Deliverable 2.4. Project Title Project Acronym Call Identifier. Starting Date End Date Contract no

Transcription

1 Deliverable 2.4 Project Title Project Acronym Call Identifier Next-Generation Hybrid Broadcast Broadband HBB-NEXT FP7-ICT Starting Date End Date Contract no Deliverable no. 2.4 Deliverable Name Description of the Selected Business Model Work package 2 Nature Dissemination Author Contributors R PU Daniele Abbadessa (NEC) Joao Girao, Felix Gomez Marmol (NEC), Mark Guelbahar, Klaus Merkel (IRT), Antje Benke, Bettina Heidkamp, Björn Stockleben (RBB), Bas Gerrits (TNO) Due Date Actual Delivery Date

2 HBB-NEXT I D2.4.z Deliverable title Table of Contents Executive Summary Business Model Framework Customer Segments Value Propositions Channels Customer Relationships Revenue Streams Key Resources Key Activities Key Partnerships Cost Structure Current Business Models Broadcast Domain Internet TV Domain (IPTV) Over-The-Top Domain (OTT) Hybrid-Broadcast-Broadband Domain (HBB) Conclusion Current Business Models HBB-NEXT enabled Business Models Media Cloud Service Provider Identity Provider Application Trust Provider Rich Media Provider Multimodal I/F Hardware Vendor Group Recommendation Provider Conclusion HBB-NEXT enabled Business Models Scenarios for HBB-NEXT enabled business models A/V multi sync-technology driven business models Group Recommendation Provider Three Business Models for a Broadcaster offering Rich Media Services The concentrated (broadcaster-centric) model Conclusion References HBB-NEXT Consortium 2012 Page 1

3 Executive Summary This document illustrates new business models that can be enabled by the HBB-NEXT project. The Business Model Canvas framework is being used to describe first the existing business models in the domains relevant for HBB-NEXT and then new HBB-NEXT enabled business models, thus allowing for a comparison and an outlook on future options. Initially (chapter 1), the Business Model Canvas Framework is introduced to provide a basis for the further sections. Then, in chapter 2, the document offers a detailed description of the business models associated to four key players in the TV domain, namely: TV broadcasters, hybrid broadcast broadband, over-the-top and IPTV service providers. These industry players have been chosen as representatives of this industry. Interestingly, there are many similarities across them, but there are also significant differences in terms of value proposition, customer relationship and revenue streams. Afterwards, in chapter 3, attention is drawn to the new business models that could be enabled by the key technologies researched and developed within the HBB-NEXT project. These business models are described separately one by one. This is done by identifying new providers / business roles related to the HBB-NEXT key technologies. These new business roles, each described separately along the Business Model Canvas Framework can be considered as building blocks that can be used to create and evaluate more complex business scenarios. The analysis carried out in section 3 illustrates that the new business roles are often related to multi-sided business models, which implies a more complex ecosystem for success. In addition, the research shows that some of the new business roles are more suitable to a given existing provider (industry) then to another. Chapter 4 of this document is based on the new business roles of chapter 3. It tries to provide some scenarios which consider how these new business roles enabled by HBB-NEXT might be utilised by existing industry players, namely Telcos and Broadcasters. It considers how and in which differing business constellations they could extend their roles and offerings by taking advantage of some of the technology developed in HBB-NEXT. Page 2

4 Finally, section 4 offers some conclusions based on chapter 3 and 4. It describes different scenarios and constellations of HBB-NEXT enabled business cooperation and models, analysing the business potentials arising from the advantages of the technology developed in HBB-NEXT. The idea was to open a broader horizon by presenting a lose assembly and sketches of different aspects, of possible models and constellations that will be relevant when HBB-NEXT business models will be implemented, taking different perspectives and angles. A challenge will also be to find the correct revenue models, considering the users are nowadays used to product bundle and flat rates. Page 3

5 1. Business Model Framework The Business Model Canvas (BMC) introduced by Osterwalder and Pigneur (Osterwalder, 2010) provides a way of composing a business model with nine building blocks: Customer Segments Value Propositions Channels Customer Relationships Revenue Streams Key Resources Key Activities Key Partnerships Cost Structure These nine blocks map on the four main business areas of a business, which are: Customers Offer Infrastructure Financial viability Figure 1 and Figure 2 depict Osterwalder and Pigneur s BMC. Page 4

6 Business Model Canvas Figure 1 Business Model Canvas (Pictural View) Figure 2 Business Model Canvas (Building Blocks) For simplicity, the term customers is used both to refer to an end-customer or to an organization in the descriptions of business models in this document. Page 5

7 1.1. Customer Segments The Customer Segments block is intended to capture the different groups of customers, which are the target for the organization described in the BMC. Segmentation is key, since it allows the identification and grouping of those potential customers that share similarities and can be served by the same product/service. It is very important that an organization identifies its potential segments and selects which one should be finally served. Customer Segments (CS) Figure 3 Customer Segments Segmentation can be performed using different criteria (e.g. consumer/business demographic, psychographic, geographic, behavioural, Distribution channels). Particular attention should be drawn to multi-sided platforms since target customers are rather different but, at the same time, complementary. The business model cannot be in place if one of them is missing Value Propositions The Value Proposition building block is probably the most important building block since it captures which products and/or services are offered to a specific customer/business segment. The fact should be stressed that a key concept of marketing is that customers are interested in benefits and not products [Kotler et al., 1999]. So, clearly identifying the proposed value proposition is essential to create differentiation and eventually capture customer interest and market share. Page 6

8 Value Proposition (VP) Figure 4 Value Proposition As Osterwalder and Pigneur pointed out, values can be quantitative (e.g. price, speed of service) or qualitative (e.g. design, customer experience). In addition, it is important to understand whether the service/product is addressing a new set of needs that customers previously didn t perceive, or whether it is addressing existing needs by offering better performances or a higher level of customization. Other factors to take into account when specifying the value proposition are, for examples, price, design, peace of mind (i.e. managed service), convenience, usability, and cost reduction Channels This building block captures how a company intends to reach its target customers. In other words it captures the company s interface with customers. This includes communication (e.g. advertisement), distribution and sales channels. All these components play different roles at different stages. Osterwalder and Pigneur call these stages Channel Phases and they identify five of them: Awareness. This stage involves raising customer awareness of a company s products/services. This might also include making customers aware of new needs. Evaluation. This involves channel activities and resources that needs to help the potential customer to gain enough information to evaluate the company s offering and compare it against competing products. It is also important to highlight that competing products could also be substitute products/services. Purchase. This phase means dealing with the structure put in place to allow potential customers to purchase the specific products/services Page 7

9 Delivery. This phase is about delivering the value proposition to the customers. In the case of products, the product features deliver the value proposition to the customers. However, this phase is much more complex in the case of services, and, in general, in the case of relationship marketing. After sales. This is also a very important phase especially since post sales experiences have a relevant influence in re-purchasing decisions. Channels (CH) Figure 5 Channels These steps are closely related to some of the key steps involved in end-user or organisations buying processes. An organization can utilise its channels, partners channels, or a combination of both. In addition, different strategies could be utilised in the different stages Customer Relationships Linked to the Channels building block, the Customer Relationship block illustrates which type of relationship a company would like to establish with each customer segment. Different types of relationships can be envisaged from personal assistant to self-service, communities, and even co-creation. Page 8

10 Customer Relationship (CR) Figure 6 Customer Relationship It is also important to stress those different types of customer relationships could be applied to different customer segments. In addition, different types of customer relationship approaches might be applied according to whether the organization if focussing on customer acquisition, retention or service/product upselling Revenue Streams This building block captures various sources of revenues that are envisaged by the organization with regard to the specific products/services that are offered to the customers. Revenue Streams (RS) Figure 7 Revenue Streams An important aspect to take into account here is whether a specific product/service is suitable for a one-off payment approach or for recurring payments. Recurring payments can be created in different forms (e.g. subscription, usage base). Page 9

11 In addition, is important to keep in mind that in multi-sided business model revenues streams are not generated from the end customers, but from one or more parties involved in the business model. [Osterwalder, 2010] depicts some of the possible pricing mechanisms (see Figure 8). Figure 8 Pricing Mechanisms 1.6. Key Resources The Key Resources building block captures all resources that are needed to make the entire business model possible. These resources are needed to create the offered products/services and the related value proposition, and to support the Channels, i.e. how to reach the customers, deliver the products/services and collect revenues. Key Resources (KR) Figure 9 Key Resources Page 10

12 Key resources can be physical, financial, intellectual, or human. In addition, resources could be provided by external companies and/or partners. This happens in the case of outsourcing and/or partnership Key Activities This building block is close related to the previous one and it is meant to capture the key activities needed to offer the specific products/services. Key Activities (KA) Figure 10 Key Activities Osterwalder and Pigneur categorise these key activities into three main groups: Production. Activities in this group relate to designing, making and delivering products. Problem solving. These activities are typically found in the service industry and are related to, for example, consulting or knowledge management. Platform/network. This type of activities are related to platform management and promotion as well as service provisioning. They are very important in those business models in which a platform is a key resource (see 1.6) Key Partnerships This building block is utilised to capture suppliers and partners that are essential to create and deliver the specific products/services. The BMC suggests four main categories of partnership: Strategic alliances between non-competitors Strategic partnerships between competitors Page 11

13 Joint ventures to develop new businesses Buyer-supplier relationships to assure reliable supplies Key Partners (KP) Figure 11 Key Partners One important aspect to understand in the business model is the reason driving a specific partnership. Partnerships aimed at optimisation and economy of scale are driven mainly by cost savings objectives. Partnerships could be also driven by the objective of reducing risks in a new competitive environment by spreading them across the partners. Furthermore, partnerships are often created in order to acquire specific knowledge, technologies or to access new customer segments Cost Structure This building block is intended to capture the most relevant costs associated to implementing and operating a specific business model. The most important cost components can be identified by considering the information captured in the Key Resources, Key Activities, and Key Partnership building blocks of the BMC. In broad terms, costs can be divided into fixed and variable. The former are costs that are incurred regardless of the volume of products manufactured or services that are delivered. The latter are costs that are proportionally linked to the volume of products manufactured and services delivered. The creation of large volume of products and/or services often benefits from economy of scale as the average cost per unit falls as output rises. Page 12

14 In addition, large organizations can benefit from economy of scale as their operations can be shared and support multiple products and/or services. Cost Structure Figure 12 Cost Structure Clarifying whether the organization s business model is cost-driven or value-driven is a very important aspect of an organization business model, and it has large implications on operations and costs. Page 13

15 2. Current Business Models This chapter focuses on describing the business models associated to the TV broadcast, the Over-The-Top (OTT), IPTV and HBB domains. These specific four domains have been selected as they represent traditional TV players, i.e. the TV broadcaster, the IP-based providers of Media content, i.e. IPTV and OTT providers, and finally the HBB providers, which take advantages of both broadcast and IP technologies. It should be noted that other key players such as satellite service providers or cable service providers have been exclude by this analysis since their business models are very similar to broadcasters and IPTV service providers, respectively. For each of these domains, the Osterwalder and Pigneur s BMC is created and each of the building blocks is described in more details Broadcast Domain Almost everywhere in the European Union the coexistence of public and private television providers, the so-called dual broadcasting system, prevails, while the systems are slightly different in each country [Deutsche Welle, 2010]. Taking the German example, the public broadcasting corporations compete with the private broadcasting corporations for audience, listener- and advertising revenue. The most significant difference between both broadcasting systems lies in the actual set up and the major objectives of the organisations. While the private broadcasters are focussed more on gaining profit for their private investors, the public broadcasting corporations have to fulfil their public assignment under public control. German public broadcasters are not allowed to generate profits like the private sector. However, public broadcasters have the possibility to found Private Enterprise Companies or to join such Private Enterprise Companies. (Schmitt-Beck, Prof. Dr. Rüdiger, 2007) In Germany, Public broadcasters have to satisfy a constitutional mandate. The constitution of the Federal Republic of Germany guarantees everyone the right to inform themselves freely from generally accessible sources. It is the constitutionally based function of the broadcasting media and of the other media to give the people free and ample opportunity to form their own opinions. The freedom of reporting by means of broadcasts is a basic freedom written into the constitution. Page 14

16 All of the [German] broadcasting corporations established by states or groups of states have the same mission, i.e. to serve the public as a whole with programmes providing information, education and entertainment. [ARD, 2009] Inform freely as cited above does not refer to completely free of charge but to having free access to information in the sense of un-censored and uninfluenced by the state. To prevent such a direct influence of the state Germany has a licence fee and not a model based on tax. In the following sections the nine building blocks of the canvas model will be described from the perspective of the public broadcaster, mainly modelled on the German example. Page 15

17 HBB-NEXT I D2.4.z Deliverable title Business Model Canvas Figure 13 The Business Model Canvas of a Boradcaster Service Provider HBB-NEXT Consortium 2012 Page 16

18 HBB-NEXT I D2.4.z Deliverable title Customer Segment Customer European public broadcasters create value primarily for their audience, the inhabitants of a European State. Each radio station and TV channel has it own target audience (youth up to old age, local, majorities up to minorities, disabled people or immigrants). The different radio stations and TV channels provide the different target groups with matched information, service and entertainment. In the German example, they also create value for their advertising customers to a small extent. They provide their advertising costumers with targeted advertising, meaning that the advertising is placed in the programme according to the respective target group. Customer Segment In public broadcasting, both categories segmented and diversified as specified Osterwalder for this building block apply. A TV channel might either have a broader target group (diversified inhabitants of a certain geographical region). Here, the diversification happens on the programming level, i.e. by providing special programmes for the different target groups. A TV channel can also cater for a very specific target group by creating special interest channels such as a channel for children or a music channel). The same applies to radio stations as they are usually more diversified, each addressing a certain segment of the population. Public broadcasting corporations take into account both majority and minority interests. They are obliged to cover a wide range of audience interests and to cater for the needs of specific target and age groups Value Proposition Public broadcasters provide the different customer segments with a basic service, independent information, a diversity of opinions, minority- and local/regional programmes, and access for everybody (subtitles, audio description and further access services). The bouquet of products and services they offer to their audience combines TV, Radio, Online, Teletext and services like subtitles and audio description, all in line with the target audience. The elements contributing to customer value creation are topicality, customization and accessibility. Through their programme diversification broadcasters provide advertising placed according to the target group. HBB-NEXT Consortium 2012 Page 17

19 Channels Customers are reached through the following Channels: TV, radio (both analogue and digital), and online, mobile, hybrid and social media networks. To describe the channel phases it is important to understand that the products of a public broadcaster are the programming / the broadcasting and media services as such. Awareness Evaluation Purchase Delivery Broadcasters raise awareness of their programmes and services through marketing and PR activities. This might include film/audiotrailers and teasers within the TV or radio programme, which advertise further programme offers, cross promotion between Radio, TV and Online, including Social Networks, advertising in third party media and bill boards. the audience evaluates public broadcasters programmes and services either through direct feedback like service hotlines, phone and mail feedback directly related to a certain programme offer, online forms or social media activities and else, indirectly, and most importantly as an indirect verdict through their using an offer or not. The quota or share of viewers for a certain programme will in the long run decide about its existence. Customers/the audience do not purchase certain products but have free und unencrypted access to all services. However, they have to pay a general licence fee (see chapter 3.1.6). The delivery of value proposition to customers happens via TV, radio (both analogue and digital), and online, mobile, hybrid and social media networks. Page 18

