Business Model Innovation
for the Digital Economy
for the Digital Economy
Online video makes up one third of consumer internet traffic today, with a further half of traffic coming from file sharing. By 2013, online video is forecast to grow more than ten times, and with two to three times growth forecast in file sharing, video will comprise 90%+ consumer traffic1.
1Source: Cisco Visual Networking Index: Forecast and Methodology, 2008-2013
For telcos and other Broadband Service Providers (BSPs), success in managing their broadband businesses across everything from designing customer propositions to running the network now rests on understanding how the online video market will evolve.
As online video challenges traditional distribution models, both old and new suppliers are pushing into the value chain in the hope of grabbing a share of the emerging global market. But how will the market develop and which companies will be the ultimate winners?
STL Partners has analysed the potential of online video, identified possible market winners and losers, and set out three interlocking scenarios depicting the evolution of the market. In each scenario, the role of Broadband Service Providers is examined, possible threats and opportunities revealed, and strategic options are discussed.
Vendors need to understand these pressures to anticipate telco’s needs while other players in the video value chain (e.g. producers, aggregators) will benefit from an insight into the evolving market scenarios and their likely outcomes.
Publication Date: March 2009
The study is an invaluable guide to fixed and mobile Broadband managers and strategists, and those across the TV and video value chain who are seeking insight into how the online market will develop and the opportunities and threats it presents.
CxOs, Strategists, Product Managers, Investors, Operational Managers in Telecom's Operators, Broadband Service Providers and ISPs, Media Companies, Content Aggregators and Creators.
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All recent data point towards video being the fastest growing segment of all internet traffic and the trend looks set to continue for the foreseeable future. This is true whichever metric is used: absolute number of viewers, total time spent viewing, data traffic volumes.
Growth is not limited to a content category: adult, sports, movies and music are all rapidly moving online. The internet has also led to a completely new category: User Generated Content - home movies have moved out of the privacy of the living room and are becoming more and more professional.
Growth is also not limited to a specific geography: the movement online is a worldwide phenomenon. The internet has no respect for traditional geographies and boundaries.
Overall, the evidence points towards a future where the internet will be a critical distribution channel for all forms of video.
Innovation in Video Distribution is nothing new and over the last century we have seen cinema, broadcast networks and physical media creating temporary shocks to older methods of distributing content – but the older methods survive.
However, there is only a certain amount of time in the day available for entertainment in general and watching video specifically. Legacy distribution channels are understandably worried about whether video online will be additive to or cannibalise their audiences, and our survey respondents largely share this view.
Positively, individuals have generated their own content and made it available to the world. Negatively, some individuals have used interactivity to distribute content without regard of the rights of the copyright holders. Copyright holders have struggled to enforce their rights. Illegal distribution of content not only threatens the absolute value of content, but has lead to unpopular and complicated mechanisms to protect content.
The absolute volume growth has also placed the internet access providers under severe strain: attempting to increase prices to compensate for the growth in traffic and gain extra revenue through developing additional services is proving very difficult.
These forces have generated a considerable amount of experimentation in the market especially in the area of pricing models: subscription, pay-as-you-go, advertising funded, bundles with other distribution channels and offset/subsidy - all exist in a variety of forms.
The net result is the video market is in a state of flux and increasing tension as key players explore their positions. Will order emerge from the chaos? In what form will this new order take? What will be impact on the existing players in the video value chain? And, will powerful new players emerge?
We believe that Video Distribution on the internet will reshape the value chain and the current forces point towards great uncertainty in the short term. In these circumstances, the key step is to explore possible future scenarios to assess their viability and robustness in the face of change.
Case Studies: Apple, Hulu, Phreadz, YouTube.
