Yoav Schreiber, Senior Analyst for Digital Media Infrastructure, Current Analysis
The Cable and Telecommunications Association for Marketing (CTAM) recently released a key statistic: roughly 75 percent of users consuming video applications on connected devices do so from their home. Recall that a few years ago, mobile video consumption was perceived to be an activity primarily done on the go. In contrast, today's multiscreen video market opportunity is heavily focused on delivering video applications and "TV experiences" for consumption on companion devices in the home: smartphones, PCs, and tablets. (To be fair, much if this is due to current licensing restrictions, although it also begs the question of what the business model should be.) Regardless, recasting the multiscreen video market in terms of consumption on companion devices presents video service providers with both opportunities and challenges.
Video consumption on companion devices presents service providers with the opportunity to expand their perimeter of control beyond traditional walled-garden delivery of licensed content to the TV via the set-top-box. It enables service providers to extend their brand across both broader content choices, such as catch-up TV services, Web content, and social networking, as well as across broader access devices, including PCs, laptops, smartphones, and tablets.
A second opportunity for service providers is the ability to control the TV experience across companion devices. The underlying assumption is that a positive user experience raises customer satisfaction, leading to reduced churn and the potential for higher ARPUs. As a result, by synchronizing companion content with TV streams, service providers can ensure seamless TV experiences enabled by unified back-office infrastructures that provide for management of metadata, content, and subscriber identities.
"Comcast demonstrated a 1 Gbps service at this year's Cable Show... With today's cap in place, a subscriber would exhaust their allotment in less than 10 minutes, downloading roughly three seasons of 30 Rock."
Yet, there are also associated challenges to capturing the companion device opportunity. Bandwidth caps are the most prevalent challenge, (and also the least discussed). Video applications consume increasing amounts of bandwidth, and there is not yet a viable business model in place to satisfy both consumer demand for, and service provider supply of, bandwidth resources. We are seeing some convergence around data caps at the high end. For instance, AT&T (NYSE: T), Comcast (Nasdaq: CMCSA) and Shaw (NYSE: SJR) all have 250 GB/month caps. Yet these caps are moving targets, as video consumption and bandwidth requirements are projected to continue their trajectory upwards and to the right. As an example, Comcast demonstrated a 1 Gbps service at this year's Cable Show, downloading an entire season of 30 Rock in about 90 seconds. With today's cap in place, a subscriber would exhaust their allotment in less than 10 minutes, downloading roughly three seasons of 30 Rock.
Effectively dealing with bandwidth-heavy multiscreen video requires adaptation on the part of consumers, networks, and services. Service providers need to set consumer expectations and better educate them in terms of service tiers for the data rates they purchase. Innovative approaches leverage bundling, whereby subscribers are offered higher data caps if they subscribe to the service provider's pay TV and phone service. In addition, zero-rating models are being experimented--but not for IP delivered content--whereby MSOs (such as Shaw) will provide QAM-delivered content without counting against the subscriber's data allotment. In terms of smarter networks, service providers are making use of transparent caches at the edge of the network and offloading content to reduce both network loads and costs. They are also managing content with policy-based approaches that can prioritize services based on rules. Service providers are also building their own "on-net" CDNs to manage the increasing amount of HTTP video traffic traversing their networks. Finally, content services and applications need to be developed with a greater awareness of how they interact in an increasingly always connected, cloud-based world. This entails back-up services, push-services, and on-demand services being aware of their own network implications.
"...will multiscreen video advertising further fragment the already heavily fragmented pay TV advertising market?"
A second challenge to multiscreen video is monetization. Advertising follows content, and so it will eventually find its way to the companion devices. In many respects, it already has, with various initiatives underway, including Rovi's (Nasdaq: ROVI) Smart TV advertising trials in the U.S. and Canada, and Ensequence's recent partnership with Zeitera. But will multiscreen video advertising further fragment the already heavily fragmented pay TV advertising market? How will consumption of video (and advertising) on companion devices impact video (and advertising) consumption on TV sets? A related challenge to monetizing multiscreen video with advertising is the lack of established standards in terms of measurement and data. For instance, will video consumption on connected devices be included in Nielsen C3 currencies? How will targeting on companion devices play into overall costs for advertising campaigns? These are frontier issues which are slowly being addressed in the industry.
Without a doubt, consumers are increasingly watching video on connected devices in the home. The technology is in place (and improving) to enable the seamless experiences that extend service provider brands into this new opportunity. But the business models are still undefined, leaving the commercial opportunity more to speculation than foregone conclusions.
Yoav Schreiber is Senior Analyst for Digital Media Infrastructure at Current Analysis, and a FierceCable contributor. Follow him on Twitter @yschreiber.