20 After sales Broadcasters provide customer support using service-hotlines, mail services, online contact forms and tutorials of frequently asked questions. More recently, these offers are complemented and extended by new interaction and communication facilities for users. This includes (commenting, evaluating and recommending functionalities in catch up TV portals which are both available via the web and via hybrid TV applications. It also includes links to social media (from broadcasters websites) Customer Relationship The relationship between customer/audience and broadcaster is characterized through personal assistance, communities and co-creation. Personal Assistance Experience has shown that he audience expects to communicate in person on content and technical issues, and to get corresponding assistance. This has been proven by the manifold requests which arrive every day at the broadcasters service hotlines and online forms. For content related assistance, the customer expects to receive information about the programme and to be able to provide feedback to the programme. For technical issues, the customer expects assistance in problems like receiving the programme via different transmission channels and setting up of service functionalities of the television at home like subtitles. This happens via service hotlines, helpdesk, by mail, online contact formulas and tutorials about frequently asked questions on the broadcaster s websites. Communities Broadcasters embrace social media communities to become more involved with customers, to facilitate networking between community members, and to get inspiration for content production (crowd sourcing), marketing and user-generated content. Page 19

21 Co-creation Broadcasters involve user-generated content to enrich the programmes: The prominent ARD talkshow Hart aber fair (Hard but fair) regularly includes questions and comments in real time into the live programme. At the European Elections 2009 the audience was offered to get to know election candidates and to pose questions to them. Furthermore, in the Live-programme Jetzt reden wir ( Now its our turn ), politicians replied to questions, which had been sent by the audience via mail or as videos. The programme on3-südwild is about co-creation of TV with the audience. The mobile broadcasting unit tours all year through Bavaria and reports from the market place of a different town each week. Anybody can participate, suggest topics, comment live in front of the camera or with a webcam from home, or prepare user-generated content ahead of the programme being broadcast Revenue Streams Public broadcasting is financed from License fees: German example: The public broadcasting system is financed by everyone (well, almost everyone) on the basis of monthly listener/viewer license fees. [ARD, 2009] Starting in 2013, these fees will be charged on a residence and business basis [ARD, 2011]. Additional components are licensing, advertising and sponsoring. The two latter are only a limited source of income. In case of German public broadcasters advertising revenue accounts for a share of 5 % of the overall revenue Key Resources The key resources, which the value propositions require, are human resources (knowledge and creative), physical, intellectual and financial resources. Physical Resources The physical resources encompass buildings, vehicles, TV and radio equipment, TV and radio studios, mobile broadcasting units and transmission equipment (transmitters, satellites and cable networks, internet): Page 20

22 Broadcasting organizations require extensive studio facilities in order to produce and transmit the programmes. To record and produce outside the studio, mobile broadcasting units or vans outfitted with audio/visual equipment are necessary. [ARD, 2009] Intellectual Resources and Financial Resources The intellectual resources include brands, knowledge, license, copyrights, and partnerships (Production Company). The financial resources cover TV and Radio License, Advertising and Sponsoring Key Activities The value proposition requires key activities such as production, broadcast and marketing activities. Production Activities The Production activities include editorial tasks such as content production, production of TV and radio programmes including subtitles, teletext, online and hybrid services. These activities are realized via in-house production, outsourced production and co-production. Broadcasting / Programming Activities Broadcasting and service provision is distributed via the following channels: TV and radio both analogue and digital-, as well as IPTV, streaming/ott/web TV, IP radio and online, mobile and additional services apps. Marketing Activities Marketing & PR activities communicate the programme of the broadcaster to the customer (audience). This includes design, advertising and branding as well as public relation campaigns, especially related to new programme ideas, publications, event management, direct personal assistance and media partnerships Key Partnerships Key partnerships are suppliers and partners. The suppliers provide broadcast infrastructure like cable, digital cable, satellite and streaming servers/hosting. Partners of a public broadcaster are other public broadcasters for example, in Germany all partners of the ARD broadcasting network, production companies, Media Partnerships (e.g. joint events with cultural organizations), commercial daughter companies (Marketing & Sponsoring) and Page 21

23 committees/councils. In the German examples broadcasting councils represent public control of all broadcasting activities to guarantee fulfilment of the assignment of a public broadcaster: The public programming mandate is monitored in the public broadcasting corporations by broadcasting councils. They consist of representatives of the major organized groups in society (e. g. labour, industrial management, churches). They represent the interests of the general public, i. e. of all the listeners and viewers. [ARD, 2009] Motivation for Partnerships Motivations for partnerships are optimization and economy through outsourcing, cost reduction by means of synergies, and sharing of infrastructure. The acquisition of particular resources and activities is motivated by needs of acquiring knowledge, exchange of programmes, and cooperation on various co-productions. Acquired Key Resources Key Resources acquired from partners are advertising & sponsoring - in Germany, this is outsourced to daughter companies, play-out (digital broadcasting) technology and Knowhow. Key Activities performed by partners are play-out as well as advertising & sponsoring Cost Structure The most important costs inherent in the broadcaster s business model are fixed costs and variable costs. Fixed Costs The fixed costs cover utilities, physical manufacturing and broadcasting facilities, software, servers and personnel costs (employed and freelance). Variable Costs Variable costs include external productions, equipment, licenses and copyrights. Broadcasters use economies of scope in the sense of the Osterwalder business model as the same marketing activities or distribution channels support multiple products. The key resource human resource and the key activity programme production make up the highest cost share. The business of a public broadcaster is value driven, focused on value creation. Page 22

24 2.2. Internet TV Domain (IPTV) We define IPTV as a broadcast or on-demand video service using the Internet Protocol (IP), which is streamed to a set-top box that can be connected to a pc monitor or a TV-set. This implies the use of point-to-point networking infrastructure and the distribution of broadcast video using multicasting techniques. Cable and satellite companies TV services are out of scope, as they are not primarily using an IP based network based on a point-to-point architecture for delivery of TV services. We will focus on telecom operators, although the Business Model Canvas for cable or satellite TV service providers will have many overlap with that of IPTV service providers. In contrast to OTT (see section 2.3) which is often referred to as an unmanaged service, IPTV is also considered to be a managed service because the telecom operator controls the delivery of the service across the entire network and ensures that appropriate Quality of Service (QoS) is maintained to the benefit of the end-user. Among the actors in the value chain of IPTV, telecom operators have particular interests in developing digital television service over IP, in order to compensate for the decreasing revenues in their traditional (fixed) Telephony market, and to compete with cable, terrestrial and/or satellite TV service providers for triple-/quadruple-play services (i.e. voice, data, mobile and TV). By leveraging their brand equity they might be able to offer attractive bundled products and create a renewed consumer loyalty not solely based on a subscription. Delivery of bundle services is becoming easier and more cost-effective as telecom providers are upgrading their networks and migrating to all-ip based Next- Generation (NG) networks. Telecom operators are the new entrants in the digital TV market and are aiming to capture a fair amount of market share Business Model Canvas The complete Business Model Canvas for IPTV is depicted below. In the following paragraphs we will elaborate on the individual building blocks of the Canvas. Page 23

25 HBB-NEXT I D2.4.z Deliverable title Figure 14 - The Business Model Canvas of IPTV HBB-NEXT Consortium 2012 Page 24

26 HBB-NEXT I D2.4.z Deliverable title Customer Segment Customer Segments define the different groups of end-users IPTV operators aim to acquire, service and keep. IPTV is typically a product for the masses. Individual channels from broadcasters will aspire to different groups. The IPTV operator usually offers a basic package of TV channels, which aspires the largest possible number of viewers. In addition, specialised TV packages (e.g. sport, blockbuster movies, etc.) are offered in the attempt to attract particular segments of viewers. With a TV device penetration of over 90% in any single European State, this basically means the complete population Value Proposition The main product of the IPTV operator is the package of basic TV channels. Through additional packages the IPTV operator can target its offer to certain segments of the population, but every customer gets at least the basic package. TV audience measurement statistics gathered by e.g. Barb (UK), AGF (DE), SKO (NL) also indicate that the top 10 channels from the basic package are responsible for the lion share of TV viewing time. Nonetheless, additional packages targeted towards a theme or culture (family, sports, documentary, Hindi, Turkish etcetera) form an interesting additional source of income for IPTV operators. No IPTV operator offers access to just a single theme or cultural package. Typically, IPTV is bundled with telephony and Internet access services, sold as a triple play package. In order to compete with other TV service providers that provide access to the exact same content, IPTV operators and cable operators as well - focus on a number of other services to increase the value proposition. Most of these services provide the user more control and convenience over the content he or she can watch in contrast to the linear programming: Through Personal Video Recorders and pause functions, the user can record or stop the current TV show to continue watching at a more convenient time. By providing Catch-up TV and Video on Demand services, the user can access (some) content that is interesting for him or her, at any time. By providing more set top boxes, the consumer can watch TV programs in the bedroom or study-room as well. By creating applications for smartphones, tablets and/or PCs the consumer can watch TV on any device, even outside the home. HBB-NEXT Consortium 2012 Page 25

27 Another means to compete is buying exclusive content rights, typically the national football league. Some IPTV operators have created an exclusive deal with broadcasters or content rights owners for the distribution of content to their customers only. Given the popularity of the football league in some countries, this content can provide a strong leverage in acquiring content Channels The actual TV service is delivered through the DSL/Fibre network of the IPTV operator. The consumer obtains a set top box to connect the TV service to the TV set. Besides providing TV services, IPTV operators are typically large telecom operators that use every available channel for advertising and promoting their TV service such as Internet, billboards, print and TV advertising. Sales are also performed through a variety of channels: the telecom operators Internet portals, retail stores and call centres. Aftersales support is done mainly by call centres and Internet helpdesks Customer Relationship Customer relationship is handled through personal contacts (at retail stores or via callcentres), self-services (i.e. telecom internet portal) and automated processes. Personal customer contacts are of a different nature and vary with the channel phase (see 1.3) in which they occur: During purchase in the Retail store (phase 1-3 of the channels: awareness, evaluation and purchase), the Retail personnel aims to inform the customers and illustrate the benefits of the solution. Customers can often try the service. Upon the decision to buy the service, retail personnel handle the contract formalities; this sometimes includes helping the customers with the cancellation of their contract with their current TV service provider. During the delivery of the service (phase 4 of the channels), IPTV customers are usually provided with detailed instructions. Technical support is offered on demand and it can be free of charge or paid by the customers. Technicians visit the customers at home and handle the correct installation of the DSL modem/router, the STB and the TV. Page 26

28 Customer relationship in the aftersales stage (phase 5 of channels) mainly involves contacting the telecom operator s call centre or accessing e.g., the FAQ section of the telecom operator s Internet portal. It should be noted that telecom operators are trying to emphasize the use of self-service and service self-configuration channels in order to reduce costs and to enable customers to quickly request new services and/or customise the existing ones. In addition, part of the customer relationship takes place via an automated process, e.g. the monthly bill Revenue Streams IPTV operators use three revenue models for their services: The most common way is to charge customers for the access to the linear TV package and to other additional TV packages through a subscription fee. Usually the telecom operator creates a number of packages with increasing amount of channels, services and functionalities. Set top boxes are typically rented by customers. Due to the lack of a standard, a customer can t buy a set top box from a third party, which is common for satellite or digital terrestrial TV. Finally, a-la-carte charging is widely available. In this case, the user pays just for the premium content that he/she wants to see (e.g. VOD or a sport match) Key Resources For IPTV the following resources are the most important: Infrastructure. This includes the core network and the access network (i.e. DSL/Fibre network), the IPTV middleware and related head-end (hardware like: encoders, play-out equipment, etc.) and the customer premise equipment, i.e. router/modem and STB. Setting up such infrastructure requires a fair amount of financial resources. Often, such level of investments can be handled only by incumbent telecom operators, which can rely on existing cash flows from telephony and broadband services. The key challenge lies in the capability of a network that can handle the large amount of data involved in IPTV and provide the quality of service expected by the end user, i.e. stutter free TV service. Page 27

29 Personnel. The telecom operator requires specialised technical personnel to handle the operations of the IPTV platform. Call-centre personnel and technicians need to be trained to address new technologies. Order Chain. The order chain is an important element for telecom operators and prescribes all procedures and timelines from the purchase request until the final initial delivery of the service to the consumer. The slow uptake of the IPTV service is helping telecom operators in adjusting the internal organization and the order chain to be able to handle and deliver this new mass market service which might result in connections of thousands of users per week. Content. The telecom operator requires content licenses in order to be allowed to distribute and sell the content (channels and individual movies, sports matches or TV shows) to its customers. Managing licence deals is extremely laborious and expensive. However, managing exclusive content can be a key differentiation Key Activities In order to deliver IPTV, the telecom operator has to undertake a number of activities. To deliver the key service of TV channels, the IPTV operator has to install a Content Play-out service. This consists of a streaming service, content management and encryption of content. Furthermore, the IPTV operator has to carry out continuous management of its platform in order to stay competitive. This consists of the periodical release management, but also the development of new services/features. Recently, there have been many innovations in the form of multiscreen and multi-room offerings, and the upgrade of the look and feel of the service through new user interfaces. In addition, the connection of new customers and disconnecting churning customers is an on-going process for IPTV operators. Negotiations of content licenses for their Video on Demand and Catch-up TV services are also important. The library of Video on Demand films is continuously updated and the discussion of rates is a periodical activity with the content studios. Finally marketing, sales, PR, Customer support and billing are important activities. Page 28

30 Key Partnerships In order to deliver IPTV, the operator involves a fair amount of partners to deliver the systems and content for the IPTV service. Some IPTV operators do not own the DSL/Fibre network that distributes the TV channels from the platform to the consumer. Smaller parties buy the access to the core network and DSL lines from the incumbent operator. In such a case the IPTV operator uses the network that belongs to another party in order to deliver the service. Partners are local employee agencies that supply help-desk members. Optionally, the complete help desk can be outsourced. Mechanics can also be hired from agencies based on the need and number of new customers or customer complaints. Other partners are foreign IPTV operators that are not competitors, or companies that provide some technical services, like system integration of new IPTV platform elements or audio-visual facility services for Video on Demand content or TV channels Cost Structure Costs for IPTV services are composed of fixed costs elements and variable costs elements. The system hardware, maintenance and personnel are fixed costs. Variable costs are the licenses, devices and capacity for the service. IPTV platform vendors typically charge a license fee for their platform based on the number of subscribers. Devices can be variable costs that scale linearly with customers, as each customer requires a set top box after signing up for the service. Finally, the capacity of the network needs to be increased when the amount of customers grow. This component is actually partly fixed, partly variable. Capacity increase is not linearly related to the amount of customers. Periodically, the telecom operator has to make an investment in capacity increase when the number of customers rises or when the customers show a structural increase in the use of on-demand services. The costs for the network and set top boxes far outweigh the costs for the other components. Page 29

