Digital Refugee

OTT Tipping Point Part 1

My recent appearance at the Set-Top Box Gateway Summit in London picked up a bit of coverage (mainly from CSI who hosted the event). I've been meaning to post an article on the topic of the "OTT Tipping Point", which I have been researching, but the quotes, which I really did say, that were picked up by CSI summarise the topic well. Watch this space for the full analysis. 

CSI Gateway Summit: Industry Reaching "OTT Tipping Point"

By Goran Nastic

NAGRA has said that CDN costs have fallen sufficiently enough to enable an economic migration of broadcast content into an over-the-top environment, arguing that even satellite would be cheaper to go all-OTT within a decade.

Speaking at CSI’s Gateway summit, Matthew Huntington, VP of product marketing at NAGRA, outlined how the company performed recent analysis based on something it calls the “OTT tipping point”, which is the point at which OTT mechanisms of delivery become cheaper than traditional methods of transport.

“The interesting thing is where we are today in terms of CDN costs – the key costs of delivering that video – is for a million subscriber network with maybe 250 channels, it’s actually cheaper to deliver that today all from an OTT infrastructure than it is via satellite. Even Sky theoretically in ten years time with no inertia or momentum would be cheaper to go OTT than via satellite,” said Huntington.

Huntington did concede, however, that things change when the most popular DTT channels are considered: “If you look at usage of the main terrestrial channels and when that gets cheaper, that is still decades away doing the Big 5 channels OTT in a country like the UK.”

In terms of transcoding, he argued that the cloud is theoretically a cheaper place to perform multiple transcodes but that this approach is currently held back by rights issues.

“The Horizon project (which NAGRA is part of), part of its challenges is that it can really support one transcodefor one device in the home whereas on average there are three IP connected devices in the home so you’d have to choose which one you use. The question is, is it right to put a lot of transcoding capability into a device in the home or should we go back into the cloud model where we stick the transcodingin the headend, is that a better cost equation? The thing that’s driving us towards the gateway is rights,” he said.

Huntington also argued that interactivity is moving into the tablet, which will likely become the key TV device in the household. “Screen democratisation has happened but there is also second screen inversion where the handheld (ie companion) devices become the key device the customer relationship sits with, where they’re getting their video from and where they go to discover content. The main TV set is just the dumb display in the corner of the room they move stuff onto when they want it.”

Netflix vs. BitTorrent

Broadband TV News amongst others recently ran an article comparing the top 10 most illegally downloaded movies from Bit Torrent with the Top 10 streamed Netflix movies. Now I had expected the lists to be roughly the same, but it is interesting that they are not, in fact they are very different. The two top ten lists are include at the bottom of this article so you don’t need to search around for them.

In all the coverage of these lists, everyone remarked (generally with surprise) that the lists were different but no one gave any real reasons or analysis. As I’m always willing to provide an opinion I thought I would present some potential reasons for this divergence.

First off, the Torrent list is what you would expect. It is full of the highest grossing films of all time. We have Avatar at the top of the list; in fact if you look at the top grossing films on Wikipedia, the correlation is high, particularly if you take into account a stereotypical view of a torrent user. However, looking at the Netflix list it is nearly devoid of top 50 grossing films.

One of the main reasons affecting the divergence of the two lists is rights. Illegal downloads don’t respect rights and don’t take them into consideration. Pretty much anything that has made it to theatrical release (sometimes before) is available via a torrent. However Netflix is limited by the subscription streaming rights they can acquire and afford. For example they currently they have to wait 28 days for TimeWarner content, and the studios are pushing to increase this. I’m assuming that Netflix does have the rights to stream Avatar, and if they do then it’s not been for very long. I suspect that the position of “The Blind Side” at the top of the list is likely to be due to early release by the studio of for streaming.

I believe there are some other factors at play. One of these is content discovery. Finding a film to watch is difficult, Netflix is a strong commercial service, recommending movies, matching subscribers with something they want to watch. There are some BitTorrent search services out there, but they don’t have the polish (or the budget) of the Netflix service. So this means Netflix subscribers are more likely to watch more than just the current top 10 blockbusters.

The last factor I would like to explore is collections. I believe that a lot of BitTorrent downloads are for adding to collections and not for actual consumption. The list therefore represents a list of films that the Torrent users want to collect, where as the Netflix list is a list of films that subscribers actually watched. How many of the Torrent users are actually Netflix subscribers? How many watched “The Departed” via Netflix and also downloaded from BitTorrent to collect?

