Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
It is clear that consumers with mobile broadband plans have huge pent-up demand for video content. The advent of smartphones unleashed this demand. And faster 3G and 4G wireless networks as well as Wi-Fi ubiquity have skyrocketed downloading and streaming of video content to mobile and smart OS devices, such as smartphones and tablets. Netflix Inc., Hulu and others offer premium programming to users on their mobile devices today. Their offerings establish a trend that pay TV operators (including MSOs and telcos) cannot ignore. In fact, they are not ignoring this trend; they are jumping into the fray with their own apps to stream content to smart devices.
The rise of app stores where users can download applications to access content from sources such as Major League Baseball and the National Football League, popular movies from Epix (a Viacom company), TV episodes on demand from Fox’s Bitbop app, and others have shown a simple and fast path to getting premium content in users’ hands.
And this trend is on the rise. The Nielsen Company reports that in 2010, about 22 million U.S. mobile subscribers watched video, up more than 40% from the previous year. About one-third of U.S. adults have software applications on their phones, the Pew Research Center and Nielsen report. The Yankee Group projects that by 2014 the global number of mobile video users will jump to about 450 million from some 250 million now. Within five years, mobile video will account for two-thirds of all mobile data traffic, according to Cisco Systems Inc.’s Visual Network Index.
It has become a no-brainer for any operator with access to premium content to offer it to users as a pay-per-view or subscriber offering, free or subsidized by advertising, or in some other monetizable form. But, when it comes to launching a carrier-grade, operator-branded premium TV offering on any device, anywhere, there are a number of issues that still need to be addressed.
Technical problems associated with playing and protecting premium video to mobile users are formidable. Increasingly, service providers, cable operators and telco carriers who plan to launch a premium TV offering to smart mobile devices have adopted a popular form of video streaming that is pervasive on the Internet. With this technique, called adaptive HTTP streaming, the provider must first prepare video content for consumption by a mobile device.
Managing the various formats and speeds presents a further challenge. Most premium TV shows and movies are already digitized, compressed and encoded using MPEG standards. They are often digitized over a range of formats intended to serve a small device like an iPhone, a giant flat screen HDTV or any of the variations in between. A content provider such as Netflix or Blockbuster may have several copies in different formats of each 44 minute TV show to serve a wide range of devices. In the mobile world, the complexity multiplies because network conditions are dynamic. When a user accessing a video stream is in a congested network situation, the bit-rate may be flowing at 300 kilobits per second or even lower. When the network is less congested, that rate could rise to 900 kbps or higher.
Adaptive streaming to a range of mobile devices means the content provider may store more than 230,000 file fragments of a single program to accommodate every need. That’s just one program. Imagine how this complexity expands as you apply it to a library of 100,000 titles or for live TV programming. The need to distribute content to servers scattered around the globe adds further complexity. A user in Los Angeles will watch an episode of “24” from a server somewhere in California. While a consumer in Boston will see the same show likely from a server on the East Coast. Also, various formats required by different devices bring more complexity. Apple Inc.’s system breaks videos into 10-second chunks, for example, while Microsoft Corp. uses two-second chunks. For a carrier that must deliver video to any device anywhere, it gets complicated pretty fast.
We haven’t even addressed the many ways devised to protect the content. Clearly, the industry needs to collapse this explosion of content delivery methods into a single mezzanine format for encoding, protecting and streaming video content. This format is an opportunity to provide our customers with a high-quality experience, even when bit-rates must be constrained by network congestion. It also is an opportunity to significantly cut costs and earn more revenue by offering premium video service.
Monetization presents another issue. The most straightforward approach is the Netflix video rental model. Users can also go to app stores and look through a catalog of programs and content for a-la-carte purchase. There are also examples of advertisement subsidized pay-per-view programs, and of course, the completely free programs, such as Hulu, fully subsidized by ads.
In the mobile world, advertising is in its infancy. Addressable, personalized and interactive advertisement provides the greatest value to carriers and usefulness to consumers. Today’s powerful smart devices like smartphones and tablets enable operators to deliver addressable and interactive advertising inter-weaved with premium content to personalized devices. When combined with a pay TV operator’s existing ad sales force and a substantial augmented online ad sales force, the potential for capturing some ad revenues to support their TV everywhere offerings is very high.
A non-technological but perhaps even harder challenge faced by operators is the issue of extended distribution rights to the content they already have access to. Today most pay TV operators have rights to distribute content in their own regions and geographies, on their own managed networks to their own managed devices like set top boxes. An implicit assumption behind the hype about operator launched TV everywhere services is that operators will have extended distribution rights to stream the same content to new-media devices. This service would happen using new-media technologies, over the unmanaged Internet or somebody else’s access networks, and to devices not issued by the operators. This change is a tall order, and we are seeing signs of friction between content owners and pay TV operators already on issues relating to re-distribution rights.
All these trends, opportunities and challenges pose a very exciting future for premium content delivery. Whether you call it TV everywhere, over-the-top video delivery, IP or Internet TV, mobile TV or whatever else, the die is cast. One thing is certain, the way you watch TV, the way operators deliver TV and even what you call TV is about to change. Forever and we hope, for good.
Pankaj Shroff is director of technology strategy at Tellabs. He is responsible for identifying and building strategy for entering key growth markets for Tellabs in the areas of mobile packet core, mobile content, new-media video delivery, advertising and analytics.
Prior to joining Tellabs, Shroff was chief applications architect and director of solutions marketing at Sonus Networks, where he was lead evangelist and architect for the applications line of business. Shroff has a versatile background in mobile data, voice and video and has held a variety of leadership and engineering positions at Vonage, Verso Technologies, and Philips Electronics. While at Philips, Shroff and his team won an Emmy award in advancement of TV technology.
Shroff holds an executive education certificate from MIT Sloan School of Business, a Master of Science degree in computer science from Utah State University, and a Bachelor of Engineering degree in computer engineering from University of Pune.
