AuthoredbyJasonPetersonChiefExecutiveOfficer,ContentBridgeSystems

THEMECHANICSOFLAUNCHINGACONSUMERVIDEOOFFER“OVERTHETOP”

TABLEOFCONTENTSINTRODUCTION............................................................................................................................................1

THEFIRSTSTEP-DEFININGYOUROTTOFFERING.......................................................................................2

THESTEPSTODEPLOYINGTHEOTTSERVICE...............................................................................................3

MEDIALICENSING&ON-BOARDING........................................................................................................3

1. RightsLicensing............................................................................................................................3

2. DigitalAssetManagement...........................................................................................................4

3. MezzanineDeliverables...............................................................................................................5

PLATFORMDESIGN,DEVELOPMENT,ANDDEPLOYMENT.......................................................................6

1. UserInterface/AppDesign...........................................................................................................6

2. OnlineVideoProvisioning............................................................................................................6

3. Monetization................................................................................................................................8

4. Analytics.....................................................................................................................................11

5. Accounting.................................................................................................................................11

CONCLUSION..............................................................................................................................................12

INTRODUCTIONWhatmayseemtobeasimpleprocess—gettingaccesstovideocontentanddeliveringittoconsumers—isactuallyprettycomplexandcomplicated.Thisprimerexplainstheworkflowforasuccessfullaunch.CareshouldbetakentoacquiretherightexpertiseforeachstepinthechainasintegratingallpartsoftheprocessisacomplexundertakingandtherearemultiplepointsoffailureinanOTToffer.

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THEFIRSTSTEP-DEFININGYOUROTTOFFERINGThefirststepindeployingasuccessfulOTTsolutiontotheconsumerisdefiningit.Weneedtoaskthefollowingquestions:

1. Whoarethecustomersegments?2. Howlargearethey—i.e.,howmanyusersareweexpectingtoserveandonwhat

timetable?3. Whattypeofexperiencedowewanttoprovidetheconsumer?

a. Whatareourcustomerrelationships:i. Howdowedelivertheservice?ii. Howdowesupporttheservice?

4. Whatarethevaluepropositionstotheconsumer?5. Whataretherevenuestructures?6. Whatarethecoststructures?

BasedontheresponsesyoucanbegintoframeupthepictureofwhattheOTTofferwilllooklike.

Let’sassumeforthepurposeofthiswhitepaperthatwearegoingtolaunchanOTTofferwiththefollowingcharacteristics:

1. CustomerSegments:TargetingSpanishspeakersinHispanicculturesglobally(US,Spain,Mexico,Central&SouthAmerica,etc.)

2. NumberofExpectedUsers:Uptoonemillionperdayand100,000concurrent.3. TypeofExperience:Wewanttoprovideahybridlinear/on-demandexperienceacross

allmajorplatforms:webbrowser,Android,iOS,andultimatelyconnecteddeviceslikePlayStation,Roku,SamsungTVs,Xbox,etc.However,wearewillingtotriageandprioritizethoseplatformswiththegreatestconsumeradoptionfirst.

4. TheValueProposition:High-qualitymusicvideoandrelatedcontentunderafreemiummodel.

5. TheRevenueStructures:Willincludeanopenlyavailablefreeareawithinawebbrowserdeliveringvideoinstandarddefinitionwithanupselltoapaidsubscriptiontoaccesstheserviceonaconnecteddeviceinhighdefinition.

6. CostStructures:Willlargelydependonthetoolschosen,butcouldbecomprisedofcapitalexpensesand/oroperationalexpensesdependingonthesedecisions.Thegoalistostartupwiththeleastamountofsunkcostpossibleandtokeepthemarginalcostofservingeachcustomerwellbelowmarginalrevenue.

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THESTEPSTODEPLOYINGTHEOTTSERVICETodeployaconsumer-centricvideobasedofferoverthetop(OTT)thedistributiontoolchainincludesthefollowing:

InordertosetupthisOTToffer,weneedtoinitiatetwoconcurrentworkflows:

1. Medialicensingandon-boarding2. Platforminfrastructuredesign,development,anddeployment

MEDIALICENSINGANDON-BOARDINGOn-Boardingincludesalltheback-endstepsofobtaining,tracking,andpreparingcontentfordistributiontotheconsumer.Thefunctionsincludedinon-boardinginclude“RightsLicensing,”“DigitalAssetManagement,”and“Obtaining/ConvertingMezzanineFiles.”

