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IPTV/VoD: The fall of content's kingdom

But how will the story end?

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In the UK, one of the biggest battles is currently being fought between broadcasters and the production companies who depend on them for their survival. A recent breakthrough was made between PACT (the trade association that represents Soho's finest) and the BBC, which may heavily influence future negotiations. The argument is one of who controls the rights to on-demand content designed perfectly to live in new seven and 30-day so-called "catch-up" services offered on new IPTV platforms.

Traditionally, broadcasters commission production houses to produce programming that they then acquire the rights to originally broadcast and repeat a number of times. The rights then return to the production company to re-licence elsewhere across the world. It's understandable they are fighting for the rights to the brave new world of 30 day catch-up and replay services, but as with all these matters, the broadcasters hold the power and will win (Editor's note: the broadcasters did indeed win as reported recently).

Europe doesn't also have the same drive to high definition (HD) that the US does, simply as the transition of picture quality from NTSC is far more profound than with our standard, PAL. There's no doubt it looks impressive, but what's less impressive is the support from any of them to help anyone use it or understand why to buy it. Sky and Telewest have gone HD-mad in the first-to-market game, as has the BBC, which has left some fun provisioning problems. Even the radio world is now looking to provide high-definition audio.

It's a big boys' train set though, as the costs of broadcasting in HD are massive – at least twice the bandwidth (6-10MBit/s at approx £100k per Mbit) even with more modern MPEG-4 compression techniques. HD represents something bigger for Murdoch's boys though, which is a chance to upgrade existing customers to newer set-top boxes that are Ethernet and IPTV-ready.

But these wonderful gimmicks and fluff about next-generation convergence are fine at industry conferences, but as pointed out earlier, it means little to consumers who stroll into electronics shops in the high street. The problem is that the people who design these services build them for themselves or from precedents that may not hold true now or in the future. They earn huge salaries that allow them to afford endless chains of great-looking electronic devices and are big early adopters of new technology.

The anecdotal word from the bar is that people are just sick to the back teeth of paying through the nose for premium TV, ever pricier DVDs and other media subscriptions. Personal debt is rising to intolerable levels – there is only so long they can go on buying goods in stores on credit cards and dealing with subscriptions. You can consolidate services and bills as much as you like, but each one is now getting to "bill shock" level on their own.

Joe Public is already swimming in content and total underwhelmed by it. Digital satellite and the internet provide hundreds of channels, thousands of movies and music available through P2P, and when they are not sitting down on the couch to work their way through it, it's being blared at them through posters on walls or radio playing in the office. A million-channel EPG, billions of hours of back catalogue TV episodes and classic movies, millions of music tracks and tens of thousands of video games and service applications is a daunting prospect.

That chaos is what the threatened incumbents will seize on, so the rule of the day is that the amount of content that is available needs to be directly proportionate to the ease at which it can be navigated through and consumed. In English, if you're going to make a lot of content available, make it intelligent, personalised and easy enough for grandma to use without her glasses and hearing aid.

Generally speaking, video on-demand business models tend to be rooted in the US cable and hospitality template, that is to say it is used to sell premium content on a pay per-view basis to a pay TV audience. For the top 20 per cent of titles it works well and is a viable service, even if the four to six views per month are somewhat hot air in other markets, being more like six to ten per year in reality. The key metric that establishes its viability is that no more than seven to 10 per cent of the subscriber base are viewing content simultaneously, allowing the deployed infrastructure to serve ten times what it would be if viewing were on a linear 1:1 scale, i.e. everyone on, all the time.

But the UK isn't a pay TV market, as much as the research analysts protest. Most people still have analogue terrestrial and/or are switching to Freeview (particularly in the 50-60 age bracket). Pay-per-view video on-demand just doesn’t work well. The question most content owners are left asking is how to monetise their archive back-catalogue material to take advantage of the often-toted "long tail" effect where the favourable economics of digital distribution enable rightsholders to sell content that would otherwise be gathering dust in cupboards somewhere. The problem is that people won't pay for it in the same way they pay for premium PPV content.

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