Video Delivery is the Key to
Broadband Profitability
June 22, 2010
Madeleine Forrer, Vice President of Video Services, NRTC
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What I’ll Cover Today
Video Industry Facts and Figures
–
OTT Video in a Traditional TV World….or vice versa?
–
Consumer Viewing Trends
–
Programmer Ad Revenue
Experimental TV Services
–
Players in the Market
–
Levels of Success
Ensuring Success in Video – Be More Than a Pipe
–
Acquiring Incremental Revenue
–
Creating a Business Plan
–
Thoughts from NRTC video members
Hulu Generates Ad Revenue in 2009
In 2009, Hulu reported $100 million in ad
revenue
Hulu claims it can earn that amount in the
first two quarters of 2010
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Broadcasters’ Ad Revenues Dwarf Hulu’s
TV networks ad revenue in 2009:
• ABC – $5.98 billion
• NBC – $4.44 billion
• CBS – $6.29 billion
• CW – $591 million
• Fox – $4.44 billion
Data excerpted from “Plummeting Ad Revenues Hit NBC, CW ,MTV The Worst” © 2010 Business Insider/Kantar Media
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Gain in Networks’ Ad Revenue for 2010-2011 Season
The same five broadcast networks
recorded a 15.4% gain in ad sales for
2010-2011 primetime season.
They sold $8.52 billion in primetime ads.
That’s more than 85 times Hulu’s $100
million.
Data excerpted from “Upfront Boon for Broadcast.” © 2010 SNL Kagan
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Traditional Video Isn’t Finished, Yet
“The reports of my death have been
greatly exaggerated.”
-Traditional Video
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What is All this Press About Online TV?
• Excitement about a new market
– Potential new revenue opportunity for entrepreneurs
• Largely a creation of the media
• Headlines grab attention with words like:
– “Disruptive”
– “Game Changer”
– “Free!”
• The reality is the numbers just aren’t there
• Don’t buy all the hype! Do your own homework and
due diligence
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Consumers Demanding DVR, TV Time
•
•
•
•
36.6% of HH have a DVR*, up from 30.9% in Q1 2009
Viewers watching 9:36 of timeshifted programming a month, up from 8:22 last
year
In one month, viewers watched 1.3% more TV now than they were the same
period 2009
They spent 3:49 per month less time online compared to the same period 2009
Monthly Time Spent in9505
Hours:Minutes
Per User
minutes watching
TV2+a month
Q1 2010
Q1 2009
158:25
Watching Timeshifted
TV
9:36
8:22
Using the Internet on
PC
25:26
29:15
3:10
Mobile Subs
Watching Video on
Mobile Phone
3:37
*As of May 23, 2010
Data © 2010 SNL Kagan, Nielson
Hrs.:Min. Diff.
+ 14.7%
+ 1:14
- 13.1%
+ 3:49
Yr to Yr
190 minutes watching Internet video a
156:24
+ 1.3%
+ 2:01
month
Watching TV at Home
Watching Video on
Internet
% Diff.
÷
Yr to Yr
50:1
For3:00
every 50 minutes
+ 5.9% of live +TV
0:10
consumers
watch,
they watch
just
3:37
Flat
0:00
one minute of Internet video.
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Over-the-Top Content Not Impacting
TV Viewership
"There was speculation some years ago that
once the Internet really started to expand,
that would maybe draw people away from
TV…But none of that's really happened.
These platforms turned out to be additive.“
-Tim Brooks, TV consultant
Former executive at USA and Lifetime
Quote excerpted from “The Allure of Traditional TV Viewing” © 2010 SNL Kagan
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Simultaneous Consumption of Media
"I think a lot of people are checking their email, updating their Facebook and even
watching YouTube videos while 'CSI' is
playing in front of them on the TV set. So it is
possible for these new technologies to
emerge and to be consumed parallel [sic]
and simultaneously with the old.“
- Robert Thompson,
Professor of Television and Popular Culture,
Syracuse University
Quote excerpted from “The Enduring Allure of Traditional TV Viewing” © 2010 SNL Kagan
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OTT Not Taking Advertising Dollars, Either
“Yet the current reality doesn’t support the
‘doomsday’ viewpoint. OTT certainly is a
disruptive technology, but the economics
underlying the video business will ensure that
content gets paid for. Television remains the
preferred screen for consumers, keeping
multichannel operators in a relatively
comfortable position for the time being.”