1. RightsLicensing:Oncecontentiseitherinternallyproducedorlicensedandmastered,therightslicensed“in”shouldberecordedinarightsmanagementsystem,ideallyonethatcanreadtheEntertainmentMerchantsAssociation’sContentAvailabilityMetadata(EMAAvails)format.1Studiosanddistributorsbuildwindowsfortheircontentthatmatchpricetoconsumerutilitytooptimizetheamountofrevenuetheycanearn.Anyonlinevideoservicethatviolatesthewindowswillmostcertainlyfacelitigation.Theserightsneedtobeenforcedthroughtheretailer’stools;otherwiseabreachofcontractsuitmayensuefromthesupplier.(Forexample,ifwehavetherighttoexhibitTheHungerGamesin2015butnotin2016andthenagainin2017toconsumerslocatedintheUnitedStates,thenwehadbetternotstreamthemovieeithertoaconsumerintheUSonJanuary5,2016,oranywhereelseintheworldanytime.)

1Availableathttp://www.entmerch.org/digitalema/committeescouncils/avails-work-group/index.html.

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Somecapablerightsmanagersare:• CounterPointSystems• FilmTrack• MediaMorph• Rightsline

2. DigitalAssetManagement:Oncetherightsareacquiredandrecorded,weneedto

actuallyreceivethemasterormezzanineelementsforeachtitlelicensed.Ideally,wehaveasystemofrecordtostore,backup,andarchivethese“masterassetpackages”becausetheyarethehighestlevel/highestqualitydeliverableswewillreceivefromoursuppliersandwewillusethemtimeandtimeagaintomakedownstreamdeliverablesasexhibitiontechnologyevolves.

Thesecontent“packages”arelikelytobereceivedaspartof“mediamanifests”2containingcomponentbasedmediaelementsinamasterassetpackageformatliketheInterchangeableMasterFormat(IMF)3.ThemediamanifestisanXML-basedcontainerstructurethatallowsformultipleversionssuchasedits,aspectratios,andlocalized

2TheMediaManifestCoreDeliveryisanXML-basedpackagecontainerdevelopedbyEMAandMovieLabsthatisbeingadoptedbysomemajordigitalretailers.Availableathttp://www.entmerch.org/digitalema/committeescouncils/media-manifest-workgroup.html.3IMFisamasteringformatforthecomponentsofamotionpicturedevelopedbytheSocietyofMotionPictureandTelevisionEngineers.

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versionstobestored,relatedtoeachother,andupdatedasnewversionscomeavailable.MetadatacanbestoredutilizingtheDEG/EntertainmentMerchantsAssociationMediaEntertainmentCoreMetadatastandard,astandardbeingrequestedbylargerretailerstoday.4(However,somecontentprovidersmayopttocontroltheproductionofdeliverablesthemselvestomaintain“controloftheconsumerexperience.”Thejuryisstilloutonwheretheindustryisgoingonthis.)

Thereareafewprovidersofout-of-the-boxdigitalassetmanagementsystemsforbothglobalfilmandTV.Therearemanymediaassetmanagementsystemsfortelevision,buttheyaretypicallylightonmetadata,andthereareafewserviceproviderswithcustomsolutions.

Hereisapartiallist:

• Movieso ContentBridgeo OpenText(Artesia)

• Televisiono ContentBridgeo Dassaulto EvertzMediatoro Omneono ImagineCommunications(Harris&GrassValley)o Manyothers….

3. MezzanineDeliverables:Mezzanineanddownstreamexhibitiondeliverablesarecomprisedofencodedvideoandaudiofiles,closedcaptions,subtitles,artwork,andlocallanguagemetadata.Wehaveanopportunitytoeither“build”asystemtotranscodemezzaninefilesfordistributiontoconsumers,orwecanoutsourcethisfunctiontoapost-productionand“buy”filesasneededorwecanuseoneoftheemergingProgrammaticContentDistributionsoftware-as-a-servicevendorsinthecloud.