31 2.3. Over-The-Top Domain (OTT) Over-The-Top (OTT) refers to a service that is delivered via a network but it is not offered by the network operator. The service is delivered and utilised by the end user without the need for any business or technology affiliation between the service provider and the network provider. In the last few years the term has become familiar in connection to TV. Today, OTT TV is widely used to refer to any type of TV service and video streaming that is delivered over broadband technology. In contrast to IPTV services (see 2.2), OTT TV services are not delivered by Telecommunications providers and they usually run as best-effort services utilising the existing broadband connections available at the end users premises. For this reason, they are also referred to as unmanaged services, since there is no bandwidth reservation on the delivery network. The first OTT video mass-market service was YouTube [YouTube, 2012]. However, the pioneers of the OTT TV were the BBC [BBC, 2012a] and Netflix [Netflix, 2012a], because of their impact on commercial television. The BBC has definitely innovated the broadcasting industry with the introduction of the iplayer [BCC, 2012b], which enabled end-user to watch traditional broadcast TV on a PC connected to a broadband connection for the first time. Recently, the BBC launched its iplayer as an ipad application, enabling users to watch BBC programs outside the UK by paying a fee. As Figure 15 shows, the largest usage of the BBC iplayer relates to on-demand content. The associate catch-up service enable viewers to watch any previously broadcasted (up to 7 days) BBC TV program any time, thereby freeing viewers from the time constraints of linear broadcasting and enabling them to watch their preferred content at their preferred time. Page 30

32 Figure 15 BBC iplayer simulcast vs. On-demand The business opportunities offered by Internet-based distribution of video content was first fully exploited, from a business point of view, by Netflix in the US. In parallel to the very successful DVD mail-rental service, a few years ago, Netflix has launched a VoD streaming service that has been very successful in the US. Netflix is in the process of expanding this service to Europe (already launched in UK and Ireland) [Netflix, 2012b]. Given the success of Netflix in the US, many other service providers launched similar services also in Europe, e.g. LoveFilm, Maxdome, Voodler (just to mention some of the largest). A combination of factors contributes to the success of OTT: Widespread penetration of broadband in developed countries Broadband flat-rate CE Internet-enabled devices (Internet-enabled TVs, Blu-ray players with DBLive, gaming consoles) Increasing spread of tablets (e.g. ipad) HTTP adaptive bit rate streaming technologies. Although in Europe there are significant differences between countries, Figure 16 shows that broadband penetration is steadily increasing over the years [Eurostat, 2012]. Northern- European countries, especially Denmark and the Netherlands, are leading in broadband penetration while some of the Southern European and Easter countries are lagging behind. Page 31

33 Figure 16 Broadband penetration in Europe Consumption of video over the Internet is also encouraged by the fact that most of the broadband offerings are based on flat rate usage. Price differences are mainly based on the bit rate of the connection. Internet-enabled TVs are also on the rise. [Digitimes, 2011] accounted for about the 30 % of the market in 2011 and is expected to grow to about 50 % in In parallel, there is a growing penetration of tablets, which have been targeted by IPTV and cable operators as companion devices to enrich the level of interactivity with the media content. In addition, they are being widely used for consuming media content, as a research of Accenture shows [Accenture, 2012]. Finally, HTTP adaptive bitrate streaming is a key technology that is able to deliver multimedia content across unmanaged network as the bit rate is adjusted to the current bandwidth availability, thereby avoiding stream disruption during the viewing. Although several technologies by Adobe, Microsoft and Apple exist, a new standard is developed under MPEG [Wikipedia, 2012]. Forecasts about the overall OTT TV market are bullish and Digital TV Research forecasts that global online TV and video revenues will reach $21.52 billion in 2016 [DigitalTV, 2012]. The introduction of OTT TV is starting to have a significant business impact on the incumbent cable operators. Page 32

34 The effect, known as cord-cutting, is more significant in the USA [Wrap, 2012] where there is a well-established cable industry. However, OTT TV also represents a strong competitor for the emerging IPTV industry. Finally, it should be noted that the OTT business model is in its infancy and evolving rapidly. Some established operators are not seeing OTT as a pure competitor but rather a way to enrich their offering to their end-customers. This is for example the case of Virgin Media in the UK, which is offering integrated access to the BBC s iplayer from the Virgin Media s front-end. It also provides a bandwidth guarantee up to 10Mbps [VirginM., 2012]. Page 33

35 HBB-NEXT I D2.4.z Deliverable title Business Model Canvas Figure 17 depicts the BMC of a typical OTT service provider. Figure 17 The Business Model Canvas of OTT Service Providers HBB-NEXT Consortium 2012 Page 34

36 HBB-NEXT I D2.4.z Deliverable title Customer Segment OTT services target the mass market. Initially, OTT services targeted broadband users and offered an alternative mainly to VoD and DVD-mail delivery services, e.g. Netflix. Currently, OTT services are offering streaming for a broad range of linear channels, e.g. Hulu. Google s YouTube is also expanding its offering and it is making arrangement with various content providers and offering streaming of TV channels, [Dailymail, 2011]. The offering is limited to niche channels, but it might expand to mainstream TV channels. OTT requires the availability of a broadband connection. Therefore, OTT service providers could only target those customers that already have a broadband connection (with appropriate bandwidth) or can obtain a broadband connection. As shown in Figure 16, the EU average is around 26% of households. Service offerings are mainly considering the following, nonexclusive, customer segments: Users interested in VoD services Users interested in linear-tv and catch-up TV Users interested in premium or niche content. As technology and services mature, OTT service providers can also target lean-forward viewers, who are interested in a more interactive and personalised media consumption experience Value Proposition OTT services have the potential to offer a wide spectrum of value to the end-users. Content on demand (CoD) OTT represents a paradigm shift compared to the traditional linear-tv because it frees users from the TV broadcast schedule. While on-demand services were initially launched as VoD, catch-up TV is offered by a growing number of OTT service providers and it is proving popular. In addition, OTT technology is making the availability of long-tail content, i.e. niche content, economically feasible. Personalised viewing experience OTT services are making it economically feasible to offer the large archives of content owned by broadcasters, as well as niche content, to the end user. This enables users to have access to a much broader choice of content, which can satisfy his/her personal tastes. HBB-NEXT Consortium 2012 Page 35

37 Price OTT services often compete against established cable and satellite premium content providers on price. Providers like Hulu, for example, aim at being a substitute for more expansive cable subscriptions. This is resulting in the so-called cord-cutting effect. SNS integration In some cases, OTT service providers are offering connections to social networks. The aims are attracting younger generations, increasing user engagement with the media content, creating viral effects, and providing content recommendations. Multi-device experience As services are delivered through IP-based protocols, OTT content can be delivered to a variety of devices (e.g. STBs, connected-tvs, tablets, smartphones, PCs). A well-designed user interface is essential to ensure that users can experience, to a certain extent, the same look-and-feel across these different devices. Access on the move The delivery of content over IP-based protocols makes it possible for users to access content though broadband wireless networks (e.g. WiFi hotspots, UMTS networks), even when they are on the move. For example, cable operators in US are deploying WiFi hotspots in highly frequented locations thus providing access to media content to their subscribers also when they are away from home and, therefore, away from their cable installation Channels Due to its specific Internet-based nature, OTT service providers rely heavily on the Internet as the main channel to provide access and deliver services to their end users. The key aspects of the channel phases are shown below: Awareness It is usually achieved through Internet, TV or direct mail advertising. Evaluation Potential customers are often offered a free trial period (14 days or 1 month). Purchase Purchase is usually done directly by accessing the OTT service provider website or by calling the customer service. Page 36

38 Delivery After sales The service can be immediately accessible through a device equipped with a web-browser. In other cases an application must be downloaded on a specific device (e.g. PC, connected-tv, game console, etc.). Some OTT providers also require the purchase of a specific STB. Customer support is usually provided via FAQs, web portals and telephone support Customer Relationship Customer Relationship (CRM) is mainly based on automated services and user self-service. Through access to the service provider s portal, a user can change his/her subscription or buy specific content. In addition, by tracking the content accessed by the user, the service provider can deliver suggestions and personalised services without human intervention. Such a level of personalization is very important for delivering value to the user. Traditional CRM type of support is rather limited for these types of service providers since their modus operandi is built around the Internet and web technologies. CRM is mainly limited to support subscribers, when web support is not enough Revenue Streams OTT service providers rely on a variety of revenue sources. Monthly subscriptions for specific content (e.g. blockbuster movies) or premium channels usually form the main source of revenues. Pay-Per-View is the preferred choice for billing VoD services. However, subscription packages, which enable to consume a given number of media contents, are the preferred way for providers since it creates customer stickiness and a steady level of recurring revenues. Ad-support is also a possible sort of revenue. This is the model that is more widely adopted by Voodler in Europe [Voodler, 2012]. Finally, other sources of revenues are generated by selling or renting the STB to end-users [Tivo, 2012] [Boxee, 2012]. Page 37

39 Key Resources OTT service providers key resources are similar to the IPTV providers resources: Infrastructure This includes the computing capabilities needed to manage and store content, and to provide the play-out of content. In addition, the STB could be part of the needed infrastructure if the OTT provides the customer premise equipment and does not rely on existing equipment at the user s home such as connected-tv or gaming consoles. OTT service providers also require the setting up of the appropriate OSS/BSS platform in order to control and manage their infrastructure, and to run vital functions such as billing and customer care. OTT service providers do not need to deploy distribution networks since they rely on the broadband network deployed by telecommunications providers and on Content Delivery Network (CDN) provided by specialised service providers (e.g. Akamai). This significantly lowers their infrastructure investment costs and provides some benefits relating to the operational costs. Personnel Personnel resources are mainly limited to technical and CRM personnel. The former manage the operations of the OTT platform while the latter s main responsibility is to support the relationship with the end users. Technical personnel might also be needed to develop the service frontend, unless this function is outsourced. In addition, essential for the success of the business is the availability of a team responsible for negotiating and acquiring content, and for advertising the service. Content As is often mentioned in this industry, Content is King, and without appealing content no OTT service provider can have a sustainable business. Owning exclusive content is currently the main approach to service differentiation. Whereas todays OTT service providers rely on content created by content providers, future OTT service providers might also invest in the generation of exclusive content in the attempt to differentiate their offering. Page 38

40 Key Activities Whilst there are similarities between broadcasters, IPTV and HBB service providers, OTT service providers key activities focus mainly on content acquisition and/or aggregation, platform maintenance and customer management. As mentioned earlier, it is imperative to have appealing content. One of the main activities of an OTT service provider is the search for and negotiation the acquisition of new content, possibly on exclusive use terms. Advertisement is also an important activity area for OTT service providers. On the one hand, OTT service providers must advertise their service offering via various channels (e.g. Internet, direct mail, TV, press). On the other hand, they have to find sponsors in order to subsidize their operations or any premium offerings. Content ingestion, storage and distributions, as well as overall maintenance of the OTT platform form the main technical activities Key Partnerships Two types of partners are especially relevant for OTT service providers: Content Providers/Owners. Entering in partnerships with major content providers is essential for OTT service providers since content is what OTT service providers offer to the end users. Content Delivery Network (CDN). Although OTT providers rely on Telco providers broadband networks for delivering content to the end users, they have to utilise CDN for transferring large amount of media to various caches at geographical locations closer to the end-users. In certain cases, platform providers could be considered as key partners, since they might not just sell the solution to the OTT players but also run and maintain it. Recently, partnerships are also set up with consumer electronic vendors, mainly TV producers, as OTT services are integrated in the new connected-tv devices or Blu-ray players. Page 39

41 Cost Structure Three key cost structure elements can be identified in the OTT business model. OTT service providers have to pay for the rights of the content that they distribute. These costs are proportional to the type of content and the expected customer demand. Acquiring exclusive content can be extremely expensive, but it could provide a key element of differentiation and customer acquisition. Long tail content can be relatively less expensive and offer the potential to attract niche customers. The second key source of costs is represented by the costs associated to the OTT platform and to the delivery of content via CDNs. Finally, the remaining source of costs for OTT service providers is the personnel Hybrid-Broadcast-Broadband Domain (HBB) Hybrid Broadcast Broadband (HBB) is a term that refers to a service that combines webbased applications that are delivered via an IP-based network with classical broadcast services delivered via broadcast networks, such as DVB-S / -C / -T / -IP, to the TV set or the Set-Top-Box (STB) of an end-user. The service is delivered and utilised by the end user without the need for any business or technology affiliation between the service provider and the network provider. HBB services are delivered by broadcasters and they usually run as best-efforts services utilising the existing broadband connections available at the end users premises. For this reason, they are also referred to as unmanaged services, since there is no bandwidth reservation on the delivery network. A well-known example for HBB solutions is the HbbTV [HbbTV, 2012] standard. HbbTV (Hybrid Broadcast Broadband TV) is a new industry standard providing an open and business neutral technology platform that seamlessly combines TV services delivered via broadcast with services delivered via broadband, and also enables access to Internet-only services for consumers using connected TVs and set-top boxes. The founding members of the HbbTV consortium and a large group of supporters jointly developed the HbbTV specification to create a global standard for hybrid entertainment services. Version of this specification has been approved by ETSI as [ETSI TS ] in June The HbbTV specification is based on existing standards and web technologies including OIPF - Open IPTV Forum [OIPF, 2012], CEA [CEA, 2012], DVB [DVB, 2012] and W3C [W3C, 2012]. Page 40

42 The standard provides the features and functionality required to deliver feature-rich broadcast and Internet services. Utilizing standard Internet technologies it enables rapid application development. It defines minimum requirements simplifying the implementation in devices and leaving room for differentiation; this limits the investment required by CE manufacturers to build compliant devices. Examples of HbbTV applications are: Figure 18 start screen applications Figure 19 news reel on demand Figure 20 EPG with preview and catch-up TV Figure 21 advanced teletext application More about HbbTV can be found at [HbbTV, 2012]. Page 41

43 HBB-NEXT I D2.4. Description of the Selected Business Model Business Model Canvas Figure 22 The Business Model Canvas of HBB Service Providers HBB-NEXT Consortium 2012 Page 42

