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Content monetization: Partnerships will need to evolve if value is to be maximized

Ted Hall, Senior Analyst, TV

A recurring theme at TV Connect centered on the challenges faced by content owners in an increasingly multiplatform TV landscape. One potential scenario outlined by Liberty Global’s SVP and Chief Strategy Officer Jim Ryan was particularly resonant: The current boom period for programmers – in which they are selling their wares to a growing number of players as the OTT market burgeons – is giving way to a bust, with cord-cutting taking hold and the fragmentation of the mass audiences attracted to linear channels hitting core advertising revenue.

One safeguard against such a scenario is likely to be a natural reduction in the number of OTT players as the market evolves – the margins in the pure-OTT business are already thin, Ryan was keen to point out, and, as content owners raise their prices as deals are renewed, smaller players find it difficult to survive.

But content owners will still need to adapt to a slow movement towards more time-shifted viewing. To do this, they must work more closely with their traditional pay-TV partners to better understand and target their audience. Time Warner Cable’s Group VP of Network Architecture Jaime Miles expects such relationships to flourish over the next two years, predicting that there will be more sharing of data between operators and content providers, which will help both parties to improve the customer experience and transform the way advertising is sold and delivered.

One such partnership has already been formed in France, a known hotbed for innovation – Orange’s VP of Data Analytics Ludovic Levy shared details of the telco’s work with commercial broadcaster TF1 for what it is calling “Measurement 3.0” (see Nick Thomas’ more detailed coverage of this initiative below).

The need to move towards targeted advertising was highlighted several times during TV Connect, with Sky Media’s Deputy MD Jamie West, in particular, putting forward a convincing case for the success that can be achieved, sharing the DTH operator’s experience of its AdSmart rollout. Notably, the service is still limited to channels that Sky sells the advertising for via its own ad-sales house – although West insisted that third-party channels would come on board soon.

Aside from Sky and handful of other players – most of them in the US – a general lack of progress across the industry as a whole on the advanced-advertising front is holding back some potentially exciting new developments. Frustratingly for operators and technology vendors, many are ready to push new cloud DVR products that have the potential to wow customers with true anytime-anywhere content services, but are being held back by content owners’ reluctant to grant the kind of rights deals that will provide relatively unrestricted – but still secure – access to their programming. Virgin Media’s Associate Director of Content Security Rob Pinniger explained that the cable operator’s plans to deploy a new product were being hampered by regulatory and rights issues.

More collaborative work between operators and content providers on dynamic ad-insertion and targeted advertising will help to ensure the necessary rights are eventually negotiated. And this kind of collaboration is on the way, many executives believe – Arris’s CTO for EMEA Cornel Ciocirlan was one to make the claim. But the pace of change has been slow to date and it may be a while longer before evolution in advertising catches up with that taking place elsewhere in the value chain.

Orange says consumer data is “not a gold mine” and partners with TF1 for “Measurement 3.0”

Nick Thomas, Principal Analyst, Ovum

Ludovic Levy, VP of Orange Data Analytics, told the audience at TV Connect today that, contrary to some people’s expectations, his company was “not sitting on a gold mine [of data], because of privacy.” He argued that the restrictions caused by privacy issues (Orange promises customers it will not sell data to advertisers, for example) mean that extracting meaningful insight from user data is still a major challenge.

To that end, he announced a new initiative between Orange and major French broadcaster TF1 to better understand audience consumption in a multiscreen era, what he terms “Measurement 3.0.” The aim of the collaboration is to create the “single source” metric that Levy says is what marketers dream of, which will capture all the touch points between a brand and a consumer, regardless of where those occur. Going beyond simply tracking user activity on one screen or platform, this is the kind of initiative that Ovum believes will be needed in order for advertisers and publishers to fully realize the value of their content, given the profound changes in the way that content is consumed.

The project will combine a mixture of contextual and social data sources as well as traditional audience profiling. It will integrate panel data with new digitally sourced contextual data around social interaction, geo-location, and even weather, in order to build a model that generates a unified picture of an individual consumer’s behavior. The collaboration, which will be launched formally in the next two months, is expected to deliver results by the end of 2016.

