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Digital Video Trend & Ecosystem Development:
Challenges & opportunities of AR/VR & new
technologies
Dr. CW Cheung 張智華
Research Fellow, Consulting Director, APAC
Ovum Limited
Email: [email protected]
Date: 1 August 2016
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Agenda and Introduction
The Consumer’s World in 2025
Digital video & ecosystem
development trend, and market
overview
Digital video & related enabling
technologies (4K/8K UHD, VR/AR,
etc.)
Key takeaways Dr. CW Cheung 張智華
Research Fellow, Consulting Director, APAC
Ovum Limited
Tel: +852 9156 8683
>35 years in ICT & Telecom industries:
tenures in operators, government,
academics and consultancies
Specialized in Fixed & Mobile
Broadband, Cable TV, Telco/OTT
Strategy and National ICT policies &
regulations
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About Ovum: the world largest telecom research & consulting firm
Advising on the
commercial impact of
technology and
market changes in
telecoms, digital media,
software and IT services”
Ovum – the global brand in ICT research and consulting for more than 30 years
Part of $2B Informa Group
Over 300 ICT analysts & consultants worldwide
Blue-chip client base: top tiers SP, vendors, government, etc.
We have 23 offices across the globe and more through our associates. Our 300 experts worked in
more than 50 countries in EMEA (Europe, Middle East and Africa), the Americas, and Asia Pacific.
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Most influential (Relatively) unknown Non-existent
The consumer’s world in 2005
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Consumers will invest in “experiences they value”:
Tomorrow’s key battlefields are emotions & time
Value
Time
Money
Relationships Status
Emotions
???
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Future revenue growth in 2025: Digital is the future …..
Digital video will attract four out of every ten dollars spent on consumer media and
advertising (i.e. $660B out of $1,627B in 2025). It represents 43% revenue growth vs
2015 ….
But traditional media & TV advertising feel the squeeze ……
267
156
304
240
240
420
0
500
1,000
1,500
2010 2015 2020 2025
US$
Bill
ion
s
Global, media & entertainment revenues by type, 2010 -2025
Digital advertising
Paid digital media
TV advertising
Pay TV
Traditional advertising
Paid traditional media
Source: Ovum, PwC
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Over half of all revenues from consumer media
& entertainment will be from advertising
0%
50%
2010 2015 2020 2025
Global, share of media & entertainment revenues by type, 2010-2025
100%
Payments
Advertising
Source: Ovum, PwC
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Success with digital will require an almost
opposite approach to traditional media…
37%
63%
Traditional
Advertising Payments
44%
56% 64%
36%
TV Digital
Advertising Payments Advertising Payments
Global, share of media & entertainment revenues by sector and type, 2025
Source: Ovum, PwC
Payment or
subscription model
Advertising
model
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Competition will shift from delivery to
multi-platform mastery, data and design
Revenue
Investment
Data AN
Other
Audience
Usage
Monetisation
Data & Design Multi-platform Delivery
(e.g. network)
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Digital video & ecosystem development,
and market overview
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Video will shape the customer behaviors, services &
applications, business models and networks
Global video traffic will grow at CARG 25.3% in 2015-2020, with a dominated share of
>77.3% by 2020
Video will become “basic services” before 2020.
Video will drive digital transformation of industry stakeholders especially of network
operators and CSPs “voice-/data-centric” network migration to “video-centric” network
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Key trends of development …..
OTT SVOD to set new opportunity for content owners, and new wave of competition for
incumbent TV and video distributors.
SVOD has already become a mass-market leisure activity in developed markets
Evolution of bundling in multi-play: TV, OTT, and mobile entertainment are being bundled in
existing telecoms bundles in innovative ways.
Mobile video: live video streaming as mobile-first services will hit the social media mainstream
(e.g. Facebook)
Go east: The biggest visual entertainment growth opportunities are in Asia.
Linear OTT TV is upcoming, until then OTT video will be dominated by TV series viewed as part
of subscriptions
OTT (Digital) video revenue will grow fast to challenge pay TV …. the pace will be much
accelerated with possibility to come close to pay TV’s within a decade!