44 HBB-NEXT I D2.4. Description of the Selected Business Model Customer Segment HBB services mainly combine broadcast and broadband-delivered OTT content, so the Customer Segments for these services are largely the same as for broadcast and OTT. This is the mass market covering the full spectrum of the whole TV-using society including all segments. Only a small minority of the European population does not use TV at all and the big TV majority is the target for HBB services. However, the target audience is restricted by the availability of broadband connections, as HBB services require both a broadcast as well as a broadband connection. The more relevant question is how far this mass audience really appreciates the combination of broadcast and broadband on the TV screen. An alternative to HBB could be seen in scenarios where people use the TV set for watching TV only and use different devices for OTT services. But the majority of the market players consider the integrated HBB scenario to be attractive for all groups. Using OTT services on other devices - which will take place on a large scale would not mean that HBB usage would not be attractive as well. On the other hand, the ease-of-use of HBB services, achieved by means of a well-designed user interface, could trigger a more intense usage of OTT value enriching services Value Proposition The value proposition of HBB devices is three-fold: they combine the value propositions of TV and OTT and add specific value, which cannot be provided by TV and OTT in their standalone version. Linear TV services: HBB devices are designed to provide all the value of linear TV. The basic hardware design and functions are included in order to fully meet the expectations of a TV user. Normal TV usage will probably be the main usage of HBB devices. So no new or specific aspects need to be added here. HBB-NEXT Consortium 2012 Page 43

45 OTT services: The second value proposition of HBB devices is to provide OTT services on the TV screen, so all of the considerations in relation the OTT in general are valid here as well. In addition to video dominated content, all kinds of other web-based services can be offered. This includes news, shopping and gaming services as far as they are suitable to be adopted in their user interface for TV usage (e.g. less tiny graphical elements, adoption of navigation for TV remote controls). Specific HBB services: HBB devices allow the implementation of services, which make specific use of both broadcast and broadband components on the TV screen. These are typically services like: Advanced teletext services directly linked to TV services OTT video services related to TV services; which are made directly accessible via specific launcher applications tied to the TV services Enhancements to TV programs such as program-related information, gaming or betting applications Electronic Program Guides with direct access to TV services Personalised advertisement add-ons from the Web (browser cookie - based) Home shopping TV services with directly coupled shopping applications Access services related to broadcast channels Channels The distribution channels include the broadcast channels and the channels used for OTT services delivered over broadband connections. HBB does not use nor plan to use different or specific channels. HBB is designed exactly to make use of existing channels, broadcast and broadband. In the HBB scenarios, viewers of traditional TV channels will be made aware of interactive HBB services via overlays on the screens. The red button on the remote control will be used to start the interactive service. Page 44

46 Customer Relationship Specific aspects of the customer relationship with regard to HBB services - which go beyond the aspects covered with Linear TV and OTT, both of which can be applied to HBB as well - can be identified as follows: Here the main new and additional potential is not situated with the OTT operators, but with the conventional broadcasters. HBB offers them a huge potential to use the TV services as an entry point to create a much closer relationship with the end customer. Traditionally, broadcasters do not have any direct relationship with their audience. HBB enables broadcasters to create personalised offerings targeting the individual TV user much better. They can collect data of each individual user, invite them to register, join games and to perform direct commercial transactions related to products of the broadcasters or third party partners. On the other hand this creates a lot of additional challenges related to content creation and operational processes. HBB devices may change the customer relation for TV operators due to new interactive usage scenarios, even if the operators do not aim at such scenarios - the end customers may have higher expectations in the future and thus begin to miss something if the broadcaster remains fully passive resulting in a change in relation on the part of the end customer Revenue Streams HBB services offer the potential of new revenues streams that go beyond the aspects covered with Linear TV and OTT, both of which can be applied to HBB as well. In particular, the new dimensions of customer relationship created by HBB allow new potential revenue streams for broadcasters. Additional revenue streams can be generated by enhancing free services with new forms of advertising e.g. personalised, more information on demand, more and longer videos, interactive product description etc. - which relates to a deeper customer relation, but not to an explicit commercial relation. Direct revenue streams from the end customer can be generated via all sorts of transactions and subscriptions ranging from offering some premium information services on a low-cost basis, up to selling high priced goods such as washing machines or travels via the TV set. Page 45

47 Key Resources The HBB providers will require resources that are needed to deliver Linear TV and OTT, as well as resources that allow synchronization for the two types of content. This implies that broadcasters need additional resources to enter the area of HBB business. In particular, both technical and content related skills are required. In order to be able to provide HBB content and applications, contracts with e.g. CDNs need to be signed, enabling the usage of a reliable broadband network backend. Additionally, the play-out backend and systems need to be upgraded for support of signalling and play-out of HBB applications and services. Once these two resources are enabled, the real HBB content (Service, Applications and A/V content) needs to be designed and implemented. This requires specific conceptual and technical skills as usage concepts and technical browser profiles relevant for HBB devices differ from the ones widely used for PC or mobile device applications. These applications can then be played out, but the customers will need to have consuming devices (e.g. STBs or ConnectedTVs) that are capable of decoding and presenting the HBB content. Finally, there s the need for Customer Support, to handle questions, problems or remarks customers might have. Customer support is a completely new dimension for broadcasters Key Activities The HBB provider will share the activities that are typical for a broadcaster and a OTT provider. Additional activities are needed to handle the convergence of the two domains. One of the key activities a broadcaster performs when creating, providing and maintaining HBB offerings, is typically the technical installation and the play-out of HBB content and applications, and eventually the encryption of both (depending on whether it is a public or private / Pay-Tv broadcaster). Additionally, the applications platform requires maintenance efforts, e.g. related to the release management, content management for VoD content, and the design & testing of UIs and applications. Other non-technical activities are the installation and maintenance of a Helpdesk, a Sales department and the marketing activities centred on HBB, as well as content license purchasing (for e.g. VoD content) and billing (for private and Pay-TV broadcasters). Page 46

48 Key Partnerships Specific aspects of the key partnerships relationship with regard to HBB services - which go beyond the aspects covered with Linear TV and OTT, both of which can be applied to HBB as well - are two-fold and can be described as follows: External Partnerships: A broadcaster providing HBB services will need to set up and maintain a partnership with a platform Vendor (e.g. a CDN), in order to be able to distribute his HBB services via reliable broadband networks. Also, the encoding of a huge amount of videos may require external partnerships. For the provision of HBB content (e.g. VoD content), the HBB provider will need to manage the partnership with content parties, and in case of private or Pay-TV broadcasters, with encryption vendors, enforcing the right restrictions for the content being distributed. Additionally, cooperation and contracts with STB vendors are required, especially when it comes to Pay-TV HBB services where special access restrictions (subscription-based contracts) need to be realised. Applications/services are likely to be developed by 3 rd parties. Therefore, the HBB providers have to establish partnership with developer companies that develop services on their behalf, or third party companies that will develop their own services/application and that will be available within the HBB offering in partnership with HBB providers. Internal Partnerships: Besides the already outlined external partnerships, an HBB provider will need to maintain internal partnerships. In the initial phase, partnerships with system architects, engineers and mechanics will be necessary for setting up backend systems and integration of new technical components required for successful HBB provision. Additionally, content acquisition, design and purchase will need to take place in this phase. Some service aspects will require closer cooperation of internal departments, as services will e.g. need additional metadata. In a parallel or second stage, departments for account management, sales and customer support will need to be either installed or upgraded. Page 47

49 Cost Structure Specific aspects of the cost structure with regard to HBB services - which go beyond the aspects covered with Linear TV and OTT, both of which can be applied to HBB as well - can be described as follows: For the technical and system-related parts, set-up and maintenance costs incur for the system back-end, the broadband network platform and the play-out systems. Additionally, license fees will need to be paid for content and external services/applications. Services/applications could also be offered without incurring costs if specific partnerships are in place. Non-technical areas where costs incur are those related to the maintenance of the departments covering marketing of HBB services, customer support, sales, and account management Conclusion Current Business Models The scope of this chapter is to illustrate the business models associated to TV broadcast, the Over-The-Top (OTT), IPTV and HBB domains. These specific four domains have been selected as representative of key players in the TV industry. Other important roles, such as private broadcasters and satellite operators, and cable operators, have not been described since their business model is closely related to the broadcast and the IPTV providers, respectively. An understanding of the current business models is crucial to understand the advantage and the innovation that HBB-NEXT could bring to the evolving landscape of TV and Media. The analysis of these four business models highlight that many similarities exist amongst all these players. They all target similar customers, however, the value proposition is different. Whilst public broadcasters aim is to fulfil the need of information requested by the governments, IPTV or OTT providers are capturing viewers interest by providing exclusive content, VoD, non-linear media consumption. Customer relationship is also different. IPTV operators tend to establish a more direct contact with their customers, because of their telco background and CRM infrastructure already in place. Page 48

50 Key partnerships and activities are also very much similar amongst these players. All these players have to acquire content that is afterwards made available or distributed to end users. Broadcasters are also actively involved in content creation and this is one key activities that differentiates them from other players. Partnerships with content providers as well as technology partners are important for all players. On the technology domain, there are significant differences since the underlying technology to reach viewers are different: broadcast and IP technology, respectively. OTT providers sit in a special case since they do not have to provide and maintain a delivery network since they utilise existing broadband networks for the delivery of their services. This is also open some fierce discussions between Telco provider, regulatory and the supporters of net-neutrality. Media streaming is putting under pressure existing IP networks and it requires significant upgrades in the core as well as in the edge networks. Therefore, Telco providers are lobbying for having the OTT providers, e.g. Google s YouTube, contribute to the large investments needed. The current flat rate subscription models are proving not particularly suitable to cope with the explosion of data traffic due to media content. As result of this, tier-based subscriptions are started to appear in the US. The sources of revenues show many similarities within the broadcast and the IP domain. Public broadcasters are funded mainly via special taxes, whilst advertisement is the major source of income for satellite and private broadcasters. IP and OTT providers main source of revenues are customer s subscriptions and single payments for VoD services. Rental of STBs is also an important source of revenue for IPTV (and cable operators). The cost structures have similarities across these different domains. The main difference is represented by the OTT providers that do not own and maintain a distribution network. Therefore, their cost structure is relatively low compared to the other players. HBB providers present an interesting evolution of the traditional broadcasters. Their business model is very much based on the broadcaster model, however, the availability of a return channel (via broadband connections) opens new opportunities for enhancing the value proposition and create new revenues streams. At the same time, these operators faces new challenges coming from entering the IP world which is new to them. Page 49

51 3. HBB-NEXT enabled Business Models This section focuses on HBB-NEXT enabled business models while describing each of these models along the chosen approach Business Model Canvas. The basis for each of these models are specific industry players or providers which have been identified by HBB-NEXT based on the key technologies developed in the project and which play a well-defined role in the HBB-NEXT ecosystem. The single business models described in this chapter one by one could be considered as basic business models building blocks. They are like a toolbox which can be utilised to describe more complex business models. The complexity arises from the fact of the different options and possibilities of how the specific industry players cooperate, i.e. to which extent the new roles identified in this chapter are performed by independent companies or are performed by the existing players on the market, broadcasters on the one hand and Telcos on the other hand. This implies that by combining some of these building blocks appropriately it is possible to describe a more comprehensive business model of an HBB-NEXT service provider (broadcaster or Telco-based). Consequently, section 4 of this document takes these newly identified business models of section 3 and illustrates how a selection of the simpler business models described here might be combined in order to create more complex ones. The following business models linked to the following providers or industry players are covered in this section: Media Cloud Service Provider Identity Provider Application Trust Provider Rich Media Provider Multimodal I/F Hardware Vendor Group Recommendation Provider Section 5 covers two examples of an HBB-NEXT Providers and illustrates how a selection of the simpler business models described in this chapter can be combined in order to create more complex ones. Page 50

52 3.1. Media Cloud Service Provider The Media Cloud Service Provider offers functionalities that facilitate the delivery of mediarelated services, and the infrastructure and capabilities for enabling cloud offloading of interactive applications. It is also makes the development of media-related applications easier, as common media processing modules are offered to developers via the media PaaS 1. 1 PaaS stands for Platform-as-a-Service. It is used to refer to cloud computing services, e.g. software tools and libraries, offered to developers to shorten the development cycle. Page 51

53 HBB-NEXT I D2.4. Description of the Selected Business Model Figure 23 illustrates the overall BMC of the Media Cloud Service Provider. Figure 23 The Business Model Canvas of a Media Cloud Service Provider HBB-NEXT Consortium 2012 Page 52

54 HBB-NEXT I D2.4. Description of the Selected Business Model Customer Segment The Media Cloud Service Provider is not targeting end-users but rather other service providers such as broadcasters, IP-based media service providers, e.g. IPTV, OTT Providers, and cable operators. These service providers will use the media PaaS functionalities to enhance their service offering and/or to benefit from the cloud infrastructure, effectively address fast growth in user service demand, and quickly develop new services using the media-related capabilities offered by the media cloud. In addition, the Media Cloud Service Provider targets developers. By offering media processing functionalities it enables developers to create applications easier and faster since the media PaaS offers basic media processing functionalities ready for use Value Propositions The values delivered to the customer segment are the same offered by a cloud provider; namely flexibility and elasticity. In addition, media-specific functionalities are made available to simplify the development of interactive and media-related services. Cloud offloading provides a platform to run media-related interactive applications and, as result, it enables to deliver interactive services to end users even if they are using not-so-powerful devices, e.g. smartphone or tablets. With regard to developers, the main value proposition is the availability of media processing enablers that can be reused, thus making the overall application development cycle shorter Channels This involves typical activities related to B2B. Awareness It can be achieved via Internet, advertisements at industry specific conferences and/or trade fairs, contacting service providers directly through the sales organization of the Media Cloud Service Provider. Evaluation This might assume various forms and include for example off-site or on-site trials, which could be charged or free-of-charge. Alternatively, developers can have access to test environments. Purchase Purchase in B2B is often a complex process that includes several steps and involves several entities within organisations. In the case of the HBB-NEXT Consortium 2012 Page 53

55 Media Cloud Service Provider, purchase of processing capabilities and PaaS functionalities is the likely scenario as the physical infrastructure and the maintenance of the software will be handled by the Media Cloud Service Provider. Delivery After sales Assuming the more realistic case of the Media Cloud Service Provider running and managing the media PaaS, end-users will access services offered by services providers by being directed transparently on the Media Cloud Service Provider infrastructure. Customer support is usually provided via FAQs, web portal and telephone support. The platform will be managed by the Media Cloud Service Provider. The level of service offered to 3 rd parties is regulated via service Level agreements SLAs Customer Relationships As the cloud business is often related to utility-based and/or subscription-based payment mechanisms, it is important to establish a long and durable relationship with the customer service providers since this will ensure the continuation of profitable business Revenue Streams The two main payment models associated to cloud computing are based on subscription and pay-as-you-go. These two models are both relevant to the case of the Media Cloud Service Provider. Subscription based revenue streams are likely to be applied in the case of an established relationship between the Media Cloud Service Provider and a service provider such as a broadcaster. Pay-as-you-go is very likely to happen at the earlier stage of a relationship, when a new service is initially launched, or a new service is tested. While free-to-use offering, within limited processing and storage usage, is a common practice for consumers, this model is not applied in the B2B scenarios. Developers might contribute to revenue streams either during the development of applications (probably in a pay-as-youuse model) or at later stage if they offer services to end users directly. In the latter case they will play the role of service provider Key Resources Page 54

