Facebook may yet have a role to play in the evolving TV ecosystem

The stats on Facebook usage are jaw-dropping, with over 900 million registered users, over 500 million of whom visit daily. For many of those users, Facebook is the internet. It’s the place they go to connect, to communicate, to share and – increasingly – to spend time consuming content. Much of that content – photos and status updates – is user-generated, but in terms of time spent and revenue generated, the importance of professionally created content, notably social gaming, cannot be overlooked. And by virtue of its scale, Facebook is becoming an important global platform for more traditional media content such as music and video. Yet attempts to charge users for such content have so far failed to gain traction.

Facebook’s attitude to revenue generation has been notably relaxed since its inception, but post-IPO there will necessarily be a much sharper focus on generating revenues, both from advertisers and consumers. The experiment of charging New Zealand Facebook users for highlighting certain types of content will not be the last attempt to make money from loyal users. But the danger here is in alienating those who love Facebook as a free service. Will users stay with Facebook if they have to pay for its services? Charging for something that has historically been free is incredibly difficult to pull off. It makes more sense to focus on increasing revenues from advertisers who on the whole are still reluctant to commit spend to the social network.

There are two further threats to Facebook’s future evolution, though these are also opportunities, too: Consumers spending more time on mobile devices such as smartphones, rather than PCs; and the rise of multi-screen video consumption.

Facebook is still at heart a PC-based proposition, but its users are devoting more time to the mobile devices, so Facebook must shift its centre of gravity to better serve and monetize this trend.

Facebook may yet have a role to play in the evolving TV ecosystem too. Facebook needs more ‘sticky’ content to keep its users glued to the site, and no content is ‘stickier’ than TV. Though it insists on being a virtual utility rather than a content provider, Facebook is nevertheless well placed as a platform for TV experiences, especially with the rise of social TV, where viewers interact on a second screen around content that is shown on the primary TV screen. The exact formula for success in the space has not yet been established. Pre-IPO, Facebook could afford to be relaxed about its role in the evolution of social TV (and the potential rise in ad revenues from those second-screen interactions). Post-IPO, Facebook needs to drive that evolution.

Finally, the fate of Yahoo! casts an unwelcome shadow over Facebook’s IPO. For several years Yahoo was a cool site that couldn’t stop acquiring users, with over 600 million in its heyday. The culture clash between its laid-back founders and shareholders wanting a return on their investment has never truly been resolved. Now, both the company and its users are no longer able to answer the simple question: What is the point of Yahoo!? Facebook can avoid this fate, but it must listen to users and innovate its services to remain relevant and fun. If not, the party will move somewhere else.

Thierry Dupont is telecom project manager, for TDF Group

Thierry Dupont is telecom project manager for TDF Group, the largest broadcast network operator in Europe with 11,000 sites. Ahead of his speaking role at the LTE World Summit 2012, taking place on the 23-24 May 2012 CCIB, Barcelona, Spain, we speak to him about the impact of LTE on TDF’s operations.

What are the main milestones you have reached with relation to your LTE deployment?

As far as TDF is concerned, we have setup an LTE trial showcasing the opportunity to build a shared network using Multi Operator Core Network (MOCN) concepts.

What are the main challenges you have faced, or expect to face, as you roll out LTE?

Using the 800MHz, one of the main challenges was to get a plethora of devices from the infrastructure manufacturers due to the need to maximise Inter-operability Testing (IOT). The other main challenge was to get network elements, as this can help provide dynamic QoS and consequently help with implementing VoLTE.

With so much attention paid to the radio access network is there enough focus on backhaul?

As TDF is also a broadcast operator, we have already upgraded both our backhaul and transport networks. We are aware of the necessity to design the backhaul network due to the traffic increase and the idea was to segment broadcast and telecom output within a single link.

What’s your view on FDD vs TD-LTE spectrum?

It will not have to be an either or situation. We see them as two complementary sources for offloading data traffic. Key issues will be first to define clear engineering rules for the deployment of these two heterogeneous networks and then to have dual-mode devices coming from the market.

Do you think that VoLTE will have an impact and if so in what time frame?

MNOs will first deploy and tune their LTE Networks and then implement IMS enabling them to propose RCS services (if standardisation occurs) like VoLTE.

Is there enough innovation occurring in the mobile network industry? Can you provide some examples?

Rich Communications Services (RCS) and Location Based Services (LBS) services are innovations coming in the mobile network industry.

What changes would you hope to see in the industry in the next five years?

