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The NeW ReAliTy: Tomorrow’s Multiscreen, Multirights World

The NeW ReAliTy: Tomorrow’s Multiscreen, Multirights World

The NeW ReAliTy: Tomorrow’s Multiscreen, Multirights World

Consumers are embracing today’s multiscreen world;

however, pay-TV providers have yet to take full advantage of

this new market opportunity.

TWo-ThiRds of U.S. broadband households watch TV programs and movies using a connected device.

oveR oNe-hAlf pay for an online video service.

less ThAN oNe-quARTeR know that their current pay-TV operator offers an online video option.

Awareness & Use of Online VideoU.S. Broadband Households

© Parks Associates

0%

35%

70%

* Among broadband households with a pay-TV service

Watch TV/ Movies on a connected device

Pay for an online video service

Aware of TV Every-where services*

Use a TV Every-where service*

The New Reality: Tomorrow’s Multiscreen, Multirights World

Since the introduction of multiscreen services,

operators have faced significant questions regard-

ing multiscreen/TV Everywhere. Initially, these

questions dwelt on how to deal with OTT com-

petition and potential cord cutting. These threats

and the increasing consumer appetite for online

video services pushed many operators to invest in

multiscreen delivery solutions.

As leading operators launched their own multiscreen service offerings, questions shifted. Attention focused

on business models, quality of experience, and consumer demand for content on mobile platforms. Operators

developed a better understanding of the value of multiscreen in revenues, costs, and impact on subscriber churn.

Many are adding tools to better measure the experience encountered by subscribers on unmanaged devices.

Most have launched apps that provide them a presence on mobile platforms. Still, despite current efforts, operator

online video still lags the awareness, popularity, and acceptance of OTT alternatives.

Looking to the future, operators face several new questions regarding the direction for multiscreen services and

the role of the operator in video services overall.

How operators address these challenges will determine their future

competitiveness and success in the OTT marketplace.

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New Devices

The consumer electronics industry thrives on product

innovation and differentiation. For existing categories

such as smartphones, tablets, and streaming media

players, device makers are regularly changing their

products in order to incent new purchases or replace-

ment of older devices. Screen sizes of mobile devices,

in particular, are in a regular state of flux as smartphone

and tablet manufacturer seek to find the optimal blend

of portability and viewing area.

Device operating systems also continue to evolve, re-

quiring perpetual changes to and testing of multiscreen

applications. New features are likely to be introduced in

the near term, including voice and facial recognition,

gesture controls, or authentication via a smartphone.

Perhaps more concerning is the potential for entirely

new platforms to emerge.

Game changers such as the iPhone and the iPad rede-

fined the landscape for connected products.

External Challenges

Many of the challenges facing operators arise from ongoing changes

in the video marketplace and how those changes will impact

multiscreen services.

Smartphone & Tablet AdoptionU.S. Broadband Households

© Parks Associates

0%

40%

80%

2009 2010 2012 2013 20142011

TabletsSmartphones

The rapid adoption of smartphones and tablets—and their subsequent

impact on consumer expectations—shows how quickly new connected

devices can change the market.

Over the next few years, another game-changing device is likely to emerge, introducing new features and functions that will have a similar impact.

Because operators cannot foresee all potential changes or predict which ones will be relevant, they stay in a

constant state of catch-up. They must remain on high alert for new products to be released and then assess the

relevance of those new product versions and platforms before development and testing can begin. The current

push to allow consumers to use their own CPE devices at work further complicates this picture as already thin

budget, development, and testing resources are stretched even further.

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Frequency of Use: Personalized Viewing Recommendations

U.S. Broadband Households Who Receive Personal Viewing Recommendations

© Parks Associates

0%

50%

100%

Monthly Use

Weekly Use

Daily Use

Content recommendations are popular features and can give providers a competitive edge by offering convenience to subscribers in content discovery.

New Multiscreen Features

Beyond devices, multiscreen apps and services themselves are changing. While original TV Everywhere apps

provided a guide and access to linear or VOD content, consumers now expect more from a connected app or OTT

service.

Discovery features that quickly connect consumers to preferred content have become an important part of

successful services. As operators add ever more content to their video libraries and new live channels to their ser-

vices, consumers need a mechanism to pare decisions down to a reasonable set of options. Devices with smaller

screen sizes have a particular need for optimized discovery tools since consumers cannot easily browse through

multiple choices.

Today , over 40% of U.S. broadband

homes receive personalized video

recommendations from at least one

source. © Parks Associates

Of those who use recommendations from an online

video service, almost one-half use the recommenda-

tions at least weekly to choose content.

Video has long been a social activity, and consumers

seek social interaction even on small, private devices.

Several companies are experimenting with various

types of interaction such as second-screen features,

group viewing of content, interactive games, and other

types of cross-platform interaction.

