OTT: THE NEXT BIG THING IN BROADCAST & MEDIA

Over-the-top (OTT, Over-the-top Video) - n. -

def.- Premium video services delivered over the Internet

to televisions and other connected devices.

CATEGORY PLAYERS

Connected TVs

Connected STBs

Connected TV Platforms

Gaming Consoles

Content & SW Services

2011 – The Year of the Cable Cut

• In Q2, 711,000 subscribers cut cable TV

• 6 of 8 operators suffered worst quarterly losses

SNLKagan points to these factors:

• Economic woes

• Promotional churn

Not so fast!

% of U.S. cord-cutting homes remains stable as cable & broadband homes grow

Jan 2008 Jan 2009 Jan 2010

70

60

50

40

30

20

10

0

Perc

ent (

%) o

f Pop

ulati

onSource: Nielsen National People Meter Sample (Jan 2008 to April 2010)

GROWTH OF MEDIA PLATFORMS

54.8

61.6

66.3

3.23.9 3.9

Cable & Broadband

Cable - No & Broadband -Yes

of US cord-cutting homesas cable and broadband homes grow

Young: 54% of likely cord cutters are under 40.

Educated: 97% have graduated high school;69% pursued or are pursuing post secondary education

Employed: 90% are employed, full-time students, or retired

Not Poor: 57% make more than $50,000 / year

Source: Gigaom / Strategy Analytics, Multiplay Market Dynamics Service

• 13% of American’s surveyed plan to cut the cord

• Cord cutters are young, educated & affluent

Who? When?

OTT Players and their Hurdles

*Source: Forrester Study 2010

Connected TVs

4 PROS :

• Heavy industry support:

o Best Buy to sell only connected TVs by 2011

o Wal-Mart promises the same by 2012

• 43 M+ Connected TVs in US homes by 2015*

6 HURDLES :

• Consumers: 61% are unaware, and 40% question the value*   

• Not enough processing power to offer compelling services and UE

Most Connected TVs sold will never be used in connected mode

4 PROS :

• Apple TV – Good UE and Apple’s muscle

• Boxee – Innovative platform / market buzz

• Roku – Great content and low price point

• TiVo - Great brand clearly now focused on apps and connected features

6 HURDLES :

• Consumers don't want to buy another box when cable provides one for free        

• None of these services provide the same level of content as cable

• Most consumers won’t cut the cord for one of these services

Connected STBs

4 PROS :

• Potentially the most promising player

• Offers a stepping stone to OTT : builds on existing TV experience

• Provides an app marketplace

6 HURDLES :

• Lack of broadcaster cooperation

• Complexity

• Expensive

• No app marketplace at launch

Connected TV Platforms

Gaming Consoles

4 PROS :

• Massive install base

• Easy to use and install

• 60% of Netflix streaming

6 HURDLES :

• Only 6% of Console owners watch streaming video

• Lack of content - too little too late

Content & SW Services

4 PROS :

• Netflix is winning here

o Play nice with content owners

o Available on every Internet TV platform

o Account for 20% of the Internet’s bandwidth usage during primetime

• Vudu - Massive library, high quality streaming and the muscle of Walmart

6 HURDLES :

• None are a complete solution

Incumbent Cable and Satellite Operators

• Most threatened by OTT

• Fighting back with TV Everywhere

• Adding OTT services of their own

• Deep content relationships getting even deeper (Comcast/NBC Universal merger)

Incumbent Telcos

• OTT providers will capture the value of their IPTV investments

• Adding OTT capabilities to their IPTV offerings

• Creating their own pure OTT offerings

What will it take?

Key Success Factors:1. Powerful processors

2. Apps marketplace (like mobile, only bigger)

o Support for 3rd party apps

o Complete SDKs

o Social discovery

o Apps will become the new channels

3. Great User Experience including set-up and ease-of-use

4. Premium, timely content live and on-demand

5. Interactivity to extend the TV viewing experience

6. OTT business models for content owners

7. Advertisers sponsoring interactive experiences

7. Consumer education and marketing

8. Broadcast networks need to get on board

9. Single platforms that have it all

o Ad supported free content

o Subscription content

o Paid VoD from 1 provider

Thanks!

Daniel GoodfellowEmail:Daniel@kitd.com