On the infrastructure manufacturer side only two or three players will survive. On the engineering side, evolution of the RAN towards base-band clouding will force MNOs to dramatically upgrade their backhaul networks but also to become and/or work with Content Distribution Network (CDN) operators.

Why are you attending the LTE World Summit and what are you looking forward to most?

I am firstly looking forward to presenting TDF’s work on the LTE network sharing and then to exchange ideas with major players in the market from MNOs to device manufacturers.

The LTE World Summit is taking place on the 23-24 May 2012 CCIB, Barcelona, Spain. Click here to register your http://ws.lteconference.com/interest.

The Red Bull F1 car

As always Informa’s analyst team was out in force at this year’s IP&TV World Forum – the last IP&TV World Forum, it turns out, as the show re-brands to TV Connect for 2013 and beyond. This year’s show was certainly bigger and brasher than previous years (exhibit a: the Red Bull F1 car on the upper floor) and most of the conversations we had showed companies in bullish mood about future opportunities.

OTT-where’s the money?

But the one question we kept getting asked, which belies this feeling of optimism, is where the money is in OTT. There is money to be made for sure – Informa forecasts a global $17.5bn video ad market by 2016 (subscription required) , but how this money is divvied out is a concern to many.

The answer to this question is that perennial analyst favourite: that it depends on a case by case basis. For operators like Viasat or Sky, offering OTT in conjunction with an extremely profitable core TV business – and focusing its OTT on its premium channels, as both are doing – there is a clear positive business opportunity. For others, there remains value in using OTT to reduce churn and increase service stickiness. The latter are justifications that, to be fair, do sound very like those made for IPTV at the dawn of that particular technology. And the danger for operators is to get sucked into OTT by the considerable hype around the service. The strategic rationale for OTT varies, but there must be a strategic rationale.

OTT without borders

The concept of using OTT to target diasporas or ex-pat community is something that came up in around 80% of the conversations I had at the event. It’s becoming increasingly seen as something of an OTT silver bullet for two simple reasons – this content often can’t be served in any other way, and for that reason, users will pay for it. It’s unlikely this will ever be a mainstream business case, and, as with any good story, there are always a few “buts” to dampen things. In this case, it’s getting global content rights, and getting around the fact that in many markets, immigrant populations are typically low ARPU customers unwilling to pay much for content. But it looks like becoming a white hot opportunity for OTT during 2012. (Informa subscribers can read further in our recently published OTT without borders report).

Truth in advertising

Media and ad agencies and technology guys seldom see to eye-to-eye, advertising-wise, which makes IP&TV an interesting opportunity to meet both groups of people. The former typically accuse the latter of pie-in-the-sky thinking that has little relevance to their clients or their day-to-day needs. The latter, in turn, believe the former are not opening their eyes to the new opportunities that IP and connectivity bring. The two just about managed to avoid fisticuffs on the advertising stream at the show, but it’s clear that the thinking of the two is still far from aligned. Case in point – while targeted advertising is described as a TV advertising game changer by many, speakers from OMD and Mindshare both claimed it will take only single digit percentages of TV budgets in 2016, and that the premium it attracts to conventional advertising will be minimal.

The Android STB invasion begins

For all the hype over Google TV, it is Google’s mobile OS that is becoming more widely adopted by set-top box vendors, who were eager to share how well received their Android STBs had been at the show.

While some lower-end TV manufacturers have simply ported the Android mobile UI to the TV, with unsurprisingly underwhelming results, Android boxes we saw from the likes of Peer TV and Comigo were more compelling. Comigo has substantially reskinned Android to give it the appearance of a reasonable mature TV UI. Likewise, the firm already offers access to many of the best apps on the Android marketplace. The oft spoke about advantages of bringing Android to the TV is the large number of existing apps and developers that can be leveraged. But Informa is mightily skeptical at claims from a few vendors that apps can simply be ported from one box to another-particularly as Google itself told us this was not the case.

The other elephant in the room regarding Android for the TV is that, in an age where tablets become even more commonplace, how compelling is having Android apps on the TV? Certainly, however you view TV apps, it’s clear that the game is not creating a mass of apps for the TV, but providing the ones most suitable for the big screen. For this reason, our view is that STB manufacturers will use Android for the much the same reason as mobile OEMs did – the fact it is almost free to do so.

