Topics Include Collaboration, Monetization, New TV Formats and the Role of WirelessA wide-ranging discussion of the disruptions and opportunities impacting the pay TV business at the INTX Show revealed key players’ latest thinking on issues that will shape their fortunes in the years ahead.
Led by Gene Reznik, group technology officer for the communications, media & technology practice at Accenture, the panel included:
- Tony Werner, executive vice president & CTO, Comcast Cable
- Steve Shannon , general manager, content & services, Roku
- John Honeycutt, CTO, Discovery Communications
- Kevin Hart, executive vice president & CTO, Cox Communications
- Darcy Antonellis, CEO, Vubiquity
The final day keynote session drew little attention, as is often the case on the last day of events like INTX, but it bears scrutiny by anyone interested in these companies’ perspective on topics such as collaboration, monetization, new TV formats, organizational approaches to innovation and the role of wireless. An edited transcript of the full discussion follows.
Gene Reznik, group technology officer, communications, media & technology practice, Accenture – The theme here is “From Chaos to Opportunity.” I’ll start, Tony, with you. Chaos to opportunity – clearly Comcast is at the forefront of leading innovation in the cable sector and more broadly now with your X1 platform. With the keen interest you have in the Internet, wireless, Wi-Fi, how do you see the opportunity that chaos and all the over-the-top (OTT) disruption is creating in terms of what you need to be doing?Tony Werner, executive vice president & CTO, Comcast Cable – I’m not sure there’s necessarily chaos. There are opportunities for us as an industry to go after across the spectrum.
We all feel at Comcast the digital world is well upon us, and we’re embracing a lot of it. But there’s still a lot we can do. Where we’ve turned our sights in the last 12 months in a big way is – we’re still pushing products out the door; we’re still coming up with cool new things and features, and that’s going quite well – but making it a true digital experience for the customer from the time they find you on a website until they have service.
A digital experience isn’t to go there and dial 1-800-Comcast and talk to somebody and then a guy comes out to your house and drills some holes and runs some cables. We’re going across that whole suite to where you have instant gratification. You go to the website, and before you leave the website you have service on an app and you’re starting to be able to already consume the service.
Then we’re app first on walking you through the installation. And we’re putting a lot of effort into wireless devices and the rest of it so that in the vast majority of the homes this is a self-install. And it’s the same way you do a Roku box and you do another box across your suite of services.
That’s going to be a great thing for the customer. Most customers like this a lot. And at the same time it makes our experience a lot more economical and allows us to put more money back into innovation.
Reznik – Steve, Roku has been wildly successful – ten million active customers, 50 percent growth, international expansion. How do you think Roku and where the entire box OTT industry is headed?Steve Shannon , general manager, content & services, Roku – We’ve been on fire. Growth has been phenomenal. We’re up to 3,400 apps now and streamed five and a half billion hours last year with the most popular TV-connected platform in the country. We’re starting to expand internationally and we’re also putting the system in televisions.
You know, it’s essentially an operating system. And the reason we’re at the show here is we’re partnering with operators around the world to deliver the best pay TV experience. [Part of] the panel name here is “Harnessing Disruption.” I think a lot of folks call us disruptive, but we are here to be harnessed [laughter].
The goal really is to deliver experiences people love. And how exciting is that for folks to be thrilled about their set-top boxes? Our software is beloved. It’s not just Roku. Apple TV, [Amazon] Fire TV – these are good products.
The change in consumer experience is dramatic, not just from the usability and simplicity of it, but the fact these are developer platforms that third parties can put apps onto is really transformative for the value proposition.
And on top of that they’re way, way less expensive than the set-top boxes that have been used historically. When you sell them profitably at 39 bucks, you can imagine how low the price to make them is. We think that’s going to be pretty transformative.
Reznik – You mentioned 3,000 apps on Roku. Clearly navigation becomes an important part of the story. How do you start to navigate through it all? I know, Tony, that’s a big part of the X1 platform. John, you’re coming at it from a content producer, a production standpoint. How do you think about the whole customer experience and navigation part of the story?John Honeycutt, CTO, Discovery Communications – As a content provider we see in all this nothing but opportunity to get our content positioned in front of consumers in the most efficient way possible. Internally what we focus on for this part of the discussion is really about ensuring we have the right hooks, the right information to be able to provide to have it be discoverable, to have it be aligned in whatever structure makes sense for the platform we’re on.
