OTT technologies and strategies for broadcasters

OTT technologies and strategies for broadcasters By Steven Hawley November 14, 2012 This research was underwritten by Envivio. Connected consumer

TABLE OF CONTENTS Executive summary... 4 Market and consumer drivers... 5 TV and video service models... 5 BROADCASTERS... 5 PAY-TV SERVICE PROVIDERS... 5 OTT VIDEO PROVIDERS... 6 AGGREGATORS... 6 BUSINESS MODELS... 6 Pay-TV service models... 7 The OTT model... 8 Connected CE and device ecosystems as video distribution channels... 9 Demand for commercially produced TV and movie content online... 11 OTT and multiscreen technologies... 13 Multiple screen sizes... 13 Managed versus unmanaged video delivery... 13 Content delivery networks... 14 ABR: maintaining high video quality under constrained bandwidth... 15 Evolution toward standardized OTT-capable video formats... 16 Multiscreen video security... 16 Ad insertion: another set of variables... 17 Key technology issues... 19 Video quality... 19 Multi-encoding for device-specific video formats and protocols... 20 OTT technologies and strategies for broadcasters 2

Video processing for OTT and multiscreen video... 22 SOLUTION ARCHITECTURES... 22 Processor approaches, pros and cons... 23 EXTERNAL DEPENDENCIES... 25 Conclusions and takeaways... 26 Summary of the current situation... 26 Ranking the priorities of video encoding... 26 Recommendations... 28 Additional considerations... 28 About Steven Hawley... 31 About GigaOM Pro... 31 OTT technologies and strategies for broadcasters 3

Executive summary As communications and entertainment needs have gone mobile and social, consumers have increasingly embraced internet-delivered video for viewing TV shows and movies. If broadcasters and programmers are to reach this audience, they themselves must embrace a new set of video-delivery techniques. One of these is over-the-top (OTT) video delivery: digital video programming via the open internet rather than over the air or through a facilities-based service provider that can be sent to any connected-consumer electronics device, regardless of location. Online delivery to so many types of consumer devices means that video programmers must produce multiple internet-streaming formats that use different types of security and different ways of inserting ads. This report explains the technical details of the various format and delivery types. Other considerations include the need for maintaining high video quality despite external factors and choosing from among multiple architectural approaches to optimize delivery. Broadcasters and other content producers should keep in mind that content is still king; their programming represents their primary value to consumers, so OTT is not just an added expense. Broadcasters should view OTT delivery as both an additional channel of distribution and an added revenue opportunity for video-programming producers. Because younger consumers want the delivery and pricing models of OTT, video programmers, pay-tv operators, and consumer device makers are all racing to enable them. Although programmers fear new devices and inadequate security, advances in security technologies and the finalization of OTT technical standards will mitigate these concerns over time. OTT technologies and strategies for broadcasters 4

Market and consumer drivers Video delivery has changed dramatically in recent years. Gone are the days when video programming was either broadcast or delivered by pay-tv operators that only delivered to set-top boxes. New standards for online video delivery have also emerged, such as OTT service models for direct-to-consumer video delivery via the internet, including multiscreen delivery. The impact of these service models and standards on video encoding and infrastructure decisions are detailed later in the report. TV and video service models Most mature telecommunications and media markets now have access to several TV service- and contentdelivery models, some of which are immature. Once these solutions are understood, content providers can focus on those that best allow them to compete effectively in their chosen markets. Today the four types of video service providers are: Broadcast Pay TV (cable, satellite, and telco operators) OTT (provided direct to consumers from content originators) Video aggregators Pay TV, video aggregators, and some broadcasters now complement their traditional one-way distribution models with unicast delivery over IP (which already is the native distribution model for OTT). To accommodate multiscreen video delivery, IP video has moved to a new video distribution technology called adaptive bitrate (ABR) streaming. BROADCASTERS In the United States, the U.K., and many other world regions, broadcasters continue to provide over-theair TV programming and have migrated their services to digital, in most cases due to mandates by local regulators. PAY-TV SERVICE PROVIDERS Cable, telco, and satellite TV programmers, also known as multichannel video programming distributors (MVPDs), have the broadest available range of video content and have traditionally been facilities based. Today, however, pay-tv operators provide content both on-net (where the service provider owns the OTT technologies and strategies for broadcasters 5

