UltraViolet : Outlier on Telcos OTT Video plans !!

Presentation1The global entertainment market is huge and as such is obviously attractive to telcos looking to counter falling ARPUs. It accounts for a considerable share of disposable income and overall entertainment spending is much higher than that on telecoms. Online video makes up one-third of consumer internet traffic today and is forecast to grow more than ten times by 2013 to account for over 90% of consumer traffic overall.New consumer content consumption models that shift both time and place challenge operators to rethink their service models. Smartphones, tablets and Internet-connected TVs are carrying the feature set and expectations previously reserved for set-top boxes.

Believe it or not the single most important factor for success in OTT video is an attractive content library. However, these content rights are still cumbersome to acquire. This is due to the fact that OTT video rights form an entirely new category and that the value of such rights is yet to be determined. Consequently, content rights are negotiated on a piece-by-piece, geography-by-geography, business-model-by-business-model basis. Cooperation with content providers should be the primary choice in order to limit content procurement complexity and to achieve better economics of the service

So say hello to UltraViolet : No…not the sun’s rays or the movie but an Outlier with Black Swan potential !!

UltraViolet (UV) is a digital rights authentication and cloud-based licensing system that allows users of digital home entertainment content to stream and download purchased content to multiple platforms and devices. UltraViolet adheres to a “buy once, play anywhere” approach that allows users to store digital proof-of-purchases under one account to enable playback of content that is platform- and point-of-sale-agnostic. UltraViolet’s basic proposition of ‘buy once, play everywhere, forever, for the whole family’ is a new and valuable one that overcomes many of the frustrations consumers have with online video content as it offers:

• A single point of access to content from multiple content owners
• The ability to buy once and view content on up to 12 devices
• The ability for up to 6 family members to view the same content

UltraViolet does not store files, and is not a “cloud storage” platform. Only the rights for purchased content are stored on the service. By creating a digital-rights locker rather than a digital media storage locker, UltraViolet bypasses the cost of storage and bandwidth used when the media is accessed and passes that cost on to various service providers. UltraViolet is deployed by the 74 + members of the Digital Entertainment Content Ecosystem consortium ( DECE ), which includes film studios, retailers, consumer electronics manufacturers, cable TV companies, ISPs, network hosting vendors, and other Internet systems and security vendors, with the notable exceptions of Disney and Apple.

DECE members developed a common file format (CFF) designed to play in all UltraViolet players and work with all DECE-approved DRMs. The format is based on existing standards from MPEG, SMPTE, and others, and was originally derived from the Microsoft (PIFF) specification. The goal was to avoid the problem of different file formats for different players and to make it possible to copy files from player and player.

Put simply, UltraViolet is DVD for the Internet. Just as the DVD logo means that you can buy a DVD from any seller and expect it to play in any player with a DVD logo (DVD players, DVD PCs, DVD entertainment systems in automobiles, and so on), the UltraViolet logo means you can buy UltraViolet movies from any seller, keep track of your “online locker” or “virtual collection” of movies, and expect them to play on anything with the UltraViolet logo (PCs, tablets, smartphones, Blu-ray players, cable set-top boxes etc ).

Telcos have a unique set of assets that enable them to become a true partner with content owners, not just another retail channel. These include: the ability to provide payments, multi-modal content delivery, support a user experience across three screens (TV, PC and mobile), provide interactive marketing and CRM data and support hands on customer care. At the same time, the increasing availability of enabling technologies, such as CDNs and adaptive bitrate streaming, means that even legacy infrastructure is no longer a deterrent to OTT video and that a consistent single-digit, megabit-per-second DSL connection is enough to support most video streaming activities. Ofcourse 4G and FTTx makes HD even more widely consumed.

It is worthwhile noting that the business case for entertainment products is not based on sales but instead on “ foot traffic “ and the overall size of the “ shopping basket “ just like in a Retail Mall. Many upstream services rely on the ability to secure consumer attention and sell this on to third parties in some form ( a.k.a Telco 2 sided business model) .This is the basis of the advertising-based business models, including the one that dominates the Internet.

In the final analysis the profitability of an OTT video business depends on a large subscriber base ( which is what Telcos have ) and the highly efficient operations of a large scale technical platform ( which is what Ultraviolet aspires to become ). For Telcos that don’t have an entertainment platform, UltraViolet offers an opportunity to join the party and use that infrastructure to access what is expected to be premium content which they can offer to customers through their own retail portals. For those that already have their own platforms consideration should be given to adding UltraViolet into the mix for what is lost in duplicating infrastructures could be gained with premium content. As for Telcos who chose to ignore UltraViolet and Digital Lockers may well find themselves deprived of premium content as some device manufacturer or broadcaster steps in to capitalise on this opportunity.

Sadiq Malik ( Telco Strategist )

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