The 4K bandwagon must negotiate a few bumps ahead

Ismail Patel, TV Analyst, Ovum

The plethora of 4K Ultra-HD screens on the TV Connect 2015 floor made for fine aesthetics, and the vendors are pretty certain this is where the TV market is heading. In hindsight, the shift from HD to 3D did not feel natural and UHD has now stepped in to realign the path of natural evolution in TV viewing. However, while 4K (3840*2160) seems to be where the market is heading, there are other variants either ready or in development, including:

  • 3.5K, in China – essentially 4K but with the addition of white pixels alongside the red, green, and blue; this format is cheaper to create compared with the RGB 4K model

  • 5K (5120*2880) – some manufacturers such as Apple and Dell have invested in this

  • 8K (7680*4320) – pioneered by the Japanese manufacturers and supported by broadcasters; in fact, 4K is considered merely as a stepping stone to 8K in Japan, with 4K being deployed as a grand testing tool.

The manufacturers are predicting strong demand from broadcasters. Many broadcasters have already commissioned 4K cameras to shoot UHD in scripted video formats. Trend-setting broadcasters in the West have been trialing 4K in unscripted TV such as live sports.

One of the underlying drivers for 4K is broadcasters’ fear: They want to be first adopters and do not want to be left behind. 4K linear channels have already launched in South Korea and Japan, while Europe and the US are seeing similar moves at the content and channel level.

One would have thought that the shift from HD to UHD is therefore going to be smooth, but, after speaking to numerous executives on the TV Connect floor, it is clear that, while they remain confident of success, 4K is still throwing up a number of notable challenges, including:

  • The enhanced experience of 4K over HD is only realized when a viewer is in front of the 4K screen in close proximity, typically within three to four height lengths of the viewed device. Any further and the difference between 4K and HD becomes insignificant. This makes the value-add of 4K over HD only marginal, relative to HD over SD. Consumers want to see a visible difference in 4K from their current home sets when they go window shopping.

  • 4K is accused of providing an “unreal” – and so potentially negative – viewing experience. Specifically, when the human eye naturally focuses on individual moving things any surrounding items become blurred. A similar effect is achieved in pre-4K devices when a fast-moving object is the focus of the camera, and objects in the background blur, giving a natural and immersive experience. However, in 4K, surrounding objects are significantly enhanced, thereby rendering the object of focus not sufficiently dissimilar from the background that is not supposed to be the point of attention, thereby losing a degree of viewer immersion.

  • Most legacy consumer devices manufactured up to the end of 2014 are incompatible with 4K. The process of reinvestment, as happened with HD, will be costly and will be passed on to consumers. In the Blu-ray industry, for example, one disk can hold only around half of a standard movie shot in 4K and current Blu-ray players cannot stream in 4K. Both disks and hardware will have to be redesigned and deployed. When that happens, current devices will visibly look out of date, much to the chagrin of early Blu-ray buyers.

  • 4K compression has achieved a bit rate of 15Mbps. For an OTT connection, 4K will therefore be virtually impossible, as this is several times more than current HD compression rates. This is costly and also the broadband connection would have to be way in excess of 15Mbps to deliver a seamless stream, particularly when other devices are accessing the Internet from the same source as the 4K stream. If 4K aspires to mass adoption on multiple platforms, this problem has to be solved.

  • The other immediate challenge is that of awareness, or the lack of it. As industry insiders, we sometimes tend to look a bit too far ahead and forget what is around us. Yesterday I talked to some of my tech-savvy friends about the 4K-studded conference floor and that it is a technology that will soon be coming to living rooms across the nation. All I got was a blank look and “What is 4K?” That, right at this moment, is where most consumers are.