network) and OTT (to consumers who cannot be accessed via those operators networks); their ability to deliver programming to multiple screens is becoming increasingly sophisticated. Satellite TV providers in the U.S., Europe, Latin America, and other markets now offer a hybrid of traditional one-way satellite delivery plus two-way interactive services over broadband IP access networks. Some tier-one telcos go one step further by enabling application developers to access functions that reside within their networks, such as location and presence, unified communications, and messaging features, all of which can be blended with the video experience. OTT VIDEO PROVIDERS OTT video providers include TV programmers, movie studios, and broadcasters that deliver content directly to the consumer via a web browser or through a dedicated app, or by partnering with consumer electronics (CE) manufacturers that bundle their own hardware solutions with apps that access OTT content. Some CE providers, most notably Apple, Google, Microsoft, and Amazon, offer entire ecosystems that include devices, content, apps, storefronts, operating systems, and a unified mechanism to deliver content to supported devices. Because CE manufacturers do not own their networks, they are generally seen as OTT providers, although some exceptions have emerged. One example is Google, which provides video-capable smartphones and other CE devices and is now in the process of launching its own facilities-based network in the Kansas City area. Also, some traditional pay-tv network operators have begun to partner directly with CE manufacturers to deliver content to connected TVs (including, for example, Verizon and Samsung or NTT and Panasonic), as well as game consoles (such as what Microsoft has done with Comcast and others, with Xbox 360). AGGREGATORS Aggregators come in two types: those, such as Avail-TVN, that deliver traditional pay TV programming to a pay operator s headend for on-net delivery to consumers and those, such as Hulu and Netflix, that provide content directly to consumers as OTT. BUSINESS MODELS Pay TV offers subscription-based service for multichannel TV as well as both subscription and per-use models for on-demand movies and TV programming. These video services are often bundled in tiers at OTT technologies and strategies for broadcasters 6

different price points and are, in turn, often bundled with non-video services including broadband internet access and home telephone service. Recently some pay-tv operators have added homemonitoring and home-appliance-control services. A second business model is advertising. Some pay-tv operators complement traditional advertising with banner advertising embedded within their TV program guides. OTT and CE device providers also offer these models, but the price points are much lower. A third business model is taxpayer subsidy, which is the case for PBS and the BBC and for public, educational, and governmental (PEG) programming. Broadcasters and content owners can provide internet-delivered content within the context of any of these service models. Pay-TV service models Among these service models, the first and most familiar is pay TV. This is the path to market for cable-tv operators, direct-to-home satellite providers, and telcos. Video quality and the range of premium content are key selling points for pay TV. Because pay-tv operators own their delivery networks, they can guarantee video quality by monitoring their networks end to end to detect video errors. Pay-TV operators are currently engaged in three technology-focused activities, each of which leverages IP delivery and the internet: Blended user interface (UI), which requires blending pay-tv and internet-sourced content within the home-tv experience TV Everywhere, which is the secure delivery of some or all of an operator s programming over the internet to a connected device Secure multiscreen delivery, which can be enabled within the home via a video gateway device from resources upstream from the home, within the service provider s network, or both Dozens of pay-tv operators around the world have already introduced multiscreen services or have set their sights beyond the TV. One example is Verizon s FiOS TV service in the United States, which began as a triple-play offering with TV (using cable-tv technologies), broadband internet access, and telephone service. It now encompasses many more features. FiOS TV and competing MVPD multiscreen offerings have two multiscreen aspects: They can control the TV experience using apps that run on screens other than the TV, and they deliver video content to these connected and mobile consumer devices. OTT technologies and strategies for broadcasters 7

Figure 1. The service provider worldview: Verizon FiOS Source: Verizon Communications One of the most notable aspects of pay-tv deployments such as FiOS is that they have begun to extend beyond the traditional triple-play lineup by adding video home monitoring and home controls, such as using a smartphone app to raise the garage door. AT&T, Comcast, Time Warner Cable, and other providers are pursuing similar road maps. The OTT model The worldview in which pay TV revolves around service providers has been on a collision course with the internet for nearly a decade, beginning with Slingbox. With the advent of OTT delivery and service providers seeing the internet as a direct threat, the two worlds truly began to collide. In 2008, soon after Netflix and Hulu initiated their movie-streaming and TV-streaming services, device companies, including Apple, Microsoft, and Sony, introduced download-to-rent and download-to-own video services. Amazon, the U.K. s Lovefilm (also part of Amazon), and others soon joined the fray. The primary value proposition for OTT TV is the combination of content availability, price, and convenience. A key selling point is that users can access video through a single subscription and watch it on a PC, tablet, or smartphone as well as on internet-equipped televisions, all at a low cost. If traditional OTT technologies and strategies for broadcasters 8

service providers have average monthly revenues per user (ARPU) of $160 baked into their business models, how can they possibly compete with $7.99 per month OTT? However, OTT providers are dependent on outside factors for quality of service (QoS). Since they do not control the entire end-to-end delivery chain, service quality is highly variable. This situation has been a major driver in the development of ABR streaming technology, which can switch between different versions of a video asset when low bandwidth is detected. It has also been a driver in the evolution of video encoding, to improve quality video across the board. As was true with the DVR, the question has been whether OTT would prompt consumers to abandon pay TV en masse. As of 2012, this has not yet happened significantly. Despite early fears, only a small percentage of pay-tv consumers have cut the cord. Multiservice, multiscreen operators that can provide pay-tv and internet-delivered video can also leverage their facilities so that they can centrally manage subscribers, content, entitlements, security, personal-communications features, devices, and QoS to give them a distinct value advantage over OTT competitors. Connected CE and device ecosystems as video distribution channels A huge range of devices is already capable of receiving video content both from pay-tv providers and direct-to-consumer OTT content providers. Figure 2 separates the alternatives into three categories: pure pay TV, pure internet delivery, and hybrids. OTT technologies and strategies for broadcasters 9

