By Fred Dawson
September 13, 2013 – Advances in cloud-based OTT TV platforms have become a force behind surging multiscreen rollouts abroad, especially in Europe, where the competition includes DBS, smart TV, DTT, TV networks, pure-play OTTs and incumbents.
The abundance of multiscreen premium service strategies may raise questions about how many aggregators the market will bear, but such concerns don’t seem to be slowing the rush of entities into cloud-based pay TV. Newcomers want to take business away from incumbents. For incumbents the cloud is opening a path to realizing benefits beyond the subscriber retention goals of early TV Everywhere services.
In many cases the traditional headend is moving onto software platforms running in standard-issue datacenters, observes Sam Rosen, practice director for ABI Research. “Dedicated racks will give way to an IT stack of common servers,” Rosen predicts
With that, business models will shift, Rosen adds. “It becomes possible [for network service providers) to pursue syndication models where they handle content ingestion, metadata and processing and sell it as a service to ISPs,” he says. “The role of video service changes.”
Indeed, wholesale carrier strategies are expanding across Europe. Leveraging their content and technology licensing clout, telecoms and even cable providers see an opportunity to drive a wholesale model that allows ISPs to build brands around a suite of apps and services that include a good pay TV bundle. Carriers are also using the cloud as a seamlessly integrated extension of existing facilities that allows them to lower the costs of territorial expansion, improve multiscreen service and hasten migration to all-IP operations.
“Increasingly, people are moving to the hybrid cloud where there’s some equipment in your facility, banks of encoders and the digital asset system,” says Braxton Jarratt, CEO of multiscreen platform provider Clearleap. “They want to take advantage of the scalability of software they’ve already deployed by extending it to where they can benefit from shared resources. A lot of our customers are taking this approach.”
At the wholesale level one of the more dramatic demonstrations of what’s in store involves Deutsch Telekom, which has teamed with Octoshape, a provider of advanced distribution technology, to offer a wholesale service for anyone who wants to get into the pay TV business. Octoshape, which has had growing success supplying a wide range of service providers, is using proprietary streaming technology supporting a variation on IP multicasting as a way to reduce costs incurred with unicast streaming. Octoshape says that by overcoming the limitations of standard IP multicast it cuts bandwidth consumption and, with it, a large chunk of CDN (content delivery network) costs while enabling fast channel changes on par with traditional TV service.
Deutsche Telekom’s new LiveStream Perform service is capable of providing the “dial-tone” reliability of broadcast TV today through best-effort broadband networks, says Karim El-Khazen, vice president of the carrier’s wholesale arm, Business Development and Innovation. “Thanks to the Octoshape technology, we can expand our product portfolio with a service that represents a differentiating factor and accompanies our customers into the next phase of video distribution over the Internet,” El-Khazen says.
Another wholesale strategy involves an unnamed customer of Clearleap. “This is probably the most exciting innovations I’ve seen with the use of our technology,” Jarratt says, noting the launch is four or five months away. “They’re doing a buildout of a brand new wholesale OTT service for PCs, Android, iOS, game consoles and connected TVs with the most comprehensive layer of apps out there, including Netflix,
“They’re doing basics like predictive search, single sign-ons, recommendations and setting it up so any developer can take our APIs and develop world-class apps on these devices in a matter of weeks,” he continues. “They’re literally developing to seven platforms simultaneously.”
At the retail level, datacenter technology leveraging premium multiscreen platforms is starting to look like a revenue driver to incumbent providers who believe they can deliver a competitive pay TV service OTT outside their current operating territories. One case in point is France cable operator Numericable, which recently announced it would offer pay TV packages everywhere in France to anyone with a 2 megabit-per-second or better DSL connection.
BSkyB, with its NOW TV service, represents another dollar-making OTT expansion path among established providers. As previously reported, the just-launched service offers pay-per-day impulse purchases of its premium sports channels in conjunction with subscription-based access to premium movie content.
Such moves are contributing to an OTT pay TV expansion which research firm Analysys Mason predicts will be the fastest of any segment in the Western European pay TV market between now and 2018, outstripped in raw sign-ups only by managed IPTV. Pay TV over OTT, now reaching about 400,000 subscribers in Europe, will register 140-fold growth with about 5.2 million sign-ups, according to Analysys Mason’s latest pay TV survey. Overall, a 6.2-million gain in IPTV, some uptick in satellite and a big falloff in cable, pay TV subscriptions will net out to 9.2 million new subscribers, bringing the total in Western Europe to 113.3 million by YE 2018, the researchers say.
Rising demand for cloud support has induced Clearleap, whose customers include HBO Go, Verizon and Scripps Networks, to open a European office in Amsterdam, Jarratt says. “After winning a couple of customers and seeing what’s happening there we decided now was the time to hit the gas and get aggressive in Europe,” he adds. “There are good reasons to have people there.”
Clearleap has opened datacenters in Frankfurt and Amsterdam, which means once a customer is engaged “we can turn them up in a matter of weeks.” “We’re also hiring now to open in Latin America, which is another region we’re excited about,” he adds. “There are some advantages for a company like us. Customers feel a need for more competition with the reduction in the number of big monolithic players who are fighting to control everything. Having more competition gives people more flexibility to do content deals.”
Perhaps even more important to the competitive opportunity are the dynamics of local content aggregators’ responses to the threat from Netflix, which over the past few months has pursued an aggressive European expansion agenda. “In Europe usually every country or region has a handful of local miniaturized version of Netflix,” Jarratt says. “It has created an interesting new competitive dynamic.”
