Redefining the Pay TV Experience
Aunindo Ghosh Senior Product Manager – Service Provider Video BU
July 2015
SP Video Market Trends and Case Studies
© 2013-2014 Cisco and/or its affiliates. All rights reserved.
1. Pay TV Updates
2. Time Shifted Viewing Trends
3. Next-Gen UX Trends
4. Latest on OTT
Agenda
© 2013-2014 Cisco and/or its affiliates. All rights reserved.
Total Pay TV Subscribers and Annual CAGR by Regions (in M)
Worldwide Pay TV Growth
12
530
82 112
52
120
14
603
88 112
61
125
Africa and Middle East Asia Pacific Central and EasternEurope
North America South and CentralAmerica
Western Europe
2012 2013 2014 2015 2016 2017 2018
+2.1% +5.3%
+1.3%
+4.9%
0%
+4.4%
Source: IHS Screen Digest, 2/2015
© 2013-2014 Cisco and/or its affiliates. All rights reserved.
Screen, Screens, Screens
of all media interactions
are screen based
10% On average we spend
4.4 hours of our leisure
time in front of screens
each day. of all media
interactions are
non-screen based
Smartphone Laptop/PC Tablet Television
Source: Google, Sterling Brands & Ipsos: The New Multi-Screen World, 2012
Radio Newspaper Magazine
90%
© 2013-2014 Cisco and/or its affiliates. All rights reserved.
TV Consumption is Undergoing a Revolution
3 Screens
Source: IAB – The Multi-Screen Marketer, 5/2012
TV is still the main household video
consumption device
However, almost a third of 4-screen
owners regularly watch TV on other
video-enabled devices
Share of Television Viewing by Device
77%
18% 5%
4 Screens
69%
16%
4% 10%
TV Computer Smartphones Tablets
Size matters: Consumers prefer the
biggest screen available at any point:
TV at home, 3G/4G Dongle on the
move, else mobile
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Two major Go-to-Market strategies: White-Label and Aggregation Portal
Both monetize via combination of paid subscription and dynamic ad insertion
Will Content Providers Go “All In” on OTT in 2015?
White-Label Platform Aggregation Portal
Platform
Owner CBS MLB DISH DirecTV
Affiliated
Networks
CBS,
Showtime
MLB,ESPN,
WWE, HBO
Disney: ESPN,
Disney Channel
Turner Broadcast:
Adult Swim, TNT,
CNN, TBS, HLN,
Cartoon Network
beIN SPORTS en
Español, Cine Sony
Television, MTV,
¡Hola! TV
© 2013-2014 Cisco and/or its affiliates. All rights reserved.
Annual US Multichannel Network Programming Expenses (in $Bn)
Content Innovation – Heavy Investment in Programming
18.6 19.8 21.7
24 26.4
29 31.5
33.9 36.1
2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: SNL-Kagan, 2014
US networks collectively invest $30Bn annually in premium TV content
DirecTV and Dish each spend 45-52% of their revenue on programming
© 2013-2014 Cisco and/or its affiliates. All rights reserved.
Revenue Synergy
Upsell / Package upgrades
Advertising scale
Cost Synergy
Sales & Marketing
Support & Maintenance
Reduce content acquisition costs as a result of increased bargaining power
Network / Backbone
Increasing Costs and Competition Bring SPs to Consolidate
Buyer Seller/s Sum Paid
($Bn)
Total Subs
(M)
49 27
45 32.6
25.4 24.5
10.1 8.5
7.5 17.8
2.2 0.7
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Service & Technology Innovation – Dish Case
Non-Dish subs: “Sling TV”
Pure OTT service for linear TV
$20/month (no commitments)
Adding News or Kids packages will cost an extra $5 each
Offers linear streaming from ~12 basic and premium cable networks including ESPN
Features pause, rewind and replay of (some) live shows for up to 3 days after airing
Premium subscribers: 4K Joey
Uses BCM 7448 SoC capable of 4K playback at 60fps or side-by-side HD display
Available this summer. New 4K content partnerships deals are in the works
Compatible with current Hopper STB and works with any 4K sets (unlike Comcast, DirecTV)
Mainstream subs: New RC, UI and Vevo music video app
The Hopper voice controller is equipped with a touchpad, responding to swipe gestures
In addition, a new UI will coming to the Hopper DVR this year as well as a Vevo app
© 2013-2014 Cisco and/or its affiliates. All rights reserved.
“To date, DirecTV has offered “synthetic” bundles with AT&T and Verizon, which combine TV, Internet and phone. But those bundles aren’t integrated, requiring two truck rolls and two separate bills. Last year only 9% of DirecTV’s customers opted for such a “synthetic” bundle.”
− Mike White, DirecTV president and CEO
“AT&T sees opportunities to extend DirecTV service in other areas, too. We are planning to expand the satellite TV service into the auto market (as a way of entertaining kids in the back), building on ours agreement with General Motors to deliver 4G LTE to the select vehicles.”
