IPTV/VoD: The world that's on its way
Part three: We're only 1% of the way there
Industry comment A lot of frustration is levelled at content providers and it's very easy to see why. Dealing with the studios and production companies can be like pulling teeth if the approach isn't correct.
Surprisingly, dealing with record labels is actually very easy as they've had five years or so of violent erosion into their sales from the establishment of a piracy market for digital files and the new market forcing change upon them involuntarily.
As Universal's recent gesture of opening up its catalogue for free suggests, it has come to accept a new role as wholesaler, will licence to anyone who asks to get its products distributed as widely as possible, and now refuses to deal exclusively with anyone.
The market for digital distribution is already there in the form of piracy. The labels now understand what their retail customers have been telling them for years, and that is the new model in a world of universal ability is aggregation, paid for by revenue-sharing and advertising.
Digital sales are now contributing up to 20 per cent of their total revenues and the profits are piling in. If only their big brother companies in TV and movie-making would listen. They are paranoid about falling into the same trap the labels allowed themselves to walk into, but still won't open their ears.
The attitude these two types of industry share has come to be known as the "Ivory Tower Complex". The conventional way of doing things up until now has to be to spend huge amounts of money on producing high quality content that is licensed exclusively through the rights model to one or two specific customers on a very, very limited basis. That exclusivity commands a lucrative premium. Understandably, they want that to continue, and in some ways it will as people will always be attracted to the premium titles they produce before anything else.
Unfortunately, as the evidence from the music industry shows, the world that's coming isn't going to work like that. Content will be distributed as widely as possible all over the world, to as many different people as possible for maximum profitability. Their products will compete with those from niche markets catering to a specific taste rather than a generalised audience. That means they will lose that lovely premium, and it's quite upsetting.
Luckily, the exciting news is that universal distribution will most likely make them up to 50 times more money in the long term that exclusivity would. What they lose in exclusivity, they will make back in spades through volume. The longer they resist the inevitable, the more painful it will get. Whoever strikes first will conquer.
So assuming they come to adopt this new way of doing things, there will naturally be obstacles in their path as there are with all new technologies and markets. One of the biggest is the industry's new panacea – the so-called "Long Tail", and its "digitisation problem".
The Long Tail is a great idea and a potential source of a lot of lovely revenue, but it has some very crucial flaws which are currently preventing it from becoming a new model for content providers. It's the most basic of issues, namely how on earth you monetise back catalogues of content that no-one will be prepared to pay for in pay-per-view style.
Digitising and storing millions of hours of archives tapes is a formidable challenge, so the only sensible business decision is to provide the most popular 10 to 15 per cent of titles at first. This will mean we will see cascading availability based on viewer demand, and store-for-free/pay-for-playout businesses.
Ninety per cent of the content of the world is not sellable by the conventional mechanism of pay-per-view. It's a sobering thought. Viewers just won't pay for it, even in micro-transaction or through subscription. The most popular video on-demand services are free (for example, so-called "Catch-Up" TV services that allow you to watch programmes you missed), like all products.
That leaves only one viable option as the primary means of recovering the costs of digitisation and monetising the content – advertising. Google, AOL, Universal, YouTube, and others are already flirting with ways to marry advertising content with either the subject of the content being viewed and/or a viewer's personal profile and preferences. Only a fool would follow it as the only route, and as the dotcom and Web 2.0 herd showed, there are a lot of them out there. It may not perfect, but it's a reasonable start.
That principle demonstrates a very simple rule which applies to advertisers, their agencies, and those who want to support their services using the old commercial broadcasting model. The new advertising "space" to be bought by media buyers on on-demand systems is the ability to watch for free. Subscription mounts as a premium service very nicely on top if the ads become too intrusive, and it means advertising can be dynamic and personalised rather than static and perpetual. But it also creates a further problem. Advertising always generates a surge of technological innovation for products that remove it.
There are many people saying they believe they have the answer to the problems the IPTV industry faces. Don't believe them. We can't know every problem that will arise or whether the answers will be suitable forever, or even now. The huge revolutionary hyperbole being spouted by marketing charlatans is coming to be seen as the puffery that it is. On-demand is not a revolution, neither is aggregation as a business model. The simplest example is a common supermarket. Aggregation is the natural and sensible answer when there is massive diversity and breadth of available competing products in a marketplace.
We buy things from supermarkets who aggregate food products on-demand when we feel like it. On-demand is the most natural way of doing things mankind has ever devised. On-demand is the way we already do everything else, and have done for thousands of years. It is not a revolution.
The key question is one Rupert Murdoch is closely focusing on and is a master of. When we have all the technology in place and serving up every piece of content imaginable, how do help people to consume it?
Technology is developed by early adopters for early adopters, and is only made a success of by commercial specialists who natively understand the social anthropology of buying products. Technology assumes customers will "pull" it or "search" for it. Tradition and centuries of experience show we need to "push" it to them in some way, whether through a review by a journalist, pushing a free newspaper in their hand, or bombing them with advertising. If they don't know its there, they can't buy it, use it, or watch it. Websites that provide feedback or notifications to their users have massively higher retention rates than those who assume their customers will do all the work.
