OTT in the future of television
March 1, 2011, OTTCon, San Jose, CA– a panel moderated by Colin Dixon from the Diffusion Group considered some of the issues and challenges facing the television industry. The panel was comprised of Ian Valentine from Woomi, Kevin Simon from Logitech, SV Vasudevan from Cisco Systems, Russ Schafer from Yahoo, and Mark Benscheidt from Sezmi.
One of the interesting issues facing content and ad providers is that OTT users cannot skip the ads. A more important change, is that now, instead of going to content is available to the largest number of technologies, they are making it so that content available must find the user. As an example, Netflix currently has about one third of their users getting content via streaming. Pundits predict that by 2016, 300 million households will have IP TVs. This number is expected to grow to half of all households in the world by 2020.
Benscheidt suggested that people are switching due to their exclusion of the big four business model. Broadcast ads are getting scarcer so OTT provides a new way to monetize content. The broadcasters need to change or they will die, channels will go away, and the dissipation models are changing for everyone and moving towards a playlist.
Simon opined that the web is a driver for change in all offerings and soon will add existing content versus the replacement content to the mix. Everything is available on the web and is becoming a mobile app for television. The number of channels available is completely open. New technologies are increasing the integration between the web and broadband by enabling video search. Apps tied to content such as social or video extend the reach of the various application platforms like android from Google.
Vasudevan noted that Cisco is to focus on data networks and IP with video as a secondary consideration. As networks move to video and move to the cloud they are now starting to emphasize video networks over IP. The network will become the relevant packet delivery service but these functions are much harder with mobile. The development and maturity of the cloud has prompted the move to greater virtualization and so far, have not hit any limits. The cloud and networks provide centrally located delivery services and enable more people to access the value within.
Schafer suggested that personal TV experiences have not changed any while. The average house accesses 15 channels and the average person averages eight of these. Apps enable fine-grained choices and allow viewers to link the televisions with the web and engage with content in real-time to discover what is interesting. On the web, the top three sites are social networks, so apps provide access to content based on personal ratings. In the future, navigation and their personal television experiences will allow people to follow others to other screens. So far, social network recommendations increase the number of buyers for a product or service by 20 percent.
Vasudevan offered an example of the influence of social networks. Navigating through unknown spaces is simplified in specific areas. For example Yelp rates restaurants and services, making it easier to find something you’ll like. It’s really hard to drill down to relevant content with the increasing number of channels, and probably 90+ percent of all that content is not interesting. An app can bring the information about that content to you. Linear programming is still the most popular, as people tweet in parallel with the broadcast. In addition, some content is still live.
Simon proposed greater integration of social networking with search functions. The discovery of content is completely the social function, and providers can enrich the TV experience by using the social nature of television rather than just trying to create more stuff. The problem really is the technologies to integrate social and search functions does not currently exist, or the capabilities to enhance these experiences is too make immature. So far, the best technology can do is provide an adjunct extreme application on another platform.
Valentine suggested that the percentage of live audiences is fairly small, and many things can disrupt the linear channels. He added that the challenge is in integrating the functions in a meaningful way. A good recommendation engine could get viewers to watch. Apps improve Web TV by addressing the entertainment versus search functions and keep television viewing as a lean-back experience. The DVR is going away, mostly due to content license issues and the ability of the cloud to store everything.
Schafer put forward the concept of gathering information on what people were doing and provide a place for that information to provide the consumer with easy access to the aggregate data. Access is relevant to the device, but consumer adoption is the biggest barrier. The distribution models are changing; the window for change is fairly small. The biggest problem is to personalize the services, navigation, and layout of the screens.
In response to a query on smart TV, Simon opined that smart or connected TV is not likely to be successful, because you need rich content, apps, OTT, and browsing. Existing set manufacturers do not have the scale to attract the developers. Devices aggregate the content at the point of sale. Moving more content requires new business models and data acquisition of consumer drivers. Device makers are not directly to the users, but have to go through the stores as intermediaries. How would the makers monetize this new relationship? The game consoles and other boxes can provide as much connectivity as an integrated TV.
Valentine expects services to be consolidated but external boxes will continue to exist. TV sets are expected to last about 10 years, but during that time, many changes can appear on the market. Users who want those other services will add another box to get the new offerings. There will be fewer boxes in the future, as current offerings become more integrated, as in the PS3.
Schafer disagreed with the boxes idea. Lots of innovation will be likely in the next decade. The main room is ok for extra boxes, but the other rooms have little tolerance for extras. The smart phone and the TV will be working together and by putting functions into the cloud, the user can access software upgrades whenever needed.
The next question related to operators. Vasudevan considered Netflix as equal to reruns. The overall industry spends a lot of time in reruns and only a small percentage are cutting the cord. Now, most people supplement their existing cable with OTT content and the number of shows is the driver for the industry changes.
Along the same lines, Simon offered that content providers have to face the challenge of OTT without cannibalizing their existing offerings. They want to monetize more, but have to change their business models first to include other providers and other offerings in conjunction with the overall supply network context. This is new income for the operators. A new model at some income level is supplemental. One challenge for Google TV is that it is a standard STB that requires full disconnect to change modes–you cannot watch something while browsing for new content. This will evolve into an overlay in the future.
Valentine noted that OTT content trades 14 ads in 30 minutes for 2 minutes of pre-roll per segment. The providers need to get a 20 times increase in pricing per ad to stay even. The carriers need to find other ways to monetize their viewers. If the carriers view OTT as a way to shift the off-load to the OTT box then a new model is possible. This needs partners, box and MSOs (Multisystem Operator) to work together.
Schafer joined in with the comment that OTT adds money to the pool. Carriers can replace linear programming with the pool resources. This is a different income model that needs interactive ads. Broadcast plus content added interactions or some other combination will be good. Pricing must include terms of service at the source. Whatever works best will be scalable in the marketplace and will enable selling ads across the digital networks. The OTT content needs to be accessible with the existing TV while permitting useful multi-tasking.