I would say in some areas we are making a lot of progress. I would say in other areas – I think at some point we have to raise the concept of advertising in this and understanding where we are in digital advertising and those topics, which I think is challenged at this point. But as a content provider I think the headline is: Fantastic. All platforms – how do we get it there most efficiently? Working with people like Darcy in her business to [foster] a supply chain that is as efficient, quick and detailed as possible is really what we’re focusing on.
Reznik – Let’s change gears a little bit. [CableLabs] has clearly been the vehicle over the years of driving collaborative R&D, doing product development, really driving innovation across the cable industry. Now we see much different sorts of formats. We see RDK as a platform for innovation, certainly all the open-source, OpenStack, lot of technologies. We also see the destination capabilities that now Comcast is enabling in how it positions X1.
Kevin, you’ve had one of the first experiences thinking about, rationalizing and ultimately deploying the X1 platform. What was the strategy that drove you to that decision, and what have been some of the early results?Kevin Hart, executive vice president & CTO, Cox Communications – Partnering with Tony, surging the X1 platform was a key part of our strategy to being scaled around innovation. With competition, consolidation, there’s more need for collaboration within the industry.
CableLabs has facilitated that, [as has] NCTA. We rolled out Contour 1, our first solution. We had very good success. We’ve looked at some of the features and capabilities and thought it would be a great idea to scale and partner with Tony.
So we did that two years ago – about a two-year development cycle. [There’s been] a lot of agile and DevOps work at play. The partnership has been fantastic. And the early success is off the charts. The customer demand, feedback came back much like the X1 feedback.
We’re now looking at some of our capital models for the year to keep up with the demand this year and next year. I think we’ve also provided some feedback and input back to Tony’s team to help make the product, the solutions and the service better. The collaboration between the teams drives more scale and ultimately a better customer experience.
Werner – The Cox guys have been wonderful partners. And so has Shaw [Communications].
Cox was our first one. We think we used it to get the recipe right. We started with a bunch of DevOps more on the Cox side than ours, but a little bit on both to get the integration layer right. And then after we did, Cox rolled out 20 markets in two and a half months, six regions. So once we got her locked and loaded, these guys went. It’s been a great partnership. We got a lot of good feedback, and it’s helped us to make the platform more robust. And we continue to.
It’s something I think we both went into a little bit worried. I didn’t want to be a vendor necessarily, and I didn’t know if we’d be able to step up. But so far it’s been fantastic.
Hart – I think the other benefit is, the product is fantastic, but now that the technical development work is behind us, we can focus on innovation around the customer experience, around bundling, automating the home, enhancing the in-home Wi-Fi and really thinking about the customer journey as opposed to just the technology. That’s really where innovation can take on a new life.
Reznik – How do you view RDK as a key enabler of externalizing innovation?
Werner – I think we both love it. I’ll let Kevin speak for himself. Hopefully he’ll say the same. Otherwise I’ll be tackling him here [laughter].
We think on the video side what the RDK has really done is two or three things. There are 280 partners now. We have 280 people who have licensed it, which is great, because it makes it a large base and a lot of contributed software and contributed code to it. So you get this open source development model a little bit.
But the other piece that’s so good, we’re showing devices here on the floor and devices that are going into Kevin’s network and our network where the SoC has only been done for six or seven months, and we’re already able to put it into a customer’s home.
It used to be 18 months or so of development from the time the SoC came out until we could put it in the customer’s hands. That helps us to have a newer, fresher product. But to the point here, it also reduces our costs. It takes a lot of cost out, because we’re getting the latest technology sooner. We think the same thing can happen with RDKB, which is what we’re pushing for the broadband side.
Hart – RDK is a great example of open source collaboration driving speed to market, driving economics and having our partner community rally around that. I remember about two years ago on this panel Tony put his arms around the folks on the panel and said, we’re all in on RDK, right? That’s the same meeting he kept looking at my notes, reading all my answers. But that’s a different story [laughter].
Reznik – Darcy, moving into your world, Vubiquity is a leader in media services. How do you see your business evolving to support where the industry is heading?Darcy Antonellis, CEO, Vubiquity – Sure. [To Hart:] Can I see your notes [laughter]? You know, I think my colleagues up here have said it best and how it’s impacted our company. Vubiquity is in a very interesting place, because we work directly with the content community from a licensing perspective as well as the service provider community.