Build:IfwearegoingtotakeownershipofanIMFpackageoranothermasterormezzanine-leveldeliverable,wewouldmanagethemezzaninefilesviain-housedigitalassetmanagementandthenhireanoperationsteamanduseathird-partysystemin-housetotranscodeandpackagethemfordistributiontotheconsumer.Theupfrontcostforthesoftwarewillbehigher,andateammustbeemployed;however,the

4Availableathttp://www.entmerch.org/digitalema/committeescouncils/media-ent-core-md/index.html.

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marginalperunitcostshouldbemuchlower.Anotheroptionistousethe“software-as-a-service,”whichmaybeviabledependingonvolumerequirements.

Buy:Therearemanypostproductionproviderswhocanmanagethelogisticsofsourcingmasterassetpackagesfromcontentprovidersandproducetherequireddownstreamdeliverablesfordistributiontotheconsumer.Thisoptionrequireslittletonoupfrontinvestmentandcarryingcost,buttheper-pieceratewillbetwototentimeshigherthananin-housesolutionatscale.Programmaticcontentdistributionsolutionscanachievesimilarresultsforafractionofthecostandcycletime.

Somewell-knownprovidersare:

• 2GDigital• ContentBridge(programmaticcontentdistributionsoftware)• Deluxe• Mojo(formerlyInceptionDigitalServices)• NEP(formerlyConsolidatedMediaIndustries)(Europe)• PremiereDigitalServices• PrimeFocus(India)• Radius60• SonyDADC• VisualDataMediaServices

PLATFORMDESIGN,DEVELOPMENT,ANDDEPLOYMENTDesigning,developingdeployingtheconsumer-facingfunctionsincludingtheUserInterface/App,OnlineVideoProvisioning,Monetizing,Analytics,andAccountingisofparamountimportance.

1. UserInterface/AppDesign:Thefirststepistodesigntheuserexperienceandthentoexecuteitthroughagenerallyacceptedsoftwaredevelopmentlifecycle(SDLC).[SDLCbestpracticesarebeyondthescopeofthisarticle.]

2. OnlineVideoProvisioning:Oncewe’vedesignedtheuserexperience,duringthedevelopmentoftheapplicationwewoulddeterminehowcontentwillbeprovisionedtotheconsumer.Self-Developed:Oneoptionistodesignanddevelopourownend-to-endsolutionusingeitherownedoroperatedhardware.Buildinganend-to-endsolutionfromscratchinclusiveofoperatingyourowndata-center(s)canbeamassivepropositionthatisonlyrelevantforthelargestparticipantsinthespace.Ifyou’reamajorstudio,thenitmight

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makesensetobeentirelyverticallyintegratedandowntheentirestack.However,theriskofpursuingsuchastrategyisthatanycomponentinthechainmightfailtomeetthenecessarybusinessrequirementsand/orcostsandschedulesmayoverrun.(Thishasbeenpartiallythecasewithoneofthemajortelecomproviders,whohasbeenattemptingtobuildtheentirestack.Theyaremorethan$500millionintobuildingandbuyingthecomponentsandyearsoverschedule.Itwilleventuallywork,butatwhatcost?)

LeasedHardwareinaThird-PartyCloud:Forthepurposeofthisexample,wewillassumewe’regoingtointegratebest-of-breedprovidersandcomponentsintoasolutioninthecloud.

Thefirststepistoselectanonlinevideoprovider(OVP)toprovidethevideoplayer,thebackendcontentandsupplierrightsmanagementsystem,userauthentication,anddigitalrightsmanagementforsecurity.Wewillbesupportinguptoonemilliondailyusersfromaroundtheglobewithupto100,000concurrentstreams.Inorderfortheoffertohaveacompellinguserexperience,latencyfortheusermustbeverylow;nouserwantstowaitforpagesorvideostoload.Inordertodeliveralow-latencyexperience,acontentdeliverynetwork(CDN)shouldbeutilizedtocachecontentthatismostpopularinaregionattheedgeofthenetworksoitistheleastnumberofnetworkhopsawayfromtheuser.WhenselectinganOVPtheywilllikelybeabletoofferyouresaleofCDNservices.

