The Business Models of the OTT Video Services in Taiwan

Transcription

1 The Business Models of the OTT Video Services in Taiwan Prof. Yu-li Liu National Chengchi University 20th ITS Biennial Conference Rio de Janeiro

2 OTT TV Definition OTT video services defined as the distribution of video content to a wide range of IP-enabled devices (TVs, PCs, mobile phones and tablets) over the unmanaged Internet (Venturini, 2011) NCCU

3 Development of OTT Video Services Over 380 million people will watch online video 54 billion times via connected-tv devices in 2015 (Informa Telecoms & Media, 2012) OTT services are expected to grow from a mere $2-3 billion market in 2011 to $15 billion by 2016 (Taga, Schwaiger, & Little, 2012) NCCU

4 Global, OTT TV viewers, (m) SOURCE: Informa Telecoms & Media, 2012 NCCU

5 Western Europe, TV viewers by type, SOURCE: Informa Telecoms & Media, 2012 NCCU

6 Research Questions (1)What are the challenges and opportunities of the OTT video services in Taiwan? (2)What kind of co-opetition exists between the OTT video services and the existing media? (3)What are the business models of the OTT video services in Taiwan? (4) What success factors are relevant to the OTT video services in Taiwan?

7 OTT value chain (adapted from Accenture) Content Aggregator Distributor devices Content Creators Applications/ services Program Packagers (channel operators) platform Aggregators (Next VOD) Network Operators (CHT, KBRO) Access Providers (other ISPs) Apps Devices Manufacturers (Samsung TV, Apple STB, smart phone, tablet PC)

8 Types of OTT TV OTT video Rental Content MVPD Multichannel Video Programming Distributor UGC Devices Netflix Blockbuster Amazon MLB TV HBO Go ESPN3 Hulu Plus Xfinity TV online TWCable TV YouTube Movie itunes Qriocity (Sony Streaming Service)

9 OTT Players Aidi, Markendahl, Tollmar & Blennerud (2012) define the players in OTT market: Pure player, Diversified player, and Vertically integrated player. 1. Network operators (telcos and cable operators) 2. ISPs (5 TV) 3. Content aggregator (Next Media) 4. Joint venture between telco & others(cht+htc; KT+ Skylife) 5. STB providers 6. TV manufacturers (Samsung s smart TV)

10 OTT TV Operation Model Through its own STB Through other s STB Through Connected TV (cooperate with TV manufacturer) Cooperate with network operators (share revenue or increase the partner s value) Use App

11 Emerging pricing models Free Hybrid model (free+paid) Monthly fees Pay per view (VOD) Package Bundle with other services Embedded with Ads A la carte

12 Literature Review: Business Model A business model describes the rationale of how an organization creates, delivers, and captures value. The business model is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems (Osterwalder & Pigneur, 2010). The logic of the firm, the way it operates and how it creates value for its stakeholder(baden-fuller, MacMillan, Demil &Lecocq, 2008). A business model is commonly seen as composed of two elements: a business system and a profit model. (Itami & Noshino, 2010).

13 Literature Review: Business Model A business model depicts the content, structure, and governance of transactions designed so as to create value through the exploitation of business opportunities (Amit & Zott, 2001; Casadesus-Masanell & Ricart, 2010). One role of business models is to provide a set of generic level descriptors of how a firm organises itself to create and distribute value in a profitable manner (Baden-Fuller & Morgan, 2010). A business model is an organization s approach to generating revenue at a reasonable cost, and incorporates assumptions about how it will both create and capture value (Gambardella & McGahan, 2010).

14 Main OTT business model Aidi et al,. (2012) concluded four OTT business models: Rental model: Netflix, Amazon watch instantly, Vudu, Voddler, etc. Retail model: User buys the TV/video content, e.g. Amazon VoD, itunes Subscription model: Neflix, Hulu Plus, LoveFilm, Amazon Prime, etc. Subsided model: User does not pay to get access to the copyright works as other revenue channel supports the business, e.g.youtube, Hulu

15 Main OTT business model Waterman, Sherman and Wool (2013) concluded 4 basic online TV business segments: a. a la carte rentals and purchases, video-on demand (VOD) Blockbuster on demand, itunes b. subscriptions Netflix, Hulu Plus, Amazon Prime Instant c. advertiser-supported Youtube, Dailymotion d. authentication-dependent, offline/online bundled content Verizon Fios, HBO GO Source: Waterman, D., Sherman, R., & Wook Ji, S. (2013). The economics of online television: Industry development, aggregation, and TV Everywhere.Telecommunications Policy, 37(9),

16 The Definition of Critical Success Factors CSFs can be defined as areas in which results, if they are satisfactory, will ensure successful competitive performance for the organisation (Rockart, 1979). Saraph et al. (1989) viewed them as those critical areas of managerial planning and action that must be practised in order to achieve effectiveness.