I once took a taxi in Amsterdam on my way to have dinner with FreeSat in one of Jamie Olivier’s restaurants, which is another story all together. But the taxi driver talked at length (the traffic was bad) about his downloading habits. By his account he had illegally download 1000s of hours of content, but the interesting comment he made was that he didn’t expect to have time to watch any of it until he retired. He was just collecting.

My question is, if the video is out there on the web for free why do Torrent users like the taxi driver need to download it now and end up with hassle of managing terra-bytes of video? Once download how easy is it to find the stuff that’s been download? especially if distributed across hundreds of burnt DVDs and external hard-drives. Can the taxi driver preserve several terra-bytes of video until his retirement?

In the real competition between Netflix and BitTorrent the most imporant fact is since May 2011 Netflix has taken over from BitTorrent in internet bandwidth usage and accounted for 22.2 percent of all U.S. broadband traffic compared to BitTorrent's 21.6 percent share.

Top 10 illegal BitTorrent downloads

1. Avatar (2009) – 21 million – $2,782,275,172, #1
2. The Dark Knight (2008) – 19 million – $1,001,921,825, #10
3. Transformers (2007) – 19 million – $709,709,780, #45
4. Inception (2010) – 18 million – $825,408,570, #29
5. The Hangover (2009) – 17 million – $467,483,912,
6. Star Trek (2008) – 16 million – $385,680,446
7. Kick-Ass (2010) – 15 million – $96,188,903
8. The Departed (2006) – 14 million – $289,847,354
9. The Incredible Hulk (2008) – 14 million – $263,427,551
10. Pirates of the Caribbean: At World’s End (2007) – 14 million – $963,420,425

The list above is based on statistics is gathered from public BitTorrent trackers, dating back to early 2006. The figure after the title denotes the number of illegal downloads, the $ figure the estimated total world-wide box office earnings

Top 10 most rented movies on Netflix

1. The Blind Side (2009)
2. Crash (2004)
3. The Bucket List (2007)
4. The Curious Case of Benjamin Button (2008)
5. The Hurt Locker (2008)
6. The Departed (2006)
7. Sherlock Holmes (2009)
8. Inception (2010)
9. Iron Man (2008)
10. No Country for Old Men (2007) 

Second Screen Inversion

 

There is a growing phenomenon which I call second screen inversion. This is where consumers see their handheld device (smartphone or tablet) as being their primary TV device and not their traditional television set.

Today in the TV industry, PCs, tablets are smartphones are referred to as second screens; with the television set being the primary screen.  The use of the term is to cover these second screens being used to enhance the TV experience, either by making it interactive or by making it mobile. Another term currently used is “companion device” where a handheld device is used to support the television experience, especially for content discovery.

With seconds screen inversion consumers will no longer see the television set as the primary or initiating screen of their TV experience, but as a secondary screen after their handheld devices (tablets and smartphones). This does mean that the television set is not their preferred screen for viewing, but its role is as a slave to the other devices.

A key example of inverted behavior is shown with Apple TV users. With Apple TV and Apple Airplay whatever is being viewed on an iDevice (iPad, iPhone) can be pushed to a TV screen (via Apple TV). People increasingly don’t use the Apple TV remote or user interface instead preferring to find and preview content on a handheld device and then pushing it to the TV screen.

This inversion/switch impacts how consumers view their television and television service providers (their satellite or cable operator).  The quality of experience and breath of content on the handheld device will be the driver for service provider selection by these inverted consumers. Most TV service providers see the television set as their primary outlet and the set-top box as their most important presence in the consumer’s home, if they are to appeal to inverted homes they need to change their thinking and their positioning.

Today CE manufactures are building every more functionality and complexity into television sets and service providers are doing the same with set-top boxes. However in inverted homes the television (or set-top box) just needs to acts as a slave to a handheld device and can become dumber not smarter. I predict that while televisions may get bigger, may be even covering whole walls, displaying a vast variety of information, they will only do this as a slave to a handheld device.  This may require more sophisticated remote UI protocols than are available today.

