From Video to Revenue: Fixing the Broken OTT Video Value Chain 11/2/2011

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Clarissa Walsh
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2 Agenda OTT Video Consumption Trends New Media Behaviors Create Challenges and Opportunities for Service Providers CONNEXUS Ecosystem and Architecture Use Cases Conclusion and Q&A Page 2 Copyright 2011

4 Change in Consumption Trends US Adults Average Time Spent per Day With Major Media: Growth Consumption of video moving from broadcast TV to mobile Traditional broadcast video is in decline Source: E Marketer Page 4 Copyright 2011

5 Emerging OTT Video Service Models NETFLIX 25 million subscibers in North America $7.99 monthly subscription Unlimited movies/tv shows No advertising Lack of premium content ~$3 billion revenue (2011E) OTHERS Subscribers (in Millions) TV Everywhere Page 5 Copyright 2011

6 New Behaviors Are Challenging Operators New kinds of consumers New kinds of devices 5 people connectivity will be in directly 2015 touched by Billion 55% New kinds of connections of respondents say their next phone purchase will be a smartphone New ecosystems 29X is the amount that data connectivity will grow between 2010 and 2015 $21 Billion in revenue will be generated worldwide by mobile apps in 2014 Page 6 Copyright 2011

9 Consumers Are Already in Multiscreen World TV (live TV) How often do you watch video on your (by video, we mean TV, films, YouTube clips, etc.)? U.S. (n=3,641) Italy (n=922) Spain (n=1,016) U.K. (n=913) France (n=818) Germany (n=897) 69% 66% 56% 54% 60% 50% 16% 19% 20% 13% 12% 14% Tablet U.K. (n=79) Germany (n=182) Italy (n=200) Spain (n=182) U.S. (n=508) France (n=98) 33% 35% 35% 29% 24% 32% 24% 26% 17% 34% 28% 24% PC/laptop Mobile phone Italy (n=932) Spain (n=1,014) France (n=836) U.S. (n=3,709) Germany (n=945) U.K. (n=843) Italy (n=952) Spain (n=912) Germany (n=870) France (n=694) U.S. (n=3,497) U.K. (n=868) 46% 37% 36% 30% 32% 26% 26% 20% 12% 17% 13% 19% 9% 12% 15% 11% 10% 13% 22% 22% 25% 20% 24% 20% At least once a day At least once a week Base: People who own the device Source: Yankee Group U.S. and Europe Consumer Surveys Page 9 Copyright 2011

10 Multiscreen Video Users Are Premium Customers 80% 70% 60% 50% 40% 30% 20% 10% 0% Watch Video on Multiple Screens Age of Respondents France (n=879) Germany (n=1,010) Italy (n=1,009) Spain (n=1,074) U.K. (n=929) Source: Yankee Group U.S. and Europe Consumer Surveys Page 10 Base: Asked everybody (Percentages shown are based on the age group) Copyright 2011

14 CONNEXUS Scope What It Is Architecture for service providers seeking to monetize OTT video How It Works Collaboration by innovative vendors to create solutions, use cases and proofs of concept Starts With Co marketing activities Connects Established standards bodies and associations (3GPP, ITU, GSMA and TM Forum) to promote an open ecosystem for OTT video Page 14 Copyright 2011

18 OTT Video Inflection Point Trends Opportunity Ad revenue shifted from print to online (Google) The next shift is from broadcast to OTT video Who will capture the value in OTT video? Challenge Subscribers will only pay for high quality video, compelling content and flexible viewing options Solution An ecosystem is needed to facilitate end to end collaboration to deliver to subscriber expectations Page 18 Copyright 2011

19 A Collaborative Ecosystem Benefits All Unified Delivery ecosystem for advertisers and content providers End to End Collaboration between service providers, content aggregators, advertisers and device vendors to effectively deliver high quality OTT video services Sustainable Platform for revenue sharing between service providers, content providers and advertisers Page 19 Copyright 2011

20 CONNECTED OTT Video Ecosystem SUBSCRIBERS SERVICE PROVIDER CDN CONTENT AGGREGATOR CONTENT PROVIDER SUB NETFLIX SUB CDN YouTube 20 th Century Fox Usergenerated content SUB CSP IPTV. SUB CDN Page 20 Copyright 2011

