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The State of OTT Services 2014
2013 saw OTT video services extend the overall market for pay TV, a definite shift to networked PVR, and a rapid move toward HbbTV.
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There has been intensive activity around over-the-top (OTT) video in Europe in 2013. Almost all broadcasters have gone OTT with live and catch-up services. HbbTV has started to make headway with a wide range of services launched across the continent thanks to greater support from TV manufacturers. The arrival of mainstream subscription video on demand (SVOD) offers -- from ITV in the U.K., Teleboy Serien in Switzerland, and HBO Go in Nordic countries, among others -- promises to further accelerate an online video market that has witnessed the emergence of fully bundled pay TV offers embracing the set-top box, live TV packages, and streaming VOD services.

“In some European countries, in advance of internet video providers entering the market, operators are positioning themselves as the OTT aggregator of choice for their customers,” notes John Maguire, S3 Group’s director of strategy and marketing for TV technology. “They recognise there’s a demand for OTT TV, so they are using their offerings to cement customer loyalty. Integrating OTT into their service enhances the personalisation experience and enables more fine-tuned marketing of content and services -- providing operators are willing to innovate with their business model.”

Pay TV Services in the Driver’s Seat

With global spending on OTT video set to rise to €3.53 billion by 2018, according to Strategy Analytics, it is pay TV operators, rather than pure-play services such as Netflix, that may reap the most benefit from the consumer demand by extending their reach into online subscription services.

Analysts at Analysys Mason agree, arguing that the real impact of OTT will be felt on secondary TV sets and that traditional operators could broaden their reach with their own OTT services to these sets.

“We are entering a new phase in the evolution of TV distribution over the public internet,” states Strategy Analytics’ director of digital media, Ed Barton, on unveiling the company’s 2013 OTT Video Forecast Global Summary. “Pay TV service providers are recognising the defensive imperative in ensuring they have a major say in the development of online TV. Stand-alone online subscription TV addresses the holdouts who will not be swayed by traditional premium TV offerings by promising high quality content including, crucially, live sport, shorter commitment periods, a lower cost of entry and much simpler installation and hardware requirements than traditional, ‘full fat’ pay TV services.”

The key premium TV service deployment in 2013 was by BSkyB, which in July launched its Now TV Box (shown above left) at an “impulse buy” price of €11.71, offering pay-per-day access to its premium sports channel lineup, as well as subscription-based access to its premium movie content.

Already available via PC, iOS, and Android devices, Xbox, PS3, YouView, and LG Smart TVs, the streaming service via the rebranded Roku box (Sky is a Roku investor) enables customers to access catch-up services from U.K. broadcasters including Demand 5, 4oD, BBC iPlayer, Flickr, Facebook, and Spotify as well as movies for an additional fee.

Earlier, Sky had launched Sky Go Extra, which enables Sky customers to download content to mobile phones and tablets. In December, it made movie rental service Sky Store available to non-Sky subscribers to stream titles such as Despicable Me 2 ahead of Netflix or LoveFilm in the U.K. and Ireland. Via skystore.com, viewers are able to rent through YouView boxes, Roku devices, and Now TV.

“Sky’s approach of introducing differing business models, has been a key development in 2013,” says Dan Peters, SVP of product management for Saffron Digital. “They’re offering different levels of capabilities over the top depending on your level of subscription. Now TV, with packages like the sports day passes, gives non-Sky subscribers access. It shows that they’re really looking at much broader access models.”

As a riposte in December, pay TV cable rival Virgin Media launched its TV Anywhere on-demand and live streaming television service -- already free to TiVo customers -- on Android mobile devices. The company had already made its most significant play of the year, under new owners Liberty Global, by boldly making Netflix available over TiVo boxes. The deployment marked the first time that an OTT offering has been accessible by subscribers through a pay TV platform. I’ll talk more about that later.

Take-up of OTT video services will grow much more strongly than traditional pay TV services, Analysys Mason found in its August forecasts, but cord-cutting will not be extreme. OTT video to the TV set will account for just 5.6 million primary pay TV services in Western Europe by 2018.

Analysys Mason expects strong growth for IPTV in many West European countries, predicting that the number of IPTV households will increase by 29 percent to 27.6 million. The firm puts this down to aggressive bundling strategies by telecoms, which are offering basic pay TV services at little or no incremental cost within multiplay propositions in order to gain market share.

The continuing and increasing role of social networks in TV, especially live TV, is another interesting trend. More than a billion tweets are now sent every 2 days, with 40 percent of these at prime time being TV related.

“Twitter, and how it impacts on the end-consumer experience, is just one example of the broader multi-vendor technology platform that operators must now consider when planning new TV service introduction and operation,” notes Maguire.

One means of doing this is to have experts comment and answer questions via Twitter during a game or a replay of it. Sky experimented with this in April, inviting fans to chat with boxer Carl Froch, whose 2010 bout with Mikkel Kessler was streamed in real time. ITV created a similar event in November with its rerun of England’s 2003 rugby triumph in tandem with player’s social media commentary.

The Rise of Cloud-Based PVR

The rollout of network PVR (nPVR) solutions was a highlight of 2013 and will clearly grow in 2014. Among the first European introductions, in mid-2012, was from Swisscom. A year later, Swisscom’s service delivered a rise in average revenue per user (ARPU), according to the company, as customers upgrade to a premium TV plus package.

The solution is powered by Alcatel-Lucent (ALU), which received an Emmy in 2013 for its “pioneering work in implementation and deployment of Network DVR” (alongside Time Warner Cable and Cablevision Systems Corp.).