4K is at a stage where 3D was three years ago. If hindsight is of any benefit, the key message for 4K is to reach critical mass before it falls into a 3D-like lull. UHD critical mass is expected to be reached by 2017, by which time 4K screens will be affordable to most HD screen adopters. If it still has not gained mass acceptance by then it will be because it has failed to address the five challenges highlighted above.

TV Connect 2015 is dead…long live TV Connect 2016 (and 2017)

Adam Thomas, Lead Analyst, Global TV Markets

With TV Connect now over for another year, it has once again provided a very useful insight into the new types of TV and video products and services that have emerged and evolved this year. For Ovum’s clients within the traditional TV business, their priority remains to understand how they can best adopt and exploit these new technologies where they are complementary to their core businesses and also to successfully challenge them where they are competitive.

The TV Connect event has cemented Ovum’s view that new ways of distributing visual entertainment will augment traditional TV and cannibalization (such that exists) will be slow. SVOD will take spending from home-entertainment disc sales, not TV. TV advertising will continue to be the dominant advertising format: No other medium commands its reach or share of voice. Meanwhile, traditional TV players will continue their march onto the Internet and increasingly onto the mobile Internet.

Premium TV will continue to be the cornerstone of the multiplay bundle but the bundle will evolve. OTT services will increasingly be bundled with fixed and mobile access. Zero-rating data usage of bundled services against monthly data caps will become increasingly common. The growth in services, distribution technologies, consumer endpoints, and the emergence of addressable TV advertising will enable companies to segment the audience to a much finer degree than ever before. Hence, being successful in this environment will require addressing individuals rather than households.

With this in mind, it is interesting to conclude this round-up with some industry predictions provided by a range of key executives attending this year’s event. In answer to the question “What do you expect to happen over the next 12 to 24 months…” these are the issues they expect to be talking about at TV Connect 2016 or 2017:

Nick Coulter, Head of Digital, Western Europe, BBC Worldwide: “We will see the first serious bundles with no linear channels.”

Jim Ryan, SVP & Chief Strategy Officer, Liberty Global: “More screens…more tablets…more connected TV…more consumption on second and third screens. The power of linear for sport and news will continue to be important. Our research shows that our customers want simplicity and transparency over anything else.”

Murali Nemani, CMO, ActiveVideo: “OTT content will be seen as not detracting from but complementing traditional TV and there will be some offload of content costs to online aggregators.”

Neale Dennett, Director Pay Content & Packages, ITV: “Many new SVOD propositions will create a big bubble, giving the public a dilemma on which ones to sign up for. This will be followed by consolidation.”

Jinshan Liu, Head of VAS, R&D Institute, ZTE: “Lots of new OTT service launches plus more flexible bundling from pay-TV operators.”

Pierre Francois Dubois, SVP Technocentre, Orange France Telecom: “Content production will move faster, reacting to the challenge of finding the content that users want.”

Luke Gaydon, VP of Strategic Initiatives, Media, Brightcove: “An increasing amount of AVOD, assisted by more sharing of metrics.”

David Mowrey, VP Product Management, Clearleap: “There will be a significant shift to SVOD, creating chaos for consumers. Also, growing interest in CPM rates for AVOD services.”

Richard Halton, CEO, YouView: “80% of viewing will remain linear and data will become more intelligent to anticipate user wants.”

Simon Trudelle, Senior Product Marketing Director, Nagra: “I expect changes to scalability, reacting to high demand for live content…and more flexibility, through greater segmentation and skinny packages. Also, data will become the currency for rights deals.”

Jaime Miles, Group VP Network Architecture, Time Warner Cable: “More video delivered over IP, plus the sharing of data back to programmers will transform the way advertising is done.”

Denise Parkinson, Entertainment Director Global & UK, Telegraph Media Group: “We need to give the advertiser the ability to see the entire consumer journey.”

Eric Budin, VP Advanced Advertising & Data Monetization, Liberty Global: “We will see data exchange between programmers, operators, and advertising.”

Matt Eaton, Director Digital Media, Cognizant: “The biggest challenge is finding a complementary currency across linear and the second screen that will satisfy agencies.”

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