SHIFT HAPPENSFROM VALUE DESTRUCTION TO VALUE CREATION

Dr. Ken MorseCTO, Service Provider Technology GroupCisco

TRADITIONAL VIDEO COMPETITIVE LANDSCAPE IS IN FLUXNEW ENTRANTS, EVERYDAY, IN ONLINE VIDEO

Satellite Companies

Cable Companies

Mobile Companies

Telco Companies

Online Video

Video

Subscription Based

Pay-Per-View

Free Video

Consumer Electronic Device Focused

ONLINE VIDEO – SHIFTING THE BALANCE OF POWERMOVING IN FAVOR OF CONSUMERS AND M&E COMPANIES

POWER

Telco Companies

Mobile Companies

Satellite Companies

Cable Companies

M&ECompaniesConsumers

M&ECompanies

* Online Video=Video watched via the Internet typically within an internet browser (ex. YouTube, Hulu, Daily Motion, Omroep.nl, …)

Source: BlackArrow estimates based on internal DVR/VOD deployment estimates and publicly reported data from Nielsen Media, Nielsen NetRatings, Comcast and comScore.

Annual Share of Viewing(person hours, in billions)

ONLINE VIDEO IS PART OF A BROADER “VIEWER-CONTROLLED” VIDEO TREND

Total hours of Media Viewing by US population

LATENT DEMAND: Addressableby Online Video (e.g. catch-up TV)

2010 Viewer Con-trolled Video Plat-

forms

VoD

Online

Mobile

DVR (Timeshifted)

DVR (Live Pause)

2006 2008 20100

100

200

300

400

500Viewer ControlledLinear TV

50148447460

(13%)

414(87%) 379

(78%)

105(22%)

339(68%)

162(32%)

2-3%

USER SURVEY HIGHLIGHTS KEY DEMAND DRIVERS FOR INTERNET DELIVERY OF VIDEO TO TV“Which of the following might encourage you to start streaming or downloading TV programmes/movies online or, if you already do this, to watch more online TV programmes/movies than you currently do?”

Source: Olswang Convergence Consumer Survey, November 2008

44% 24%

41% 29%

40%

38%

23%

27%

26% 24%

29%

29%

29%

38%

ONLINE VIDEO TO THE TV WILL BE ENABLED BY AVARIETY OF DEVICES

Source: TDG

internet

MCE

nDTV

STB/PVR

Hybrid STBTiVo

Tru2Way

Cable / Satellite / Telco

Game ConsoleBlu-Ray Player

iSTB (NeuLion)

PC

Incumbents

Competitors

2009 (Global)

Game Consoles

iSTBs

MCEs

Hybrid STBs

Blu-ray Players

nDTVs

130M Capable Homes, 40M Active Homes

2014 (Global)

Game ConsolesiSTBsMCEsHybrid STBsBlu-ray PlayersnDTVs

360M Capable Homes, 170M Active Homes

FRAGMENTATION TAKES HOLD

Content FragmentationBroadcast, Premium, UGC

Device & Screen FragmentationTV, PC, Mobile, Gaming, PDA

Interactivity Fragmentation Lean back, Lean forward, Social

Subscription FragmentationBroadband, TV, Mobile, Movie rentals, OTT

Free vs. Paid

Ad Dollars FragmentationTransition from linear TV to online

Consumer Experience Business Models

2nd Wave1st Wave

3rd Wave

IP Video On-net or Off-net TV, PC, Mobile Highest Service Velocity Business Model: B2B2C

IPTV On-net only TV Higher Service Velocity Business Model: B2C

Traditional Cable On-net only TV Limited Service Velocity Business Model: B2C

More Open, More Flexible, More Monetization Opportunities

THE QUEST FOR VALUE CREATION PROPELS A 3RD WAVE: IP VIDEO

Next Generation Platform Built on Web Services Protocols

Accelerates universal reach and 3rd party innovation

Next Generation Platform

Large-scale Unicast

Video Intelligence

Common Client Architecture

Managed / Unmanaged

HOW DO WE GET THERE?KEY ARCHITECTURAL TENETS FOR IP VIDEO

Next Generation Platform

Content networks scale exponentially for large-scale unicast services

Leveraging multicast technologies for efficient distribution

Large-scale Unicast

Video Intelligence

Common Client Architecture

Managed / Unmanaged

HOW DO WE GET THERE?KEY ARCHITECTURAL TENETS FOR IP VIDEO

Next Generation Platform

Video intelligence propagates deep into the network edge

Providing media, device, and network awareness

Large-scale Unicast

Video Intelligence

Common Client Architecture

Managed / Unmanaged

HOW DO WE GET THERE?KEY ARCHITECTURAL TENETS FOR IP VIDEO

Next Generation Platform

Common Client Architecture

Multi-device support – for PCs, set-tops, gaming consoles, mobile devices, etc.

Large-scale Unicast

Video Intelligence

Common Client Architecture

Managed / Unmanaged

HOW DO WE GET THERE?KEY ARCHITECTURAL TENETS FOR IP VIDEO

Next Generation Platform

Services Across Managed and Unmanaged Networks

Common experience no matter where the user connects

Large-scale Unicast

Video Intelligence

Common Client Architecture

Managed / Unmanaged

HOW DO WE GET THERE?KEY ARCHITECTURAL TENETS FOR IP VIDEO

Third-Party Services/ Content

IP Video reshapes video distribution architectures

Connected Home Busines

s

RegionalMedia Data

Center / VHO

RegionalMedia Data

Center

Aggregation

Edge

IP Core

MediaData Center

MediaData Center

SP Services/Content

VoDVoD

VoD

Consumption

ConsumersContent Providers Service Providers

Contribution

Core IPNetwork

News Gathering

Production

Sport Events

Studio to

Studio

Headend

Primary SecondaryDistribution

Headend

Headend

Direct To Home

Telco

Cable

Mobile

IP

IP

IP

IP

Ingest

Media Data Center

Post Production

Tighter Linkages Between Core, Data Center and Edge

MEDIANETTHE ARCHITECTURAL BLUEPRINT FOR DELIVERING NEXT GEN IP VIDEO SERVICES

Consumption

ConsumersContent Providers Service Providers

Contribution

Core IPNetwork

News Gathering

Production

Sport Events

Studio to

Studio

Headend

Primary SecondaryDistribution

Headend

Headend

Direct To Home

Telco

Cable

Mobile

IP

IP

IP

IP

Ingest

Media Data Center

Post Production

UCS

Real-timeTranscoding

Storage

Video Processing

Consumer Apps

Svc. Delivery

Billing

Encryption

Device Mgmt

NRT Transcode

Data CenterSwitch

Media Data Center

Tighter Linkages Between Core, Data Center and Edge

Proximity Routing

Core + E-MSE

Core + E-MSE

Aggregation Router

Aggregation Router

Storage

Storage

Storage

Aggregation Router

Aggregation Router

Distribution Router

DistributionRouter

Storage

MEDIANETTHE ARCHITECTURAL BLUEPRINT FOR DELIVERING NEXT GEN IP VIDEO SERVICES

SHIFT HAPPENS: WILL SPS LEAD AN ECO-SYSTEM SEARCHING FOR VALUE CREATION