The quickest way to observe the generational difference in how people watch television is to study your parents, as they typically sit on their sofa in a virtual coma, Homer Simpson-style, while they are spoon fed.
Prevalence relies on huge marketing budgets, and it will be no different with the next generation entertainment that IPTV provides. No one has given a thought to the QVC and/or Saga audience, who make up the majority of people who got Freeview to its dominant position in the UK television market. Too much choice is damaging and intimidating. Google "glues" web surfing together by helping users to find their way around the web from place to place. TV is a passive social medium used for entertainment, and an experience shared by several people in the same room.
But herein lies a huge opportunity to "add value", as pretentious middle managers would say. With millions of channels, and millions of hours of content, we need help filtering through it to find the things we want to consume. The most advanced websites now do this with a mixture of community rating and recommendation engines that automate the process of making suggestions.
Human intervention will almost always be needed in this process. We may meta-tag every frame, translate audio subtitling into text keywords, and build up all the purchasing profiles we want, but the human condition means we will always need someone to explain and help us find our way around. And the good news is that people are happy to pay for that filtering as it takes away pain and adds quality. Nobody cares how the content is delivered.
To experience the phenomenon of choice and content overload, you just need to visit one of the latest websites based on providing user-generated content (UGC). It'll take a few minutes to get lost in it before you reach for a top 10 or most popular list. These services are reporting a new trend called the "one per cent rule" where one per cent of their users actually generate content, nine per cent moderate it editorially, and the remaining 90 per cent are happy to just be entertained without getting involved in any way. IPTV opens the door for anyone to create their own TV and radio channels, and publish their own content and software applications to anyone else in the world. The technology may be new, but the way it is consumed won't change, nor will human nature.
Even user-generated content itself isn't new. In the UK, one of the first examples was the appallingly bad TV show You've been framed! presented by Jeremy Beadle, where viewers sent in home video clips of them suffering dreadful accidents and/or humiliating experiences for a cheque of £250 in return. If you're planning an IPTV launch, please do not include that monstrosity.
There are also warnings to the intrepid and an industry that desperately needs to pull it socks up if it's going to make its mark in the way it wants to. IPTV currently is very little other than cable TV put down telephone lines.
There is 50 years of incredible innovation ahead that could see us powering the greatest revolution the media industry has ever seen, but so far our imagination has produced one per cent of what we could create if we worked hard enough and collaborated for a greater cause. The IPTV software applications on the market today are simple re-hashed clones of what is available on the normal platforms and feature very little that's interestingly different or compelling. It's no wonder customers are underwhelmed and becoming cynical.
Trying to re-create the same experience on every device just because it speaks internet is a fool's pursuit. Screen size, battery life, usage patterns, and so many other variables mean that it's impossible. We may be able to synchronise tightly and create applications that compliment each other and interoperate, but replication is the fools gold of convergence. Video transferred across and between these applications and devices also needs to be far more intelligent in itself, with audio analysis, frame-by-frame tracking of objects, and more extensive meta-labelling.
It's very easy to forget that IPTV is more than just a convenient luxury in our affluent Western cultures. We have so much choice and opportunity that we miss what it is doing for less wealthy nations who don't have our infrastructure or resources. Internet technology is transforming these countries by democratising access to the media business and regenerating economies by educating the poor through e-learning applications. These places don't second guess, weigh up spreadsheets, or analyse opportunities when they see a way to revolutionise how they live. The Third World is adopting IPTV as a technology and showing a lot more imagination than we are, despite us thinking we're the cleverer ones because we have more money flowing through our banking systems. In 20 years we will regret that complacency.
The greatest achievements, most successful companies and products, and the most world-changing revolutions have come from taking risks and stepping out into the unknown with new ideas. This preoccupation with paranoid risk adversity and sensitivity over investment portfolios has come to infect almost everything we do and it's slowly decaying our ability to produce, implement ad market new ideas because of the heavy price we put on our heads for failure.
There is a bigger picture at work in our world that needs to be considered that demands we act with courage and the wild energy of inspiration to achieve what this technology could empower and enable us to. Our culture is becoming more and more insular and ingrown when it needs to reach out and generate wonder in all that experience it.
And if you need a reason to do it, there a very simple one.
This world is already on its way. It's coming.
To do it will be one of the greatest undertakings the media industry has ever witnessed. But it can be done, and we will do it. Someone has to step forward. We'll lead, you follow. Pack a helmet and a strong stomach as we'll be getting blood and dirt on our hands. Consider this your invite to join us.
Digital TX Limited is a London-based provider of technology and consultancy solutions for interactive digital television and broadband media. Alexander Cameron can be reached at [email protected]
As well as co-ordinating the birth of the IPTV Consortium (IPTVC), Alex is now offering a great value one-day workshop course on IPTV and Video On-Demand (VoD) specifically for web and media professionals. It can help you get up to speed on the latest technologies, content deals, operators and applications across the world, and offer immense value in identifying both new opportunities and threats for your business and personal career. If you would like more information, call Alex on 07986 373177 or email [email protected] Readers who quote The Register as their source will receive a 10 per cent discount on the course fees.