To think about it both creatively and technically, the common theme you’ve heard is all about how do you change cycle times from concept directly into the consumer’s home. That’s had a direct knock-on effect for our business.
What we try to do, and a common theme we’re hearing throughout North America and the rest of the world, is where do our customers need to be most focused? It’s truly about taking their human and financial capital and focusing those resources on their brand experience, their best touch point with their subscribers. And our role then becomes important in [shaping] how we can make other pieces of the ecosystem a lot more frictionless. That trend just continues.
If you look at overall availability and licensing of content and how the whole windows and avails and monetization have changed, the need to have a ubiquitous method to manage those changes and availability as well as the need to make sure you’re supporting the knock-on opportunities to monetize is pretty critical. So those are the areas we’ve been investing in.
We were talking back stage about everybody needing the cloud, that it has to be as easy as in where can I get very easy access to the content I need. And, oh, by the way, it’s got to be able to function properly and pass through my infrastructure and show up with the expectations the consumers have.
These guys all make it look really easy, but we all know there’s a lot of complexity behind that. So we’re trying to stay really focused on the managed services and tech solutions piece of it so that they can focus on the content side and the user experience side.
The State of Advanced Advertising
Reznik – John, staying with the content theme, interactive advertising, advanced advertising, data monetization – what do you see happening in that space? Where’s this train heading?
Honeycutt – I wish I knew. Clearly, when we talk about disruption, that has to be one of the biggest disruptive spaces, whether it’s consistency of data, never mind access to it. What language are we talking here, what measurement methodology? That’s one part. I think the legacy systems we’ve used on the ad sale side, many, if not all, are incapable from a functionality perspective of getting us to where the future needs to be.
Taking it all the way to the top, just simply the mall, what is it we’re selling? There’s one [opinion] that says everything should be targeted and everything should be available. I think that gets hard.
On the one hand you run the danger of putting everything as programmatic into a commodity world, [which puts us] right into the world of banner advertising. That’s not fun. But there’s probably a mix that comes from a business model perspective.
We have some brands at Discovery that have very pure audiences. Think about a business like Investigation Discovery [a Discovery crime documentary channel]. It’s very consistent with what that audience is. So perhaps that’s an opportunity for targeting in the programmatic world.
But I look at the audience on Discovery. It’s very diverse – men, women, old, young, different socioeconomic backgrounds, people from the middle, people from the north. It’s all over. So how you get to a point where you can create a meaningful, at-scale target gets harder. But in general I will say I’m more bearish on this area than I’ve been, because it’s just not becoming clear at all the levels of the supply chain what the path is going to be. If you’d asked me two years ago, I was probably, yeah, we’re going to get there. I’m struggling right now with the path.
I want it to happen. If anybody can tell me another way to make money in this business besides subscription and advertising, I’m all ears. Clearly, we have to figure that out, but I think it’s pretty muddy right now as to where we stand.
Reznik – Tony, your view on interactive advertising. The cable industry has had a lot of very visible initiatives in this area. Do you feel we’re getting more to clarity or are we still in this uncertainty phase?
Werner – It’s a good question. This is one we’ve talked about for 20 years. So it’s hard to sometimes not be a little jaded.
I think in a number of areas we’re getting there. We on X1 have found the advertisers hard. In the beginning when we didn’t have too many eyeballs on it nobody cared that we weren’t doing advertising in the guide. Now that it’s up to about 35 or 36 percent of our base and headed toward 50 by the end of the year, they’ve been doing the limbo under our door trying to get ad spots on there.
We’ve been very careful on the guide, I’ve warmed up to advertising, [but] we’ve set several rules. It’s got to be endemic. We’re not going to have mattress ads on the front page, because we want it to look good.
We’re neighborhooding on the grid so you don’t have Wrestle Mania right after the Family Channel or something like that. They’ve got to follow exactly the same style guide. There’s a little bit of push back: nobody is going to click on it if it isn’t big and throbbing at you or something like that. [But] I think that’s going to go pretty well.
[With interactive] we have a bunch of ideas coming together that I think will gel. Even though some of the stuff wasn’t as huge a success as people would like – the way that we did interactive triggers using the EBIF (Enhanced TV Binary Interchange Format), which was a very crude way of doing it – there were some of those things that did amazingly well. We will be bringing that back in a big way with more modern technology capabilities.