CommonOVPsInclude:

• Brightcove• Kaltura• MLBAdvancedMediaOoyala• PlatformPurple• ThePlatform• Vimeo

Additionally,thecontentmanagedintheCMSneedstobestoredinanavailableplace.Storagecostsareamajorcostcentertobeconsidered.

ThearchitectureoftheCloudissuchthatthereareinfrastructure-as-a-serviceproviders(IaaS),whicharetraditionallythelargenetworkingandsoftwarecompanies.TheseIaaScompaniesinvestbillionsinlargewarehousesfullofcomputerhardwareconnectedbywayoffiberopticcablestointernetbackboneproviderslikeLevel3,MCI,Worldcom,andthewell-knowntelecoms.

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IfyouhavefirstselectedanOVP,theywilladviseyouonwhichIaaSproviderstheysupport.IncreasinglyIaaSprovidersarecourtingthosecompanieswhoprovidetheapplicationstackthatrunsontheirinfrastructure.Thisisbecauseinfrastructureislargelyacommoditybusiness.However,itisthesoftwarethatisadifferentiator.

CommonCloudIaaSProviders

• Akamai• Amazon• Google• IBM• Microsoft

OncewehaveselectedanOVPandanIaaSproviderforstorage,processing,database,andtransportwithaCDNforedgecachingandlow-latencydelivery,it’stimetostartthinkingaboutmonetization.

3. Monetization:Therearefourpredominantbusinessmodelsinmedia:purchase(EST),rental(T-VOD),subscription(S-VOD),andadvertisingsupported(A-VOD).5Inthisexamplewearegoingafterwhatiscalleda“freemium”model,whichisacombinationoffreetouseandsubscription,anticipatingthatwewillconvertusersintopayingcustomers,becauseitallowsfordiscussionofbothtransactionalbusinessmodels(ESTandT-VOD)andA-VOD.FirstwewillneedausercredentialingandauthenticationengineprovidedbytheOVPthatintegratesintoapaymentprocessinggatewaytoprocesssubscriptionpaymentsviacommonlyavailablemethodssuchascreditcards,AndroidPay,ApplePay,PayPal,etc.IftheOVPdoesn’tprovidethispieceyouwillneedtosourceaseparatevendorandintegratetheirpaymentsystem’sbackendviaitsAPIintotheOVP’sauthenticationengine.

Vendorsforpaymentprocessinginclude:

• Mostmajormerchantbanksaswellas,• Paypal.com• Processing.com• Square.com

5Foradiscussionofthesebusinessmodels,see“DefiningOver-the-Top(OTT)DigitalDistribution,”availableathttp://www.entmerch.org/digitalema/white-papers/defining-digital-distributi.pdf.

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OurFreemiumofferwillalsoincludeadvertisingunderboththefree-to-useandpay-to-useareasoftheservice–similartocableTV.Advertisingmonetizationcanbetricky.Inmostcases,whenyouloadawebpagethesubstantivecontentcomesfromtheCDNandtheadvertisement(s)loadinaseparateareacalledan“i-frame”thatisservedbyan“adserver,”whichisaseparateCDNforadvertisingwithadecisionenginebehinditdecidingwhichadvertisementtoservewhichconsumeratanygivenopportunity.Advertisingontheinternetisdynamicandprogrammatic.Thegoalistoservethemostrelevantadvertisementtoeachconsumertomaximizetheperformanceoftheadforthebuyerandmaketheexperienceashelpfulandrelevantaspossibletotheviewer.Commonad-serversare:

• Atlas(formerlyMicrosoft,nowFacebook)• DoubleClick(Google)• SmartAdServer

Theadserverperformstwofunctions:(1)decidingwhichadtoserve;and(2)deliveringitintothei-frameorvideoplayer.Therearestandardsdescribinghowthewebsiteinteractswiththead-serverdevelopedandimplementedbytheInternetAdvertisingBureau.ThecurrentstandardsareVASTandVPAIDanddescribedifferentlevelsofintegrationandflexibility.