The Apple TV debate rumbles on

They may have been under the radar, but Apple were at the IP&TVWF in at least a semi-official capacity (hat-tip – @cybronics) which set the stage nicely for our somewhat heated Apple TV debate on Thursday. We still believe that an Apple TV box could have a real impact on the market if Apple allows third parties to offer content on there, as they have on the iPad, and if they fully integrate Airplay, pretty much the best thing about owning an Apple TV today, into the experience.

A TV made by Apple is more difficult to fathom. At $2-3000, users will expect a full TV experience. The OTT services on the iPad are nice to have but, in the most part, additions to the main experience. This leaves Apple with the choice of working with the vast array of Digital TV standards today to offer some form of “traditional” linear service (very difficult technically) or striking their own TV-like content deals (very difficult commercially). It’s dangerous to rule Apple out of this particular game – they’ve upset the odds before – but it’s equally dangerous to assume superiority before they’ve even put out a mainstream TV product. The message, as ever, is to watch this space.

Note: For more information on any of these topics, feel free to either contact us or download our IP&TV White Paper.

This is not the first time the market has been severely disrupted in recent months, and it follows hot on the heels of Google’s recently completed acquisition of set-top-box vendor Motorola. The Cisco-NDS deal is almost of the same magnitude.

Although the announcement of the purchase is a bolt out of the blue, on reflection it makes a great deal of strategic sense for Cisco. And it is perhaps surprising and rather damning that the analyst community failed to foresee the move.

Since the first release of its VNI traffic forecast, Cisco has been predicting the rapid growth, and subsequent dominance, of video on the internet, and has long been advising anyone who would listen that IP video was the future.

And Cisco has very aggressively followed its own advice and has been investing in an attempt to become a major player in the video-provider market.

Last year Cisco launched Videoscape, a multiscreen video platform that can deliver video on both managed and OTT networks. But unlike similar platforms, Cisco provides all the equipment as well, including STBs and routers. But despite Cisco’s aggressive pushing of the service, it so far has only one customer, Canadian operator Telus.

Informa Telecoms & Media believes that Cisco’s purchase of NDS is an attempt to accelerate its move into the video market, especially outside its North American base.

NDS’ position as a leading middleware provider gives Cisco the last piece of the puzzle it needs to offer operators a truly compelling video platform. Although revenue-wise NDS’ CAS expertise is the big prize, its middleware assets are a huge strategic gain for Cisco. In Snowflake, NDS has purchased a market-leading middleware platform.

The NDS purchase also gives Cisco a relationship with many big players that it has traditionally ignored. Among the most significant is leading satellite player BSkyB, which has a long-standing association with NDS because of the 49 per cent stake News Corp. holds in the company.

As these players begin the long transition to offering truly multiscreen services, they will need new back-ends to make sure they can deliver. Cisco can use NDS’ existing relationships to upsell the rest of its Videoscape platform and potentially many other services.

But it is not just Cisco that benefits from this purchase. NDS also receives something it has long lacked: a hardware platform. For much of its life, NDS has integrated its middleware with that of many different hardware vendors. And to remain an important player in the market, Cisco will ensure that it continues to do so. But now NDS can offer not only highly innovative middleware, but potentially leading hardware as well.

The bundling of such a product would be attractive to many pay-TV providers looking to refresh their aging STBs and user interfaces in the light of competition from OTT players.

The impact on the wider market has yet to be seen. But Informa believes that Cisco’s purchase of NDS can be beneficial to both companies because it provides them with expertise in areas where it has historically been lacking.

What’s more, there are few instances where there is a crossover of clients, although the potential is great. But this does not mean that Informa believes the acquisition is purely positive.

NDS has a reputation for innovation and leading the market. All that is good about NDS could be lost within the larger Cisco organization. Such a situation is not without precedent, and Cisco must be wary of this development.

As for the wider market, Informa believes that further consolidation is likely as other players look to offer a completely vertically integrated video platform.

Many of NDS’ rivals, including Nagra, are likely targets for larger players along the value chain. And although they are now in a weaker position relative to NDS, as the company takes time to become integrated into the larger Cisco machine, they have the opportunity to snatch NDS’ innovation crown.

Some Korean delegates at the CDN Asia 2012 event had been arguing that KT’s move into the CDN business, a move it has taken in partnership with local CDN player Solution Box, meant that the firm was now less likely to clash with OTT players such as connected TV manufacturers such as Samsung and LG.

This argument was basically centred on the fact that deploying its own CDN’s gave KT the power to generate revenues from the connected TV manufacturers Over-the-Top content services by striking mutually beneficial CDN deals with them – an argument which makes a lot of sense in theory but has now been proven at least momentarily incorrect.