Companies and Organisations Covered: 3 UK, AllOfMP3.com, Amazon, AOL Music, Apple, Babelgum, Barnes & Noble, BBC, BBC iPlayer, Bebo, Bit Torrent, Black Arrow, BlipTV, Blockbuster, BT, BT Openreach, BT Vision, Comscore, Del.icio.us, Deutsche Telecom, Deutsches Forschungsnetz (DFN), Diggnation, Digital Entertainment Content Ecosystem (DECE), eMarketer, EMI, European Union, Eurosat, Facebook, Flickr, Flickr, Forbes, Frost & Sullivan, Gartner, Google, Hanaro, Hitwise, Hulu, iBall, IBM, Imagenio, International Movie Database (IMDB), Joost, KDDI, Korea Times, KT+A94, Lenovo, London Business School, MGM, Mobilkom Austria, Mobuzz, MP3Sparks, MSN Music, MTV, MySpace, Napster, National Information Society Agency (NISA), NBC, Net Asia Research, Netflix, NewTeeVee, NicoNicoDouga, Nielsen SoundScan, Nintendo, Now, NTT DoCoMo, Ofcom, Orange, Phorm, Phreadz, Powercomm, Qik, Recording Industry Association of America (RIAA), Revision 3, Screen Digest, Seesmic, Seskimo, Silicon Valley Insider, Sky, Softbank, Sony, The Guardian, T-Mobile, Tremor Media, UK Football Premier League, Verizon, Video Egg, Virgin Media, Vivid, Walmart, Web Marketing Guide, Wikipedia, World Intellectual Property Organisation (WIPO), Yahoo, YouPorn, YouTube.
Technologies & Applications Covered: 3G, 3GP, AAC, Adobe Flash, AMR, Android, Apple Quicktime, Apple TV, AVI, Batrest, BBC iPlayer, Beacon, Betamax, Broadband, CD, Cinema, DivX, DOCSIS 2.0, DOCSIS 3.0, DRM, DSL, DVD, Ethernet to the home, Fibre to the home, Final Cut HD/Pro/Studio, FLV, FON WLAN, Fring, GIF, H.264, H.264/AVC, HSDPA, iDVD, iMovie, Iobi, IP, iPhone, iPod, IPTV, iTunes, JPEG, Linux, MOV, MP3, MP4, MPEG, MPEG-2 SD, MPEG4, MPEG-4, NVOD, OGG, P2P, PAL, PNG, PopTab, P2P, RM, RMVB, Scopitones, Sky +, Slingbox, Soundies, TiVo, TV, VCR, VHS, Video over IP, VOB, VOD, WiFi, W-LAN, WMV, XviD.
Markets Covered: Global, US, Canada, UK, France, Germany, Italy, Hungary, Spain, Sweden, Finland, Japan, South Korea.
Forecasts Included: Online Video Vs Cinema & TV 2012, Global TV, Video and Cinema to 2018, Online Video Subscription and Advertising Revenues, Pro-Tail content advertising forecasts, Mobile TV and Video 2013.
Introduction
Executive summary
Part 1: Online video - the situation today
Part 2: Future scenarios
Part 3: Evolution of specific media genres
Part 4: Mobile evolution
Part 5: Geographical differences
The research evaluates the likelihood of three scenarios: Old Order Restored, Pirate World and New Players Emerge. Each of which paints a picture of the future entertainment industry in terms of: technology developments; consumer behaviour; service uptake and usage.
The research is based on comprehensive literature reviews, industry research and interviews with key staff from relevant organizations that shed insight on the needs and dynamics of the key players. Key Case Studies bring the story to life and provide a context for both successes and failures. An economic model of the resultant value chain is produced for each of the scenarios with analytical commentary.
Broadband Video: Market Study
Publication Date: March 2009
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The Online Video Distribution research raises a number of important questions and challenges for operators and their partners. To help companies take these findings forward and develop concrete action plans, Telco 2.0™ run interactive 'Mindshare' Workshops to provide a unique means to access this knowledge quickly and effectively, combine it with internal thinking, and produce agreed action plans for clients to exploit the opportunities presented.
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This report is one of a series of in-depth analyses of the Broadband market.
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