− Ralph de la Vega, president and CEO of AT&T’s mobility division
Creating New Service and Bundling Opportunities
Source: Goldman Sachs’ Communacopia conference, 9/2014
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Catch-Up and Box Sets
Catch-Up TV (up to 30 days from
airing) Up to 60 channels (depends on package)
Restart TV – enabled only after show ends
(currently in SKIT, UK launch later this year)
Sky Box Sets (TV Series, S-VOD) Solution targets binge viewers
Examples of available premium content: Downton Abbey S1-4 (Feb 14)
The Walking Dead S1-5a (Oct 14)
True Detective S1 (Mar 2014)
The Following S1-2 (Apr 14)
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Movies On-Demand and Sky Store
Sky Movies On-Demand (S-VOD) Netflix equivalent (mostly long-tail)
VOD must be downloaded to HDD
Counts against BB usage caps
Filtered by Cast and Genre
Also includes push-VOD items (found on
“Showcase” section) and link to Sky Store
Sky Store (Movies, Transactional VOD) Rental, Purchase-to-Own, Pre-Order
Downloads can be archived to save DVR
space (only title metadata is saved)
DVD shipped within 5 business days
Plans to enable device access via apps
Non-Sky TV customers will be able to
purchase via the Sky Store website
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DTH Monetize Content While Cable Monetize the Pipe
Provider Sky Deutschland Viasat Virgin Media Com Hem
Footprint Germany & Austria Scandinavia UK Sweden
Platform DTH DTH Cable Cable
TV Subs 3.5M 580K 3.7M 612K
Service Snap Viaplay Netflix on TiVo
Audience Subs & Non-Subs Subs & Non-Subs Existing Subscribers
Content VOD VOD + Live Sports Netflix VOD Catalogue
Price Subs: €4.90
Non-Subs: €9.90
Subs: Free
Non-Subs: From
$12/m
£5.99/month
(to Netflix) $11.57/month
(to Netflix)
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Time-shifting accounts for 15% of viewing in UK and steadily growing
The Tip of The Iceberg…
0
10
20
30
40
50
60
70
80
90
100
Jan-0
6
Apr-
06
Jul-0
6
Oct-
06
Jan-0
7
Apr-
07
Jul-0
7
Oct-
07
Jan-0
8
Apr-
08
Jul-0
8
Oct-
08
Jan-0
9
Apr-
09
Jul-0
9
Oct-
09
Jan-1
0
Apr-
10
Jul-1
0
Oct-
10
Jan-1
1
Apr-
11
Jul-1
1
Oct-
11
Jan-1
2
Apr-
12
Jul-1
2
Oct-
12
Jan-1
3
Apr-
13
Jul-1
3
Oct-
13
Jan-1
4
Apr-
14
Jul-1
4
Oct-
14
Jan-1
5
Live Viewing
Time- Shifted
UK Live vs. Time-Shifted Viewing (in %), 1/2006 - 1/2015
Source: BARB, Feb 2015
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Linear accounts for only half of video consumption among ages 16-24, while time-shifted content account for almost 30%
The Younger They Are, The Less Linear They Will Watch
50 61 64 69
80 82
16
18 17
20 13 12
7
6 7
4 3 3
6
6 3
13
7 5 4 8 2
0%
20%
40%
60%
80%
100%
16-24 25-34 35-44 45-54 55-64 65+
Short Online Clips
DVD/Blu-Ray
Online Subscription
VOD/Catch-Up
PVR
Linear TV
(4:14) (3:51) (3:50) (4:31) (4:37) (4:36)
UK Video Consumption by age (in %), 2013
Source: Ofcom, Aug 2014
© 2013-2014 Cisco and/or its affiliates. All rights reserved.
Total UK Viewing Time by Genre, Time-Shifted and Linear (in %), Feb 2015
Original Programming Accounts for Bulk of TSTV Viewing
5.0 2.8 2.4
1.3 1.2 0.9 0.5 0.5 0.2 0.2
13.7
15.4
12.0
7.0 7.6 7.3 5.7
4.0 3.5
7.9
18.6 18.2
14.4
8.3 8.8 8.2 6.2
4.5 3.7
8.0
0.6 0.1 0.2 0.1 0.0
Linear
TSTV
Source: BARB, Feb 2015
© 2013-2014 Cisco and/or its affiliates. All rights reserved.
47
24
10 6 5 4 3 1
Same day as live Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7
UK TSTV Viewing by Playback Delay, 2013
71% of time-shifting occurs within the first 24hrs after airing;
87% of time-shifted viewing occurs within the first 3 days
TSTV Challenges Methodology for Audience Measurement
Source: Statista
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Networks campaign to retire live and same-day ratings
Showtime: “Its been years since the network last paid attention to live viewing.”
60-70% of Dexter viewers watch via VOD or DVR
Only 32% of Homeland’s 7M weekly views occur during a live Sunday night telecast
ABC, CBS, NBC, Fox: “viewers are time-shifting more than many might think.”