-SNL Kagan, Excerpted from “Multichannel Providers Well
Positioned to Take Advantage of OTT” © 2010 SNL Kagan
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Major Content Companies Looking for a
Working Model
"The train won't leave the station until the major content
companies say it will," the two analysts [Sanford C. Bernstein
analysts Craig Moffett and Michael Nathanson] wrote in a note
e-mailed to clients.
"As we have so often reminded investors, six companies
(Disney, Time Warner, NewsCorp, Viacom, CBS [Corp.], and
NBCU) control more than 80% of viewing hours in the U.S. (as
measured by Nielsen 18-49). Until they find a model that is
economically viable, the development of online video will be
halting at best.“
-SNL Kagan, Excerpted from “Competing Models and Other Obstacles for Online
Video” © 2010 SNL Kagan
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Existing Multichannel Providers Better
Suited to Providing OTT
“In fact, according to Minerva Networks Inc CEO
Mauro Bonomi, existing multichannel operators, not
the new entrants into the OTT video, may be best
suited to offer a solution in the form of a service that
blends existing subscriptions with over-the-top
content.
Cable and telecom companies are in a unique
position to act as aggregators of all the available
content that currently comes from multiple sources
and present it in a simple, searchable fashion for
viewing on multiple devices to their subscribers.”
-SNL Kagan, Excerpted from “Multichannel Providers Well
Positioned to Take Advantage of OTT” © 2010 SNL Kagan
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TV Advertising Leads the Pack in
Revenue Annually
billions of dollars
• Online ad revenue to reach only $2.1 billion by 2016.
• TV ad revenue to reach $20.7 billion by 2016.
Data © 2010 SNL Kagan
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Hulu Views Grow, But Audience Growth is Flat
While Hulu unique user’s viewership continues to grow,
the actual number of unique viewers has not (blue).
Data © 2010 Business Insider SAI
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Advertisers Still Wary of Online Ads
“First of all, [Advertisers say] you need to
show me that the reach online is
significantly incremental to what I already
get on TV.”
Kevin Arrix
SVP of Digital Advertising
MTV Networks
Quote excerpted from “Media Executives Say Online Video Still Not a Material Threat to Multichannel.” © 2010 SNL
Kagan
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OTT Device Growth through 2014
Data presented in percentage of homes
with a given device.
Over 360 million
devices could
potentially stream
OTT video in 2014.
These devices
bypass your video
service using the
Internet.
No opportunities for
meaningful telco
revenue.
Data excerpted from “Multichannel Providers Well Positioned to Take Advantage of OTT.” © 2010 SNL Kagan, Minerva
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Thoughts to Keep in Mind
Although OTT programming will always
have a market, the smart money is on
evolving subscription/pay-TV models
Key to video success is a flexible service
that allows for new developments and
services
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Experimental TV Services…
…everyone wants a piece of the pie
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“Burned Out” Players in OTT
Company
Total Funding
(in Millions)
Date of 1st
Funding
First Two Years
(in Millions)
% Raised in 1st Two
Years
Spot Runner
$133
12/31/05
$82
62%
Veoh
$99
8/2/05
$69
70%
Move Networks
$91
12/8/06
$91
100%
Brightcove
$81
2/28/05
$81
100%
Visible World
$73
2/16/00
$20
27%
Invidi
$62
12/18/03
$32
52%
Metacafe
$49
7/1/03
$4
8%
Joost
$45
5/1/07
$45
100%
DailyMotion
$44
8/16/06
$44
100%
Tremor Media
$40
9/10/06
$22
55%
BlackArrow
$38
2/25/05
$18
47%
Most online video businesses are funded by venture capitalists.
Although they have millions in VC funds, these ventures raise too much money too
quickly—which ultimately leads to their downfall.
They fail to generate sufficient revenue before their VC funds run out.