56 A first key resource for the Media Cloud Service Provider is the cloud infrastructure, which consists of datacentre with related computing and networking resources. In addition to the software that runs on the cloud platform, e.g. hypervisors, OS, media-processing software, the Media Cloud Service Provider requires software for the management and monitoring of the entire platform, i.e. OSS systems, and CRM and billing solutions, i.e. BSS systems, in order to manage the relationship with their customers and the billing of the used resources. Another key resource of the Media Cloud Service Provider is the technical personnel that manage the cloud infrastructure. Page 55

57 Key Activities The core activity of the Media Cloud Service Provider is to maintain the cloud infrastructure. In addition, on the software side, the Media Cloud Service Provider must install new software and perform the required updates. One important activity is also the monitoring of the overall infrastructure and ensuring that service level agreements (SLAs) are met or exceeded Key Partnerships Amongst the key partners of the Media Cloud Service Provider we can identify, CDN providers, software providers (e.g. hypervisor providers), independent software developers as well as open-source communities Cost Structure The main sources of costs of the Media Cloud Service Provider are: Infrastructure. This includes the datacentre facilities and the cloud hardware (server and networking equipment) deployed in the datacentre. Software. This includes licences, unless open-source software such as KVM, is utilised. Licences are not only needed for the basic cloud infrastructure but also for the media PaaS functionalities offered to service providers and developers. Staff. Staff will be mainly needed to maintain the cloud infrastructure and the related PaaS, and to handle other operations and business activities (e.g. billing, CRM, sales) Identity Provider The Identity Provider is responsible for authentication, user profile management and, partly, for authorization policies. It allows for other segments of the value chain to focus on their core competences while the Identity Provider provides those parts of the application with Single-Sign-On (SSO) and an easy way to exchange user data. One important aspect of Identity Provisioning is privacy and data leakage control. Through pseudonyms and access control policies on user data, the Identity Provider is able to restrict access to the real user data, if necessary, and prevent the ability to link user events even in an SSO scenario. Page 56

58 When a user accesses an application which requires authentication, the Identity Provider is contacted. If the user is not yet authenticated, the Identity Provider will proceed with the authentication process, which can be local or depend on a third party. Once that authentication is concluded, the Identity Provider will vouch for the user authentication and provide any extra user profile data that the application is allowed to receive. The Identity Provider is also usually also responsible for account creation or account linking, which provides the pseudonyms for the SSO and user profile management functions. The Identity Provider could also act as a management interface for the users' data, where the user may update, retrieve or input data in his profile in a centralized way. Other applications may then access this data (if allowed) in a coherent and always up-to-date way. It is important to note that in addition to the normal authentication, data management and authorization functions, the Identity Provider offers a stronger level of privacy, which allows to separate user provisioning from application specific data. Page 57

59 HBB-NEXT I D2.4. Description of the Selected Business Model Figure 24 illustrates the BMC of the Identity Provider. Figure 24 The Business Model Canvas of the Identity Provider HBB-NEXT Consortium 2012 Page 58

60 HBB-NEXT I D2.4. Description of the Selected Business Model Customer Segment Since Identity Providers are general constructs for basic functions, there are many possible configurations on how the Identity Provider may be used in the context of HBB Next services. It can act as the main contact to the customer or as a relying function to the value chain. In the first case, the Identity Provider gathers its own list of end-users and approaches its partners as a source of user base. In the latter case, the Identity Provider enables its partners to improve their operations and/or user management features. In both cases, an Identity Provider's role affects the following customer segments: End-users: These are the subjects for authentication and their main purpose is to access services. In addition, end users are concerned about their privacy when accessing services and would like to be able to view and control their (distributed) user profile(s). Service providers: Service providers rely on the authentication and user profile information provided by the Identity Provider. They also have liability issues and would like to reduce the amount of data they store about end users. They want to focus on their core competences (their service). Application Trust Providers: Work in combination with the Marketplaces to create a scalable sales platform that provides a measure of quality. The Identity Provider enables access to application trust providers, maintains the privacy of the user and allows to the anonymity and usage of statistical results. Application providers rely on the Identity Provider for authentication and user profile management local to the device. They expect SSO with their services components (if these exist) and a tight control (local and remote) of application and data usage. CE manufactures: Through an Identity Provider can improve their customer tracking and customer loyalty without compromising privacy. HBB-NEXT Consortium 2012 Page 59

61 Value Proposition The Value proposition will be different according to the customer segment. End-users: Provide a single point for authentication and management of their profiles Increased profile security, privacy and control Application providers, Service Providers, Market Providers: Focus on core competences, up-to-date user information, higher security and higher fraud prevention Application Trust providers (Pseudo-)Anonymity for statistical analyses and advertising CE manufactures Easier mechanisms to control customer fidelity and branding associated to authentication independent from product Channels This involves typical activities related to B2B and B2C. Awareness The Identity Provider will advertise its service at industry specific conferences and/or trade fairs, or contacting service providers, marketplace providers and CE manufactures directly through its sales organization. Awareness towards end-user will be managed utilising typical B2C approaches. Evaluation The evaluation of the service will follow formal processes since the purchasers of the services are likely to be service and marketplace providers, and CE manufactures. Users might simply register with an Identity Provider and leave the provider if the service is not satisfactory. Purchase Purchase in B2B is often a complex process that includes several steps and several entities within organisations. In the specific case, it is more likely that customers such as service providers will pay for the use of the Identity Provider functionalities and link their platform to the Identity Provider using well define standard APIs. Page 60

62 Delivery After sales The delivery of the service is rather transparent for the end-users since such a service will be seamlessly integrated in the service provider s or marketplace s front-end. After sales support will be directed towards the enterprise customers (e.g. service and marketplace providers). End-user support is instead dealt with, at first level, by the service and marketplace provider or the CE manufacture Customer Relationship Regardless of the customer segment, the Identity Provider aims as establishing long-term relationships. Long term relationships with end-users are also very important since being trusted by a large number of users will increase the value of the Identity Provider in various value chains and strengthen its power in negotiating relationships with enterprise customers (e.g. application developers, marketplace providers, etc.) Revenue Streams It is very unlikely that end-users are willing to pay for such services, therefore, revenue streams will be mainly generated by enterprise customers (e.g. service developers), which can deliver a more compelling user experience to their end-customers. Various sources of revenues could be identified: Subscription based payments Transactional-based payments Ad-supported Key Resources The key resource of the Identity Provider is the identity management platform and the database that holds user profiles, and the policies related to the transfer of information to authorised third parties Key Activities The Identity Provider relies mainly on a working platform populated with user information. It is important that the user experience is not damaged by the role the Identity Provider plays in the access to the services. For this reason, the main activity is the maintenance of the identity provisioning platform. Page 61

63 In addition, the Identity Provider must guarantee the validity, freshness and control of the data it keeps. Therefore, tailored audits may be required. In addition to the normal operations, the Identity Provider must also stay up to date with legal and regulatory requirements and data retention laws. This is an area of R&D for Identity Providers and may define how an Identity Provider is used in the context of its partners. Furthermore, if the Identity Provider is offering the service directly to end-users, then it will be necessary to put in place activities for handling customer relationship Key Partnerships The Identity Provider relies heavily on its relationships with other parts of the value chain. It relies on the customers from Application and Service Providers, Marketplaces, CE Manufactures and Application Trust Providers. However, the relationship with these partners is inter-dependent: the partner needs the Identity Provider and vice versa. Since partners put the customer data and authentication to the services in the hands of the Identity Provider, partnerships must be well catered for and are essential to the survival of the Identity Provider. Similarly, an Identity Provider gathers many users and has the power to help a service to succeed (or not) Cost Structure While most of the costs will occur on operating and maintaining the infrastructure, special costs are related to data management, e.g. validation and destruction of old records, legal and regulatory data retention / privacy considerations, etc; and data security, including physical security, constitute special considerations for this type of service. Keeping up with legal and regulatory matters also adds to the research and development operational costs. It is important to note that both for the validation of data provided by the user (for legal requirements), and for the dealing with litigations that may occur from misuse of user data, a legal department will be required. Page 62

64 3.3. Application Trust Provider The Application Trust Provider offers a platform that enables users to assess the reputation of applications. This is an important role since a proliferation of applications in the media domain is expected in the near future as technologies, such as the one investigated by HBB- NEXT, will appear in the market. While platforms will have to support any number of applications from third party providers, as shown by the current trends in the mobile markets (e.g. Android, iphone/ipad), it becomes difficult: a) for a platform provider to perform an in-depth quality control of every application; b) for an end-user to choose the right application for what he wants and to receive a compelling user experience; c) to maintain a high competition for quality in the application developers market; d) to increase the value proposition of the platform provider to both end-users and application providers. The concept of an Application Trust Provider appears as a way to mitigate these issues by crowd-sourcing quality control based on the user experience, and utilising a set of reputation schemes and protocols which, by working in a collaborative way, filter out the bad applications from the good ones. Using recommendations made by end-users minimises the need for costly certification processes and human interaction in the application selection process, while maintaining a quality threshold set by the user. The Application Trust Provider offers a multi-sided platform. On the one side, we have service providers, marketplace providers that are interested in this platform to differentiate their offering and offloading the application certification process. On the other side, we have the end-users who provide application assessments and who use them. Since the Application Trust Provider can operate over multiple Marketplaces, it can aggregate knowledge over the same application or over multiple users. In combination with the Identity Provider, it can offer a strong recommendation, less susceptible to attacks or cheating, and operate over feedback of many (individual) users without compromising privacy. Page 63

65 This aggregation of information is the Application Trust Providers strongest asset and can be leveraged towards statistical analysis, user behaviour analysis and advertisement, without compromising privacy. Page 64

66 HBB-NEXT I D2.4. Description of the Selected Business Model Figure 25 illustrates the BMC for the Application Trust Provider. Figure 25 The Business Model Canvas of a Application Trust Provider HBB-NEXT Consortium 2012 Page 65

67 HBB-NEXT I D2.4. Description of the Selected Business Model Customer Segment As a multisided platform, the Application Trust Provider addresses end customers on the one hand. On the other hand, it addresses several potential players that could be customer of the Application Trust Provider. In particular, the following groups can be identified: Application providers: Provide the applications Service providers: Provide backend logic to some applications Marketplace providers: Provide the platform to sell applications CE manufactures: Provide the devices These different segments all benefit from the value proposition and may directly or indirectly be involved in the revenue streams. HBB-NEXT Consortium 2012 Page 66

68 Value Proposition The value proposition is different depending on the customer segment: End-Users End-users can benefit from a higher quality control, sorting and filtering of applications based on user experience, and assessment of functionalities. In addition, such trust mechanism can decrease the time to choose the right application without compromising quality or going through lengthy examination of the application available. Another important aspect is that, as feedback information is provided by other users in a distributed manner, there is not a single entity that is responsible for assessing application trust, avoiding potential situations of power abuse. Application Providers Reduces the noise towards the end-user and restricts competition to suitable applications on the same level, which leads to higher sales for application providers who focus on quality and apply best practices for dealing with the end-user. Marketplace and Service Providers Increase differentiation by providing users with a better experience and faster time to buy. It also minimises the need for costly certification processes requiring significant human resource efforts. Consumer Electronics (CE) Manufacturers By providing users with the best user experience possible, CE Manufacturers also make their devices more attractive and increase sales. Page 67

69 Channels This involves typical activities related to B2B and B2C. Awareness The Application Trust Provider will advertise its service at industry specific conferences and/or trade fairs, or by contacting service providers, marketplace providers and CE manufactures directly through its sales organization. Awareness towards end-user will be managed by the service providers, the marketplace providers or the CE manufactures. Evaluation The evaluation of the service will follow formal processes since the purchasers of the services are likely to be service and marketplace providers and CE manufactures. Purchase Purchase in B2B is often a complex process that includes several steps and several entities within organisations. Service and Marketplace providers and CE manufactures will either purchase a platform that they will run, or connect to the platform managed and run by the Application Trust Provider, which is a less risky approach. Delivery The delivery of the service is rather transparent for the end-users since they such a service will be seamlessly integrated in the service provider s or marketplace s front-end. After sales After sales support will be directed towards the enterprise customers (e.g. service and marketplace providers). End-user support is instead dealt with, at first level, by the service and marketplace provider or the CE manufacture Customer Relationship Relationships with end-users are short-term as, the user will interact with the Application Trust Provider only at the moment of providing feedback or analysing existing reputation information about an application. On the contrary, long term relationships should be established by the Application Trust Provider with the enterprise customers (e.g. Marketplaces or CE Manufacturers) in order to ensure long lasting revenue streams. Page 68

70 Revenue Streams While the end-user is unlikely to pay directly for this added value service, since users are already accustomed to free customer reviews on numerous e-commerce websites, revenues are expected to come from Marketplace, Service Providers, Application Providers and CE Manufacturers. Mainly two possible sources of revenue streams can be envisaged: Subscription-based: The customer (e.g. the application provider) has a flat fee contract with the Application Trust Provider to manage the reputation of its applications and the relationship to the end-user during the collection of feedback, and the filtering and sorting of applications. Transaction-based: Part of the purchase fee is paid by the enterprise customers (e.g. application providers, marketplaces) on each single purchase of an application. In addition to the revenue streams described above, the nature of the system also provides an opportunity to complement revenue with advertisement, either internally, i.e. within the applications in the system, or externally, i.e. any external source of advertisement or partnership Key Resources The main asset of the Application Trust Provider is the large database of feedback provided by end-users on specific applications. This large source of data can be leveraged outside the scope of application feedback. For example, it could provide useful information for advertisement placement. A large database means a faster setup time for a new player (e.g. Marketplace), a decreased setup cost for the platform, and a faster end-user adoption of the system. Ramping up trust platforms is usually a painful and costly endeavour. The actual platform, algorithms and partnerships are also of great value Key Activities The main activity of the Application Trust Provider is to maintain the platform and to provide a good user experience for the end-users and its partners. In addition, a key activity and source of differentiation of the Application Trust Provider is maintaining and enhancing the quality of the algorithms and the amount of functionality exploited from the database Page 69

71 of feedback and user interaction. This activity is essential to provide an appealing service and therefore maintain and increase the revenue streams Key Partnerships All customer segments, with the exception of end-users, are also the basis for key partnerships. Without the support of Marketplace providers and/or CE Manufacturers the Application Trust Provider has no platform or end-users from which to operate from. Without Application and Service Providers/Developers, there is no content to evaluate trust and therefore, also no end product Cost Structure The main source of costs in the Application Trust Provider is related to the set-up and maintenance of the trust platform. The platform relies on crowd-sourcing for the evaluation of the applications, therefore, the potential high costs related to application quality control and application assessment are passed on the end-users. Page 70

72 3.4. Rich Media Provider The role of Rich Media Provider can be performed by a broadcaster, Telco, e.g. IPTV and cable operators, or independent media IP-based service providers. The Rich Media Provider focuses on adding value through the use of the HBB-NEXT key technology A/V multi-sync. This key technology can be applied in three main areas as identified in the use cases/scenarios of deliverable [D2.1]: 1. Inter-media synchronization (i.e. two or more media streams are delivered synchronised on a single device). 2. Inter-device synchronization (i.e. use of a companion device: several streams send to main TV device and companion device at the same location). 3. Inter-destination synchronisation (IDMS). Page 71

