IPTV and VoD: the great content adventure
Time for a new deal between ISPs and content owners
IP-based systems also change the world in the way that they make geography utterly irrelevant. This causes one of the largest headaches for content owners, as for decades their businesses have been based on allocating rights by continent, country, region, platform and window. IP networks stretch across the planet and as the backbone of the internet; they offer a conduit for seamlessly distributing digital content the likes of which generations past only saw in simplistic telephony.
We can send video files anywhere in very little time at all, and they will never lose quality. We can move them around, change them, copy them and store them. If you’re a rights holder, those last few sentences will probably mean that by now you’re in a cold sweat and foaming at the mouth. It’s nothing else than an intellectual property owner’s worst nightmare. The inevitable is slowly hitting home despite the wave having crashed long ago – the new business model in the absence of physical media (and the associated production cost) and where the material can be transported anywhere in seconds, is not to sell the product itself, but the rights to how, where, when it is consumed.
That’s not to say it’s impossible to take some of the old world with us. Cunning technologists are increasingly using a system called, amongst other things, IP "geo-coding". Based on the issues that introduced the world to conditional access smartcard systems, the theory is that through querying the RIPE database and collecting raw data about address allocation, it is possible to identify blocks of IP addresses that match to individual countries. Content can then be released to only those who have a public IP address registered in the particular country that rights have been allocated. The BBC used this to great effect when restricting access to multicast Olympics coverage to UK viewers, and recently to their new iMP media player service. Naturally, it’s possible to generate false IP addresses, use proxy servers and other tricks, so the technique has its limits.
A more silent and permanent revolution that has been overshadowed by headline technologies like HD, H.264 and IPTV, is the process of digitisation in the media world. Broadcasters want entirely digital workflow from beginning to end, as the savings are huge when compared to the baggage of physical media. The implications for the industry are enormous. One of my greatest joys when working with ISPs is seeing the wonderfully surprised look on people’s faces when I tell them that most of the TV content they want to get their paws on is still only keep on VHS or Digibeta, and archiving isn’t nearly as far along as it should be. Household brands like the BBC, ITN, MTV, Universal Music and co are still working out exactly how they go about putting everything they have into digital storage and not only make the investment back, but actually whether they can make a profit from doing it.
What that means to an ISP is that the content they want (or is within their budget) is that you don’t get a hard drive delivered by CityLink the next day, but that the content is most likely going to need to be “ingested” if you want to offer it, i.e. pulled out of a dusty cupboard, played into an industrial encoder, stored on a storage area network (SAN) at the highest quality so it can be transcribed into multiple platform formats later (e.g. for SD/HD broadcast, mobiles, computers etc), encrypted with a CA algorithm, put through manual QA and catalogued.
The policy so far has to follow the 80/20 Pareto principle that seems to govern everything in new media (especially on-demand distribution) – 80% of the viewers want to watch only the most popular 20% of your content. The business case for digitising the large bulk of produced work rests on the model in use to derive the necessary revenue from it. Ingesting content is very, very time-consuming, expensive and labour-intensive. When you add the need to screen personnel to prevent criminal piracy and the shelf life of digital storage media costs begin to spiral and rightsholders are faced with a genuinely difficult business problem that they thought was initially much smaller than their need to monetize their back-catalogue.
Herein lies a fascinating and complex new territory for content owners. What is the most profitable way to offer content from huge digital archives? Consumers will not pay for material in the way they do for pay-per-view movies, and bundling optional flat rate access fees into monthly triple play subscriptions adds pricing sensitivity that could risk making the business model unviable.
Many (including Bill Gates) believe the answer can be found in so-called “Long Tail” economics, a term popularised in a 2004 edition of Wired magazine to describe the appearance of sales statistics from internet retailers. The theory says that products that are in low demand or have low sales volume can collectively make up a market share that rivals or exceeds the relatively few current bestsellers and blockbusters, if the store or distribution channel is large enough. More and more content owners are coming to see the statistical distribution that is the signature of the Long Tail theory, such as online DVD rental and music download services. Surveys are consistently showing that niche or back-catalogue content is in higher demand than premium content.