Figure 2. Device alternatives for pay TV and OTT TV Source: tvstrategies A general rule of thumb for multidevice delivery is that the more devices a video provider can support, the more relevant the service will be to consumers. So the primary value of a connected device to content providers and advertisers is its potential to provide an additional channel of distribution. Connected CE device providers have the potential to participate in pure OTT, pure and hybrid pay TV and device ecosystems alike. Device providers can accommodate application developers by providing open interfaces and application-development environments. Examples include connected-tv and Blu-ray providers such as those from Samsung and Sony, embedded software providers like Yahoo, and the game console makers Microsoft, Sony, and Nintendo. Some CE device suppliers go a step further and build a closed-service platform using an interdependent range of devices and software. By taking this approach, a device or service provider can offer an increasingly common set of user experiences within the home, online, and across multiple devices. Apple and Google are the best-known examples of device-centric ecosystem providers. To harness connected CE devices and device ecosystems as channels to market, pay-tv and OTT service providers must become software and content developers for these devices. The resulting apps are presented to consumers via the device provider s online store, including the Apple itunes Store, Google Play, Microsoft Xbox Live, and Sony PlayStation Store. Figure 3 demonstrates the range of device alternatives for pay-tv, OTT, and connected CE and device ecosystem models. OTT technologies and strategies for broadcasters 10

Figure 3. Examples of connected CE and device ecosystems Sources: Apple, Google, Samsung, Yahoo Careful observers quickly realize that the number of application-development environments almost equals the number of devices. Apple s hermetically sealed distribution framework provides secure content to devices running Apple software. By comparison, Android is highly fragmented because it is supported by hundreds of vendors and each CE and mobile phone vendor has its own flavor of the operating system, its own development toolset, and in many cases, its own storefront. Demand for commercially produced TV and movie content online The internet has become a mainstream channel of distribution for consumer video content. According to comscore, out of the top 10 sites for online video viewing in April 2012, Viacom Digital was ranked No. 6 (41 million viewers for the month). Hulu was No. 9 (28 million), and VEVO music was No. 3 (49 million). These rankings fluctuate monthly. NBC Universal and other TV content sites have been in the top 10 in prior months. TV-network websites are the most popular way to access TV content (27 percent), with Netflix at 24 percent, online aggregators like Hulu at 18 percent, and pay-tv provider sites (Xfinity, Verizon FiOS) at 12 percent, according to a study by Chadwick Martin Bailey (CMB) titled The New Age of Television. Consumers increasingly access commercial-tv and theatrical movie content via the internet. OTT technologies and strategies for broadcasters 11

According to the same CMB study, 39 percent of consumers between the ages of 50 and 75 watch TV and movie content online, as do 74 percent of consumers between the ages of 16 and 29. Online on-demand TV-show views (33 percent in 2011 versus 30 percent in 2010) and on-demand movie views (25 percent in 2011 versus 23 percent in 2010) are increasing at about the same rate as pay TV. Ondemand usage is declining, according to highlights from Ericsson s TV & Video Consumer Trend Report 2011. Consumers also want to access and control their pay-tv services in more than just the family room. One webinar states that 16 percent of tablet owners watched on-demand TV episodes, video-on-demand, or live-broadcast TV on their tablets almost every day in September 2011. Forty-eight percent watched live TV at least once that month, and 49 percent watched on-demand. Fifty-eight percent of tablet viewers watched TV on those devices while at home, even if they could have watched on the TV instead. However, despite this strong consumer interest in internet-delivered video services, consumers are not abandoning pay TV, as has been feared. According to CMB, only 3 percent of pay-tv users have cut the cord altogether, and 20 percent of those surveyed said they would cut back rather than abandon altogether. OTT technologies and strategies for broadcasters 12

OTT and multiscreen technologies Broadcasters wanting to make better-informed decisions about OTT and multiscreen video-processing infrastructure will find that understanding the basic enabling technologies and how they work is useful. This includes knowing the types of devices consumers are using and the kinds of video and security those devices require. Also, the method of online video delivery for these devices differs significantly from pay TV s. Multiple screen sizes Because different video-capable devices have different-sized screens, the first challenge for broadcasters and other online video providers is to produce content that is properly sized for the consumer devices they are targeting. Unlike broadcast TV, which includes three formats, online video has a multitude of formats. Compounding this challenge is that PCs and some pay-tv set-top boxes (depending on their middleware) use web-page templates as frameworks for video, while smartphones and tablets tend to use native apps. Connected TVs and set-top boxes might use either, depending on the device supplier. Managed versus unmanaged video delivery As mentioned earlier, video-content producers do not have the luxury of controlling the quality of their videos. Table 1 compares the major characteristics of OTT-delivered IP video versus digital broadcast. OTT technologies and strategies for broadcasters 13