73 HBB-NEXT I D2.4. Description of the Selected Business Model Key Partners System suppliers: Media stream platform vendor STB vendor Encryption vendor Content suppliers Content Parties Broadcasters Distribution supplier Broadband network operator (CDN) 7 Agencies Mechanics Call center Cost Structure Key Activities Content creation Content selection and acquisition (content license purchasing, etc.) Rich Media design, testing, verification Service & PR: Helpdesk, Sales, communication, marketing Key Resources Human resources: Rich Media experts, translators, signers, subtitle editors, application developers, Customer support Physical: Play-out equipment, Broadband network, STBs, A/V content, Rich Media applications & services Content: creation, acquisition and license STBs: (in the case that the Rich Media Provider is offering the service directly to end users Infrastructure (Content storage, management, play-out,..) Network access (and guaranteed QoS) Marketing, Communication, Customer support Value Proposition End User: Inter-media sync: Multi-lingual subtitles/audio Live subtitles Picture in Picture Inter-device sync: Companion screen (tablet, mobile phone) Inter-destination sync: Social TV (IDMS) Service Provider: Services for niche market (multi-lingual, disabled viewers) Innovative, interesting service offerings (competition) Interactive Advertisement Interactive Apps (live events) Smaller service providers can offer services independently from traditional broadcaster or telco Revenue Streams Customer Relationship (either direct to enduser or indirect via a SP) Personal Helpdesk (phone, Internet) Retail shops (own, 3 rd party) Automated services Internet Shop, App store My Portal Community On-line community Social media Co-creation User generated media Channels Awareness/Sales Advertising (TV, billboards, Internet) Retail shops (own, 3 rd party) Helpdesk (Internet, phone) Distribution Broadcast network Broadband network Set Top Box Tablet TV End-users: subscription, pay-per-view/action, vouchers, etc Service Provider: user basis payments, content based regardeless on number of users Advertisers Rental: STB Customer Segments End-users Mass market Niche markets: disabled viewers, language, culture Service providers Figure 26 The Business Model Canvas of the Rich Media Service Provider HBB-NEXT Consortium 2012 Page 72

74 HBB-NEXT I D2.4. Description of the Selected Business Model Customer segments Depending on its business role, the Rich Media Provider targets end-users and/or service providers directly. In an operator-centric business model the broadcaster or Telco will become a Rich Media Provider by implementing the HBB-NEXT A/V media sync technology and developing new services that may attract the masses (companion screens and social TV). In addition, it can target specific segments of viewers such as disabled viewers or viewers belonging to specific cultural backgrounds. It is also possible that the broadcaster or Telco will out-source the typical rich media part of their service (the A/V media sync technology and/or content) to a specialist rich media company. In that case the Rich Media Provider offers its products to the service provider (broadcaster, Telco). In the case the rich media company offers its A/V media sync services directly to end-users, then either an open HBB-NEXT business model or a partnership with TV content provider must be in place so that the Rich Media Provider can use the linear TV content distributed by the broadcaster or Telco. The users can freely buy their HBB-NEXT compliant STB or TV Value Propositions In order to compete with other TV service providers, broadcasters and Telco s may introduce new HBB-NEXT technologies to their services to increase the value proposition. They can position themselves as innovative Rich Media Service Providers. The key technology A/V media synchronization can enrich the traditional media experience, e.g. linear TV, significantly: By providing services, which support multi-lingual subtitles or audio feeds, the service provider can target its offer to certain segments of the population (disabled viewers, specific cultural communities, etc.). Synchronized picture-in-picture, e.g. multi-view cameras, can add all kinds of additional information during live events, even synchronized interactive advertisement. By providing the option for companion screen services a bouquet of innovative services are possible. For example, during live events, smartphones or tablets can be used for voting, games, providing additional information, other camera positions or just synchronized second screen etc. HBB-NEXT Consortium 2012 Page 73

75 Social TV is based on IDMS where (live) TV can be watched within groups that are physically separated as nicely described in scenario 3 of D2.1. For an independent media company, providing synchronised rich media is possible through their portal when the end-user owns a HBB-NEXT STB or TV. Such a Rich Media Provider can target certain niches, specific cultural communities, or offer their services to a broadcaster or Telco Channels Awareness Evaluation Purchase Delivery After sales Is achieved by advertisements on TV, Internet and billboards. In case of B2B, a Rich Media Provider will approach their potential customers (broadcaster, Telco) on conferences, fairs or direct contacting. Broadcasters and Telcos normally offer large discounts for the first months of use. Sometimes, a free-of-charge trial period is offered. This might assume various forms and include for example off-site or on-site trials, which could be charged or free-of-charge. In addition, developers can have access to test environments. Sales to end-user are achieved via a variety of channels like an Internet portal, retail stores and call centres. B2B sales are most likely performed by direct contact through the sales organisation of the service provider. The actual service is delivered through the broadcast and broadband networks of the broadcaster and Telco. The end-user will need a HBB- NEXT compliant STB or TV, smartphone, tablets etc. In the case of B2B, a Rich Media Provider can deliver additional content directly through their Internet connection and the broadband connection of the end-user or indirectly via the Telco or broadcaster. Customer support is usually provided via FAQs, web portal, telephone support or retail stores. B2B, SLAs between the parties will be agreed. Page 74

76 Customer Relationships Relationships with the end-user are normally handled through personal contacts at retails stores or call centres. Furthermore, direct (e)mailing and my-portals are often used. B2B is often related to long-term relationships. Therefore, innovative products, release management, maintenance and customer care are essential to ensure the continuation of profitable business Revenue Streams Broadcasters and Telco s may use three types of revenue models for end-users: 1. Subscription fees. They can differentiate their services in different packages distinguishing in number of channels, extra services (like rich media with companion screen, social TV etc.) and hardware (STB). 2. Pay per view or action. An end-user can purchase a service by pushing the red button during a live event or accessing a rich media portal. 3. STB Rental. The end-user rents an STB, which gives him access to the rich media services. In the case of B2B, the Rich Media Provider can use licence fees (fixed, per-user, per event) for the usage of its service by the service provider. For the technical integration into the service provider s platform and service support, additional contracts will be made. Additional revenue can be found in advertisement, which can be more interactive and direct due to the A/V media sync technology Key Resources The key resources for a Rich Media Provider can be divided in: Infrastructure: this includes a broadcast and broadband network (core and access), play out equipment, rich media applications (supporting HBB-NEXT A/V media sync). Rich media content: additional camera feeds, multi-lingual subtitles/audio feeds etc. Page 75

77 Human resources: rich media developers specialized in equipment, content and services. Furthermore, human resources are required for customer support, whilst content creation might be done internally or outsources Key Activities The name rich media services are pushing up the expectations of the end-user. Therefore, it is important that the services will satisfy these expectations. Key activities of a Rich Media Provider will consist of creating, selecting and purchasing content, developing, designing and testing the rich media service. Furthermore, the usual activities such as help desk, customer support, marketing & sales etc., are required Key Partnerships A Rich Media Provider needs partnering with: system suppliers for HBB-NEXT supporting STBs, media stream (play-out) equipment, rich media content suppliers, broadcast and broadband network suppliers. In the case of B2B, a Rich Media Provider will have a partnership with a Telco or broadcaster. Normally, this means that most of the distribution activities are covered by the partners. Additional partnerships are required for gaining content and HBB-NEXT supporting equipment Cost Structure Costs for rich media services are composed of fixed cost elements and variable cost elements. Fixed costs: system hardware, maintenance and personnel Variable costs: the licenses, end-user devices and CDN capacity for the service. Media platform vendors typically charge a license fee for their platform based on the number of subscribers. Page 76

78 3.5. Multimodal I/F Hardware Vendor The hardware vendor for multimodal I/F offers functionalities that facilitate the usage of services and applications offering control mechanisms via voice or gesture, by providing hardware that captures end-users speech and/or movements. Figure 27 illustrates the overall BMC of the hardware vendor. Page 77

79 HBB-NEXT I D2.4. Description of the Selected Business Model Figure 27 The Business Model Canvas of a Hardware Vendor HBB-NEXT Consortium 2012 Page 78

80 HBB-NEXT I D2.4. Description of the Selected Business Model Customer Segment The multimodal I/F hardware vendor targets end-users as well as service providers such as broadcasters, media IP-based service providers, e.g. IPTV, OTT providers, and cable operators. In the case of an open HBB-NEXT business model, end-users can directly buy the multimodal I/F - hardware off-the-shelf, and connect it to their HBB-NEXT compliant STB or TV. In the case of an operator-centric business-model, above mentioned service providers will ship the hardware together with a HBB-NEXT compliant STB to their customers to enhance their service offering. In addition, the hardware vendor targets application- and service- developers. By offering a multimodal interface to developers, they can enhance the applications and services in order to support face detection, gesture control, speech recognition and speech control. These functionalities will enable developers to enhance the level of interactivity between the user and the applications. At the same time, it offers increasing possibilities for differentiation Value Propositions The value delivered to the end-users consists of new ways of interaction with their TV-sets and the media content leading to: New content consumption behaviour: more active viewers instead of lean-back consumers Group awareness: detection of groups and adaptation of content, services and applications A higher level of trust: through identification via speech and face More entertainment, especially to groups of users. With regard to developers, the main value proposition is the availability of high level interfaces that hide the complexity of accessing low level hardware functionalities such as microphones, video cameras, etc. As result of this, they can focus more on the application logic and save valuable development time. HBB-NEXT Consortium 2012 Page 79

81 Channels This involves typical activities related to B2C and B2B. Awareness It can be achieved via Internet, advertisements in TV, shops and at industry specific conferences and/or trade fairs, contacting directly service providers through the sales organization of the Hardware Vendor. Evaluation This might assume various forms and include for example off-site or onsite trials, which could be charged or free-of-charge. In addition, developers can have access to test environments. Purchase & In the case of B2C, traditional ways of selling and delivering the Delivery hardware can be applied, such as online marketing and CE retailer shops. Purchase and delivery in B2B might be handled similar to the purchase of service-provider- or operator- specific STBs. After sales Customer support is usually provided via FAQs, web portal and telephone support. In the case the hardware embedded in the STB delivered by a service provider to its customer, the Multimodal I/F Hardware Vendor is obliged to provide a certain level of support to the service provider, which is regulated by SLAs between the Hardware Vendor and the service provider. If the hardware is purchased directly by the end-user, the level of after-sales support is typically in line with CE after-sales customer support Customer Relationships Hardware business is often related to long-term relationships with customers. In case they are satisfied with already purchased hardware from the same vendor, recurring purchase is more likely to occur. Therefore, the maintenance and customer care, as well as a efficient support and continuous upgrades of the hardware drivers are essential to ensure the continuation of profitable business. Page 80

82 Revenue Streams The two main payment models associated to hardware sales are based on subscription (to a service-provider or operator) and pay-as-you-go (off-the-shelf sales). These two models are both relevant to the case of the multimodal I/F hardware vendor. Subscription based revenue streams are likely to be applied in the case of an established relationship between the hardware vendor and an operator such as a broadcaster or pay-tv operator. Pay-asyou-go is very likely to happen at the later stage of deployment, once a certain level of penetration of hardware has been achieved, and a certain amount of services and applications that support speech and gesture control are available. Developers might contribute to revenue streams either during development of applications and services, or at later stage if they directly offer services to end users. In the latter case they will play the role of a service provider Key Resources The key resource for the hardware vendor is the hardware consisting of camera(s), infrared sensor(s)s and microphone(s), as known for example from the Microsoft Kinect hardware solution. In addition, drivers for these pieces of hardware need to be either developed or adapted in order to support full HBB-NEXT compliance and capabilities. Another key resource of the Multimodal I/F Hardware Vendor is the technical personnel who carry out R&D activities and who manage the testing of the hardware and the developed drivers Key Activities The core activity of the hardware vendor is to develop and maintain the hardware and the drivers for the hardware, as well as continuous improving performance through, for example, the introduction of better performing multimodal hardware, e.g. cameras with higher resolutions. Page 81

83 Key Partnerships Amongst the key partners of the hardware vendor we can identify camera / lens - developing and manufacturing companies, microphone manufacturers, manufacturers of infrared (and maybe other) sensors software providers, and potentially software developers. Additionally, in case of an operator-centric business models, service providers and operators can also be key partners Cost Structure The main sources of costs of the Hardware Vendor are: Hardware manufacturing. This includes development and production facilities for producing the multimodal I/F hardware. Software development & testing. This includes driver development and adaptations for the hardware, as well as testing procedures and methodologies (e.g. with typical off-the-shelf STBs and TV sets). Staff. Staff will be mainly needed for support and customer care, for maintaining the relations with service providers and operators, as well as to handle other operations and business activities (e.g. billing, CRM, sales). Page 82

84 3.6. Group Recommendation Provider The proposed business canvas for the Group Recommendation Provider model focuses on content brokerage. The recommendation provider intermediates between a large number of independent content and advertisement providers, and service providers seeking to enhance their services. Key feature is the facilitation of long-tail content distribution by means of recommendations. The profile data needed for recommendation is aggregated from selected social network profiles and service provider data. If possible, user data should be stored on an aggregated level only, so that no backtracking to the individual user is possible to avoid privacy hazards. The role of the Group Recommendation Provider can be integrated with other roles in the HBB-NEXT ecosystem, resulting in distinct advantages and disadvantages as will be described below. A service provider would be able to integrate the recommendation features better with his own services, yet might have a weaker market position when it comes to approaching other service providers that offer recommendation services. Likewise, the content provider could have problems to market the recommendation platform to other content providers. The easiest integration might be an advertising network, which is open for booking by all media agencies and companies anyway. The typical TV broadcaster is part of a larger media enterprise, which integrates service, content and advertising providers. It has three major options to integrate recommendationdriven extra content into their service bouquet: 1. Establish a recommendation service in-house, recommendations span content from their own enterprise network only. 2. Integrate a third party recommendation service, which allows control of the content sources from which recommendations are generated. 3. Let users choose their own recommendation service, no content control. Option 1 may work if the enterprise's content archive is large enough to provide a real experience of personalization. Option 2 is a compromise between control and variety. Option 3 cuts the broadcaster from potential revenue streams (unless HBB-NEXT succeeds to introduce a platform-wide licence and rights framework) and the model that equals the open web the most. Page 83

85 The choice between option 2 and 3 is determined by the question whether the user values a seamless user experience more than freedom of choice in content recommendation. Figure 28 illustrates the BMC of the Group Recommendation Provider. Page 84

86 HBB-NEXT I D2.4. Description of the Selected Business Model Figure 28 - The Business Model Canvas of Group Recommendation Provider HBB-NEXT Consortium 2012 Page 85