17 Critical Success Factors Critical success factors (CSF s) are those characteristics, conditions, or variables that when properly sustained, maintained, or managed can have a significant impact on the success of a firm competing in a particular industry. The concept of critical success factors has been applied at three levels of analysis: firm specific, industry and macro environment (economic sociopolitical environment). Source: Leidecker & Bruno (1984)

18 Research methods 1.Literature Review 2.Survey: OTT user behavior (827 samples) April Focus group interview a. Officials, OTT players, experts (10 interviewees), May 2, 2014 b. OTT users, April 20, In-depth interviews

19 Challenges for OTT Video Services Lacks of diverse STBs (for the consumer to choose) and OTT embedded smart TV Needs enough bandwidth and fast download speed Network neutrality issue: whether ISPs will control the volume. Lacks of innovative business model (different from existing media) and its own branded content Easy-to-use user interface User behavior and adoption Sources: Industrial Development Bureau, Ministry of Economic Affairs

20 Challenges for OTT Video Services Broadband speed (cannot be too slow) Lack of innovative content or services Lack of branded content and interactive service Copyright issues, DRM Release window is slow, Difficult to get content User behavior, not enough subscribers User interface Network operator or ISP s attitude (cooperate, compete, network neutrality) Lack of new business models Small revenue

21 Challenges for OTT Video Services (focus group) Market: Most Taiwanese audience prefer free OTT services. Ads is acceptable. Taiwan market is too small. Should consider overseas market China s impact Most of Taiwan s users like to watch China s OTT content Copyright Difficult to get content: Some popular channels do not want to sell content to OTT. Piracy issue Program fee category for multi-screen TV and OTT need to be established Broadband access and bandwidth Integrate content, bandwidth, server, and user devices

22 Most watched OTT service are from China (Liu, 2014) item Frequency percentage YouTube PPS (China) Tudou(China) Youku(China) FunTV (China) PPTV(China) MapleStage Onlinewatch.TV 66 8 Quick VOD(China) FUN698 (China) Hichannel

23 Video viewers via internet in Taiwan (InsightXplorer) Total audiences (million) Average view frequency Average view time (min) Average browse numbers Google site (ex YouTube) Yahoo! site facebook VEVO Viacom Digital Youku (China) Chunghwa Telecom (Taiwan) PPStream China)

24 Why do Taiwanese audience prefer these OTT services (Liu, 2014) item frequency percentage Various programs More free programs Can view many programs not offered in Taiwan More newly released programs Easy to search Appealing content Ads can be skipped after viewing for a few seconds Good picture quality Smooth play (no lag) others 6 0.7

25 Most Taiwanese audience prefer Free OTT services with ads Without buying extra playing-devices and paying subscription fee, most interviewees admit that OTT services save their entertainment cost (focus group, 2014).

26 Most Taiwanese audience prefer watching ads than paying fees item frequency percentage Unwilling to pay, ads are % acceptable Unwilling to pay, do not % want to see ads Prefer free programs, occasionally pay, ads are acceptable % Prefer free programs, occasionally pay, do not want to see ads % Willing to pay, do not want to 5 0.6% see ads Total %

27 What types of ads do Taiwanese audience accept item frequency percentage Ads before the % programs Scrolling text % Ads display below the % screen while the program is playing Pop-up ads % Ads during the breaks % total %

28 Multi-screen copyright issue and piracy Many interviewees watch OTT content on their way to work/ home, so offering multiscreen service is crucial for OTT operators (focus group, 2014) Cord-cutting phenomenon is not obvious Most interviewees will not cancel home TV service. OTT and pay TV services are complementary to them (focus group, 2014)

29 Most users will not stop subscribing existing pay TV services: Cord-cutting is not obvious item frequency percentage Yes No Total

30 Business Models of Major global OTT operators Service Business model Primary content Netflix Subscription Broadcast/ cable programs, movies, original programs Hulu Plus Subscription and Advertisement Broadcast/ cable programs, movies, original programs Amazon Prime Subscription and VOD Broadcast/ cable programs, movies, original programs Redbox Instant Subscription and VOD Mainly movies Youtube Dailymotion Youku Free(advertiser-supported ); VOD; subscription Free(advertiser-supported ); VOD; subscription s Free(advertiser-supported ) and VOD User-generated content, paid channels User-generated content, paid channels, exclusive content User-generated content, Broadcast/ cable programs, original programs

31 OTT Video business models in Taiwan Free service Subsided/ advertisersupported model udn TV Pay service 1. Subscription model 2. pay-per-view / VOD / Retail model 3. DVD rental model Huada 5 TV (ISP) Kbro (cable MSO) Catchplay (content aggregator) Kbro Samsung TV Taiwan Catchplay Hybrid (Free and pay) Li TV (EPG, Tivo) Elta TV Hichannel