Table 1. Comparing the characteristics of pay TV and OTT video Service origin Content Digital broadcast Service provider headend High-quality SD and HD (MPEG-TS) Unicast/internet distribution Content providers and/or broadcasters Multiple formats (H.264 or ABR) Delivery network Policy-managed, facilitiesbased network Internet, via third-party CDN Hardware end point Set-top box or managed second-screen device OTT CPE or other connected consumer electronics device Software end point TV browser or runtime and a TV middleware client HTML5 browser or dedicated custom app QoS (data errors) Low Variable QoE (perceptual quality, responsiveness) High Variable Source: tvstrategies Content delivery networks Online content producers have the dual challenge of delivering content to multiple devices and of doing so in a high-quality, latency-free way. Because the internet delivers content on a best-effort basis, workarounds have to be applied in order to meet this idealized goal. Content delivery networks (CDN) are the chosen workaround. CDNs have several distribution approaches: Delivery from the broadcaster or producer through independent data centers by third-party CDN providers like Amazon, Akamai, and others Delivery by facilities-based pay-tv operators using CDN technologies within their own networks Aggregated delivery, in which multiple formats are ingested from multiple sources such as fiber or satellite; the formats are then normalized into one common format, processed into online formats, and distributed via CDN OTT technologies and strategies for broadcasters 14

Delivery from the broadcaster or producer through a broadband service provider s managed facilities-based network, functioning as a private CDN A hybrid of two or more of these approaches ABR: maintaining high video quality under constrained bandwidth Video processing for distribution entails two steps, regardless of whether it is for broadcast, pay TV, or online: compression and packaging. First, video must be processed into a format that can be packaged for delivery. Then, video that is destined for a given target screen must undergo different packaging, depending on the intended device. ABR streaming has become the preferred way for video content and service providers to provide an experience of the best possible quality, given different levels of available access bandwidth. The current generation of video encoders can process a single MPEG video input into a multitude of different video formats, with different video resolutions in different sizes for different video screens. The key to ABR is that it produces multiple (output) copies of the same video input for different bit rates, resolutions, and aspect ratios. It segments each copy into chunks. Each stream of chunks is associated with a playlist, or manifest file, that serves as a database for the chunks. When a user pauses an ABR file, a bookmark is placed in the session so playback can be resumed where the consumer left off. The three competing proprietary approaches to ABR are Microsoft Smooth Streaming, Apple HTTP Live Streaming, and Adobe HTTP Dynamic Streaming (HDS). Each of these platforms has its own security, and each handles metadata, captioning, and ad insertion differently. A new ABR standard is now emerging: MPEG Dynamic Adaptive Streaming over HTTP (MPEG-DASH, or DASH). DASH is intended to provide a common video format for multiscreen delivery. We will discuss it further in the next section. Video formats aside, the bottom line is that broadcasters and content producers intending to deliver streams to multiple consumer device environments to pay-tv set-tops, the Microsoft Xbox 360, Roku, Apple TV, and Boxee devices, for example must encode in multiple formats. They will have a continuing challenge to keep all of these factors in alignment so that they can ensure a smooth and consistent video experience for the consumer on any targeted device. OTT technologies and strategies for broadcasters 15

Evolution toward standardized OTT-capable video formats Rather than trying to displace the proprietary ABR formats noted above, two standardization initiatives have been working toward harmonizing them within technical standards. One is DASH (described above), and the other is UltraViolet, discussed in the next section. Between now and 2014, MPEG-DASH and UltraViolet will become the standard video transport and container technologies. The other emerging standard for online video delivery is HTML5, which seems to have become the de facto road map for multiscreen presentation, whether the receiver is a TV set-top box, a mobile smartphone, a tablet, a PC, or a connected TV. However, HTML5 s progress toward becoming universally accepted has been slow. Despite the buzz associated with these standards, the DASH specification is not complete, and HTML5 is nowhere near being universal as of this writing. Content producers must still support the devices and client software in the field today. In defense of implementing support for video codecs and browsers currently in widespread use, one industry expert said that supporting HTML5 and H.264 only is like teaching your kids German first and then English, just in case the kid they meet at lunch doesn t speak German. Multiscreen video security Video security has two aspects. One is content protection, which deals with the scrambling or encryption of a video signal. The other deals with user authentication. Digital rights management (DRM) is the term used for the authentication of file-based and IP-streamed content. Conditional access (CA) is the term used for the authentication of pay-tv services. Any multiscreen solution especially one that targets the TV set-top box as well as portable and connected CE devices must be concerned with both content protection and authentication. Broadcasters, video producers, and service providers alike must now support many types of security if they are to enable multiscreen delivery. Each type of video has its own security platform: For pay-tv MPEG video: proprietary or standards-based CA, scrambling (analog), and encryption (digital) For online video delivery: proprietary encryption from Adobe, Apple, Microsoft, and Google (Widevine) For mobile: OMA, or one of the same platforms used for online delivery OTT technologies and strategies for broadcasters 16