Consumption of digital video is not about collecting, it is all about fast access to exclusive new
content, and delighted video experience
“Convergence Video” = entertainment + communications + vertical video applications
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OTT from online to mainline:
SVOD take lead in global OTT Video trend ….
OTT Video will grow from $13.5B in 2015 to more than double $22.9B in 2019
Business models comprise of subscription, transaction and digital retail (or electronic
sell-through, EST)
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Video traffic over cellular
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
2015 2016 2017 2018 2019 2020
Pe
tab
yte
s p
er
year
Total 4G Traffic of which video
Mobile Video will be the second high growth video area after OTT Video.
Mobile video traffic (excluding WiFi) will increase tenfold during the next five years to
188,129 PB/year in 2020 – open up huge opportunity & challenges to 4G network
operators
Network operators need to address it at both a business and technology level
ranging from network cost savings (efficiency) to monetization (e.g. service convergence)
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Global OTT revenue by resolution (2015 vs 2019)
4K UHD will experience tremendous growth from 1% (2015) to 8% (2019) share of total
OTT revenue – further growth to be driven by devices and content
SD Video will still dominate (47%) global OTT video revenue, across all three OTT video
platforms, in 2019
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Active connected devices for OTT video and digital
content
The global total active devices will grow from 2.1 billion in 2015 to more than double to
4.8 billion by 2019 – mobile and portable devices (e.g. tablets) are growing more
importance
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Global 4K UHD penetration ……
4K UHD penetration is set to increase from just 2.5% in 2015 to 30% in 2020
4K UHD household penetration will grow to nearly 50% of total TV households by
2020; the top four biggest markets are China, the US, Germany and the UK
Source: Ovum 4K UHD Forecast
Global 4K UHD Household Penetration
40 80
147
246
382
537
0
100
200
300
400
500
600
2015 2016 2017 2018 2019 2020
Mill
ion
s o
f h
ou
seh
old
s
Middle East & Africa Asia & Oceania Americas
Europe Total
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2015 2020
Other
ME&A
Eastern Europe
Latin America
Asia without China
Western Europe
North America
China
4K UHD TV sales distribution by global
regions, 2015–20
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Netflix’s aggression in global market development
Netflix launched its aggressive SVOD development in 130 markets at the start of 2016
Forecast to increase its international subscriber numbers to surpass the total in the US
home market
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UK’s Sky using OTT to compete in more release
windows
Sky and Netflix leverage on OTT content to compete with other pay-TV operators
Telcos increasingly bundle OTT content & services in their existing convergence service
packages
From simply usage revenue to increased monetization, reduced churn, customer loyalty
management or enhanced competition …..
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Danish’s Telmore Play bundling with 3rd party OTT
media services
Fixed and mobile telcos partner with OTT video services and digital content (e.g. streaming music
and e-books) to:
drive data usage
drive higher-tier subscriptions to larger data caps
offer better QoS
diversify revenue away from data which is become increasingly commoditized.
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Digital video enabling technologies
Operators and CSPs embark on end-to-end network upgrade / transformation to
enhance video customer experience, and support video-centric “Convergence Video”
services & applications ” (i.e. entertainment + communications + vertical video
application)
High throughput and high bandwidth ultra-broadband networks (FTTH, 4.5G / 5G) to
encompass access, metro, core and backbone (i.e. end-to-end)
CDN (Content Delivery Network) moves closer to network edge or content source for network
efficiency and video experience (e.g. latency)
Cloud computing and SDN / NFV technologies for improved network flexibiity, agility and cost-
effectiveness
DRM and digital content security solutions
Network OSS software
Objective video experience QoS / QoE standards such as U-vMOS for specifications, design,
installation, testing, O&M, etc.
Innovative video compression algorithms and technologies enabling 4K/8K UHD
Device technologies such as VR / AR, IoT, etc. to enhance “Convergence Video” development
Source: Huawei
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4K UHD: setting boundaries and definitions
ITU defines the two resolutions of ultra-
high definition (UHD) television:
4K UHD 3,840 pixels x 2,160 lines
(8.3 megapixels)
8K UHD 7,680 pixels x 4,320 lines
(33.2 megapixels)
At end 2014 , the US Consumer
Electronics Association agreed to “4K
Ultra HD” and “4K UHD” as “common
terminology to describe the new
generation of television products,
technology, and content.”