Herearethreecommonadunits:

Thinkofoptimizingthemixofadvertisingasapyramidfunction:

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o DirectPre-Soldo TargetedProgrammaticSoldo RemnantRunofNetworkSold

Priortothead-serverinthetoolchainforadvertisingliesasupplysideplatform,oneormoreadexchangesandmanydemandsideplatforms.Belowisagraphicthatsummarizesthemany-to-manyrelationshipsinprogrammaticadvertising.

DirectSold

RunofAudience(TargetedProgrammaticSold)

RunofNetwork(remnantinventory)

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Theseprogrammaticbuyingandsellingtoolsliveconcurrentlywithmanualinsertionordersthatcanbeinsertedintothead-servertopre-emptorliveconcurrentlywithinventorybeingpurchasedprogrammatically.Anexampleofthiswouldbeifwesoldallofourhomepageinventoryatanupfronttoasingleadvertiserforathree-monthperiod;wewouldinsertthatordermanuallyintotheadserveranditwouldpre-empttheadexchangeinventory.

Pricingisusuallydevelopedbasedonamatrixofcriteriaincludingtargetingdataandpre-emption(someadvertiserswant100%shareofvoice,forexample).

4. Analytics:Beingabletoidentify,track,andoptimizeconsumerbehavioriskeytoconcertingandkeepingcustomers.Churnwillkillabusinessliketheonewe’rebuildinghere.TheOVPCMSwillcomewithsomeanalyticscapabilitiessuchasinformationonwhatcontentispopularincertainregionsoftheworld.However,wewillwanttooptimizethecustomeracquisitionfunnelontheonehandandtheuserexperienceontheother.

Foroptimizingthesalesfunnelwewillwanttodoourbesttoestablishacausalrelationshipbetweendemandgenerationactivitiesandcustomerconversions.Wewillthenwanttomonitorsourcesoftraffic,costsperacquisition,servicestickiness,andchurn.Thegoalistomaketheservicestickyandviralsuchthatmosttrafficandconversionscomefromorganicnon-paidsourcesandconverttopayingcustomersatagoodrate.Therearemanyservicesthatcanhelpwiththis:

• GoogleAnalytics• Hootsuite

Foroptimizinguserexperienceforacquisitionandstickiness,wewillcontinuallyA/Btestdifferentuserinterfaceconfigurationsacrossourmanydifferentdevices.ThisispartoftheSDLCbestpractices.Wewillwanttouseaservicethatallowsustodothis.Thereareseveralavailable.

5. Accounting:Thisistheprocessofdistillingrevenuedataintoroyaltystatementsforyourcontentproviders.

Whendealingwithadvertising,accountingcanbecomplex.IdeallywecancreateauniqueidentifyingnumberchainthattiestheAdIDfromtheadservertotheEIDRforthecontentaroundwhichtheadvertisementwasservedandthenreporttheresultsinastandardizedformulasuchastheDEGstandard.Ifwecandothisthenwecanalsooffercontentspecificadvertisinginventorytobuyersthatcanincreaseourrevenue.Several

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companiescanhelpwiththis,althoughitmostcertainlyisasystemsintegrationproject.Herearefewwhoarewellknown:

• CounterpointSystems• FilmTrack• MediaMorph

Whendealingwithtransactionaldatasuchassubscriptions,themathismuchsimpler.Thereneedstobeacontractuallydefinedmethodinplacewiththecontentsuppliersforhowtheyarecompensated,whetheritisusingarevenuepoolingapproachoraperstreamroyaltyorotherwise.ThisdataneedstoberecordedintheCMSdatabaseandcaneasilybemanipulated.

CONCLUSIONBuildinganddeployinganOTTnetworkisacomplexprojectthatrequirescarefulplanningandexecution.Maintaining,upgrading,andplanningfordeliveryatscalearealladditionalareastoconsider.Luckilytherearecompaniessuchasthoseillustratedwithinthiswhitepaperthatcanhelphandlethecomplexity.