One additional aspect of multiscreen encoding is content security. Although consumer-level content security has been somewhat outside the concern of broadcasters, at least in the United States, multiscreen delivery requires the application of DRM for online video content. Like video on demand (VOD), online video also carries technical parameters for copy control, which apply usage rules to the content. A new standards-based framework for online video security called UltraViolet has also emerged., UltraViolet is the standards initiative for the Digital Entertainment Content Ecosystem (DECE) and endorsed by more than 70 members of that organization, including most of the major studios. UltraViolet provides both a common file format and a common online video encryption model that supports Adobe, Microsoft, OMA, Marlin, and Google/Widevine formats. Apple and the Walt Disney Company have refrained from adopting UltraViolet. Future versions of the MPEG-DASH specification will be harmonized with UltraViolet. Support for UltraViolet may become a priority for pay-tv providers, as content providers begin to require adherence to the standard. UltraViolet defines a common file format (CFF) that uses the fragmented MPEG-4 container, along with a group of approved DRM solutions. The UltraViolet CFF will become part of the MPEG-DASH specification. Future iterations of the MPEG-4 container format specification will also incorporate the UltraViolet CFF. This standardization is intended to ensure that all UltraViolet-compatible content plays on any UltraViolet player. Players can be CE devices or streaming players. Business rules (like DRM information) are placed in the MPEG headers. UltraViolet files can contain MPEG-4/H.264 (video), MPEG-4 AAC (audio), and SMPTE-TT text (for subtitles, captions, and so on.). Although UltraViolet s potential as a catalyst for a universal, secure video file format is nearly undeniable, the implementation of UltraViolet in CE devices is not yet widespread. Similarly, content-productionservice companies are just beginning to produce UltraViolet-compliant content. For this reason, content providers should encode to the individual video security platforms. Ad insertion: another set of variables As of this writing, VOD remains the most common form of online video delivery, although live delivery is on the rise, since content providers grow more comfortable with evolving video-security solutions. OTT technologies and strategies for broadcasters 17

Online video delivery must support the same technical standards for ad insertion that are used for broadcast and pay TV: The SCTE-104 standard defines communications between an ad-automation system and a compression system. SCTE-35 provides alerts (i.e., cue messages) that ads are scheduled for delivery at a future time. These messages must be translated into markers that are embedded into the online content. The SCTE-130 standard defines interfaces among different components of an ad-insertion ecosystem, including advertising servers, ad decision servers, and ad splicers. These must be mapped to online delivery. To complicate matters, each of the OTT video-delivery technologies has its own method for advertising insertion and ad splicing. OTT technologies and strategies for broadcasters 18

Key technology issues When broadcasters and other content producers evaluate OTT and multiscreen video-encoding solutions, they should have several technology concerns: Video quality: QoS and quality of experience (QoE) The bewildering variety of multi-encoding and transcoding needed to support multiple target devices and video form factors Processing architectures used by different video-processing suppliers If content providers are to make content available anywhere and anytime, they face a primary difficulty: to provide the highest possible video quality to the widest range of consumer devices. The problem sounds straightforward, but the solution holds many challenges. A good starting point is video quality, a core concern. Video quality Video quality includes three technical characteristics: The quality of the source video, whose end result, as is the case with standard TV, can only be as good as the quality of the source QoS, which is the error-free delivery of video over networks and deals with the integrity of video streams QoE, which includes perceptual quality and applications responsiveness OTT providers must contend with the best-effort delivery characteristics of the open internet, while pay- TV providers use dedicated facilities. The pay-tv provider manages end-to-end delivery, so QoS is high. This in turn ensures better QoE. Both OTT and pay TV are subject to unpredictable environmental conditions. For example, a backhoe could cut a line to a home or a neighborhood. Old fixed-access lines can degrade through oxidation. Radio (mobile) access has only a limited range. Wi-Fi deals notoriously badly with walls and other obstructions. Satellite pay TV is subject to interference due to atmospheric conditions, weather, and line-of-sight obstructions. OTT technologies and strategies for broadcasters 19

Multi-encoding for device-specific video formats and protocols Although most online video distribution uses the MPEG-4/H.264 video format, there is no single container format. Instead, there are proprietary containers from Adobe, Apple, Microsoft, Google, and several open-source formats. Different device providers support different formats, and each format has its own method of content security (encryption, DRM). This fragmentation means that in order to reach more consumers, content producers are forced to support more container formats. Table 2 lists the common OTT formats, including their types of container and transport stream types. OTT technologies and strategies for broadcasters 20