The availability of powerful (and hopefully useful) natural language voice control such as Siri in the Apple iPhone 4S is another push in this shift to handhald devices. Remote controls and televisions just can’t complete with this level of processing power and service. We are far more likely to be saying “Show latest Simpsons episode on the living room television”, or better still “Show Simpsons in living room” into our mobile phones than into our TV remotes.

Note:

In this instance the term inversion is taken from Negroponte Inversion (also known as the Negroponte switch), a prediction Nicolas Negroponte made in his book “Being Digital” in 1995 that wired communication would become wireless and broadcast Television would become wired.

Thoughts on the Television User Experience

In the pay-tv industry content is still king, but this statement doesn’t mean what it use to. The pay-tv industry is largely built on content exclusivity, exclusive rights to sports, films, channels and series. But that exclusivity is being steadily eroded. On one side regulators are constantly pushing to reduce or remove exclusivity, but the real threat to exclusivity is from over the top services from the internet.  Today, consumers general have a choice to get the same content from either a pay-TV service provider or from a legal or illegal internet source, and finding content on the internet is getting easier and easier. A TV service provider’s defense against this is the user experience they provide.  A strong and compelling user experience can actually make over the top services a positive addition to a service provider’s services.

Consumers are lazy, particularly when sitting in front of a TV. Consumers will turn to easiest to access source for the content they are interested in, on the device they have at hand, at the quality they want. Traditional service providers can offer a uniquely convenient and consistent use experience across devices and content sources, with an ease of use that will truly appeal to consumers. This make the user experience a true differentiator for service providers against both traditional competitors but also new entrants.

 The user experience is not just a key differentiator in winning and retaining customers it can also have a positive impact on revenue, margin and operational costs. 

A user experience that provides effective content discovery through promotion, search, recommendation and community can enhance revenues, both in driving pay-per-view purchases but also through increasing the perceived value of subscriptions to consumers. Consumers often churn off premium subscription packages as they can’t “find” value in the packages as they don’t find the content that is relevant to them in the channels bundled in the package. If the user experience can reveal to the consumer the content relevant to them then they should value to package much more highly. Also, an effective user experience should be able to up-sell consumers to higher value packages.

Easily finding a movie amongst the myriad of choices that matches a consumers mood will make a consumer more likely to make a pay-per-view purchase.  If the movie comes from a broad library not just the latest blockbuster then the service provider’s margin on the movie is likely to be much higher. The studios retain a much larger percentage of the transaction value for movies when they first enter the pay-per-view window.

Better, easier to use interfaces will generate less issues and therefore generate less customer calls and reduce operational expenditure. The loyalty a great user interface can inspire can significant reduce customer retention costs.

Increased competition but also good business sense is making the use experience a key element of a service provider’s strategy.  There is an imperative for service providers to focus on and invest in their end-user experience. 

Why Blog?

Before I started to write a blog I had to ask myself why? Is it just pure vanity or for self promotion.  Surprisingly enough I do actually have a real reason for blogging. Before I get to that, I have to admit it is partly due to sibling rivalry. You see my brother has a blog.  When we were young he was the arty one and I was the techie, so if either of us was going to end up with a blog, by rights it should have been me. My brother doesn’t just have a blog, he has a blog that people actually read, hundreds of people of day for several years have read his blog. My brother writes

www.adlierate.com which is one of the top advertising planning blogs on the planet. I don’t understand much of it, but apparently it is gospel for up and coming advertising planners.

So, apart from trying to catch up with my brother, which to be honest I have no hope of doing, why do I blog?

I come up with lots of ideas, feed me the appropriate amount of caffeine I’m an idea factory. I find that those ideas only truly develop when I start to write them down. Random thoughts are crystallized into meaningful useful ideas we I put pen to paper. For work related ideas I do this as part of my usual working day. I write ideas down in documents and emails, I distribute them, I elicit responses, I apply feedback. The ideas either develop a life or die, but they become well form. However, ideas that don’t fit well into my immediate sphere of work have nowhere to go, nowhere to develop. They get tossed around in my head and then forgotten about.

I could just write my ideas down for my own consumption. I could write them down in a private Moleskin notebook like an aspiring poet.  However, I find without the public disclosure there is no pressure to correctly develop the idea, to make coherent sense of them and the ideas fail to reach maturity.

I blog to develop ideas. Of course this raises all sorts of IPR issues which is food for a blog all in itself.