Initially we use it inside for us being able to target to the right customers. Offering phone for $9.95 a month is a great deal unless you’re paying $39 right now. So we’d just as soon send it to people who don’t have phone, have it only show up for those as the offer.
Some of the areas where we’re having great success are with a number of partners. NBC in particular is really bringing viewership up in there. When you see what we’re doing around the Olympics and some of that, I think there are opportunities starting to emerge.
I agree it’s a little bit murky, but the tools are getting better. We’re getting lots of hardware out there that can do it. For me it’s more on the sell side now than it is on the delivery.
Honeycutt – I totally agree. We’ll figure it out as we always do. But that relationship between the agency and programmer, how does that work?
I think we as programmers have not done a very good job of expanding how we talk about our inventory. Men 18 to 49 or women are interesting [categories], but it’s not very deep. I think we need to come together and expose a better set of descriptors about our inventory as an industry, not only as an individual programmer, if we’re going to be able to move to a digital world.
Werner – One thing that’s very, very clear is that the advertising has to start pivoting and morphing, because the idea that we can just interrupt your show and show you something that’s not relevant and not interesting is going by the wayside.
If you look at the millennials with browsers, nobody’s watching ads. They’re not paying for anything either. So I’m not sure how the monetization works on that. And then with DVR people fast forward through it.
As you start to be able to put ads that are interesting and relevant to you, which I think we will be able to do more and more of – a good example is things that are hobbies to me. If there’s only a magazine without the ads, I wouldn’t pay as much for that as one with the ads. In fact that’s what I read the most in these photography magazines and the rest of it. But I think we have to get that same model over there.
Customers are not going to stick with us if we disable fast forward. At first it was good because it got to more content, but that’s not going to last.
Shannon – Those are important points. We have actually invested super aggressively in advanced advertising techniques on Roku. And it has been very, very successful. It’s a big part and one of the fastest growing parts of our revenue.
What we do is we’ve segmented our data base and we attach a lot of data. We don’t allow the data out of the company. We’re very secure and careful about how we use the data. The deal we announced a few weeks ago with Viacom is one example where we’re working with them to make the ads more relevant.
That does a lot of things. It makes the ads more interesting. It makes them more valuable to help subsidize the programming. And it also allows them to run fewer ads, which is a big benefit to the user experience. People without babies aren’t getting diaper ads.
It’s been phenomenally successful. We are very optimistic about the future of advertising. We do it in display ads, and we consider ourselves the most aggressive OTT platform in partnering with our publishers, content distributors to build their audience. A lot of types of display ad inventory – you click through video ads, install a channel, things like that with interactive capabilities. We’ve really gone full tilt on it, and it’s super popular with advertisers.
Werner – To your point, the ad load is important. One of the things we’re seeing on the IP feeds – we’re going to have all these IP feeds for the Olympics – and we get a sense in generating them they want to get some form of monetization.
The one thing we went back and forth with is we’re doing X1 experience. First they were doing a pre-roll on everyone. We said this isn’t going to work. People are going to want to go to the pole vaulting, and if they go and they get stuck into a 30- or 60-second pre-roll, and you hop over to this one and you get another 60-second and come back to pole vaulting and get another one, it’s going to kill it.
We got our message across. And so they changed it and really reduced the ad load. Doing things like frequency capping and the rest of it and relevance is just so important in my mind to keep this going.
Shannon – We’ve got to get collaborative, too. We had this sort of competitive ad sales organization in cable and our group and Discovery and all of that. One of the things we’re trying to do is actually equip the publishers with basically the same tools that we go to market with. And we sell blind, so we’re not directly competing. But if we can share these tools and find ways to target without violating people’s privacy…
Honeycutt – The exchange of that is critical. How we efficiently exchange information about viewership – obviously privacy [has to be maintained] – but how do we be more effective as a DMP (data management platform) or whatever you want to call it on what that data is and then how we sell against it.
Antonellis – It’s interesting, because you think about it in the scheme of relevancy and getting the right ad at the right time, I still believe we’re so in the nascent stages of continuing to try to refine that.
Reznik – Clearly, monetization around this is key, but also most of us are CTOs. We have a technology radar. We look at what’s in front of us.