As a result, operators must change their multiscreen

services and the supporting client applications often in

order to remain relevant among a throng of aggressive

competitors.

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New Methods for Moving Content

Because consumers want access to content at the times and in places of their own

choosing, new technologies are emerging that allow consumers to move content

in ways that the content industry did not originally anticipate. Google’s Chromecast

is a prime example, but Chromecast is just one of many similar content-portability

technologies.

At 2014 International CES, several companies displayed products and features for

moving content between devices, ranging from multinational system integrators like Huawei to small startups

such as Airtame. Pay-TV operators, CE makers, and other technology companies in the Digital Living Network Al-

liance (DLNA) introduced a new extension of the DLNA standard, CVP-2, that allows pay-TV providers to deliver

premium video from the set-top box to other connected devices in the home through the home network.

Several of the largest U.S. cable operators as well as CE manufacturers are adding

support for this new multiscreen aspect of the DLNA standard.

New Security Requirements & Challenges

As multiscreen content rights evolve, security requirements continue to change. Studios today require different

levels and types of security for different players in the market. Pay-TV providers, which offer content over both

managed and unmanaged networks, have a greater set of security requirements than pure OTT players. Technol-

ogy providers continue to develop new security technologies to address new consumer use cases and delivery

mechanisms. While consumers seek to circumvent barriers to content access for personal use, professional pirates

are a much greater threat as they use the latest technologies to foil content security solutions. Operators and

security partners must constantly monitor and adapt security-related

software in order to honor license agreements and protect their content

investments.

However, innovation is bringing some simplification to security. For

example, the previously mentioned CVP-2 leverages DTCP-IP for secure

connections, a technology that is already accepted by major U.S. studios.

So, whether to defeat content piracy or to leverage beneficial

innovations, operators are under pressure to remain aware of

the constantly changing security landscape.

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Managing Separate Delivery Solutions

For operators that deployed a TV Everywhere service prior to 2012, the original delivery system was likely de-

signed to provide content to a computer. When multiscreen priorities shifted to mobile devices, many operators

found that these original solutions could not be scaled to support mobile platforms. As a result, many were forced

to add separate, standalone systems to enable TV Everywhere on smartphones and tablets.

In some cases, the offerings were provided by separate vendors, making integration problematic. Perhaps more

importantly, many of these systems run separately from the operator’s existing broadcast systems. As a result,

some operators are running three separate content delivery systems.

As TV Everywhere services mature, the demand for new features is causing some operators to reassess their

initial multiscreen investments. Though tempting, wholesale replacement of existing multiscreen solutions with

new, feature-rich, integrated delivery systems is costly; the replacement forces a write-off of previous multiscreen

solution expenditures after only a few short years.

The alternative taken by many operators is to execute a best-of-breed approach, adding new features via inte-

gration of offerings from selected vendors. Some have made moves to integrate their delivery systems, but many

continue to operate them as separate systems.

Building a Cohesive Service

Providing a cohesive branded experience across platforms is difficult because each CE platform is unique.

Operators quickly found that simply offering the EPG grid or VOD menu on non-TV devices produced a poor

experience. The interface has to be optimized to leverage the strengths and mitigate the weaknesses of each

type of device.

New Devices

New MultiscreenFeatures

New Methods for Moving Content

EXTE

RN

AL

CHA

LLEN

GES

INTER

NA

L CHA

LLENG

ES

New SecurityChallenges

Managing Separate

Delivery Solutions

Building a Cohesive Service

Managing Content Rights

Predicting Business Models

Challenges in Multiscreen Services

© Parks Associates

Internal Challenges

While some challenges arise

from the industry, operators

face several internal challenges

as they grapple with delivery

multiscreen services for

consumers, both today and in

the future.

The interface for each type of screen, when optimized for

that particular connected device, is inherently different from

all other device interfaces.

The content available on each platform can also differ, making it difficult for

consumers to anticipate whether the content that they want is actually available on

the platform that they want to use.

Managing Content Rights

The growth of multidevice families has begged the question: what is a subscriber? Is it a household, a location,

an individual, or a family? Should the operator limit the number devices within the home that can access content

at the same time? Portable devices and remote access to content add another layer of complexity, forcing op-

erators to make policy decisions that balance between facilitating customer convenience and limiting potential

misuse of services.

The nature of content licensing provides a further complication. Each video asset has a unique set of rights

and obligations associated with it, including specified business models, market availability, security requirements,

delivery mechanisms, and devices upon which the content can be viewed. Operators must code each of these

detailed requirements into content management systems to ensure that license agreements are met, a task made

more difficult when operators have separate systems for different types of multiscreen services (computers and

mobile platforms).