8K = 4 x 4K = 16 x FHD = 108 x SD
bandwidth challenges of 360º 3D Video
for AR/VR
2,160
4,320
1,080
480
0
8K UHD
4K UHD
FHD
Scope of the report
SD
Evolution of TV resolution*
3,840 7,680 1,920
*Horizontal axis – pixels; vertical axis - lines
640
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4K UHD ecosystem: the value chain
The 4K UHD ecosystem includes the
following important segments:
Manufacturing of 4K UHD enabled
hardware, e.g. hardware and
software vendors.
Production of 4K UHD compatible
content
Content delivery enablement, e.g.
software developers in content
delivery and protection.
Content transmission, e.g.
broadcasters, standard pay-TV
operators, ISPs and OTTs
Manufacturing
TV set manufacturers
STB manufacturers
Software/ middleware
vendors
Content production
Content producers
Copyright holders
Content delivery
enablement
Software developers
Content transmission
Pay-TV operators
Broadcasters
IS providers
OTT service providers
4K UHD ecosystem: major types of
players*
Source: Ovum
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4K UHD ecosystem: broader mapping, 2015
Set-top boxes & SoCs
Media streamers
Traditional pay-TV services
OTT pay-TV services
TV sets
Content
TV devices
TV DEVICES
STBs
Media streamers
Content
Content
Content
Set-top boxes
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pay-TV operators will have to look for interim solutions to
launch 4K UHD services ahead of competitors
4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16
UHD pay-TV trial
by Japanese
NTT (STB-
based, vendor –
Sumitomo)
Dish Network
(US) launches
the first 4K
STB service
among US
pay-TV
operators
KT Corporation (South
Korea) launches the
world’s first UHD pay-
TV service, called
“Olleh GiGA UHD TV”
DirecTV (US)
launches its
first non-STB
RVU-based 4K
UHD pay-TV
service
Comcast becomes
the second US pay-
TV operator to
launch a UHD pay-
TV service (non-
STB, Samsung app)
Videotron
(Canada)
launches a
4K UHD
commercial
service
BT
launches
YouView
box, the
first UHD
STB in
the UK
China Telecom
Sichuan launches the
first commercial 4K
UHD STB service in
China (developed with
Huawei)
Netflix*
adds first
4K titles to
its online
streaming
library
DirecTV
unveiled
its first 4K
STB the
Genie Mini
Totalplay
(Mexico)
launches
the first
UHD STB
in Latin
America
Etisalat (UAE)
launches the
Middle East and
Africa region’s
first UHD 4K
IPTV service
There are diverse early adopters pioneering in 4K commercial services since late 2013:
telcos, pay-TV operators, ICPs, OTTs
Telcos account for more than half of the 4K UHD implementations.
4K UHD pay-TV services: chronology of launches
Source: Ovum
Amazon*
and M-Go*
launch 4K
UHD offers
UltraFlix*
launches
its 4K offer
on Roku 4
* OTT operators
SFR
(France)
launches
a UHD
gateway
La Box
Fibre Zive
Free
(France)
launches
its first
“Mini 4K”
STB
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VR / AR technologies & ecosystem, and
market overview
Rony Abovitz, CEO Magic Leap
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Comparing VR and AR: definitions and evolutions
AR (Augmented Reality) is designed to blend
into a user’s view of the real world, offering
communication, education, or entertainment
influenced by a real-world context – the
prototype Microsoft HoloLens is the most
advanced vision of where AR will head.
VR (Virtual Reality), in contrast, is
designed to be fully immersive,
completely isolating the wearer from
the outside real world, and
generating visual, aural, and (in
some cases) tactile experiences
separate from user context
Others include Virtual Video (neither
AR nor VR), and MR (Mixed Reality:
AR + VR), or “cinematic reality” by
Magic Leap
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The best way to compare the VR/AR technologies and
applications
There is a spectrum of VR/AR applications ….