4K is in front of us. Gigabit speed into the home is in front of us. Wireless networks pushing gigabit speeds are in front of us.
Do we think this is incremental sort of technology change, and ultimately the things that we do today will just look better, be downloaded a little bit faster? Or do we think these technologies will enable fundamentally different competitive dynamics, business models, and so to some degree it’s really a geometric change that we’re on the precipice of?
Hart – I think from a network perspective it is exponential. It’s disruptive on the one hand. But it’s opportunity for providers on the other hand. We’ve invested billions of dollars building out the best network in our footprint, and that’s going to continue.
As we look at some of the things that are here at the show around DOCSIS 3.1, full duplex DOCSIS, enabling symmetric speeds, a push to a node-plus-0 architecture, it is going to provide us an advantage to provide those next-generation applications at high speeds, high throughput, high quality of service. And then take advantage of emerging technologies whether it’s 5G for access and things along those lines.
The work we’re doing as an industry with the virtual CCAP, remote PHY, not only is driving down the economics but also is trying to put a better experience for the end user based on applications that are to be imagined and developed. I think we’re in a good position.
It’s an opportunity for us not only on residential, but commercial as well. We have a big property in Las Vegas. Things we’re doing in the arenas and hospitality bring next-generation connectivity to enable experiences at a sporting event, at a concert that are just now being imagined.
Werner – I think we very much live in an exponential world right now. It’s not just the network. The network feeds it.
Sometimes we forget how fast it has changed. Four or five years ago most people connected a wire from their cable modem to their computer. Today we don’t connect wires from hardly any of our cable modems.
It used to be people would turn their computer off when they were done. Today everything is persistently connected. And those really change a lot of things out there.
Web pages – we still call them Web pages; they’re not a Web page anymore. This is not a static page that’s coming up.
You look at browsers and how they are going into the devices; you look at how quickly software is changing, and you look at consumption out of the home. Data consumption goes up exponentially. It’s a big deal.
It wasn’t such a big deal when people were consuming kilobytes. But now we’re into gigabytes, and you’re going up 50, 60 percent per year. It all changes. And if we can’t move at those speeds, we have to go after all the tools that our competitors are.
A lot of them are cooperative. All of us on the stage including Roku and us, I think we have more in common than we have not in common. There are a lot of things that overlap. But at the same time they can’t slow down and continue to be prosperous. We can’t slow down and become yesterday’s news.
4K and HDR
Reznik – How far do you feel we are away from 4K changing the game in terms of both the customer experience and the bandwidth you’re utilizing in getting to the users?
Werner – I personally am more interested in HDR than I am in 4K. I think 4K is great; 8K will be better; 16K, 32K, more K is always better [laughter]. But at some point, 1080p up converted [to HDR] looks really, really good. HDR makes a noticeable difference.
For us we will not be a roadblock. We’ll be an enabler. You need more content to come. We are shipping an HDR set-top.
[But] that subtle fidelity thing, that’s not what I see as changing our business and radically changing a lot of things. It’s interesting, it’s good, but that’s not something I call super fundamental to change.
Honeycutt – From a content creative perspective, I think I share a lot with Tony on that. One more thing into that recipe. Let’s back up a second. We were the first ones to launch a 24-hour HD channel 13, 14 years ago. I think you have to remember in the HD transition there were actually three or four things that occurred.
Obviously the resolution improved. We went from 4×3 to 16×9, at least in the United States. The size of the device changed. It became skinny. We hung it on the wall. And then we introduced the concept of surround sound.
There’s a recipe there. We see resolution, whether it’s 2K or improved resolution, absolutely color space, and then frame rate. We think frame rate is very important to give that experience.
So if those three things come together it will be a nice addition. Will it be as revolutionary as SD to HD? I don’t think so.
Werner – I agree. It’s not going to sell as many sets, to your point. When people bought HD sets – if HD was still a CRT and weighed three, four, five hundred pounds it wouldn’t have taken off. It came right at that same time as plasma, some of the other things to flatten.
I’m 100 percent there with you. I think people are going to buy sets because it’s going to come for free. Content will come. Some people will use as it as a competitive thing to talk about.
Honeycutt – But there is production. It isn’t easy to do this. We produce a few hundred hours now in varying conditions.
Werner – And you make a lot more on 4K than you do on 2K, right [laughter]?