32 Major OTT operators in Taiwan Service Business model Primary content udn TV Free (advertiser-supported ); Sale content real-time and replay video news, citizen news, VOD news and programs Huada Paid-apps Golf apps 5 TV (ISP) Monthly subscription fee; Franchise Kbro (cable) Monthly subscription fee; pay-per-view Catchplay (content aggregator) Samsung TV Taiwan Li TV (EPG, Tivo) Elta TV Hichannel Monthly DVD rental fee; OTT subscription fee Apps; Cooperated with OTT operators Free; Monthly or yearly fee; Pay-per-view Free (advertiser-supported ); Monthly subscription fee Free (advertiser-supported ); Monthly subscription fee; Pay-per-view; Package Movies, TV channels, Karaoke, Games, Online-shopping center VoD, Internet TV, Connect TV, Super MOD service Online movies, home entertainment, online TV, online DVD rental service Smart TV apps Interactive EPG, HD programs, movies, games, Karaoke, live stock news TV channels; Online video websites; Real-time programs Real-time channels and VOD; free online video; Internet (connected) TV

33 Considering Hulu s Model (ETTV and SET) Hulu is a joint venture of NBC Universal Television Group (Comcast), Fox Broadcasting Company (21 st Century Fox), and Disney-ABC Television Group (The Walt Disney Company). Hulu Plus, a monthly subscription service, also has commercials. Hulu Plus allows access to additional content, mainly in the form of full current and previous TV seasons. Hulu Plus supports a wider array of platforms than the free Hulu. Source: Rodgers, 2011

34 Considering UK s YouView Model (CHT s MOD and Kbro s SMOD) Partnership (launched in July, 2012) BT, Talk Talk, Arqiva BBC, ITV, Channel 4 and Channel 5 Provide access to Freeview TV and TV on Demand via a 'hybrid' STB, connected with a broadband connection and a TV antenna No contract and no subscription for accessing catchup and Freeview content Only buy a set-top box or to get it free if having 12- month contract with BT or Talk Talk

35 Coopetition (focus group) OTT TV and telephone companies Network neutrality issue OTT TV has to pay telephone companies(for instance, CHT) for using its bandwidth. The cost is quite a lot. Provide multi-screen services (such as CHT s MOD and Hichannel) HiChannel cooperates with smart phone, tablet and IPTV. OTT TV and cable operators Provide appealing content Kbro cooperates with content providers Providing home security, automation, home healthcare Provide APP OTT TV and content providers Samsung TV cooperates with OTT TV

36 Critical Success Factors Macro-environment Technical perspective: over-the-top video can take advantage of the growth of 4G and the popularity of smart device The emergence of mobile and social media platforms provides opportunities for the development of OTT services. No specific regulation for OTT TV. Encourage rather than regulate Source: focus group (2014)

37 Critical Success Factors Industry Content: appealing or exclusive or content is the key Copyright: content providers provide content to OTT operators. Platform: OTT TV needs the support of platform. It needs to reduce cost.

38 Critical Success Factors Firm For SET, establishing a user paying system is a great concern. For ET Today, investing in content needs capital. For Kbro, cooperating with content provider and using ads model to support. For CHT, the model of revenue sharing with content providers needs to be built. For LiTV, it is important to integrate content, technology and service. Creating a nice user experience is important.

39 Opportunities of OTT Video Services Broadband, 4G (LTE) and smart devices are the main drivers of OTT services(cht, 2014) Mobile, socialization and video are the future of TV service (ETtoday, 2014) Content is the key composition of OTT business (SET, 2014). The vertical integration with content providers is crucial to Taiwan OTT operators (Kbro, 2014)

40 Opportunities of OTT Video Services Content providers and platform operators could cooperate and set up a fair revenue-split model (Elta TV, 2014). Content providers could cooperate and build a OTT TV platform like U.S. Hulu whose business model is advertisement-supported (Ettoday, 2014). OTT operators should seek cooperation with China OTT services to gain bigger market share (5 TV, 2014)

41 Conclusion: Strategies for the OTT Video Services Provide appealing, exclusive, innovative or branded content Apply big data to target audience Use social media to promote OTT services Binge viewing is the trend Partnership with broadband providers or other platforms Cheap price, bundling package, flexible pricing model One account, more devices DRM, copyright Multiple revenue model

42 Conclusion Hybrid model: Follow Hulu Plus model Establish a revenue sharing model among the players Co-establish and co-maintain cloud system Virtual service provider established by channel provider and platform provider (split ads revenue). Complementary to the existing media