Portable workspaces, a dropbox for my life

While working I carry my laptop with me nearly all of the time. I carry it between home and work nearly every day. This is not so much of a problem when I’m taking my normal commute using public transport, after all I have a pretty light weight road warrior laptop, but a real pain when riding my bike to work.

I also carry a blackberry with me but I like to have my laptop with me to respond to email. I find the act of writing with my blackberry somehow limits my thought process and make my communications less effective. I also derive a certain level of comfort in carrying all of my work files with me – the accumulated knowledge from 15 years of working in the industry.  

Over the years people have made some suggestions to help break my dependence on my laptop. The first option is to carry my files on a small USB hard drive.  This could work between the office and home, but while travelling I would still need to carry a laptop to work, and now I would need room to plug in the drive to my laptop, which is a bit tricky on a seat back airplane table.  The other suggestion is to push my important files to the cloud and access them from there. In order to access the files on an airplane I would need some good syncing software. The USB disk would also work better with good syncing software, only taking it with me when I don’t want my laptop.

The problem with me and syncing software is I leave my files open for days on end, I only put my laptop to sleep when I’m on the move. Typically I have 20 files open at once. Many could be closed, but many are either being actively read or updated. I’m not great at multitasking, so I hate to think how many files a true digital native multi-tasker would have open. It would take me a lot of wasted time to close all my files so I can sync properly to the cloud or USB disk.

What I need is to carry the CPU with, so maybe one solution is to have a laptop that I can break apart and leave the keyboard, screen and most of the battery behind. But most laptops have the ability to suspend to disk, so one thought is to suspend my laptop at work to disk, pop the disk out and carry it home. Then at home pop the disk into an identical laptop and un-suspend from disk.

If I can suspend to a local disk, then I could suspend to the cloud and not carry the disk with me at all. The only problem I have now is I need to buy two identical laptops. The family does currently have three laptops in working order but none of them identical and the two non-work laptops have other functions. So the solution to my problem is to be able suspend my “workspace” to disk (locally or in the cloud) and then restore it as a virtual workspace on another machine which can also be running separate workspaces. I expect than vmware is part of this solution.

With this wish granted I would want one more, I should get three, right. This is wish is for Windows (or the OS I’m using in the future) to stay stable, not for a couple of days of use, but for months. But maybe that is asking too much.

One last thing I shouldn’t need to plug anything in – to charge or connect just place on mat.

TV As It Use To Be

 

A couple of weekends ago I experience TV as it use be and what a pain it was.

 

We were staying at my parents-in-law, who have recently taken a step forward and moved to  HD digital satellite TV (Freesat not Sky) but do not yet have a PVR.  We were watching as a family the X-factor, which is currently being watch by 15 million households and accounts for of the 40% viewing share.  It is on a little bit late for my 5 year old daughter and so we normally let her watch the first half live on a Saturday night and then  the second half on a Sunday morning. While the PVR at home was merrily recording the show, we were not going to be home in time to watch it on Sunday and my daughter was not going to be happy to wait until after school on Monday to watch the second half, particularly as that is the time she gets to watch the X-factor results show, which airs on a Sunday night. Getting a family to watch 3 hours of TV every weekend is complicated and takes planning even with the latest technology to hand.

 

Luckily I noticed that my in-laws still have a VCR tucked away underneath their TV. I don’t know when it was last used as my in-laws were only just able to record a program is the days of analogue TV and video stores are few and far between in the depth of Dorset.  After rerouting all the cables at the back of the TV and a lot of luck I managed to get the VCR to record off the satellite box. So come Sunday morning my daughter was able to complete her fix of X-factor.  A couple of things struck me, firstly it this was really difficult to achieve and the quality was terrible, even though it was only a SD channel the difference between SD over HDMI compared to recorded VHS was very noticeable.  I haven’t actually watched a VHS tape in many years and I was a bit shocked by how bad it was. We also realized, and only just in time, that once we had started recording we couldn’t change channel, a request from my father in-law to watch a bit of news before going to bed almost rendered my hours of fiddling with the VCR pointless.

 

While my father in-law had imposed his own analog switch-off, in the next two years most people across Europe are about to have it imposed on them and many of their strategies for watching the TV they want to watch will be disrupted. Will this drive to much higher uptake of PVR/DVRs in mainland Europe or a faster move to broadband video?