Honeycutt – The one I will raise is VR (virtual reality). I’ll put the commercial in. If you haven’t experienced Discovery VR, check it out. It’s pretty amazing. I think there’s a lot of interest there. I think we’re still searching for that consistent viewer experience in it. But the potential of that is interesting for certain types of content.
Werner – I think it’s more interesting than 4K.
Shannon – We shipped a 4K product, the Roku 4, last year. It’s doing very well. We shipped a 4K TV as well with our partners TCL, which kind of puts us on the roadmap and helps give us some insight into how those products are made. And the interesting learning for me is they’re not that much more expensive to make than the regular HD products, which tells me we’re going to move a point where it will be hard to buy a TV that’s not 4K eventually.
Antonellis – We’re definitely seeing an increase. We have access to several hundred titles already. On the management and processing side, I’m a huge HDR fan. On the HDR side we’ve been prepping for both dealing with the next generation on the mastering side for pre-distribution and what those archives look like to manage those assets.
On the cost side for production, visual effects are still a little pricey, but that’s coming down. Whether it’s on the television side or on the theatrical side if you’re using a number of visual effects on the 4K front it’s a lot of data, and it adds up. On the high frame rate side I completely agree, but [there’s a question of] how that works its way back up into production.
Honeycutt – We’re advocating from a production perspective to produce in a high frame rate and then make what you want. I wouldn’t call it future proofing, but just having that asset available at 125 frames, or pick a number, and then the equivalent of a 4×3 pulldown, in old school terms, to get to that 24-frame film look. But at least the asset is available to your as far upstream as possible.
Staffing for Innovation
Reznik – Clearly, [companies] all over the globe are now talking about trying to get the innovation gene into their organizations. I’m interested, Kevin, in the journey of Cox Communications and how you see the talent agenda playing out. Is it really about re-invention or about acquisition of new? How are you thinking about getting a fit-for-purpose workforce to take you into the future?
Hart – We’ve been through a multiyear transformation within Cox technology. First things first, you have to take care of the talent that you have right in front of you.
We have a technology leadership academy. We have job rotations. We have training. We have mentoring. We have a lineup of business partners. There’s a lot of hidden talent within the organization and providing them the opportunities to step up is a big part of that.
We also have resource groups. We have a millennial resource group, a women’s resource group. We recruit in the community. I hosted a summit a few months back where we invited about 200 college students from across Atlanta to showcase all the things we’re doing to show them that we’re actually on the leading edge of a lot of technology development. That brought a lot of attention. We’ve built a strong recruiting pipeline.
Also, Cox puts a huge emphasis on culture and diversity. We provide a lot of opportunities within the organization to step up and lead and manage and take us to the new frontier.
It is competitive. You don’t necessarily think of a communications or cable company as your first stop. [But] as you can see on the floor here, we’re changing the game, the perception. We’re investing hundreds of millions, billions of dollars in technology. So it’s actually a great place to be in to build a career.
Reznik – There are a lot of incubators in Silicon Valley, and every company has some level of presence. The question for most is how do you get that back into the core part of the organization, versus having it being a satellite that operates on the periphery. Are you seeing the ability to get that into the core organization?
Hart – Absolutely. We have a new business group within our organization. We partner with Tony; we partner with CableLabs; we have presence in Silicon Valley. We’ve made acquisitions of different companies to bring in that kind of entrepreneurial spirit.
Healthcare is one of the types of investments we’ve made to leverage our network and leverage the connectivity with our customers. I think the spirit of innovation at Cox is alive and well. We have a 20-year vision of where we’re taking the company, growing other verticals, leveraging our existing assets and investing in our people in support of that.
Reznik – Tony, what is your perspective at Comcast? We all see the second building coming up, the technology tower. How do you see the transformation of Comcast going into the future?
Werner – Well, I think talent is key to all of us. All of us are out there searching for the right talent, the best talent. It’s one thing to get them in the door, which is not easy in and of itself, especially when you’re competing with Google, Facebook and these other folks who have got people right off the Stanford campus.
We are getting a lot more Stanford graduates. We’re hiring out of school now, which is good. We’re doing all the things we can.
My full-time job is keeping it a place they want to work. Part of it is, these folks who come in want to start working right away. They want to start developing product. And so we’re trying to keep Comcast feeling like a whole bunch of real small companies where you have your own pieces you work on that contributes up to a larger piece is what we work on.