Swisscom introduced a network PVR powered by Alcatel-Lucent as part of its TV Plus package, which allowed for viewing of recorded programming on a variety of devices. 

The French infrastructure provider was contracted to provide Spanish quad-player Telecable with internet protocol (IP) video technology to extend its pay TV everywhere strategy. The project established Telecable as the first cable operator in Spain to offer advanced, cloud-based PVR when rollout began in December and comprises ALU’s Velocix Origin and Cloud DVR, Harmonic encoders and transcoders, and the Verimatrix digital rights management (DRM).

Others operators with cloud-based multiscreen strategies include Belgian cable company Telenet -- which this year began charging a premium to multiscreen customers for the ability to watch content on any screen as part of its Yelo TV service -- and the Netherlands-based Ziggo, whose IPTV service is powered by ActiveVideo.

Based on Ziggo’s 2Q figures from September, 6 months after launch, the new interactive cloud services had earned Ziggo a 150 percent increase over 1Q, with overall VOD usage up 56 percent year on year.

“Cloud PVR features have become a must-have for most TV operators in 2013,” says Albin Du Pasquier, OTT and HbbTV product manager at Arkena. “That’s why we have developed a rich product line around it. Among the most popular is a time shifting service with data retention in the cloud. We also propose a Start-Over service and Instant Catch-up. We propose to publish files being recorded from the live stream directly to on-demand once the programme has finished. We have also designed a trendy feature allowing users to instantly share live TV abstracts on their social networks.”

This year, Dutch telecom KPN amassed 800,000 subscribers for its cloud DVR service, which is powered by Edgeware’s recording and delivery technology. This is now one of the largest cloud DVR services in Europe, offering 200 hours of storage per user, all of it stored in the network.

“We are seeing many large telco and cable service providers adding DVR and other timeshift services such as start-over TV to their current live multiscreen offerings, and we expect these enhancements to go live during 2014,” says Jon Haley, VP of business development at Edgeware. He expects to see large terrestrial and satellite broadcasters mirroring this with their own on-demand services.

Russell Zack, Kaltura’s VP and general manager for EMEA, also thinks we’re likely to see more and more operators use nPVRs as part of their customer acquisition and retention strategies.

Infrastructure providers are following suit, with QuickPlay Media and TiVo demonstrating nPVR solutions in September. QuickPlay Media’s product will make a virtue of recording and playback of live TV content on OTT devices.

“In the competitive pay TV market, nPVR enables cable operators and multiscreen services providers to offer on demand content for hundreds of live channels with quick and easy support for new devices, networks and features requiring limited if any in-house development resources,” says Mark Hyland, SVP of global sales for QuickPlay Media.

TiVo’s claim that its device is an “important next step for operators as they consider a transition to IP delivered content and use of low-cost IP clients and consumer provided devices with an eye toward enhancing the user experience inside and outside of the home.”

QuickPlay Media introduced a network PVR service that works in conjunction with its Live TV and VidAnywhere on-demand viewing service. 

Roamio, the TiVo DVR’s user interface (UI), will move to the cloud, and planned features will enable co-viewing experiences through social networks and recommendations.

In announcing Comcast’s cloud-enabled X2 platform, chairman and CEO Brian L. Roberts told the NCTA (National Cable and Telecommunications Association) in June that “the cloud is a game changer” and described his corporation as “a technology and innovation company.”

S3 Group’s John Maguire expects to see Europe’s incumbents continue to move toward this reimagined view of themselves as a platform with a world of content, properly licensed and available. “We expect to see them begin to open this platform to broader application and service development through carefully controlled ecosystems of application developers,” he notes.

The biggest challenge for nPVR services is that universal, perpetual rights for TV content in the cloud do not exist right now. Because of this, Saffron Digital’s Dan Peters thinks 2014 will see ongoing growth and adoption of catch-up TV services, offering users multiple platform, post-broadcast access to content “but within acceptable licensing constraints for the content owner.”

Saffron itself has had a remarkable year, launching subscription VOD services for Britain’s ITV, and Switzerland’s Teleboy, on its new Stage platform. Teleboy Serien is Switzerland’s first SVOD service and is also the first customer to launch on Deutsche Telekom’s business development and innovation unit’s VideoRise platform, which is powered by Saffron Digital.

Saffron Digital’s Stage online video platform comprises individual modules, including content preparation, a proprietary content management system, storefront services, application design and development, the UltraViolet digital locker, and a proprietary player. These are either sold separately or as a complete end-to-end solution.

“What is unique is how we’re deploying it and using that technology to minimise costs, scale effectively and have the flexibility to roll out to multiple platforms in multiple territories,” says Peters.

Saffron’s multiscreen, multiregion service for ITV stands in contrast to the cancelling of the paid version of the BBC iPlayer (intended for users outside the U.K.) in October, following 2 years of trials in 16 European countries. The BBC cited fierce competition from Netflix, Hulu, and Amazon and instead will integrate its international app into bbc.com.

“It shows that even in a mature OTT market there [are] still large challenges for service providers to actually bring multi-screen, multi-region services to market effectively,” says Peters. “It shows that service providers are re-thinking their strategy to some extent based on business grounds rather than technology grounds.”

Liberty and Netflix Landgrab

Unequivocally the year’s biggest deal was Liberty Global’s acquisition of the U.K.’s Virgin Media for £14 billion in February. The 1Q set of figures since the acquisition showed that while Virgin Media lost 8,000 pay TV subscribers in the period, it grew cable subscribers by 14,000 to 4.9 million and broadband customers by 30,000.

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A research report finds the European OTT video market poised for strong growth, and sees big differences between East and West.