If all this sounds like the commoditization of pay TV distribution, that’s because it is. As often reported in these pages the ability to deliver a pay-TV caliber service OTT wherever there is average or even a little below average broadband service has inspired many new initiatives among broadcasters interested in getting high-value content directly to online viewers. In Europe not only is the pace more frenzied; the directions are more varied, shaped by multiple agendas and legacy backgrounds in 31 countries.
The cloud platform strategy poses a new market challenge, namely, a saturation of suppliers, that’s intrinsic to why the cloud is appealing in the first place. That IT stack of common servers, as ABI’s Rosen calls them, has allowed people with great software chops and experience in the pay TV technology space to deliver compelling multiscreen platform solutions without big investments in new hardware, speeding their time to market and cutting the costs of going OTT.
In Clearleap’s case the firm’s Multiscreen Platform includes the full range of content transcoding, streaming, protection, management of metadata and other video derivatives along with the apps required for delivering high-value content on demand and live to all types of devices. The back-office component in the Clearleap portfolio supports a wide range of payment and marketing promotions, Jarratt notes.
“We support subscription, transactional, free VOD, pre-trials, multiple accounts, however you want to offer your service,” he says. “We can operate as a software-as-a-service or platform-as-a-service. For our customers it makes no difference whether the servers are in one of our datacenters or theirs.”
Up to now, multiscreen technology platforms have largely been about on-demand distribution. For example, HBO Go, which provides in-house multiscreen support for live sports, premiers and other time-sensitive programming, runs the largely on-demand service through Clearleap, with which it just concluded a contract renewal.
Now live has emerged as a priority in the direct-to-consumer push of brand name programming outlets. As previously reported, this is opening an uneasy space for competition between programming networks and their traditional distributors.
“Both Comcast and Food Network would prefer that subscribers watch on their service, so we’re seeing MSOs and TV networks starting to compete with each other to get eyeballs to go to their service,” Jarratt observes. “For content owners, this approach allows them to add more content. Scripps has a ton of ancillary content like recipes and outtakes which they can use to allow a deeper dive into their content. If Comcast subscribers want to watch on Xfinity they can watch the show, but for a deeper experience they can go to the Food Network directly.”
At this point Scripps is not offering its OTT content live, largely because of concerns over the bandwidth limitations that could diminish quality, Jarratt says. But the way Scripps is using the platform lends itself to going live, he adds.
“We’re capturing live streams as they broadcast them in their facilities, because we know that’s the only way to get the most up-to-date version of content and advertising going on air,” he explains. “We pull it off air in real time and do all the ad marking and ad replacement, all the derivatives, deliver the C3 assets for quick term ads and do the D4 for others. We interface with Freewheel and BlackArrow to know what the rules are and where to go for an ad, and we do all that in essentially real time.
“They use that process as the core system of record for all the places they put content,” he continues. “Our system feeds their website, their iPad apps and deals with Amazon and Netflix and all the VOD for their pay TV distributors. So we could also be taking that live stream from Scripps and turning that into a stream that could be broadcast live over the Internet.”
The quality-of-service barriers to going live are falling rapidly, Jarratt notes. “As the technology gets better for doing things like multicasting and bandwidth gets better end to end, we’ll see companies like Scripps flip the switch on the full live turnaround,” he says. “If they’re using us, it’s literally a matter of switching over.”
When it comes to the cost advantages of a cloud-based OTT strategy, multiscast could become the next big contributor on the efficiency curve. For example, NAGRA, which is supporting several OTT pay TV operations running on its cloud MediaLive platform, has embraced the Octoshape multiscast solution in a partnership announced earlier this year.
The end-to-end solution offered by NAGRA with the multicast option adds “more efficiency into the mix,” says Jean-Michel Puiatti, senior vice president of the Multiscreen Product Unit of NAGRA. “This option brings a unique quality and economic value proposition through CDN cost optimization to service providers that implement NAGRA MediaLive,” Puiatti says.
One of the more dramatic implementations of a multiscreen cloud platform involved Spanish IPTV operator Jazztel’s shift this year to the NAGRA MediaLive platform with its conversion from a managed IPTV service to an OTT version. “They’re using an IP set-top with adaptive bitrate streaming to deliver linear pay TV channels and VOD,” notes Simon Trudelle, senior product marketing director at NAGRA.
Another NAGRA MediaLive customer is PRISA TV, the Spanish DBS service offering CANAL+ programming in that market.“PRISA is getting a lot of traction with a premium OTT service that offers some live channels on the tablet as well as catchup and VOD,” Trudelle says. “We’ve designed MediaLive to do everything in HTML5. It delivers a very fast response in the viewing process.”
PRISA, like BSkyB with its Now service, sees this strategy as a way to bring in new subscribers rather than pursuing a TV Everywhere enhancement for existing subscribers, he adds. “They’re partnering with various CE suppliers to expand the market for the service, especially into segments that would normally not be candidates for DBS,” he says.
NAGRA is also involved in one of the first telecom wholesale operations devoted to offering a turnkey set of OTT solutions to retail distributors of premium content. As previously reported, NAGRA is partnered with abertis telecom, the provider of Spain’s main telecommunications network in radio and television broadcasting. The fourth named customer for the abertis-NAGRA Multiscreen Cloud Service is Costa Rica Telecom, the nation’s incumbent carrier.
With a change in regulations that allowed the telco to enter the pay TV business it chose to go the cloud OTT route, Trudelle says. “The cloud offered them a very fast and cost-effective way into the market,” he explains. “They could rely on NAGRA’s expertise in content protection to secure the rights, and they knew that dealing with the complexities of standards and all the pieces of technology with a dedicated team of experts would save time and pain.”
Other projects are in line to be announced in the final months of this year and beyond, he adds. The move to cloud pay TV “is definitely happening, and it’s accelerating,” he says.