Even though the cloud is a bit of cliché, that platform helps us so much, because now teams will come in and they own five, six, seven, eight services. They own them end to end, and they can do what they need within the services provided they don’t impact anybody consuming the services.
They give themselves different team names. We have like 50 different team names – Vader, Viper, all these different things. But then they feel like they’re part of a micro-culture.
You have to be able to bring them in. You have to pay them right. You’ve got to do all that stuff. That’s kind of easy. But if they’re not actually producing something and coming in and writing code fairly quickly, they’re leaving you.
This is another area where open source does come in. Open source is great to leverage against. These folks take great pride: I contributed this to open source, I contributed to the OpenStack community, I contributed that. We do everything we can to rebrand, to make them feel like they’re doing something different, and then whatever we have to do to retain them.
Reznik – Steve, you were born digital with a good DNA. You didn’t have to be re-invented or reprogrammed. But I also imagine a lot of your employees have a lot of opportunities. Retention, motivation, where do they go next are probably a lot of the issues you deal with. I’m interested in your perspective.
Shannon – I second a lot of what Tony said about talent. We’re headquartered in Silicon Valley. We are approaching [a staff of] 500 people, and the vast majority really are engineers. They are the core of the business.
Hiring the best, really the elite talent is the day-to-day battle at Roku. What we do, as our key metric, we have to win with the reviews in the marketplace. We don’t have the big ad budgets of Apple or Amazon or Google. The way we sell is by winning reviews.
You go look at Cnet, you go look at Amazon, or Best Buy reviews or whatever; we have to win those reviews. We focus on those. We look at that consumer feedback. We really work hard on data infrastructure to make sure we have a bunch of KPIs underneath those reviews that we drive towards. It’s a very analytical, data-driven environment, and, of course, engineers understand that.
The set-up process is paramount, because that’s when people write the reviews, right after the set-up process. We have to nail that. What are the biggest problems of set-up? Wi-Fi. Our Wi-Fi team is unbelievable. It’s that secret sauce that a lot of consumer electronics folks don’t pay attention to. We have to get Wi-Fi absolutely perfect. It’s all this data driven combined with finding the talent, and at the end of the day, to make sure we have the best product.
Reznik – I think it’s great as you characterize it as selling to them. We’re thinking of them as customers. We’re understanding their buying preferences, and we’re creating experiences for our employees that attract them to us.
It’s a very different way than a lot of us entered the workforce where we were the ones selling to employers. Now it’s the other way around.
Thank you all for the dialog. Now let’s open it up to the audience for some questions.
The Cable Mobile Question
Audience question – You’ve talked a lot about the in-home experience. Can you talk about what you’re doing outside, the mobile experience? Do you see that growing, stagnant?
Werner – First of all, there’s no one size fits all. I think people when they’re in the home with a big screen want to watch it on the best screen available. But with the mobile experience, both in the home and out of the home, tablets have enabled a whole new viewing experience. So we’re doing everything we can.
A lot of what we’re doing for the Olympics will also be available on the tablet. You’ll be able to access these live extra streams. All our metadata enrichment we’re doing where you can search by medalist, you can search by country and all that, will also pull over to it.
We do a lot of mobile viewing right now. We have about seven and half million uniques monthly on our apps going across Web and mobile. I think we’re at about 110, give or take, linear channels that are available out of the home on that device and tons of on demand and the ability to download. The TV’s not going anywhere, but this other is growing, and in aggregate you have to check the boxes in all of them.
Hart – Tony touched on a lot of key pieces. You have the infrastructure, the device enablement, the content. From an infrastructure standpoint, building out through our commercial services, we have the MSO consortium around all the metro access points across the various footprints.
The connectivity, the infrastructure, some of the things we’re doing around small cell, back haul within the commercial space, is another key part of the component. Device enablement, providing rights to the content and [providing] the information and applications our customers want are kind of the three-step approach we’re taking.
Antonellis – I would think everyone is paying attention to the things we see happening internationally. We distribute today to 117 countries in 80 languages. When you go to different places with different topologies where certainly wireless is the first order of business, there are some interesting learnings to watch how mobile-first types of services are occurring. That certainly has influenced how we try to accommodate and service a whole set of seamless experiences.
Honeycutt – I think that’s a great point. We see it. Our footprint is worldwide. We see consumption habits changing in Southeast Asia. Africa will be the first highly connected by 5G. Several countries in Africa will be there quickly.