Data excerpted from “What Sank Veoh and Joost? Too Much Cash Too Soon” © 2010 AdAge
“Burned Out” Players in OTT (continued)
Company
Total Funding
(in Millions)
Date of 1st
Funding
First Two Years
(in Millions)
% Raised in 1st Two
Years
Eyeblaster
$38
12/20/03
$8
21%
VideoEgg
$36
4/20/05
$16
44%
BitTorrent
$36
9/27/05
$29
80%
ExtendMedia
$33
3/16/06
$23
70%
KickApps
$32
10/30/06
$18
56%
Vuze
$32
12/4/06
$32
100%
Heavy
$30
12/23/05
$30
100%
Visible Measures
$29
3/1/07
$19
65%
vMix
$27
3/13/06
$27
100%
Adap.tv
$24
6/30/07
$24
100%
Kyte.tv
$23
8/15/06
$23
100%
Next New Networks
$23
3/8/07
$23
100%
Data excerpted from “What Sank Veoh and Joost? Too Much Cash Too Soon” © 2010 AdAge
“Still Standing” OTT Players
• Hulu – Moving to a paid model, significant reduction
in content by programming participation limits
• Netflix – Current programming selection, significant
delays for new releases
• Sezmi – Has changed model several times
• Vudu – Movies only
• Roku – Platform only, delivers Amazon and Netflix
content
• Boxee – Platform in search of content
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A Hybrid Model will Evolve for Video
OTT and TV Everywhere can be a part of your
video offering, but not all of it
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NRTC Changes Focus Based on Industry
Intelligence
We’ve focused on different areas of the
industry as technology develops:
1. Linear Programming
2. High Definition
3. Video on Demand
4. Start-Over TV
5. TV Everywhere
Three Principles to Guide You
• Follow the money
• FREE is not a business model in the content
world
• Content is still king
• Distribution channels are less
important than the first two principles
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Programmers Already Involved in TV Everywhere
• HBO GO!
• EPIX
• ESPN3.com
– Now has Xbox 360 compatibility
– ESPN3.com only available if ISP offers it
You want your subscribers to come to you
to get these services.
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Your Video Business isn’t about Video
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Video is about expanding ARPU
• Allows you to be more than a pipe
• The market is focused on who owns the
relationship to the home (share of wallet)
• Go beyond thinking about your each of
products/services individually
• How much revenue can you generate
per home in total
– Every home you lose to a competitor
impacts your long term viability.
Video is about Incremental Revenue
Success in video isn’t found in the video
product itself, it’s about the incremental
revenue generated by complimentary
additional services:
•
•
•
•
•
DVR
Whole-home DVR
HD
On-screen caller ID
Mobile voice
•
•
•
•
•
Broadband
Upgrade fees
STB fees
Additional tech. fees
Telephone
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Survey: Why Did You Decide to Offer Video?
(multiple answers allowed)
82% want to become an FSP
90%
80%
82%
70%
60%
50%
40%
30%
20%
10%
0%
*Other listed as “defensive” maneuver
You Can Be a Technology Service
Provider…
Provides access to delivery
technologies like voice, data, and
video
• Offers services that use these delivery
technologies
• Creates bundles that tie access and services
together
• May create offers that include popular
consumer electronics
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Model Telecommunications Offerings
Delivery
VOICE
Services
LOCAL
LONG DISTANCE
MOBILE PLANS
CALLER ID
CALL WAITING
DATA
BROADBAND
E-MAIL
WEB MAIL
PC PROTECTION
VIDEO
IPTV
TV EVERYWHERE
VIDEO ON DEMAND
Products
HANDSETS
“HUB” DEVICE
SECURITY SYSTEM
SURGE PROTECTION
DIGITAL CAMERA
XBOX, PS3, etc.
ENTERTAINMENT PKGS
MODEM - WIFI ROUTER
COMPUTER
SET-TOP BOX
PC
HDTV
HOME MEDIA SERVER
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Technology Bundle Examples
West
Wisconsin
Telecom
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Creating An Action Plan
• Become your community’s “technology
service provider”
• Realize it’s not just bundles—it’s technology
bundles
– Combine the access methods with services
– If you only provide access, you’re leaving revenue
on the table
• Make the infrastructure choices that enable
you to offer the services you plan
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Create a Business Plan
1. Know your competition
2. Bundled services help drive penetration rates,
allows you to “own the household”
3. Ensure you’re providing the services your customers
want and best your competition when you can
4. Incremental video services are how you make
money
5. Consider future offerings when launching video – IP
middleware provides the greatest functionality
quickly
Thank You!
Madeleine Forrer
Vice President of Video Services
NRTC
mforrer@nrtc.coop
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