This issue takes on greater significance when the current debate between TV production houses and broadcasters is taken into account. Generally Hollywood tends to impose its strict own conditions and restrictions on the way its content is stored and distributed, but the unique relationship that production houses share with their customers complicates how arrangements are made for IPTV.
Tradition dictates those broadcasters commission independent production companies to produce programmes for them, and subsequently acquire the primary rights for a single broadcast and a repeats showing (the most profitable part for producers). The secondary rights are left with the production houses to sell overseas and in new markets. More flexibility is needed for making content available on-demand from a digital archive, for example for a “seven-day catch-up” service, as it’s not clear who exactly controls how it is distributed.
Ofcom’s answer to this scenario is two rights windows – the first for rights acquired by the public service broadcasters (“PSB”, BBC, ITV, Channel 4 & RTL/Five), across any distribution platform, across any wholly-owned channel, for a specified duration, for free-to-view UK distribution. A second holdback window will then follow in which the broadcaster may limit the exploitation of rights by the producer. This restriction can be shorter than the current five-year period and the broadcaster can retain an option to extend the duration on further payment.
At the end of the holdback period, the ability to control exploitation of the programme would revert back to the producer. It is worth pointing out that the BBC is in a unique entity in this situation, in that it is required by royal charter to make its own material available in to the widest audience of UK viewers possible and commission a minimum of 25 per cent of its output from external production houses. One of the most common sources of confusion to the question of whether BBC content is free is the difficulty in understanding the difference between true BBC PSB content and the rights to commercial content controlled by its business arm, BBC Worldwide (UKTV, Flextech etc).
With the massive reduction in storage costs provided by digital technology, there is a school of thought that we may just be heading towards commoditisation of non-premium content. Producers won’t hand over the crown jewels for free (especially jewels they have spent hundreds of millions on making), but the redundant back catalogue may just come at a pretty good price as it could offer the ability to resurrect the goose that makes those lovely golden eggs. How do you charge for access to hundreds of thousands of new clips, short films and individual episodes? Is it possible to use a staggered, average-yield model as trumpeted so successfully by Stelios Haji-Ioannou of easyGroup fame? How do you offer 3rd parties access to them to include in their own applications? The most viable options would seem to be an optional blanket/fat-rate monthly access subscription, or individual “nano-payment”.
The feedback from internet downloads is that access has to be fast (P2P, Grid and/or BitTorrent) and very, very cheap – consumers have got used to good quality pirated material available for absolutely nothing, entirely free. Disney used this knowledge to great effect when it released “Lost” as a download, because it was the most popular pirated show at the time. In that sense, the movie industry can consider itself lucky – the music industry failed miserably and has shown them what not to do, and piracy has eliminated the usual need for a pioneer – the one that inevitably gets scalped whilst the rest lie in waiting for it. Illegal downloading has shown them the demand (hence removed the risk of uncertainty over whether people will consume media in that way), and saved them the cost of educating the market.
The new wave of IPTV and Video On-Demand (“VoD”) services is a disruptive equaliser, and one that now has enough momentum to resist the overtones of the incumbents’ vested interests. The 600 billion page internet with its killer applications that have come to dominate our lives was originally built on the unbelievably simple HTTP transmission protocol. IP services naturally talk to other IP services, and therein lies the power of IPTV – the fact that using IP (i.e. TCP/UDP) to transport digital video allows us an unprecedented level of integration and inter-operation with other services (e.g. email, VoIP, SMS/MMS etc) that evolves the TV entertainment model to be one of implicit viewer involvement. The fundamental shift is that we can now identify exactly what content is being played at any given moment in time, who is watching it, and how they are consuming it.