

satellite service, they can still get access to a more-restricted range of broadcast channels via terrestrial

TV.

8 © 2011 Alan Quayle Business and Service Development

Orange’s 2 Core Hybrid TV Offers

Hybrid DTT and IPTV

Hybrid Satellite

and IPTV

9 © 2011 Alan Quayle Business and Service Development

Orange’s Triple Play Bundle Offer

10 © 2011 Alan Quayle Business and Service Development

Orange TV History Part 2• Eutelsat is supplying the capacity on its satellites, while France Telecom subsidiary Globecast deals with

encoding, encryption, and channel transmission.

• Although Samsung has been chosen as a set-top box supplier, the offer was launched with lower

specification OpenTech set-top boxes (Korean supplier not Hybrid), due to several delays. However,

Thomson is now the prime STB supplier.

• Hybrid TV customers have grown to 2.75M (2010)

o See next slide, but its not accelerating, challenge of a mature market where it’s a matter of stealing customers from

competitors rather than a land-grab

• The OTT VOD service provides downloads rather than streaming, and requires a minimum bandwidth

of 500 Kbps.

o With a 2 Mbps connection, subscribers have to wait about 10 minutes for a movie to start; alternatively, they can preorder the

movie via PC, and then it's downloaded in advance.

o Clearly, this doesn't provide the same quality of experience as the full IPTV service, but it doubles the number of households that

are able to receive the VOD component of the Orange TV service.

• Orange and Canal+ (Orange’s competitor in France and Spain) signed a coop agreement so Canal+ and

CanalSat channels are available over OrangeTV

• In Spain Orange TV is only provided over DSL and DTT (not Satellite)

11 © 2011 Alan Quayle Business and Service Development

Orange TV Subscriber Growth

Orange TV is Europe’s most successful Telco TV service, and has been Hybrid since 2006 with both HBB (DTT and IPTV) and HBI (Satellite and OTT TV services)

12 2011 Alan Quayle Business and Service Development

Orange TV Learning• Control was critical to Orange for its Satellite service

o No partnership, it owns the Satellite service – can not partner with Canalsat as they are the competition

(10M subscribers)

o Enables an integrated experience and avoids commercial risks

o Only way to achieve near 100% penetration

• France has a more competitive market than the UK, where Sky dominates

o Currently there is a PayTV land grab against CanalSat and cable

o FT is focused on achieving a dominant position as without scale it can not buy the necessary content

hence IPTV will not be competitive

• Satellite investment is significant and has impacted this year’s financial results

o Dominating PayTV is one of the top 3 domestic consumer objectives

• HD can be supported over Satellite, IPTV and DTT

o Hybrid approach maximizes lifetime of their DSL investment, before fiber is required

• Hybrid TV will remain FT’s core TV strategy

o IPTV and DTT

o Satellite and IPTV

Orange TV clearly demonstrated the only way for a telco to be successful is with Hybrid TV (DTT and IPTV), and that HBI (Satellite and OTT TV) can also be success for a Telco enabling near 100% coverage

Hybrid TV Market Dynamics: Shift to TV Everywhere and Over The Top

• In May 2011 Sky Deutschland launched its Sky Go service. Sky Go allows Sky programming to be viewed in a

second room, on the iPad, iPhone, or iPod Touch, or over the internet on a PC or laptop.

• Six years ago that BSkyB in the UK first experimented with what most cable companies call TV

Everywhere, the strategy of letting its existing users have a password to view content on multiple devices,

mostly in the home. Sky Player was only for the benefit of its multi-room customers

• Sky has taken its PC targeted service and its mobile TV cellular streaming service and merged it into one -

targeting phones and tablets - and says that from July 6th all ten million of its customers can watch Sky

TV channels and programs on PCs, laptops, mobiles and tablets at no extra charge. Each Sky home will

be entitled to register up to two devices, and view live linear channels and some of the sky on-demand

content.

• Sky plans in August to launch Sky Go as a full Over The Top service to non-Sky customers

with subscriptions priced from £15 to £40 a month.