I think we’ve learned that how to tell stories is different than on big screens for some things. It’s not a completely start again, but there’s a pace and framing on mobile that sometimes is a little bit different. So we shouldn’t discount that screen size, although the message comes across. How you tell that in a compelling way does have some differences in the process.
Shannon – I think the length is obviously an important point. Mobile is obviously important. But this group up here is mostly distributing long-form programming.
I think what you see out there is sort of the revenge of the TV. Mobile has always been connected, PCs have been connected, all of these things by definition, so [there’s been] a lot of growth there initially. But now TVs are becoming connected, and it is roaring back to be the predominant streaming platform and will pass mobile soon.
I was looking at a Freewheel report, which, granted, ad avails was what it was talking about, but it’s a proxy for viewing generally. The television streaming platforms are growing more than twice as fast as mobile. I think mobile is around sixty-something. Television OTT-connected platforms, at around 170 percent growth, have already passed tablets and will soon pass mobile and eventually PC.
So when you look at roadmaps for developing streaming infrastructure, a lot of times we’ve seen mobile get prioritized only to find that the connected TV platforms quickly will pass them, especially for distributors of long-form programming.
One Year from Now
Reznik – As cable operators coming out of a business that’s been constrained by your topography and technology footprint at a time when the OTT game is being played out against 14 billion eyeballs on a global basis, how do you balance those two dimensions of being very much focused on the core footprint that you do serve versus really thinking about a digital opportunity, which is boundless?
Werner – First of all, I agree wholeheartedly, the TV in the home is still the primary consumption device. People turn it on, leave it on. They consume more and consume higher bitrate on it.
But people don’t want to be constrained to never leave the house. They want to take content with them. We see a lot even with cloud DVR where we’ll see that the TV gets paused at 10:15 presumably in the living room, and then about ten minutes later we’ll see that movie or that show pick up on the tablet in some other room in the house. People want flexibility.
I look at tablet viewing, second screen and even out of the home as accretive, not necessarily that it’s displacing some other viewing. It isn’t that people are quitting watching TV because they have a tablet. It’s that now they can fill gaps with it, they can catch things when they’re on the road. I think in hotel rooms there’s a lot more tablet viewing then there used to be, and things of that nature. So I look at it as upside for everybody.
Reznik – We’ll do one last closing question – a quick response from each of you. We’re sitting here next year, same place, same venue. We look back on the year that has passed. What’s going to be the biggest disruption we’ll see in the next 12 months?
Antonellis – I think we’re going to continue to see the current play on that skinny, mid-skinny, fat bundle diversity of content strategies. I think there will be a lot more branded direct-to-consumer offers out in the market, coupled with the advances that are being made on the distribution side.
Hart – The biggest disruption won’t necessarily be technology. We have a wealth of technology, but it’s going to be about how we change the game with customer experience, the in-home experience, the mobile experience. Leveraging our networks, our products, our services, our content in a way that we service our customers going forward to try to meet them where they’re at, where they’re going – that’s going to be what’s innovative around what we’re doing.
Honeycutt – I don’t go with disruption, but I think I’ll say that clearly in the next year we’ll move a significant portion of our infrastructure out of our own physical data centers into a cloud virtualized environment. We have a goal that in 24 months we want 80 percent of our business applications fully in the cloud. We’re six months into that journey.
Shannon – We’re really excited about the Xfinity app coming to Roku. Those kinds of packages and some of the skinny bundles, too. Charter has a super compelling skinny bundle on the platform. We’re real excited to get those engagements going and to enable us a non-traditional streaming style in partnership with pay TV operators around this country.
Werner – I tend to agree. If I could have one wish for next year, it’s that this panel is not on the last day [laughter].
But short of that, I think what everybody says I’m in agreement with. I don’t think there’s going to be a lot of technological ah-ha, the world has changed. I think we’re going to see a lot of steady evolution.
I think we’re going to see everyone on this panel take advantage of all the technologies more and more. And I think you’re going to see more unique partnerships and relationships start to emerge. Even though on some fronts you compete with everybody, on other fronts we all have the same motivation to see great content, happy customers and the best way of monetizing so that the people that are in the value chain actually get returns on their investments.
Reznik – That’s a great way to wrap it up. Thank you.