Predicting Changing Business Models

While high use of online video suggests great promise for multiscreen services, operators struggle to find optimal

business models that will unlock TV Everywhere’s revenue potential. In North America, most of these services are

free to subscribers and are offered to minimize churn and foster retention. Outside of North America, a variety

of business models apply, including free, free for particular subscription tiers, subscriptions, transactional, and

advertising-based services, among others.

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iN 2009, Swisscom re-introduced its

previously unsuccessful free multiscreen

offering as an incentive for the telco’s

highest service tier. It quickly became a

popular feature.

TodAy , several operators use this

approach, including CanalSat (France),

Free (France), Sky Deutschland

(Germany), and Ziggo (Netherlands).

Among paid options, subscription models are the

most popular with consumers. However, consumers

now expect online content services to match the pric-

ing of low-cost OTT services. Transactional options are

straightforward from a cost and content rights perspec-

tive but are poorly received by consumers.

Perhaps the most successful TV Everywhere business

model to date is the incentive model; that is, using

multiscreen services as an incentive for subscribers to

select higher tiers of services, producing higher ARPUs.

Preparing for the Future

While several challenges remain, operators can

learn several lessons from these challenges and

from their experiences in multiscreen services

and solutions up to this time.

Flexibility is a Critical Advantage

The lack of flexibility and scalability of early multiscreen systems proved the necessity for companies and

their infrastructure systems to be adaptable to changes in the marketplace. The ongoing uncertainty in devices,

security, features, rights, and business models suggests that future changes to interfaces, delivery systems, man-

agement systems, and CPE software will ultimately be necessary, regardless of the approach taken. The use of

open standards is an important step, but adaptability goes well beyond standards adoption. Flexibility needs to

be an important consideration in software design, vendor requirements, and future planning in order to remain

adaptable. Those operators that have great flexibility to adapt services and systems to meet the changing needs

of the market are more likely to remain relevant to online video viewers.

Advertising could ultimately be

the key to future multiscreen monetization.

The advertising model is one of the few that is both popular with consumers (as part of free services) and that

causes revenues to scale proportionally with use. However, few current multiscreen systems provide ad inser-

tion or ad targeting options that can potentially unlock the revenue potential of multiscreen service advertising.

Because no single model has proven to be successful across services and markets, operators must

prepare to shift business models quickly in order to maintain parity with competitors.

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Content is King, but Convenience is Prime Minister

Clearly, consumers have proven willing to spend time and money on preferred content. However, in the multi-

screen world where similar content may be available from multiple sources, convenience is a key differentiator.

OTT services like Netflix have used content recommendations and easy access on a wide variety of connected

devices to gain a mindshare and market share (and revenues) from consumers. New discovery tools quickly

match consumers to what they want to watch, simplifying decisions and minimizing the time spent searching.

Software Design Impacts the Whole Organization

Software is no longer a technical factor that is relegated to engineering teams. Today, software and the devel-

opment process impact all aspects of the operator’s business, affecting time to market, operator flexibility, and

ultimately the final service that is experienced by consumers.

Operators are spending more resources on software development than ever before, including both internal

development and development by vendors or contractors.

The key functional areas of multiscreen services are increasingly defined by software:

SofTware defineS the differentiating features of multiscreen services. Not only are advanced

features such as discovery and user interfaces defined in software, but delivery itself cannot occur

without the back-end and client-side software that makes everything work.

appS are ofTen uniquely developed for each mobile platform. These specialized software

components provide the interface and client-side interaction with back-end authentication, business

model, and delivery systems.

operaTor SecuriTy SofTware must support multiple security approaches and standards in order

to meet all of the terms of their content license agreements.

operaTor’S conTenT managemenT SofTware must allow various types of business models as

well as tracking and validation of rights for each asset and subscriber.

improved qualiTy of experience and targeted online advertising are only possible based on the

data collected about the network, including details from the delivery of the content and consumption

by subscribers. Software-based analytical tools collect, process, and report these metrics and analytics.

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Thus, the new world of multiscreen services has forced operators to become, to some degree, software companies.

Managers now must understand the entire software development process, from initial requirements through final

testing, in order to efficiently and cost-effectively bring service features to market.

The software mindset affects other departments as well. Participation in the design process can allow marketing

teams to implement new promotional features, support teams to better prepare agents, and advertising teams to

offer new online ad inventory or more granular metrics.

As the organization better understands the impact of the software design process on their

aspect of the operator service, they are better able to leverage the benefits that software

improvements will provide.

Looking to Tomorrow’s Multiscreen, Multirights World

As the industry moves forward, an operator’s ability to compete successfully in

the multiscreen world will depend upon its ability to meet these challenges.