Table 2. Device-specific video types, containers, transport, and security Consumer end device Technology Video codec Transport Security/DRM Set-top box (pay TV, IPTV) OTT set-top box Multicast IPTV IPTV using Microsoft Mediaroom Apple HTTP Live Streaming (HLS) Microsoft Smooth Streaming Adobe HTTP Dynamic Streaming (HDS) MPEG-2, H.264 VC-1, H.264 H.264 H.264, VC-1 H.264 MPEG-DASH H.264 MPEG TS MPEG-TS/ Microsoft Smooth Streaming MPEG TS chunks over HTTP Fragmented MP4 over HTTP Fragmented MP4 over HTTP TS chunks or fragmented MP4 over HTTP AES encryption, CAS-driven Microsoft PlayReady AES encryption, open DRM AES encryption, PlayReady DRM AES encryption, Adobe Access Common AES encryption, open DRM PC/Mac Microsoft Windows Media WMV / VC-1 ASP Microsoft Windows Media DRM/PlayReady DRM Microsoft Smooth Streaming (Silverlight) Adobe HDS (Flash) Adobe RTMP (Flash) Apple HLS (Quicktime for Mac) Apple.MOV (Quicktime for PC) H.264, VC-1 H.264, VP8 H.264, VP8 H.264 H.264, MPEG-4 SP Fragmented MP4 over HTTP Fragmented MP4 over HTTP RTMP/ RTMPE MPEG TS chunks over HTTP RTP/ progressive download (.MOV) AES encryption, PlayReady DRM Adobe Access Not defined AES encryption, open DRM Not defined Apple ios (ipad, iphone, ipod touch) Apple HLS H.264 MPEG TS chunks over HTTP AES encryption, open DRM OTT technologies and strategies for broadcasters 21

Google Android (third-party tablets and smartphones; Google Nexus) Microsoft Windows Phone 3GPP (supported natively on 1 st - gen. Android players) Apple HLS (supported natively on 2 nd - gen. Android players) Adobe/Flash Google WebM Microsoft Smooth Streaming H.264, MPEG-4 SP H.264 Flash.FLV WebM codec (formerly VP8) H.264, VC-1 RTSP/RTP or 3GP progressive download MPEG TS chunks over HTTP RTMP or HTTP Dynamic Streaming HTTP Fragmented MP4 over HTTP OMA AES encryption, open DRM Adobe Access Widevine AES encryption with PlayReady DRM Source: tvstrategies As of this writing, Apple s HLS packaging has the greatest market share for connected devices. Adobe Flash is the leading format in the PC world for ad-based services. Microsoft leads in the PC and gameconsole world for pay-tv services, while Microsoft PlayReady is the prevailing DRM. Video processing for OTT and multiscreen video Video-encoding solutions process and package video content for pay-tv and OTT distribution. Video processing is one of multiple evaluation criteria for encoding solutions. SOLUTION ARCHITECTURES There are two general architectural approaches for multiscreen video encoders. One approach combines encoding, transcoding, and packaging together in a single system, in one process. The other approach takes two forms. In one of them, encoding is at the headend, with transcoding and packaging in the cloud or at the edge. In the other approach, encoding and transcoding are at the headend and packaging is either in the cloud or at the edge. The first option produces all screen sizes and video formats in one step. Distribution (network) cost depends on the number of clients. The second and third options are best when the amount of bandwidth available from the headend into distribution is low, because only one stream needs to be distributed into the cloud or to the edge (where all the multiscreen processing is done). OTT technologies and strategies for broadcasters 22

Broadcasters and other direct-to-consumer video providers tend to favor appliances that provide compression and content packaging in a single form factor. This enables them to shorten the time to delivery by combining both steps into a single location and presenting it directly to a CDN for distribution, centrally or at the network edge. Even if an encoding solution has logically or physically separate encoding and packaging modules, the modules can be co-located at a single centralized or edge facility. Service providers like to separate compression from packaging because they can encode video assets at a centralized headend facility and then custom package them at the network edge for final distribution to the consumer. Service providers also tend to standardize on IT infrastructure and to favor encoding solutions that can run on the hardware on which they have standardized. Processor approaches, pros and cons The three approaches to the processing architecture for multiscreen video encoders are: CPU-based (or software-based) CPU-based and graphics processing unit based (GPU-based) Application specific integrated circuit based (ASIC-based) These approaches are compared in Table 3. OTT technologies and strategies for broadcasters 23

Table 3. Comparison of CPU-, GPU-, and ASIC-based encoders Encoding architecture CPU-based CPU- and GPUbased ASIC-based Suitability for live playout (live streaming) Suitability for file-based workflow (for on-demand) Suitability for video producers that standardize on hardware OK: CPU speed is an influencing factor OK OK High High Low High: Solution can run on off-the-shelf hardware High N/A: Solution must run on designated hardware Density (physical space) Medium High High Power efficiency Medium High High Flexibility for different solutions Ability to accommodate new screen resolutions without replacement Dependency on processor technology road map High Medium Low High Medium Low Low Medium High Source: tvstrategies CPU-based (software-based) encoding solutions separate encoding logic from the processor hardware, and they are generally seen both as more flexible and less dependent on a processor supplier s technology road map. They have historically been considered best for encoding to files that are played out on demand rather than real-time encoding for live video, but because faster processors have reduced this concern, current solutions have become fully adequate for real-time applications. In a multiscreen deployment, CPU-based solutions are accepted because the producer can continue using the same hardware as new video formats come to market. For example, when MPEG-DASH comes into more widespread use, producers can change their software to accommodate it without having to upgrade their hardware. GPU- and ASIC-based solutions were conceptualized as ways to harness dedicated graphics processors to take on the workload of transcoding MPEG-2 video inputs into MPEG-4/H.264 outputs for multiscreen. In general, chip-based (ASIC- and GPU-based) solutions take direct advantage of processing OTT technologies and strategies for broadcasters 24

