DX The Next Generation of TV

Transcription

1 DX The Next Generation of TV Bob Caspe The International Entrepreneurship Center 1

2 Table of Contents TABLE OF CONTENTS 2 INTRODUCTION 3 THE IEC 3 CNN 3 EVOLVING TELEVISION BUSINESS MODELS 4 THE BROADCAST MODEL 4 CABLE 4 THE TV USER EXPERIENCE 5 TELEVISION ADVERTISING 5 THE INTERNET 6 THE WEB USER EXPERIENCE 6 INTERNET ADVERTISING 6 SOCIAL MEDIA 7 IPTV 8 IPTV REVENUE MODELS 8 CLOUD ARCHITECTURE 8 THE IPTV USER EXPERIENCE 8 THE VIRTUAL SET TOP BOX 9 THE IDEALIZED SOLUTION 10 THE DX SYSTEM 11 A NEW TIME-SHIFTED ADVERTISING MODEL 11 CONCLUSION 12 2

3 Introduction The IEC is introducing into the US market, DX, a patented technology that is currently in use in Brazil. We believe that this technology should be of significant interest to CNN. Given that both the market and product is complex, this document is intended to create a framework for understanding each. The IEC Six entrepreneurs with extensive experience in technology and small company development founded the IEC in Bob Caspe the CEO is a serial entrepreneur who, over forty years, has built several successful companies in the imaging industry and has taught marketing and entrepreneurship as part of Babson College s MBA program from 2003 to (Related Links The IEC s mission is to identify disruptive technological innovations from emerging economic regions that are believed to have significant potential value in the US market. This document describes one such company, DX Networks, located in Sao Paulo Brazil and Boston USA, who has developed a patented technology called DX that we believe will have an important impact upon the video delivery market. CNN CNN, like many other content providers, is uncertain as to how their content can best be monetized in the coming world in which technology is redefining the viewing experience and thus far successful advertising and subscription models. We believe that DX s innovations can offer CNN an opportunity to redefine its future and further monetize its content. We also believe that the pace of innovation is increasing and as such, there is less time available for companies to adapt their business models to new technologies. 3

4 Evolving Television Business Models Television started with a broadcast model that was driven by a collection of independent networks in combination with their local affiliates. The networks created national content and sold national advertising. The affiliates created local content and sold local advertising. Delivery was through over-the-air transmission. Unfilled airtime was sold in the form of remnant advertising, commonly known as infomercials. The Broadcast Model Central to the architecture of the broadcast model all of the networks are constantly delivering their content to all of the viewers simultaneously (albeit on separate channels) and the viewer selects content by selecting the channel. Cable The advent of cable distribution provided several important changes to the industry. It allowed for the segmentation of advertising down to smaller portions of the affiliate s coverage area, offering finer segmentation and targeting. It increased the quality and number of available channels and stimulated competition in content development. As well it introduced a new member into the business model, the cable provider, or MSO Multiple Service Operator, an aggregator who created a new revenue model, based upon subscriptions. In addition note that cable operators are also able to sell local (or national) advertising. Cable preserves the broadcast model in that they are constantly broadcasting all channels simultaneously even though the viewer only watches one at a time. Most recently cable providers have added on-demand capability to their architecture so that they can send a unique stream to a single Set Top Box. The principal threat of IPTV to cable operators is the cable operators current reliance upon bundles to generate adequate average subscription revenue, and their need for negotiation strength against content providers, to better manage OPEX. Cable providers suffer a high CAPEX, cabling and installing Set Top Boxes in every home. With IPTV, eventually, viewers will likely opt to no longer purchase bundles but rather will move to an a-la-carte selection of channels directly from content providers who deliver their content in the form of IPTV. (Cable operators may need to evolve into simply becoming ISPs and will likely adjust their ISP service charges accordingly). A second threat is that IPTV has a limitless number of channels giving more access to a greater number of content providers and a greater number of content streams from each provider. Note that this requires abandoning the broadcast architecture. Movement of leading content providers like HBO to IPTV will likely drive the rapid disintegration of bundled packages, and minor content providers will likely need to enter the IPTV market with a target of secondary (non-cable connected) displays, i.e. tablets and Smartphones as their initial market. 4