Ultimately, a plan is needed. For several years, due to the disruptive nature of OTT video and new device platforms

such as the tablet, operators have been simply reacting to changes in the OTT space. The result was companies with

decades of experience in telecommunication and entertainment having to play catch up as the video landscape

shifted. In some cases, this process has led to network redundancies and cost inefficiencies. Instead, operators need

a strategic, planned design approach to multiscreen that allows them to get out in front.

KEy AREAS TO ADDRESS:

A New Approach to Multiscreen Rights

OTT players offer viewers the same content across all viewing platforms. As a result, consumers can rely on the

fact that the content from that service can truly be accessed anywhere and at anytime. Because of content costs,

operators cannot feasibly offer all content to consumers on-demand and on all platforms. It also varies for each op-

erator. This result minimizes convenience, forcing consumers to search for content on each platform even though

it may not be available.

Although operators cannot offer all content on all platforms, an approach that provides greater

predictability is more likely to gain regular use among consumers.

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A new approach to technology and software

The pace of technology change in tomorrow’s connected

world will be shockingly quick, occurring even more rapidly

than it does today. For operators, keeping pace with this level

of change will require a radically different approach to technol-

ogy and to software. Development, testing, and release cycles

must run in waves, with regular, ongoing updates and feature

enhancements. As a result, planning technology adoption, new

features, and new services will be dramatically different as well.

For many operators that have for years thrived on maintaining stability in their CPE and networks, the reality of

a fast-paced world with rapidly changing technologies is a scary one. However, it is also a world with significant

opportunities. Consumers and businesses will continue to need connectivity, content, and providers that can

deliver both. Those companies that have the flexibility to adapt to the new reality that tomorrow offers will be in

a position to delight customers and lead the industry.

Tomorrow’s competitors will react at Internet speeds, and operators will

need to be prepared to respond in kind.

A new approach to monetization

In many cases, TV Everywhere is treated as a standalone service. While most operators work to create interfaces

that are consistent with the look and feel of the EPG or the company website, the business models and strategic

approach to the service are largely independent of the operator’s core services.

The future approach to monetization will be planned in tandem with core services. So, free access to content

online or on mobile platforms will be designed to not only reduce churn but also to drive higher tier subscrip-

tions and paid OTT and VOD use.

In addition, the technologies that drive TV Everywhere, including HTML5, are increasingly being used

in the pay-TV experience, providing additional opportunities for the services to be complementary

and to drive new monetization options.

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About ACCESS

The ACCESS Multiscreen TV Package provides secure, seamless delivery as well as sup-

port for new TV standards such as DLNA CVP-2, HbbTV, Ginga, Hybridcast, etc. The solution is based on the experi-

ence ACCESS has gained from shipping embedded software for over one billion CE devices. This solution enables

operators to offer streaming on all Internet-enabled devices through the home network or the cloud.

ACCESS has developed the ACCESS Multiscreen TV Package to provide the ‘studio confident’ security that’s vital

before TV operators can launch media sharing.

The ACCESS Multiscreen TV Package includes NetFrontTM Living Connect, ACCESS’ DLNA Technology Component

for secure media delivery; and NetFrontTM Browser NX, an HTML5 WebKit-based browser to offer a seamless user

experience on all devices. By leveraging these two complementary technologies, operators can ensure they deliver

high quality multi-screen services which allow consumers to access content via the set-top box, share and stream it

to any mobile devices and even enable access to PVR content on a second screen.

The solution is integrated with world-leading chipsets manufacturers, including Broadcom, Entropic, Intel and ST

Microelectronics. The ACCESS Multiscreen TV package has also been integrated with leading third-party CA and

DRM solutions to ensure that through providing studio confident media sharing, ACCESS removes the greatest

hurdle to TV operators launching media sharing services to previously uncontrolled devices.

For more information, visit www.access-company.com

About The Author

Brett Sappington, Director, Research, Parks Associates

As a director of research at Parks Associates, Brett Sappington leads Parks Associates services research

team, including access and entertainment services, digital media, OTT, cloud media, video gaming,

and technical support services. Brett is an expert in worldwide television and broadband services. His

personal research focuses on the activities and trends among operators and the market forces affecting

their businesses. Brett is a regular speaker and moderator at international industry events.

About Parks Associates

Parks Associates is an internationally recognized market research and consulting company special-

izing in emerging consumer technology products and services. Founded in 1986, Parks Associates

creates research capital for companies ranging from Fortune 500 to small start-ups through market reports, primary

studies, consumer research, custom research, workshops, executive conferences, and annual service subscriptions.

The company’s expertise includes new media, digital entertainment and gaming, home networks, Internet and

television services, digital health, mobile applications and services, consumer electronics, energy management, and

home control systems and security.

For more information, visit www.parksassociates.com or contact us at 972.490.1113 | info@parksassociates.com

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