Need to look at their hardware components,
platforms, which firms are involved, and, most
importantly their envisaged applications.
Involving extensive ecosystem: content &
development platform (e.g. Valve), headset,
360° camera, optics, display card, chipset, etc.
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VR hits first, but AR will eventually be bigger (1)
VR “goes mainstream” in 2016 though with low-end headsets and lack of enabling platforms
but real progress is being made from Google, Facebook and Starbreeze
B2B for ads & sale promotion, followed by B2C for high-end headsets …..
Add in many more mobile VR users (e.g. Google) – manufacturers go for viewing headsets to
complement their high-end devices from 2017 onwards
VR content and 360º Video applications in media and non-media segments: healthcare (virtual doctor),
education (virtual classroom)
Console platforms have the best chance of content monetization, and driving content
development ecosystem for dedicated home VR (rumour on Microsoft’s VR-capable Xbox One
by 2017)
VR drives industry-specific managed services in rights & loyalties, analytics, etc. in longer term
HTC & HP: Vive PC version
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VR hits first, but AR will eventually be bigger (2)
Revenues will be slow to follow though – though there is a small base of high-end VR
headset owners to buy games (or upgrade existing games)
AR has a much broader development space – running on smartphones, tablets,
wearable headsets, and dashboards, with many more application areas:
AR games such as Pokémon Go unveil monetization potential in entertainment and adjunct
business models
classic navigation in retail,
augmented ads
version 2 AR using HoloLens or Magic Leaps technology.
AR overtakes VR in terms of spending within 3-5 years – device flexibility and
applications will be more integrated in both existing user behaviours and usage
Content owners to prepare its properties and portfolios for both VR and AR
Content creators to focus at VR for wide adoption from 2017 onwards
Advertisers to focus at unique marketing experience of VR
Telcos to develop network with location-based and mutli-4K video streaming capability
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VR development: consumer market
0
50
100
150
200
250
300
350
400
2015 2016 2017 2018 2019 2020
Mill
ion
s o
f u
nit
s
Dedicated VR (home)
Promotional VR (portable)
Mobile VR (portable)
Dedicated VR (portable)
Total VR installed base will grow from 71 million (2016) to 337 million devices (2020):
Promotional VR lead "sales" 2016-17, with disposable experimentation devices predominating
Mobile VR will gain traction in 2017 and contribute 65% of sales by 2020.
Dedicated VR device volumes will remain small with 19–21% market share between 2018-20
(e.g. high-end dedicated headsets from Oculus and Valve, Sony’s PSVR, etc.)
2. Mobile
VR
1 Promotional
VR
3. Dedicated
VR
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VR development: enterprise market
0% 10% 20% 30% 40%
Telemedicine
Contact centre /mass customer service
High-capacity meetings (25+ participants)
Meetings with customers or clients - support
Meeting/collaboration with partners
Employee training
Internal meetings
Meetings with Partners
Videoconferencing users
Mobile videoconferencing Desktop videoconferencing Room-based videoconferencing
Video applications have high development potential in the enterprise segment:
Video communications services such as video-conferencing
Video surveillance to be key component of managed security solutions
VR/AR maturity (e.g. 360º cameras) to accelerate diverse vertical video applications (e.g.
contact center, telemedicine, training, sales promotion / demonstration, etc.)
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Key takeaways
Digital (video) is the future of growth (40% out of 1,627B in 2025): the way forwards is
innovation and constant change – digital advertising is the approach to development.
Video will become the basic services before 2020. It offers tremendous opportunities &
challenges to early movers
Consumers will invest in experiences they value: emotion and time will become
increasingly precious
Competition will shift from “delivery” to “platform” and ultimately to “data & design”
OTT SVOD sets the trend of future development ... Operators leverage OTT content for
enhanced competition and customer experience delivery
There is fully array of video enabling technologies for “Convergence Video” development
(i.e. entertainment + communications + vertical video applications)
Many telcos early invest and launch 4K UHD service
VR hits first (2016 - 2017), but AR will eventually be bigger (2018 - 2020)