KT has initially decided to block OTT content going to Samsung’s connected TV sets and has warned it will take the same action against LG Electronics if the manufacturer does not begin paying carriage costs.

KT has viewed connected TV services as a critical issue ever since the devices began arriving in the market. Back in May 2010 when connected TV’s had a tiny presence in the market KT’s IPTV top brass told me that the looming impact of connected TV’s on their broadband access and IPTV businesses was their number one concern.

However, as recently as last November in my discussions with top level KT officials in Seoul they had been claiming that removing OTT connected TV traffic from their network would be a last resort measure and were still hopeful of striking a deal with the connected TV players.

KT wants end to free piggy-backing
KT’s beef with the connected TV manufacturers is really pretty straightforward, they are outraged that the connected TV manufacturers are basically using KT’s extremely expensive broadband infrastructure as a delivery mechanism for their content and refusing to pay KT a single cent for the privilege of doing so, it’s the classis network operator versus OTT player stand-off.

Around one million connected TV’s have been sold in the Korean market of 15 million TV homes but Samsung and LG Electronics are planning a major sales expansion this year.

KT says – with perhaps a little too much hyperbole – that its “ecosystem could collapse if free riding [OTT] data explosively grows on the network” and argues that they must be compensated for the huge loads that connected TV traffic is placing on its network via the huge video traffic it generates.

For its part, connected TV giant Samsung, which has endured a frosty relationship with KT over the last couple of years, has reached for the comfort blanket of the Net Neutrality argument in its response to KT, and has even argued – somewhat incredulously – that there is no evidence that connected TV OTT content is impacting on the network.

KT’s move will clearly spark a round of battles in both the legal and political arenas with local regulator the Korea Communications Commission already threatening to take action against KT if it follows through with its threat to block OTT content to connected TV’s, claiming that “KT could be impairing social consensus on the [net neutrality] issue.”

“If KT pushes ahead with this action, the watchdog plans to take every measure to protect customers’ rights,” the KCC said in a statement.

Where to now?
KT will no doubt have anticipated a regulatory backlash from the KCC and is obviously prepared to weather whatever political storm comes its way to defend its broader point that consumer electronics firms and content producers must stop using KT’s world-leading broadband infrastructure as a free-to-use adventure playground.

Indeed, it is not as if KT is the only local broadband player considering a restriction on serving up OTT content to connected TV’s with SK Broadband and LGU+ also admitting to local press that they were considering their own action – and both will have been emboldened by KT’s bold decision.

Neither Samsung or LG Electronics can hope to survive in the local connected TV market if KT – which holds around 43 per cent of the local broadband market – persists with its block on OTT content to their connected TV’s and both will be dreading similar action from SKB and LGU+ which would surely kill the local connected TV market stone dead until an agreement is reached.

As a result, it is hard to see how even a company as powerful as Samsung can realistically hold KT to ransom on the connected TV issue, after all, as KT officials said to me last year, “If Samsung wants to be in the video content distribution business with their connected TV’s then they need to pay the costs of being in that business….Netflix doesn’t get free DVD delivery from the US Postal Service.”

Moreover, these events in South Korea could go on to have profound implications on a global scale, particularly in markets where incumbent operators have deployed heavy capital expenditure on new FTTH networks and are struggling to recoup their investment capital – but are seeing plenty of others making money over their top-class networks.

Let the battle commence.

But Sky has always been a deeply pragmatic company, and the nominal threats from new OTT providers such as Netflix have caused it to put aside its ideological differences with its old enemy, and ensure that its customers don’t desert their pay-TV service.

It will be interesting to see the impact of this on iPlayer usage. Customers of Virgin Media have been active viewers of iPlayer via their TV for some time now, but the addition of Sky subscribers could even see the iPlayer becoming predominantly a service viewed on TVs rather than PCs.

At the same time, the shows available on iPlayer (and on ITV online –also part of the Sky deal and home to some of the UK’s TV crown jewels such as Coronation Street and Downton Abbey) represent the ‘short head’ of on-demand TV content, the sort of shows users watch in large numbers within 24 hours of transmission. These are not only the most desirable shows, they are free. For a service such as Netflix, based on delivering ‘long tail’ TV content for an additional monthly fee, business just got a little tougher.

Sky is looking to head off Netflix, as the UK's goto choice for internet based TV and movies

Sky, the UK TV broadcaster and ISP, has announced that it is adding a fibre broadband product to its internet packages, while also for the first time offering an á la carte internet TV service to compete with UK newcomer Netflix.