• Telecom Italia moved from IPTV to a CuboVision STB OTT service, to a CuboVision OTT app available

directly on the TV

Traditional Broadcasters are now delivering over the top services

TITLESTATE

SIMILARSLIST

SEARCHLIST

RENTAL HISTORY

LIST

RATINGRECOMMEND

ATIONTITLE DETAILS

TITLE LIST

QUEUELIST

AUTO-COMPLET

ELIST

ETC…

TITLE INFORMATION

UNIFIED LIST/TITLE RESPONSEWITH PARTIAL RESPONSE BUILT IN

Using its open API Netflix is embedded in 100s of devices at little

or no cost to Netflix. Achieving the N-Screen

Vision

APIs enable Netflix to manage device fragmentation, and has created a positive feedback cycle transforming how people

consume video across N-Screens

API

Extend Customer

Reach

Sell More

Great Experience

Customer Insight

API Usage and Business Model

• 10B requests in Nov 2010

• Latest figure now at 28B, >20k requests per second

• There is no ‘standardized’ agreement, from free to a one-off fee for

sign-up ($24)

o The platform providers motivation is simply around delivering customer

value on their platform, e.g. Apple’s core motivation on its App Store

• Increasingly Netflix is going direct onto platforms using Webkit

(keep all its money)

21© 2011 Alan Quayle Business and Service Development

Nielsen Data for the US 2009

In 2009 viewing video on the

internet represents a small % of peoples time

compared to TV viewing (3 hours

versus 153 hours). Nearly half the TV viewers have watch

video in the internet.

Nielsen Data for the US in 2011

22 2011 Alan Quayle Business and Service Development

Top Online Video Brands by Time per Viewer (January 2011, U.S.) / 250K Unique Viewer

Video Brand Time per Viewer (hh:mm) MOM % Change in Time

Netflix 11:08 22.9%

Tudou.com 6:30 17.4%

Hulu 5:35 13.9%

Megavideo 3:39 15.6%

StageVU 2:52 -65.9%

Justin.tv 2:33 55.5%

YouTube 2:23 -3.0%

Veoh 2:16 99.7%

Nickelodeon Family & Parents 2:06 11.5%

Cwtv.com 1:44 -38.3%

Source: The Nielsen Company

Read as: During January 2011, the average U.S. video viewers spent 11 hours, 8 minutes watching video content on Netflix

In just 2 years the time spent watching online video has nearly quadrupled – at this rate by 2016 online could reach broadcast

Nielsen Data for the US in 2011

23 2011 Alan Quayle Business and Service Development

Top Online Video Brands by Unique Viewers (January 2011, U.S.)

Video Brand Unique Viewers (000) MOM % Change in Viewers

YouTube 112,764 -0.8%

Facebook 32,328 2.0%

VEVO 32,230 N/A

Yahoo! 25,511 2.5%

MSN/WindowsLive/Bing 17,285 26.1%

Hulu 11,924 -4.9%

The CollegeHumor Network 10,020 -2.4%

AOL Media Network 9,236 -4.5%

Fox Interactive Media 7,597 1.6%

Netflix 7,394 15.6%

Source: The Nielsen Company

Read as: During January 2011, 112.8 million unique U.S. viewers watched video content on YouTube using PC/Mac/laptops/tablets/mobile from home and work locations

From a transactional perspective YouTube is still in the lead, but continues to struggle with profitability

24 2011 Alan Quayle Business and Service Development

The Future

• The two most successful IPTV deployments (Orange and Verizon) are Hybrid TV, representing

6M subscribers as of the H2 2010. Exceptional growth achieved in mature PayTV markets

• OTT TV is proving highly successful >28M Netflix customers and >24B requests per month,

141M BBC iPlayer requests in April, 11 hours per week of Netflix viewing in the US

• Content owners remain the puppet masters in this emerging ecosystem, their objective is a

direct customer relationship to maximize $$$$

The market has clearly demonstrated Hybrid TV is the only solution for operators to be successful in TV services – but its slow linear growth… While OTT is doubling every year