Three into one
01 January 2011 |
The market for the delivery of video content to TVs, PCs and mobile devices is now wide open, and it’s time for telecoms service providers to play their part.
Anxious to sustain profitability as margins on traditional service areas decline, a number of telecoms service providers are moving beyond their comfort zone of voice and data and adding the delivery of video content to their portfolio.
Those with a real eye to the future are already thinking well beyond the revenue opportunity offered by IPTV, important as that is now becoming. The way in which customers now consume their video content, and the quality of the content that they expect, is dictating an even smarter response from telcos – especially if they are not to sacrifice share in the video market to other types of content deliverer.
Savvy service providers are, on the one hand, busily establishing relationships with the developers of the most compelling content possible, and on the other coming up with a strategy for the delivery of that content that really chimes with its ultimate consumer. The Holy Grail here has become the convergence of the same content onto three different types of screen – regular TV, PC and smartphone.
“Telcos are starting to take a holistic approach, and looking at a full three screens capability,” says Tom Little, President, Bell Wholesale. “To support this, many are looking to own content of their own. Service providers with strong content relationships are best placed for the emerging market share battle of the future. Some will look to forge partnerships, some will make purchases. We chose to purchase, with our 100% acquisition of Canada’s leading broadcaster CTV.”
A strategic imperative
Developing a video content strategy that works seamlessly across every device from the mobile phone in your pocket to the TV set in the corner of your living room is a sensible play, if not an easy feat, says Vince Vittore, principal analyst with the Yankee Group consultancy, and author of a report titled ‘In the battle of three screens, TV rules’.
“Three-screen video is a strategic imperative for network service providers, video service providers and content providers,” he says. “Three-screen video will prevail, become ubiquitous and ultimately be required of any video publisher and service provider. Most media publishers, service providers, network equipment providers and consumer electronics companies are pursuing strategies to benefit from three-screen video in varying degrees.”
So who will be the winners in the race to develop a credible and lasting three screens offer? Telecoms service providers that have strong content relationships are certainly well positioned, says Vittore.
“We’re talking about what I’d call ‘prime-time content’,” he
argues. “We define that as market-leading broadcast and cable network programming, as well as Hollywood fare.” Also important for a service provider, he contends, is having as direct a relationship as possible with the consumers that are paying for content, and the ability to support the biggest possible range of devices. Strong channel relationships are another piece of the jigsaw.
The challenge of three-screen video, he says, involves getting exactly the same content to three different types of end point – TV, PC and mobile devices – but also delivering it from different sources while creating a seamless experience for the user.
Evolution in key enabling technologies is helping to make this possible, he argues: “Firstly, we’re seeing a move to IP video delivery networks,” he says. “Plus there’s the ubiquity of video playback capabilities on myriad devices – essentially anything with a screen. Then you have the declining cost of processing power and storage, as well as improvements in battery performance and battery life in devices.”
The three screens in question naturally represent very different considerations in their own right.
TV screen sizes, for example, are getting bigger, and richer features are being added to sets. Most next-generation games consoles work with most TVs. Time spent in front of the television is on the rise in most parts of the world. According to Yankee Group research, US consumers spent an average 151.22 minutes per day watching television in 2010 – nearly 15 minutes more time than they spent in 2009.
Video on the PC is a similar story of exponential growth. Video consumption on computers has leapt since 2005, when YouTube was launched. In 2006, 13% of US consumers said they had watched online video on their PCs in the past month, according to Yankee Group’s findings. Today, the corresponding figure is 26% of US consumers watching online video on their PCs daily.
Video on the mobile handset is currently the least heavily consumed of the three screens. Consumers love the idea that video can be viewed anytime, anywhere. But the reality of bandwidth, mobile network performance and screen size has so far held this back as an application.
Those addressing the three screens market will naturally be looking to support new devices such as Apple’s iPhone and iPad, Android-based devices and others, despite this low level of mobile video take up. It’s elsewhere though that critical mass resides, says Vittore.
“While delivering video to mobile devices, tablets and PCs receive the media buzz,” he says. But the television is still the predominant screen when it comes to time spent watching video and the overall video experience. In terms of paid services, television programming is the only one with a clear video monetisation model. Traditional television programming is gaining adoption in online viewing faster than other types of
“Service providers with strong content relationships are best placed for the emerging market share battle of the future. Some will look to forge partnerships, some will make purchases.”
Tom Little, President, Bell Wholesale
content. The adoption of online video on the TV is incremental and therefore open to a much larger existing user base than new devices and use cases that need to go through a more traditional adoption curve before reaching mass-market proportions.”
The network is king
Any good three-screen strategy, he says, involves the consideration of network capacity and network architecture.
“It also affects service models,” claims Vittore. “It affects business models and the business relationships between content providers, service providers, advertisers and subscribers. While network operators and network equipment providers that sell bandwidth and bandwidth-related services stand to gain from the increased traffic on their networks – no matter which way the battle lines get drawn – they will not entirely remain unaffected by the outcome. Almost all players have some degree of vertical integration. Access service providers are also building their own content services, network equipment providers are also sometimes CPE providers, over-the-top services are tied to CPE and ultimately must deliver quality streams that travel over other networks.”
For both network operators and video service providers, online video to the TV is a unique opportunity, he says. “Any approach should highlight the operators’ existing assets – their established billing and subscriber relationships – because they are key to building a revenue stream and sustainable business in online video,” he says. “Network service providers now need to examine their network capabilities for video, evaluate the capabilities of their networks to support high-quality video delivery to the television, and invest strategically in network upgrades so that networks are more than simply plumbing for the upcoming online video surge.”
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