5 The TV User Experience Often overlooked is the simplicity of the user experience model for watching television. Whether viewers have adapted to the capabilities of the available hardware or whether the hardware has adapted to the user preferences is to some extent unimportant. But, it is important to note that viewers continue to watch a lot of television, and they are comfortable with the paradigm that includes its expected performance and controls. More specifically, couch surfing is a behavior that is clearly understood. As well, television-advertising models have adapted over time to peak their effectiveness. As an example, infomercial formats are known to work at 30 seconds, one and two minutes and thirty minutes. Fifteen-minute formats have been tried and abandoned. As well, product price points that can be successful for each of these time formats is also well understood. Television Advertising We should not confuse the distaste that consumers may have for television advertising with its effectiveness. Figure 1 - worldwide TV revenue by type It is effective. And, advertising techniques, length, and content have also evolved over time to peak their effectiveness. It is important to also observe that television revenue and its advertising component continues to dominate the industry and continues to grow. DX Networks conjectures that moving the television user experience and advertising model to IPTV is a critical component needed to drive its success. 5

6 The Internet The Internet has evolved over the past thirty years from a government-sponsored method of sharing technical documents from CERN to what it is today. However, as is often the case, a legacy comes along with the history and HTML page encoding has clearly been a legacy burden of the Internet with HTML 5 being the latest attempt at modernizing the language and protocol. The Web User Experience For the Internet User, the concept of links, page refreshes, and URLs defines much of their experience. And, while many understand it, the reality is that it s just not as simple as watching TV. In some ways there are too many choices, too much flexibility and too many ways to enter a blind alley. Internet Advertising Internet advertising continues to grow but is still less than television ad revenue. Clearly, today, Google dominates much of the Internet advertising space. Two major attributes drive its success: 1. Much of it is demand driven, i.e. the viewer actively searches for information and/or a product, and 2. Information about the viewer including, for example, what websites they have visited can be used to preferentially drive selected advertising. 6

7 Segmentation down to the individual is the holy grail of advertising. But, it is important to observe that Internet advertising, in its current form, is also beset by several important limitations: 1. Much of the advertising is delivered in the form of text, as for example, ad-words ads, while prior evidence supports that video advertising is more effective when the advertising is inserted into compelling high quality content streams. 2. For much of the Web, the content that drives the advertising is not of high quality, the best example being Youtube. Social Media Social Media is having several important influences on the video media industry. As part of the advertising model, companies like Facebook, are an attempt to find new ways to mine viewer data so as to better drive advertising placement. But, note that most of the Facebook advertising is still limited to text and still-image formats. Second, Social Media is transferring power from the company to the customer. Customers have grown, for example, to rely upon their peer s ratings in order to select products and services as opposed to relying upon corporate spokespersons and experts. Third, in the news and analysis industries, crowd sourcing of data and analysis is influencing the collection and processing of news information. (Please note that there is a different Israeli company that we are working with that can help with this change.) 7

8 IPTV Many companies ranging from Apple and Microsoft to Disney and Comcast all see IPTV as an open, unclaimed territory. And, in the reshuffling that will occur there will clearly be winners and losers. Internet Protocol Television opens several doors for content providers. Most importantly, they are now able to directly sell to viewers without the need to deal with aggregators. This needs to be considered in light of the increase of second screens, or portable tablets and smartphones that are Internet capable. IPTV Revenue Models We believe that IPTV offers the best of all revenue models. Subscription models as exampled by Netflix or On-Demand TV are easily managed. At the same time advertising can now be segmented down to the individual viewer. Cloud Architecture Often when we hear about the Cloud we can simplify it to believe that it s merely a return to time-sharing architectures of old, where processing is moved from the client to the server. But, that s not the whole story. Cloud architectures offer two important variations. First, the number of servers that are assigned to a particular set of client tasks can be variable, automatically scaling as the demand changes. And second, the data that is being served can be moved to make the network of servers more efficient, essentially moving the data closer to the user, or making copies that are each closer to different users. Cloud architecture, as implemented by Amazon and others provides the architecture needed to deliver a unique television experience to every independent user simultaneously. The IPTV User Experience Currently, virtually all of the competitors in the IPTV space, including CNN have started their architecture from the perspective of the Web user experience, adding video to traditional HTML page design. As a result, the user experience is complicated and the performance is suboptimal. The simple paradigm of switching channels is lost in the confusing architecture and design of current solutions. DX s patented technology offers an IPTV User Experience that is identical to the current TV User Experience, and builds upon the success of television, offering the ability to create advertising and subscription models that are tested and known to work. DX Networks has patented the concept of a video browser that feeds a continuous video stream, a playlist of video streams, and/or a playlist of on demand videos, and/or a playlist of playlists of any of the previous types to the user where the screen 8

