IPTV
TechVenture 2006
Kellogg School of Management
Tom Cadwell
Laurence Cua
Mahesh Jadhav
Ammon Matsuda
Rob Svetlik
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
Agenda
• Definition of topic
• Objective of paper
• State of the market
– Industry view
– Consumer view
• Key players and the business impact
• Adoption cycle framework
• Next steps
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
Definition of topic
IPTV is an IP-based delivery mechanism for
packet-based video
Really much more:
• Limitless content
• Instant access
• Interactivity
• Faster channel switching
• Flexibility
• A la carte channel selection
• Lower cost of deployment,
• A counter to cable’s voice entry
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
What are some of the major issues:
• Product differentiation
• Unclear business models
• Content Acquisition
• Inadequate bandwidth
• Lack of open or mature standards
• Piracy
• Unpredictable Capital Costs
• Inexperience in TV industry
• Poor track record rolling out DSL
Objectives of the paper
• Assess the market from a business and
consumer perspective
• Identify opportunities for and impact on
businesses and suppliers
• Provide a framework on how the adoption
cycle will play out and the key factors that
will drive it
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
Global Snapshot
Asia
• Hong Kong leading
• Taiwan, Japan moderate success
• Korea stuck in regulation
• China, Singapore, India, other in trial
Europe
• Italy leading
• France, Spain, Nordic areas moderate success
• UK, Germany, Ireland in trial
US
• SBC/AT&T/Bell South – “Project Lightspeed”
• Verizon’s FiOS
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
Major Rollout Factors
Regulatory
• US
• Korea
• Italy
Standards Wars
• ISMA vs. DVB
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transport layer
metadata
accessing and finding IP addresses
describing stored content
digital rights management
authentication and access protocols
DSL Penetration
• Video requirements – 3 to 4 Mbps, 7 to 9 for HDTV
• FTTH
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
Microsoft Labs demonstration
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
NOW Broadband TV - HK
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
Verizon infrastructure buildup
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
Consumer habits trends
• Watching content online through the PC is a
different consumer experience
– “sit up” vs “sit back” experience
• Growing desire for control
– DVRs, PVRs, VoD
• Concurrent usage of different media channels
– 96% of consumers use two or more media channels
simultaneously for 30% of a day
– Watching TV and using the Internet is the number one
combination
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
IPTV’s value added benefits and
its substitutes
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
IPTV’s value added benefits and
its substitutes
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
IPTV value proposition
Integration and interactivity
More content variety
Lower costs
(triple-play discounts)
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
Key Players & Strategies
• Microsoft
– Seeks to make Media Center PC the platform form IPTV.
– Currently betting on other entities to sell IPTV to consumers –
interested in providing software.
• Telcos (Verizon, SBC, Others)
– See IPTV as a potential windfall, and also a means of curbing
market share loss in voice and internet markets to cable
companies.
– Currently building IPTV infrastructure with large investments to
eventually sell triple-play offerings to consumers.
– Unclear what devices, features and pricing they will choose.
• Cable and Satellite
– Motivated to defend their market as both have huge investments.
Price competition will hurt them, so how do they differentiate?
– Not a lot of reaction yet, but IPTV isn’t mainstream in the US yet.
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
Key Players & Strategies
• Content Providers
– Interested in using IPTV to expand VOD offerings and to leverage the
long tail of content.
– Can strongly influence if IPTV succeeds or fails, but haven’t picked
sides yet.
– Very concerned with copy protection as usual.
• Device Manufacturers
– Some DVR manufacturers have expertise in matching consumers to
content they would enjoy. This is very valuable to IPTV, but the core
recording feature of DVRs is not useful in some IPTV versions.
– Device manufacturers encouraged to hedge bets.
• Content Aggregators (Akimbo)
– Akimbo trying to host its own alternative TV offerings set, purely VOD.
– Unclear if this will be successful as a cable/satellite substitute in the
absence of mainstream content. Will Akimbo or someone like them
produce an independent non-telco “mainstream” IPTV offering?
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
Impact on Businesses
• Content Providers
– Increase in bargaining power – can influence
who wins.
– May benefit from long-tail effects.
– May benefit from content innovations.
– Will seek direct relationship with consumer,
but unclear if this will occur.
– Concerned with copy protection.
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
Impact on Businesses
• Distributors
– Cable lost 27% market share to Satellite…
Will IPTV steal more? Can they defend?
– Potential windfall for Telcos – their turn to
steal business, but only if they meet
challenges.
– Content aggregators may seek to become
traditional distributor alternatives.
– Search capabilities from aggregators will be
key in leveraging unique IPTV capabilities.
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
Impact on Businesses
• Device Manufacturers
– Probably will not affect TV manufacturers too
much. If Media Center PC takes hold, some
opportunities for bundling extenders.
– Set-top box or Media Center PC? Will media
center PCs become standard?
– Will DVRs evolve, be replaced, or continue to
be used as they are currently?
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
Innovation diffusion
by suppliers
IPTV Adoption – Analytical Frameworks
Adoption Patterns and
value creation
Consumer adoption
life cycle
Past trends
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
Migration of intelligence
in value network
IPTV Adoption - Scenarios
Early majority
Early adopters
Customer demand for
differentiated service
Long tail programming
High
Low
- File transfer based, iTunes downloads
- Rare programming. Example world
championship for curling
- Tech-savvy and small group of loyal
customers, premium service
- Main players: Telcos+Content providers
- Compete on flex-time and customized
content
Niche interactive
entertainment
- Gaming, Real-time shopping
- Large audience, premium service
- Main players: Telcos, Niche content
providers
- Compete on interactivity, flex-time,
premium service
Video Streaming
Standard TV entertainment
- File transfer based, iTunes downloads
- Music videos, films, news, adult
entertainment
- Tech-savvy and heavy computer users
- Main players: Portals, Apple etc
- Compete on cost, flex-time and variety
- Standard programming. Example:
alternative to cable options as of today
- Large audience, low cost
- Main players: Telcos, Cable, Satellite,
Niche content providers
- Compete on flex-time and low-cost
content
Low
High
Supplier QoS and technology
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik
maturity
Next Steps
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Microsoft (Mountain View office)
AT&T/SBC - San Ramon office, focus: IP solutions
Current TV
TiVo – Alviso, CA
Akimbo – San Mateo
ISMA – SF, standards group
Yahoo!
Google
Cisco Systems
Kasenna
OpenTV – SF
Redback Networks – San Jose
© 2006 by Cadwell, Cua, Jadhav, Matsuda, Svetlik