Sky’s fibre service, based on UK incumbent BT’s wholesale network, will offer download speeds of 40Mb at a cost of £20 per month, undercutting BT. Sky said that the fibre package would be available  from April to 30 per cent of UK homes, and that this would increase in line with BT’s fibre rollout.

Aside from fibre, the company also announced plans to make its ADSL2+ service available to 88 per cent of UK homes by June 2013. The move follows a strong quarter for Sky, who said in the last three months of 2011 added 166,000 new customers to its ADSL broadband service.

Outside of the home, Sky said all of its customers will be able to make use of a public wifi service, powered by The Cloud, the UK wifi provider it purchased in January 2011.

“This year sees a number of enhancements that will ensure we create even more choice”, Stephen van Rooyen, managing director of Sky’s sales and marketing group said in a statement. “Whether it’s the launch of free public wifi, extending our network into more parts of the UK, or adding fibre to our product mix, we are focused on meeting the demands of customers and on being their number one choice for home communications.”

Sky, predominately a satellite based broadcaster, also said it was bringing an internet TV offering available to everyone in the UK, even if they were not Sky customers. Movies will be available at launch on a monthly package unlimited access basis or for one off rentals, with sport and general entertainment available at a later date. The service is set to arrive in the first half of 2012 on a range of devices, from PCs and Mac to phones, tablets and games consoles.

The move is a clear shot across the bows of Netflix, which after shaking up the pay TV landscape in the US is seeking to do the same in Europe, launching in the UK in early January. Commenting on the plans Sky’s chief executive, Jeremy Darroch said in a statement: “This exciting new service will offer some of Sky’s most popular content through a wide range of broadband connected devices. Alongside the continued growth of our satellite platform, this will be a new way for us to reach out to consumers who love great content, but may not want the full Sky service.

Completing it response to rival online services, Sky announced that the popular iPlayer service, from its broadcast rival the BBC, would finally be available as part of its Anytime+ internet based catch-up service, which launched as a Sky Broadband exclusive offering in October 2010.

The BBC said that it was now willing to make its iPlayer service available to Sky due to the latter opening up Anytime+ access to all ISPs, rather than just customers using Sky Broadband. “A core BBC value is to reach all audiences on a universal basis, so Sky’s plan to make Anytime+ available to customers regardless of their internet provider is an important development in helping to bring BBC iPlayer to around 5 million new homes in 2012 – at no extra charge,” the BBC said in a statement.

The Broadband MEA conference is taking place on the 25-27th March 2012, at the Westin Mina Seyahi Beach Resort and Marina, Dubai, UAE. Go to the website now to register your interest.

Boxee brings it all together

Informa has long believed that the winning video platform will be the one that most conveniently blends a mix of Live TV and OTT into one easy-to-use package for consumers. Conventional logic has always been that this would either come from one of four places: a Pay TV provider, one of the big CE OEMs, Apple or Google. These players are the ones with the clout required to both secure content deals, and to pull off the significant technical integration such a play would require. But at CES, the most compelling vision of this future came from a much more unlikely source: Boxee.

For the uninitiated, Boxee began as a piece of cross platform video software; that software is now integrated into two media streaming devices from D-Link and Iomega. What Boxee showed at CES was a live TV tuner. It’s incredibly simple: users buy  a $50 unit, which plugs in to the back of their TV; this simply takes whatever the user is watching and delivers it via the Boxee box and UI.

Crucially Boxee has done no content deals: the device simply takes whatever the user is watching on TV, no matter who a customer’s operator is. This means that your live TV simply sits as a menu option with all of your other OTT offerings. It also means no more having to flick between your Boxee box and your cable or satellite box.

This should be ringing alarm bells for operators. While it may seem counter intuitive to label a live TV device as a cord cutting device, it’s easy to see how some consumers might not want to take the additional sports (Boxee has deals with most of the big US sports leagues) and movie content, if they are to take all their OTT from the same platform.

Boxee may not be the answer for everyone. It is still a little more complex than what the mainstream needs and a few key OTT services – notably Hulu – are still missing. But for Informa’s money, this is the most compelling blend of live TV and OTT that we’ve seen to date. We’d be particularly excited if Boxee adds a DVR, which it says it is considering (although this would be a much harder feature than live to integrate without the support of the operators). And unfortunately for Informa, and anyone else outside North America, it’s unlikely we’ll be seeing this feature rolled out soon, due to the big differences between different Pay TV systems worldwide.