87 HBB-NEXT I D2.4. Description of the Selected Business Model Customer Segments The Group Recommendation Provider acts as a hub connecting Services, Content and Advertising by inferring user needs from profiles. As laid out to match the context of the HBB-NEXT ecosystem, there are three customer segments in the B2B domain. Service providers rely on the Group Recommendation Provider to enhance their services with personalisation. This allows them to optimize the use of the available content. Content providers have an interest to market their content on multiple service platforms. The Group Recommendation Provider can detect long tail type demand for content and help market content on a per-use basis to different platforms. Finally, Advertisement Networks have an interest in finding the right audience and environment to place ads to reach maximum attention. While the latter two segments need to provide extensive content metadata for the service to work, the service providers have to provide actual user data for the matching Value Propositions Although the Group Recommendation Provider is provisioned to act as a B2B intermediary, its obvious value propositions are targeted at end users. They will gain access to more content fitting their individual interests and ideally experience serendipity in discovering unexpected, yet highly interesting content. High quality profiling and recommendation may eventually lead to less but better targeted advertising, blending better with the overall service experience. Finally, advanced personalisation approaches allow for group recommendations, reconciling personalisation with the social nature of watching TV. While service providers can use these propositions to market premium services, there is distinct value to the service on the business side as well. The service provider is in control of which content shall be considered for recommendations. It can enhance its content bouquet by paid extra content drawing on further content archives, or it can decide to better exploit a fixed content bouquet through recommendations. With help of the Group Recommendation Provider it may optimize ad revenues and provide an overall better service experience through more context-sensitive ads. Content providers may make use of the Group Recommendation Provider for long-tail marketing of content, as today content deals with service providers are normally based on large packages only, leading to a thematic mainstreaming within service providers' bouquets. HBB-NEXT Consortium 2012 Page 86

88 The Group Recommendation Provider will allow for reaching special consumer segments that are substantial in terms of the number of users, but widely spread across multiple service platforms. Advertisement networks will find that their content is distributed more efficiently, resulting in higher conversion rates Channels Awareness Evaluation Purchase Delivery Company website is mandatory, but B2B direct marketing through sales agents and presence on industry forums are key to creating awareness of the targeted customer segments. Test integrations might be offered, though customized integration especially for service providers might be difficult. A sample service bouquet should be available for demonstration and testing purposes so prospective customers can get an idea of how the platform works in general. Individual consultation and assistance is key to success. B2B deals are often customized and require adaptations for the individual customer. Yet in order to facilitate transactions, the Group Recommendation Provider will develop a platform to facilitate itembased content transactions. The Group Recommendation Provider acts as a broker between service provider, content provider and advertisement provider. The delivery channels thus depend on those three parties, but it can be assumed that the majority of content will be delivered on demand, either through the internet or closed proprietary delivery networks. The Group Recommendation Provider will work on metadata only and mediate transactions. This will be done by use of a standardized web services API. It should be mentioned that the tailored integration of the recommendation service is a mandatory step before the service can actually be used. Page 87

89 After sales As the Group Recommendation Provider offers a service, not a product, strictly speaking there is no after-sales phase. Account managers take care of the customer relationship and support staff provides quick assistance according to the respective SLA Customer Relationships Account manager take care of the B2B relationships, with backup by the technical support staff. As service providers have to integrate the recommendation service into their own services, templates for FAQs and context sensitive help should be available to support customer relations from service provider side Revenue Streams The Group Recommendation Provider will take a licence fee for usage of its services by service providers. This fee may be fixed, per-user or per-recommendation basis. For technical integration into the service provider's platform and for ongoing support there will be additional contracts. Content providers pay a brokering fee according to the volume of content sold to customers via different service providers. Furthermore, the service provider is charged a brokering fee for personalized advertisement, as the Group Recommendation Provider increases the value of advertising slots by better targeting Key Resources The Group Recommendation Provider needs developers specialized in metadata handling and data mining. Depending on the company s philosophy, content editors may be needed or not. Generally, a recommendation system could probably be improved by an intelligent human-computer balance. B2B sales and support staff is important as well, as the recommendation infrastructure has to be intertwined with the customers' databases. A further key resource for recommendation services is user data, which is not mentioned here because it is assumed that this would be provided by the customers in a way that the Group Recommendation Provider has to store only aggregated and anonymized data. However, this is subject to the concrete implementation of this business model and it should be noted that storage and management of user profiles could be necessary under certain circumstances. Page 88

90 Finally, computing power and data storage is a vital resource, which would be acquired in the form of cloud computing services at least for the incubation phase of the business Key Activities Aggregation of a large amount of quality content metadata for personalization by cooperating with content providers, is the key to long-term company success. Know-how on metadata harvesting and harmonization has to be built, along with continuous improvement of the recommendation infrastructure. In order to support long-tail marketing on the basis of single item transactions, a licensing- and B2B billing-platform has to be developed and maintained. For the advertisement market, target groups have to be profiled and marketed. Last, the integration with third party content and metadata databases is a continuous task to win new customers and to keep existing customers satisfied Key Partnerships The boundary between customers and partners is blurry, as each of the business relationships to service providers, content providers and advertisement networks could as well be established as a partnership. In fact, any of them might take over the role of the Group Recommendation Provider too. Yet it is advisable to seek partnerships with social network services to gain data on user behaviour and preferences. Especially smaller networks might be interested in a deeper partnership if the Group Recommendation Provider acts as a neutral hub to aggregate and improve user data from more than one network, sharing the insights with all network partners alike. Also partnerships with CDN providers could be established in order to integrate B2B content licensing systems Cost Structure The fixed costs comprise the core management and staff (editorial, technical & sales). Variable costs may include freelance editors and cloud computing capacity. With large growth in customer base, an increase beyond the base support staff will be necessary. Page 89

91 3.7. Conclusion HBB-NEXT enabled Business Models The aim of this section was to analyse the business implications and, hopefully, the benefits that are generated by players (new business roles) that take advantages of the new enablers provided by HBB-NEXT. Given the different possible scenarios, the authors focussed initially on investigating the business models that can be associated to each specific new role created by the HBB-NEXT enablers and its open platform. It is likely that one of the existing TV players, e.g. HBB providers or IT providers, might consider expanding their current role and value proposition by embracing one of the new roles described in this section. Here, they could refer to the analysis carried out in this section to understand what are the business implications and the changes on their current business models when they embrace such new business roles. One key difference between the existing business models described in section 2 and the new business models described in section 3 is that given the plurality of the new roles there are underlying multi-sided business models. This means that the existing key players Telcos and Broadcasters become customers of 3 rd parties (new service providers implementing the key key technologies of HBB-NEXT become), depending on whether they perform the new business roles themselves or outsource them to third parties, new actors on the market. In addition, the proposed business model can only be realised when all parties are present and part of the same ecosystem. As a result of this, the value proposition is not always focusing just on the end users, but also on the 3 rd party service providers. Another important aspect is that some of the new business roles identified in this section are more suitable for one specific existing player than another. For example, the role of Identity Provider is more likely to be played by an IPTV provider than by a broadcaster and or an OTT provider. The reason for this is that an IPTV provider, being at the same time a Telco provider, has an established relation with end users and it already enjoy a certain level of trust by end-users. Similarly, the application trust provider is another typical case of multi-sided platform. In this case, the existence of this role requires that several parties, e.g. content aggregators, application providers, work together and deliver a easy to use and valuable service to the end-users. Page 90

92 The Multimodal I/F provider has not get involved a lot of stakeholders in order to developers starting to develop applications which can take advantage of the multimodal i/f and deliver a more compelling experience to the users. Issues about who is going to bear the additional hardware costs can be complex and finding the right model might result in broad adoption and business success or small adoption and business failure. An important aspect to take into consideration is the careful analysis on the possible revenue streams that can support the identified basic business models. Some of the challenges that will be faced by players who want play any of these role is assessing whether the envisaged revenue streams can really materialised. End-users have proven often reluctant to put for new value added services and the Telco experience shows how service bundling it is often an easy proposition that can be understood by users. Therefore, the challenge for service providers will be how to eventually bundle these added value services within existing or new service offerings. Similarly, finding the right charging model for 3 rd parties using some of the enablers provided by HBB-NEXT might also be challenge. Section 4 will show how the simple archetypical business models described in this section 3 could be used to assess more complex business roles. Page 91

93 4. Scenarios for HBB-NEXT enabled business models As already mentioned in section 3, this deliverable chapter describes different scenarios and constellations of HBB-NEXT enabled business cooperations and models, analysing the business potentials arising from the advantages of the technology developed in HBB-NEXT. The section builds upon the results of the business model analysis carried out in the previous section and constantly refers to the business roles and key technologies which have been described there. However, the section follows no schematic approach. The idea was to open a broader horizon by presenting a lose assembly and sketches of different aspects, of possible models and constellations that will be relevant when HBB-NEXT business models will be implemented, taking into account different perspectives and angles. Section 0 starts from a key technology perspective, describing how the HBB-NEXT A/V synchronisation technology (embodied in the business role Rich Media Provider) might be utilised to enrich the offering of either broadcasters, Telco providers or the Rich Media Provider specialised in aggregating media and offering it either in the context of businessto-business (B2B) or business-to-consumer. Section 4.2 then has a closer look at the Group Recommendation Provider identified in the previous chapter. It focuses of the advantages that can be achieved by intermediating between a large number of independent content and advertisement providers and service providers, thus facilitating the discovery and distribution of long tail content by means of recommendations. To this end, an existing Dutch Group Recommendation Provider is described which could be enhanced by HBB-NEXT technology. Both section 0 and 4.2 focus on the specific reality of the Dutch market, which is characterised by a high level of competition and innovation. However, the findings could be applied, with the necessary adjustments, to other specific European markets. Section 4.3 takes a different perspective again. It does not start from the actual key technology and their benefits for each actor on the market (existing and new) but it takes the perspective of one particular actor, today s public broadcaster, and moves from there in order to describe three different business model scenarios each as to their strengths and Page 92

94 weaknesses for this broadcaster. The scenarios are differentiated by the level the broadcaster might embody or outsource the new business roles in offering new services. The background to all three scenarios is the improved value proposition of a broadcaster that takes advantage of key technologies provided by HBB-NEXT, considering the new business roles Rich Media Provider, Group Recommendation Provider, App Trust Provider and Media Cloud Provider A/V multi sync-technology driven business models From section 3.4, it is known that A/V sync can enrich the traditional media experience significantly. Implementing HBB-NEXT inter-media, inter-device, and/or inter-destination synchronization technology enables rich media services like: Multi-lingual subtitles and audio feeds, Synchronized picture-in-picture or companion screen, Social TV. These services are interesting for different players in the rich media providers role model, e.g., a broadcaster, telco or small rich media provider. Page 93

95 The broadcaster Taken the Dutch market as an example, the strongest motivation for a broadcaster to implement A/V multi sync here will be to enrich their services for special interest groups, to be more innovative and interesting or to gain more revenues in pay-per-view/action, (direct) advertising etc. The broadcaster can decide to develop their own rich media services including app development and content generation or to out-source parts of these activities. Compared to a telco, a broadcaster has the advantage that they own most of their content and have full control of the TV streams to synchronize with. The business model of a broadcaster will change when it decides to implement rich media activities. Deltas on the SOTA business model of a broadcaster, figure 13, can easily be identified using the business scenario of the rich media provider as described in section 3.4 and depicted in figure 26. The impact of rich media on the business model of a broadcaster lies mainly in the following Canvas building blocks: Customer segments: new niche markets are introduced, e.g., culture, interests, disabled viewers, social TV group watching etc. Additionally, synchronized interactivity will interest advertisers. Value proposition: multi-lingual subtitles and audio feed, social TV and interactive companion screens. Revenue streams: advertisement, licenses or pay-per-view/action, selling apps Cost structure: cost will be made creating new content, buying licenses, app development, developing rich media services, etc. Key activities: a broadcaster needs to build apps, generate new kinds of content etc. Key partners: apps, content (subtitles, extra information etc.) can be out-sourced to partner companies The Telco In the Dutch market the strongest motive for a telco to implement A/V multi sync will be gaining market share in the heavily competing triple play market. By implementing A/V multi sync, a telco can demonstrate that they are innovative and interesting with new rich media service offerings. Page 94

96 Telco s in the Netherlands may use a business scenario like the SOTA given in figure 14 to do their IPTV/triple play business. Delta s on the SOTA IPTV business model can be identified by combining it with the rich media business scenario resulting in the following Canvas building blocks changes: Customer segments: new niche markets are introduced, e.g., new trend and gadget followers, cultures, special interests, disabled viewers, social TV group watching etc. Value proposition: new trendy, innovative with technology gadgets, multi-lingual subtitles and audio feed, social TV and interactive companion screens. Revenue streams: subscription fees, selling apps, pay-per-view/action. Cost structure: cost will be made creating new content, buying licenses, app development, developing rich media services, etc. Key activities: a telco needs to build apps, generate new kinds of content etc. Key partners: apps, content (subtitles, extra information etc.) can be out-sourced to partner companies. Additionally, new licenses are needed with broadcasters, content providers, etc. Furthermore, cooperation with the broadcaster is needed to implement A/V multi-sync. Interesting new question is the fact that the telco will depend on the broadcaster when they want to enrich the broadcasted TV programs. E.g., to implement A/V multi-sync, synchronization information and program scheduling is needed to prepare the rich media content (licenses, content generation, app development, etc.). This means that the broadcaster needs to cooperate. Does this result in new costs, key partnership? Rich Media Provider The rich media provider is a (small) company specialist in media and probably comparable with an OTT provider. The customer segment of a rich media provider can business-tobusiness (B2B) or the end consumer. In case of an end-consumer approach, the rich media provider will most probably focus on a niche market, e.g., focus on some cultures with multi-lingual services, developing apps for live events, social TV. For B2B, it is most likely that a broadcaster or Telco is out-sourcing some of the rich media service development, e.g., developing apps, special content generation, A/V multi-sync implementation. Page 95

97 Note that in the case of an end-consumer approach the rich media provider strongly depends on the partnering broadcaster for sync information, licenses and programming information. The business scenario of a rich media provider can be based on the business model depicted in Figure 26 of section 3.4 and the OTT provider. Deltas on the SOTA OTT business model are mainly in the following Canvas building blocks: Customer segments: new niche markets are introduced, e.g., new trends and gadget followers, cultures, special interests, disabled viewers, social TV group watching etc. Value proposition: new trendy, innovative with technology gadgets, multi-lingual subtitles and audio feed, social TV and interactive companion screens. Revenue streams: subscription fees, selling apps, pay-per-view/action. Cost structure: cost will be made creating new content, buying licenses, app development, developing rich media services, etc. Key activities: apps development, generate new kinds of content etc. Key partners: licenses are needed with broadcasters, content providers, etc. Furthermore, cooperation with the broadcaster is needed to implement A/V multi-sync Group Recommendation Provider This section analyses the possible business scenarios of a Group Recommendation Provider in the Netherlands. As described in section 3.6, the role of the Group Recommendation Provider depends on how the provider is integrated with the other roles in the HBB-NEXT ecosystem or domain model. A first example of a multi-source Content Recommendation Provider is the Dutch site TVgids.nl [TVGIDS, 2012]. The figure below depicts schematically the different roles. Page 96