9 is rendered at the server and can be a combination of one or more independent video streams and static content. The IPTV User Experience must include Social Media methods for communicating the quality of content between peers. DX includes this capability. The Virtual Set Top Box If one considers the cable (or satellite) Set Top Box User Experience there are certain expectations of performance that are expected by the viewer. That performance is defined in many ways by the broadcast model in combination with the hardware attributes of the Set Top Box. But, with IPTV, it becomes possible to provide the user with an infinite number of channels. Each content provider can have an unlimited number of content streams (or channels) and users can elect to assemble their own favorites for their own custom Set Top Box. As recently demonstrated for the Master s Golf Tournament, it is possible and desirable to have separate channels for each hole of an 18 hole golf course, giving the viewer the ability to create their own custom viewing experience, for example: the Tiger Wood Channel. The Content Provider may not be needed to perform live editing but rather may elect to deliver all video feeds directly to the viewer so that they might do their own editing. This has several implications in overall performance and architecture. It should also be noted that currently many television channels are nothing more than playlists of prerecorded materials that are interrupted with paid advertising. While ondemand is available, it is also obvious that most viewers opt for the lazy choice of letting the station decide the programming of materials and suffering through the advertising (and possibly buying a thing or two). DX creates a virtual Set Top Box and provides a toolset for the creation of playlists that can be composited with video advertising that can be segmented down to the individual viewer. As such, content owners can elect to create their own unique playlist channels that feature specific types of content and capture users. Note that this has NO ADDITIONAL COST impact on the content owner other than the effort to create the playlists. DX can also insert advertising into live content without the loss of any of the live content, thus offering the ability to create advertising revenue models for live materials that are not under a unique control in timing and do not have pre-assigned advertising slots. 9

10 The Idealized Solution The idealized solution requires the following components: Strong Video Content Video formatted Advertising A Simple User Experience Model based upon TV viewing National and Local Advertising Sales capabilities Advertising Segmentation Data for every Viewer Demographic Individual Viewer Segmentation of Advertising Delivery Subscription Management Some companies are better prepared for this model, but likely there will be the need for a realignment of partnerships that provide dominance in each component. The DX System is an important component in this solution. It provides the content provider the ability to transport the successful TV User Experience Model to the Internet. 10

11 The DX System The DX system is a software and service ensemble. It consists of hardware components in the forms of servers that are rented from cloud-based providers. The software ensemble consists of several component parts: Client Software The Virtual Set Top Box. This provides the user experience. Various platforms are supported: o Windows 8 o Windows 7 o Mac OS o Android o Iphone Server Software The content management system. This system manages the feed of videos (which are stored on separate cloud based servers) and manages playlists, subscriptions, advertising and data collection. The DX architecture provides the following features: It is an IPTV broadcast platform that provides the broadcaster the ability to manage program material and collect user data down to the individual user. It is a platform that is based upon the most contemporary scalable cloud based architecture (as offered by Amazon and others) that provides a variable cost structure and virtually unlimited growth in performance. It is a browser extension (or Ap for mobile users) that is a Virtual Set Top Box that provides a television viewing experience that most closely models the user s experience with live television. Thus, there is no learning curve, and the user s experience follows the same paradigms and expectations in performance as for TV. It is significantly faster in channel switching and automatically adapts to the client terminal specifications and network performance. DX is currently successfully in use by Esporte Interativo, a major sports television content provider in Brazil. Their use augments their revenue obtained from cable and satellite distribution by enabling them to reach secondary displays and Internet viewers. A new time-shifted advertising model DX offers content providers who have live content a new advertising model that may radically transform the efficiency of IPTV advertising. Using the DX platform, one is able to insert into a live stream of video, as in the case of sports, an advertisement that pauses and then continues the live stream once the ad has completed. In this way, the live stream is slowly being delayed by the aggregate advertising time during the event without losing any important content. This method combines the best of both worlds: insert video advertising that is segmented down to the individual viewer for live broadcast material. 11

12 Conclusion DX Networks has developed and patented a simplified User Experience Model for delivery of television (and movie) content over the Internet to primary and secondary displays that increases the effectiveness of revenue generation by modeling TV which has proven success. The stakeholders who have the most power in the shifting model are the content owners. However, they must create partnerships or aggregate a complete set of capabilities in order to survive in this changing industry. We believe that DX has a necessary component of a successful IPTV business model. 12