Last season, the average rating among adults 18-49 grew by 40% in live+C7 ratings alone
Industry is moving towards recognizing longer viewing windows
It’s Finally Happened: A Big Ad Buyer is Paying for a Week of Time-Shifting (Jun 14)
Multiple broadcasters have reached pacts with ad-buyer GroupM to do prime-time entertainment deals based on 7 days of commercial viewing after shows air
CBS/Dish Deal: No Skipping Ads With AutoHop (Dec 14)
Ad-skipping functionality of AutoHop will not be available for CBS-owned stations during the C7 window
Why Does This Matter? Advertising.
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Why its not all about OTT yet ?
Source: Accenture – Video-Over-Internet Consumer usage survey, 2012
Frustrations/Concerns With Watching Video Content Over the Internet
53% 51% 45%
19% 19% 17% 12%
0
10
20
30
40
50
60
Advertising during theprogram
Time required tobuffer/download the
video
Video quality (ie poordefinition)
Cost of the videocontent
Broadband / high-speed cost of
downloading thevideo
Range of programsavailable
Navigationexperience (i.e.search / epg)
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“Cord cutting in general remains less a thing than many pundits would have you believe;
The number cord-cutters dropped in 2014, and was the lowest rate since 2008.”
− Leichtman Research Group, Mar 2015
“Yes, some consumers are cutting the cord, but they’re in the low single digits percentagewise. A more real behavior is cord-shaving, where consumers reduce what they spend, rather than eliminating it altogether.”
− eMarketer, Dec 2014
Cord Cutting “Nibbling at the Edges” But Not Mainstream
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MSO Strategy: Befriending Disruptors
Competition (Past)
SPs saw Netflix as a threat
Used various countermeasures
Imposed bandwidth caps for Netflix traffic
Launched their own OTT/TVE services
But Netflix kept growing
Netflix’s +23M subscribers account for 1/3 of downstream IP traffic in the US
Co-opetition (Present)
• Partnership is mutually beneficial
Reduces SP’s content costs on VOD
Retains cord-cutters in SP’s ecosystem
Provides a one-stop-shop for video content
• Does not cannibalize SP business
Netflix offers mostly long-tail content with no live or premium VOD, complementing SPs
Several European operators already offer Netflix app
American SPs are negotiating…
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TV Everywhere: Monetization Strategy
Target Audience Premium Mainstream Non-Subscribers
Business Model Increase ARPU Reduce Churn Monetize Content
Offer Type TV Everywhere TV Everywhere Pure OTT
Registered Devices 4 2 2
Downloading Enabled Yes No No
Available on YouView No No Yes
Content Sky Movies & Sports
Live channels + VOD
Sky Movies & Sports
Live channels + VOD Sky Movies & Sports
Price
Extra £5/m Free for Sky TV
customers
Movies: £8.99/m for first
3 months, then £15/m
Sports: £9.99 day-pass
Different consumer segments warrant different business models for TVE
© 2013-2014 Cisco and/or its affiliates. All rights reserved.
Sky’s Multiscreen Strategy in Numbers
Source: BSkyB, 6/2013
£5 SkyGo Extra
Monthly Cost
12 Months
X 44K SkyGo Extra
Subscribers
X = £2.7M annually
£397 New Subscriber
Acquisition Cost
0.2% Average Annual
Churn Reduction
10.4M Total Sky TV
Subscribers
X X = £8.3Mannually
£8.99X3 NowTV Cost for
first 3 Months
£15x9 NowTV Cost from
3rd Month
25K NowTV
Subscribers
+ X ( ) = £4M annually
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Cast & Crew Info
Now Showing In
Comcast X1: Enhanced Metadata and Public API Integration
Rotten Tomatoes
More Like This
Buzzing on Twitter
Most Popular Now
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Liner Recommendations “For You” Menu
Comcast X1: Personalization and Customizable Menus
Customizable EPG “Personal, Prioritized Guide”
Customizable VOD “Kid’s View”
© 2013-2014 Cisco and/or its affiliates. All rights reserved.
Comcast X1: Cloud-Based Services
Restart TV “Instant On Demand”
Predictive Search Home Automation Surveillance Cameras, Locks
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23% reduction in voluntary churn
+25% Views
+20% Purchases (Transactional VOD)
2x increase in penetration for X1 versus native
75% of new X1 customers are triple play
20% of all triple play are X1
Comcast Experience for X1 Subscribers
Reduced Churn
VOD Uplift
DVR Penetration
Increased Bundling
Source: Comcast Earnings Release, Q3-FY14
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Cox Contour: 9 Months from Launch
+40% Shows Viewed
-15% Churn
+20% VOD Sales
+30% Channels Viewed
© 2013-2014 Cisco and/or its affiliates. All rights reserved.
Key Takeaways
Pay TV Innovation happening on STB Middleware, as hardware gets commoditized
OTT off-take to be additive to linear viewing rather than cannibalizing
Content monetization, advertisement & VAS drivers for ARPU lift
TV Viewing behavior slowly shifting towards On Demand, multi-screen & IP driven
Time Shifted TV fundamentally changing consumption behavior, revenue chain
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