98 Content Content and Content and Metadata and Metadata Provider Metadata Provider (C&MP) Provider (C&MP) (C&MP) Provides content to Consumers and metadata to the RSP. Recommendations Service Provider (RSP) Consumer Acquires metadata from multiple C&MP. Collects preferences from Consumer, Provides recommendations to Consumer Consumers content from multiple C&MP. Gets recommendations from RSP. Figure 29: current domain model for multi-sourced content recommendation. A content recommender like TVgids.nl determines its recommendation by collecting the metadata of all the TV channels and eventually other media sources and matched them mathematically with the user preferences. This model is the simplest one where the Group Recommendation Provider needs information (metadata) from the different content providers (broadcasters) and uploaded user preferences from the end-users. Some distinguishing business scenario building blocks are: Customer segments: mainly the end-user who is interested in multi-sourced recommendation covering as much TV channel and other media as possible. Value proposition: recommendation that fits the users profile and covers many channel and media sources. Revenue stream: subscription, advertisement. Cost structure: purchasing metadata. A more complex domain model arises when more competing recommender services do exits and the consumer preferences are collected and distributed by a dedicated Content Distributing Preference Collecting Service Provider, see the figure below. Page 97

99 Recommendations Recommendations Service Recommendations Provider Service Provider Service (RSP) Provider (RSP) (RSP) Content Distributing Preference Collecting Service Provider (CDPCSP) Distributes content to -, and collects preferences on behalf of the Consumer Acquires preferences from the CDPCSP. Provides recommendations to the Consumer Consumer Consumes content and recommendations Figure 30: domain model in case of competing recommender providers The Group Recommendation Provider now depends on the party that collects the user profiles containing the preferences. The user is free to choose for a recommender provider, the one with the best ratings on recommender quality, sophisticated algorithms. The Content Distributing Preference Collecting Service Provider uploads on behave of the enduser the preferences. In the business scenario, the different roles should cooperate as key partners. The Group Recommendation Provider needs to purchase the metadata from the content providers and additional the user preferences. Interesting are the cost structure and the revenue stream, does the end-user have a subscription only with the Group Recommendation Provider or also with the Content Distributing Preference Collecting Service Provider. Who pays who, the recommender or the Content Distributing Preference Collecting Service Provider? HBB-NEXT technology will enhance the content recommendation with the possibility for group recommendation which pushes the domain model to the next level of complexity; a group of consumers subscribed at different recommender providers wants a group recommendation. In that case we probably need roaming recommender services, see the figure below. Page 98

100 Provides content and multiuser recommendations to the Home Consumer. Provides roaming service to Visiting Consumer Content and recommendations Service Provider (RSP) Enjoys roaming service from RSP Consumes recommendations from RSP Home Consumer Visiting Visiting Consumer Visiting Consumer Consumer Figure 31: domain model for group recommender provider. In the case the group consist of consumers who have subscriptions for different recommender providers, can a visiting user profile be used? Another HBB-NEXT key technology can be added to solve this problem, e.g., identity and trust providers to guarantee privacy, security etc. More key partners or technologies are needed, which change the cost structure and the revenues Three Business Models for a Broadcaster offering Rich Media Services HBB-NEXT enablers implemented by the new business actors sketched in section 3 of this document will empower broadcasters to considerably improve their value proposition for the audience through enhancing their services far beyond today s State of the Art. Crucial in this context are the two new business roles Rich Media Provider and Group Recommendation Provider. The Rich Media Provider (HBB-NEXT A/V media sync technology) will allow new types of services. This could, just to name one example, be of importance for the area of accessibility, which is a very important obligation for public service broadcasters. Synchronisation will allow for the time-correct display of additional videos such as the IPbased video of a sign language interpreter. IP-delivered subtitle files can be transmitted in time-correct synchronisation to the TV. A user might listen to a synchronised audio description using a second device (earphones) while other users in the room listen to the original sound (or vice versa). Page 99

101 Furthermore, synchronised second-screen services include social TV features (e.g. connection of TV services to social networks via 2 nd device) or using the 2 nd device as remote control both are expected to be of great appeal for a mass audience. The Group Recommendation Provider will enable broadcasters to tailor their content (applications) much better to the requirements of specific target groups (family, regional, national, disabled people, immigrants ). Unlike with recommendation services targeted exclusively at the individual, group recommendations are designed to create opportunities for social conversation and support the social nature of TV. It will enable multi-domain recommendation (broadcast, broadband). This may even encompass recommendations for groups in different locations, taking the notion of creating social opportunities across spatial borders. Users will have access to more content fitting their common interests, they will benefit from less and better targeted advertising and they will have better serendipitous content experiences. Based on the roles defined in section 3 of this document, the following three models show three constellations of how a broadcaster might embody or outsource the new business roles in offering such new services. The models use block diagrams, which show simplified flows of business transactions between the different actors in the model. As a reference, the current model is visualized as follows: Figure 32 Exiting Model There are multiple broadcasters offering their content bouquets via one or more network providers. The user as well has access to rich media services, mediated through his internet Page 100

102 service provider. The rich media services are not technically connected to the broadcast programmes The concentrated (broadcaster-centric) model The term broadcaster refers to the classic TV broadcast company, which integrates content production, provision and service provision, sometimes mediated by a satellite, cable or IPTV network provider. However the role of the broadcaster may be substituted in the models with other forms of end user service provision, e.g. entertainment portals of Telco operators. Figure 33 Broadcaster-centric model This model depicts a merging between broadcaster and rich media provider, i.e. each broadcaster extends its own business model towards rich media provision. The media cloud provider facilitates content conversion, synchronization and delivery via OTT or a managed network. Regular broadcast content bypasses the media cloud. The model is an extension of regular TV business models, enhancing the service bouquet with hybrid TV services produced in-house. Synergy-effects can be realized through content-repurposing, but B2B relations remain largely unchanged. The media cloud provider might join as an external player, providing technical facilities for OTT or managed network rich media content provision. Page 101

103 SWOT-Table for Broadcaster Strengths Broadcaster already owns infrastructure for provision of rich media services & content, strong synergy potential Cost-saving through re-purposing of archive content Broadcaster can build strongly branded platform, providing a consistent user experience Existing linear channels can be used to cross-promote rich media services, building on existing customer base Opportunities For advanced services beyond media streaming there might be a first-mover window for the next two years Determined and timely action might stop the drain of TV-Viewers to Web-based services Distribution capacities increasingly become commodities, shift of focus towards production might help broadcasters to thrive again Weaknesses Choice of rich media services might be too small to convince users For advanced interactive services knowhow in interaction design and nonlinear content authoring must be built up, which might be inefficient for in-house use only Users might feel fenced in by the walled garden Small broadcasters might not be able to maintain extensive rich media services, failing to reach critical mass in content Threats It is possible that the Web becomes ready for HD video before TV fully embraces interactivity, rendering the Broadcaster's core business obsolete Third party rich media content providers offer competitive services, which can be used without consent of broadcaster (second screen concept) From a Broadcaster's perspective this model demands for large organizational changes, whereas the culture of offering high quality walled-garden experiences does not have to change. This puts the challenges more in the field of production, less in marketing. A Broadcaster following this model should probably start with offering services that are attractive to a major part of its audience, like social TV, recommendation services and access to archive material. Generally speaking this model is suitable for larger broadcasting companies The distributed (independent market players) model The distributed model introduces the Rich Media Provider as independent market player. They offer their services to multiple broadcasters. The broadcaster chooses the Rich Media content and services it wants to include in their own service bouquet. Page 102

104 If the market shall support SMEs as Rich Media Providers as well, the App Trust Provider can be introduced in order to facilitate trust and quality check in a fragmented market for broadcasters. This model allows both Broadcasters as well as Rich Media Providers to concentrate on their core business. The Broadcaster will be able to deliver high quality Rich Media Content to moderate costs, as specialized Rich Media Providers can maintain popular services for a number of different business customers more cost-efficiently than would be possible for Broadcaster in-house provision. A third party Recommendation Provider may act as a broker between both. Figure 34 Independent market players SWOT-Table for Broadcaster Strengths Broadcaster can concentrate on core business, little overhead for rich media services As broadcasters have already built their audiences, they are highly attractive partners for Rich Media Providers and may offer good deals Opportunities Existing programme-related rich media services on the internet can be quickly integrated with the broadcasters programming Possibly wider choice of quality rich media content Open B2B market for rich media services Weaknesses The Broadcaster depends on third parties to extend the rich media choice and there might not be enough content available that matches the Broadcaster's channel portfolio. Threats A steadily evolving OTT services market on the Internet might lead to full emancipation of Rich Media Providers on Connected TV platforms. There may be too few Broadcasters to create sufficient demand in a B2B market The distributed model requires the least organizational changes at the Broadcaster. Rich media service provision is outsourced technically, but seamlessly integrated with own Page 103

105 services. The resulting platform offers an open B2B market for rich media services, but leaves the customer market untouched. Broadcasters choosing this approach would start with a choice of general services (recommendation, social TV viewing experiences) and add selected high-interactive rich media services. In general, this model is applicable best for smaller broadcast companies The open model In this model the broadcaster would let go of the total control of the service bouquet. This would be a major paradigm shift towards the mash-up philosophy of web 2.0 services. For any TV programme, the user would be free to add services from different Rich Media Providers. The Identity Provider and the App Trust Provider would be necessary to establish mutually trusted relationships between User and Rich Media Provider. This model would allow for the highest competition and innovation, because the Broadcaster would not act as a gatekeeper anymore. It is unlikely that this model could be implemented in its pure form, yet a model between the open model and the distributed model might be viable if it introduces at least a basic level of control for the Broadcaster. Figure 35 Open Model Page 104

106 SWOT-Table for Broadcaster Strengths Concentration on Broadcaster core business Opportunities Network and recommendation effects can be realized if broadcaster fully adopts open models, e.g. offering open synchronization interface for Rich Media Providers. Open B2C rich media services market, creating substantial demand Weaknesses No innovation in broadcaster business model Without organizational change, the cultural change to openness might not succeed Threats The classic broadcast business model could become obsolete due to attractive rich media services Opportunities rise for all players but the broadcaster A Broadcaster choosing this model faces the challenge of a cultural change in marketing. Unless the open approach is fully adopted, this model could lead to a separation between broadcast and rich media in the connected TV market. Small broadcasters that do not run their own distribution networks, e.g. because they rely entirely on Internet streaming, would probably be the quickest to implement this model. It is critical for success to ensure compatibility with popular rich media services and that their content can be easily discovered and indexed by recommendation providers. Page 105

107 5. Conclusion The Internet is transforming the TV and Media industry. The most significant result has been the fact that the barriers to enter this market have been considerably lowered and the existence of OTT providers is a clear proof of this. New players are populating an increasing complex value chain and now more than ever the battle to conquer viewers loyalty is becoming imperative since viewers loyalty translates directly into revenues, either in the form of subscriptions, pay-per-view or advertisement contracts. The initial study of the existing business models of broadcasters, IPTV, OTT and HBB service providers in this document highlights many similarities in terms as well as key differences especially in the value proposition. HBB-NEXT enablers will allow enhancing existing service offerings by enabling existing service providers to expand their scope of operations as well as by enabling new players, e.g. the Rich Media Provider (Rich Media Provider 3.4), to enter this market. However, it should be noted that embracing some of the new technologies available through HBB-NEXT will pose some challenges to the exiting service providers since there might be considerable impacts on their operations, channels and partnerships. The study in section 2 shows that some existing service providers are better suited to take over new roles than others. One of the key challenges of the new business models is also linked to the identifications of the revenue streams and whether end-users or business partners are willing to pay for the offered services. Controlling and/or sharing the new sources of revenues will become also a key area to define partnerships and shape the value chain. After having analysed one by one the business models made possible by the HBB-NEXT enablers, this document illustrates some more realistic and complex scenarios. These scenarios include three possible evolutions of broadcasters and the impact of A/V multi synchronization on broadcasters, Telcos and the new rich media service provider roles. In addition, the document briefly discusses the role of media aggregator/recommender that can be enhanced utilising the group recommendation technology developed in HBB-NEXT. It should be noted that the HBB-NEXT technology will also require a certain degree of change in viewers attitude as the richness of services will also require a higher degree on involvement, i.e. a transition from lean-back to lean-forward attitude. Page 106

108 Finally, despite all the technology and service enhancements it should not be forgotten that content is king and viewers are ultimately interested in viewing quality and relevant content. HBB-NEXT can help to enrich this content and enrich user experience. The increasing importance of user generated content alongside professional content such as the CNN s ireport case [CNN, 2012] should also be noted. This is another evolving area in the media industry that can benefit from HBB-NEXT technology. It should be helpful to use the dissemination and exploitation strand of HBB-NEXT to discuss and validate the business models described in section 3 and 4 with broadcasters, telecommunications providers and other service providers. Page 107

109 6. References [ARD, 2011] [ARD, 2009] Fernsehen über den Internetanschluss - mit IPTV, ARD-Flyer, [Accenture, 2012] Accenture Video-Over-Internet. Consumer Survey 2012, [BBC, 2012a] [BCC, 2012b] [Boxee, 2012] [Dailymail, 2011] [CEA, 2012] [CNN, 2012] [D2.1] BBC iplayer, Buy a Boxee, YouTube to launch 100 'TV channels' - each offering 25 hours of shows per day, Consumer Electronics Association, CNN s ireport, [Deutsche Welle, 2010] Europäische Rundfunksysteme im Vergleich, [DigitalTV, 2012] Global OTT revenue $22bn by 2016, [Digitimes, 2011] Penetration rate of smart TVs expected to reach 20% in 2012, [DVB, 2012] [Eurostat, 2012], [ETSI TS ] [HbbTV, 2012] Broadband penetration in Europe, HbbTV standard, [Kotler et al., 1999] Kotler, P., Armstrong, G., Saunders, J., Wong, V., (1999), Principles of Marketing, Prentice Hall Europe, 1999 p. 571 [Netflix, 2012a] [Netflix, 2012b] [OIPF, 2012] Netflix, Netflix sees international growth, UK launch very successful, Open IPTV Forum: [Osterwalder, 2010] Osterwalder, A., Pigneur, Y., Business Innovation Generation, Wiley, 2010, page 33 [VirginM., 2012], [Voodler, 2012] BBC iplayer on Virgin TV just got even better!, Voodler Page 108

110 [W3C, 2012] [Wikipedia, 2012] [Wrap, 2012] [Tivo, 2012] [TVGIDS, 2012] [YouTube, 2012] World Wide Web Consortium, Dynamic Adaptive Streaming over HTTP, Cord Cutting is Real: 1 Million TV Subscribers Lost to Streaming Services, TiVo Shop, TVgids, YouTube, Page 109