21 Phased Approach From delivering bytes to delivering video services 1 SERVICE PROVIDER + + = QoE based SUBSCRIPTION 2 SERVICE PROVIDER + + = AGGREGATOR CONTENT QoE based REVENUE SHARE 3 SERVICE PROVIDER + + = CONTENT AD AGGREGATOR CONTENT MONETIZATION OF ADVERTISING The Evolution of Monetization Coopetition with OTT ecosystems Page 21 Copyright 2011

22 Service Provider Business Models Quad Play Premium CDN Bundled multi screen video service (TV Everywhere) Service provider CDN with last mile QoE SLA Tiered Services Premium subscription for streaming video with QoE SLAs OTT Ads Service provider ad slots in exchange for premium QoE or lower pricing (similar to broadcast TV local ad model) Page 22 Copyright 2011

24 CONNEXUS Solution Ecosystem Advertising Networks Core CDN Third Party (OTT) Content Providers Third Party Domain Advertising Services Access/Service Provider CDNs On Deck Content Providers B/OSS Test and Measurement/ Network Information Policy and Charging Control Service Provider Domain Device/Client Information Network Packet Gateway Video Service Gateway Page 24 Copyright 2011

25 POLL QUESTION #4 Are you partnering or engaging with content providers, or are you planning to do so in the next 12 months, to enhance your subscribers' OTT experience? YES NO DON'T KNOW Page 25 Copyright 2011

27 A Monetization Framework Subscriber Tiers Congestion (Busy Period) Video QoE Devices Price Premium Peak Excellent Smartphones, tablets, PCs Off peak As above As above $$$ Enhanced Peak Off peak Good Excellent Smartphones, tablets Smartphones, tablets, PCs $$ Basic Peak Fair Smartphones Off peak Good Smartphones, tablets, PCs $ Page 27 Copyright 2011

29 Video Service (Subscriber) Tiers Challenge Goal Different subscribers have different QoE needs based on device, content, viewing time, etc. Normalize how subscriber expectations are met while achieving profitability PREMIUM APPLICATION (QOE) NETWORK SUBSCRIBERS ENHANCED BASIC Page 29 Copyright 2011

30 Video Service (Subscriber) Tiers Challenges CSPs deploying CDNs have QoE based SLAs with content aggregators CSPs do not have a mechanism to assure or guarantee those SLAs Goals Enable CSPs to provide a tiered CDN service based on QoE SLAs Enable CSPs to monetize application QoE Third Party CDN Premium CDN APPLICATION (QOE) NETWORK SUBSCRIBERS Tiered Services SUBSIDIZED QoE Page 30 Copyright 2011

31 Advertising Challenges Advertisers will need QoE SLAs to validate ad impressions CSPs require revenue share in exchange for QoE SLAs Goal Enable CSPs to create a framework for advertising QoE based SLAs in exchange for revenue share Third Party CDN Premium CDN APPLICATION (QOE) NETWORK SUBSCRIBERS LOCATION BASED SUBSIDIZED QoE AD NETWORK Page 31 Copyright 2011

32 Getting Involved: Membership Network Vendors Traffic Analytics, Test and Measurement, B/OSS, CDN, Packet Gateway Develop Drive Ecosystem enabling solutions to enable monetization of video services Open technologies and multi vendor solutions that reduce friction in the marketplace and maximize user experience and monetization potential Fixed and Mobile Service Providers Deploy Ecosystem enabling services to monetize OTT content Invest In infrastructure capacity expansion through new revenue streams from subscribers, content owners and advertisers in exchange for providing networks that deliver a higher QoE Content Aggregators and Providers, Advertisers, Device Vendors Leverage Enabling infrastructure to monetize content and ads in the OTT ecosystem Increase Overall market size through new multiscreen revenue opportunities Diversify Revenue from traditional closed broadcast distribution systems Page 32 Copyright 2011

Monetizing Mobile Video: MNOs Get Back in the Value Chain

Monetizing Mobile Video: MNOs Get Back in the Value Chain Brian Partridge, Vice President, bpartridge@yankeegroup.com Video Consumption Market Dynamics: Mobile Taking Off The world has gone mobile, and