characteristics that are built into the processors that they leverage, which can create a speed advantage. As a result, some see these solutions as suitable for both real-time encoding and playout. One drawback of the ASIC-based approach is that ASICs are designed to produce specific video resolutions. Content producers face problems when a new screen form factor, such as the ipad 3, or a new video format, such as H.265, comes to market and the ASIC-based encoding platform does not accommodate it. Consumers could be dissatisfied that the video does not show in full resolution, and the supplier might need time to introduce a new chip that produces them. Any of these approaches can leverage close engineering relationships between the encoder supplier and their processor suppliers. In addition to raw performance improvements, these kinds of relationships can increase the number of video streams produced by a given encoder, which could lower the cost per video stream. EXTERNAL DEPENDENCIES Video content producers should also understand external software dependencies, since they often affect producers. In an ideal situation, the video-processing supplier should have as much control as possible over its encoding algorithms rather than licensing them from external sources. Software dependencies may take days or weeks to resolve, but hardware dependencies could take longer. CPU dependency can be a concern when new high-resolution video formats such as H.265 come into more widespread use: CPUs may not have the speed to handle real-time output. This concern may be minor, as H.265 is a ways off as a mainstream format. GPU-, ASIC-, and DSP-based encoding solutions have a dependency on the chip supplier s product-development cycles. OTT technologies and strategies for broadcasters 25

Conclusions and takeaways The end requirements of broadcasters and other content producers are not so different from those of service providers: Both want solutions that produce a defined set of video outputs from a single input. Broadcasters and content producers have a clear opportunity with OTT, but the task seems daunting. It s a useful exercise to take a step back and understand that online delivery is a means of replicating the traditional broadcast (and pay-tv) world online. Online delivery needs ad insertion, closed-captioning, and content security in the same way that the linear TV world does. Summary of the current situation Demand for OTT is unquestionable. Online delivery is being put in place by all types of videoprogramming providers: pay TV, content providers themselves, device makers, and device ecosystems. Suitable transcoding solutions are already available to content producers from a variety of suppliers that enable them to bring OTT content to market quickly. Because OTT content producers must support devices other than the living room TV, they cannot avoid supporting all the screen sizes, aspect ratios, proprietary codecs, and multiple DRM schemes that are currently in use across this universe of devices. OTT device support is a fragmented area, and if content revenue is the primary consideration, content developers have to decide which device environments and service models have the greatest market potential. Ranking the priorities of video encoding Priorities must be established in two key areas: which formats should be first and which given limited resources, and which encoder architecture is most suitable for which types of online delivery. The reasoning behind these priorities is discussed in detail in the previous section. Content producers considering online delivery must eventually support (i.e., transcode to) all three major proprietary ABR technologies: Apple HLS, Microsoft Smooth Streaming, and Adobe HTTP Dynamic Streaming. They must support these technologies in that order if they are to maximize their market-reach potential. OTT technologies and strategies for broadcasters 26

Video-encoding platforms include two architectural alternatives. Platforms that combine video encoding and the process of packaging into ABR streams are well-suited for OTT content providers that present video directly to CDNs for delivery to the consumer. Platforms that separate encoding and packaging provide more flexibility for service providers with tiered managed-delivery networks. Some suppliers can provide both architectures. Video processing includes two main approaches: software-based and hardware-based. The softwarebased (CPU-based) approach is abstracted from the processor, making it more flexible and less bound by the native capabilities of individual chips. The hardware-based approach takes direct advantage of a chip s processing resources, but if the chip does not support a new requirement, the vendor will be dependent on the chip vendor s hardware-development cycle. Encoding for live TV means that producers qualify their encoding solutions based on compression efficiency as well as format. With processing speed being less and less a factor as CPU architectures evolve and speeds increase, the flexibility associated with the software-based approach is undeniable. For the same level of video quality, a lower bit rate leads to huge savings in distribution (CDN) costs. ABR standards are on their way, but MPEG-DASH is not finalized and HTML5 and UltraViolet are not yet widely available in commercial services. OTT technologies and strategies for broadcasters 27

Recommendations The content provider s primary concern should be market reach, not adherence to emerging standards. Stringent standards compliance can come later. Content providers should be more concerned with crossbrowser compatibility, encoder (codec) support, and mobile optimization. Content producers in the process of selecting OTT encoding (transcoding) solutions should strongly consider offerings that are software-based. As processing platforms evolve, content producers and service providers will occasionally migrate their processing to newer equipment. A software-based approach helps ensure that the producer is not stranded with a proprietary solution. Producers considering CPU-based solutions should ensure that they can produce live video content for real-time distribution through performance testing. CPU-based solutions tend to have more frequent product introductions. CPU vendors also maintain backward compatibility with earlier processor models. On the other hand, GPU-based and ASIC-based encoder suppliers are more constrained by productdevelopment cycles, so bringing more processing speed to market takes time. Those content producers considering any of these solutions should engage in compatibility testing to ensure that they can handle all the required multiscreen formats and resolutions, as it also could take time for a chip vendor to introduce new chip models. Content producers considering GPU and ASICbased solutions should pay careful attention to the chip vendor s product road map so that they can anticipate when they can support new screen and video formats in their OTT video offerings. Some CPU-based solutions allow encoder suppliers to have the best of both worlds: Intel s i7 Sandy Bridge and Ivy Bridge chips adhere to the Intel-architecture standard and also have a GPU onboard, which uses Intel HD Graphics and Quick Sync Video for transcoding. Additional considerations Because time to market is a major consideration for OTT, content producers should consider whether their prospective supplier develops its encoding technology in-house. Those that rely on outside suppliers may find they have development dependencies outside of their control that have a negative impact on their responsiveness to a content producer s time-to-market requirements. In addition to new revenue, content producers and distributors should consider the breadth of a videoprocessing supplier s overall product line, the suppliers relationships with its own suppliers, the OTT technologies and strategies for broadcasters 28

integration of the encoding solution, the openness and acceptance of a given codec by content producers and encoder makers, and environmental issues. Content providers should go into OTT and multiscreen delivery with realistic financial expectations, because ARPUs will be low. Online delivery involves an infrastructure investment and a technical understanding of OTT and multiscreen solutions, because they do differ greatly from traditional broadcast. TV programmers can complement direct-to-consumer and online aggregator revenue streams with advertising. To do so, they must ensure that their video-encoding selections support online ad insertion. If video distribution is direct to the consumer, the best approach is via CDN. If content producers are partnering with network (access) providers, they can get access directly to the network providers consumers. In that scenario the cost of customer acquisition is likely to be lower, because they could share marketing costs and no third-party CDN provider is in the loop to take a slice of the revenue pie. Beyond the encoding and packaging processes themselves, other considerations include the ability for the overall video-processing solution to manage source video, assets for multiple screen formats, multiple resolutions for variable access bandwidth, multiple security types, scheduling, playout (to live distribution and/or to storage), and advertising insertion. Content producers should also pay careful attention to external dependencies by their suppliers, both on the hardware and software side of the equation. Video producers should also consider industry support for a given video-encoding solution. For example, even though Apple has the reputation of being a closed and secretive company, it discloses its product road map and provides early looks at new solutions to its development partners. This helps ensure widespread market readiness when Apple brings new products and technologies to market. Another aspect of industry support is the industry ecosystem built by the encoder supplier. Content producers should consider the breadth of customer wins with other content producers and broadcasters, such as other TV networks and movie studios. Service providers should consider the relationships the supplier has with other video distributors, as well as with video systems integrators. Another priority for video encoding is to encode for delivery both from centralized facilities and from the cloud. Guidelines established by the 2008 Cablevision ruling by the U.S. Court of Appeals demand that individual copies of a video asset be produced for each video consumer. By extension, this means that if a device user demands a copy of a TV show, it must be available in a format compatible with the consumer s OTT technologies and strategies for broadcasters 29

device. To address QoE concerns about application responsiveness, video must be stored as close to users as possible. Storage in the cloud raises another concern: local ad insertion. Different device environments demand different forms of ad insertion, and the chosen encoding solution must support the right methods for devices supported. Video providers considering multi-tiered distribution should pay attention to the space requirements of a solution under consideration, as edge facilities might be limited. Service providers such as telcos and cable operators have limited rack space in the field. In any case, power consumption is also a key factor, because it represents a significant operating expense. Low power consumption also supports a provider s promises to maintain a green operation. OTT technologies and strategies for broadcasters 30

About Steven Hawley Steven Hawley is the principal analyst and consultant for tvstrategies tm (Advanced Media Strategies LLC). He has worked with many telecommunications, media industry, and professional services clients. Prior to establishing tvstrategies, he served in management and team member roles for companies that include Myrio Corporation (later a unit of Nokia Siemens Networks), Northern Telecom (later Nortel Networks), and Aldus Corp. (acquired by Adobe Systems). Hawley has delivered more than 20 technology products to market, including IPTV middleware platforms; web-based commerce platforms; digital media content design, management, and production tools; and other multimedia communications solutions. He has also contributed to a wide variety of industry events, including IPTV World Forum, TelcoTV, NAB, IBC, and other conferences. About GigaOM Pro GigaOM Pro gives you insider access to expert industry insights on emerging markets. Focused on delivering highly relevant and timely research to the people who need it most, our analysis, reports, and original research come from the most respected voices in the industry. Whether you re beginning to learn about a new market or are an industry insider, GigaOM Pro addresses the need for relevant, illuminating insights into the industry s most dynamic markets. Visit us at: pro.gigaom.com 2012 Giga Omni Media, Inc. All Rights Reserved This publication may be used only as expressly permitted by license from GigaOM and may not be accessed, used, copied, distributed, published, sold, publicly displayed, or otherwise exploited without the express prior written permission of GigaOM. For licensing information, please contact us. OTT technologies and strategies for broadcasters 31