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Pace plc Technology Briefing

OTT : Over-the-top

Dr. Paul Entwistle Head of Investor Relations & Chief Technologist


Wednesday, 9th June 2010

Over-the-Top
Agenda

I will explain :
What OTT is
That TV is part of a spectrum of video content services : OnDemand, DVD, Cinema,
Subscription, Free...
Emphasize that our customers offer Subscription TV and that it is a managed service
That Subscription TV has a strong business underpinning it
That the consumer benefits from the robust, easy to use and upgradeable managed services

And conclude :
That far from a being a threat OTT allows our customers (the Subscription TV providers) to
offer even more services such as Video-on-Demand, Catch-up TV, Interactive applications...
That the continuous (relentless) evolution of these services drives demand for ever more
capable STBs
And that the STB remains the efficient, dedicated, managed device to ensure the delivery of
those services !

Basics
What is a Set-top-box?

STB: Technically standardised, commoditized, retailed

STB: Service provider managed, bespoke, edge of proprietary network

98%*
3

* 98% of Paces 2009 revenue was for service provider managed STBs

Definitions
What is OTT?

OTT (Over-the-top)

(syn. Internet TV)

The delivery of a service often video using the open internet


It can be delivered straight from the provider who could be the creator to the viewer
Without the need for intervening carriage negotiations, or infrastructure investments
(It is independent of the viewers internet service provider)
However, it is unmanaged and quality of delivery can not be guaranteed

IS NOT THE SAME AS

IPTV (Internet Protocol TV)


A managed TV service delivered using internet protocols*
Closed, proprietary network, accessed via a specific internet service provider
Services are optimised and customised to suit the network and end-device capability
Providing control over quality of delivery and end device serviceability

* internet protocols a basic suite of standardised techniques for moving data packets across a network; used on and off the internet
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Over-the-Top
Landscape...

User Generated Content

Content retailers (rent / sell)

Broad range of content (inc. premium)


(Movies, TV shows, Education ...)
High Quality Material
HD, 3D, Surround Sound
Robust high quality delivery
Managed Service
State-of-the-art Device
PVR, HD, Hybrid, VoD, WholeHome

Internet broadcasters
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Multichannel Subscription TV

Traditional broadcasters

Distributing content owner

Subscription TV
Paying for Content

Theatrical

DVD Rental (Launch price, library price)

DVD Sale (Full price, discounted price)

Pay.Per.View
On-Demand

Library
On-Demand
Pay Movie Channels
(inc. subscription bundles)

Paces
customers

< 3 months

Free TV
(Advertising funded)
6 12 months

12 15 months

2 3 years

This [Canvas] is likely to shift value from the DVD Rental market to the PPV / VoD market4
Subscription TV, Video Rental and Purchase
Are different products with different consumer behaviours
6

Source: 4 BBC Trust : Report on the Impact of Canvas on Pay-VoD Services

Subscription TV
Paying for Content

US Video Revenues (2008)

Opportunity for traditional TV


distributors to offer On-Demand

Traditional TV distributors have


very strong consumer brand

Consumers get easy to use,


seamless, integrated managed
service

On their TV, via an STB

Available on todays Hybrid STBs


: DirecTV, Canal+, Viasat...

Total 42B USD


2.1
2.8

Multichannel
Subscription TV

14.5

DTO

9.8
8.2

DTR

Investing in sport :
DirecTV
BSkyB

$4B NFL Sunday ticket


1B Premier league

DVD Rental migration to Download-to-rent [DTR] (eg. Netflix, Seesaw)


DVD Sales migration to Download-to-own [DTO] (eg. Amazon, Apple)

Source: 5 Entertainment Merchants Association,

Subscription TV
How Big is the PayTV Industry?

Global PayTV subscription revenue (2009) :

~180 B (USD)2

Global PayTV STB shipments (2009) :

+120 M2

Global PayTV TV households (2009) :

57%3

US PayTV households (2009) :

94% (108 M)

US top 10 TV distributors subscribers (2009) :

89.3 M1

US top 10* TV distributors aggregate market cap. :

351 B (USD)

US Cables revenue from residential video (2009) :

53 B (USD)1

* Based on 8 of the top 10 (excludes Cox Communications & Bright House Networks)
8

Source: 1 NCTA, 2 ScreenDigest, 3 IMS research

Subscription TV
Paying for Content (example US : 2008)
US Video (2008)

2.1
2.8

Revenue (42B USD)

3
14.5

home video - bought


home video - rental
Theatrical

CREATORS

Premium cable
Basic Cable & Broadcast

9.8

On Demand

8.2

AGGREGATORS
Cable Networks

21B

USD1

ADVERTISERS

Pace
0.67B USD

Broadcast Networks
ABC
CBS
FOX

Discovery
ESPN
TNT

TV DISTRIBUTORS
MSO

(US only 2009)

51B USD1

Comcast
TWC

TELCO

BCST

Verizon
AT&T

Affiliated
Stations

VIEWERS
9

32B USD6
Affiliate fees

Source: 6 Bill Gurley, abovethecrowd.com, 7 DirecTV & Dish SEC filings

DBS
DirecTV
Dish

29B USD7

42B USD

Subscription TV
Putting OTT into perspective
On-demand content:

Apple : 200 TV shows, 400 movies

DirecTV8

: ~6000 titles

Satellite broadcaster - No IP infrastructure


Uses OTT to complement and enhance broadcast offering
Delivered to the TV via the STB

Netflix : 17000 titles

Primarily impacts the 22.7 B USD DVD rental and sales market
Wallmart acquires VUDU (STB and OTT delivery platform)

Hulu : 190 Content Providers

Remember 32 B USD of Affiliate fees at stake !!


9.95 USD pcm to be introduced on some content
Owners: News Corp/Fox, Disney/ABC, NBC (Comcast tbc)

The television industry fundamentally has a subsidized business model that gives everyone a set-top box, and that pretty much undermines
innovation in the sector. Ask TiVo, ask Roku, ask Google in a few months. The only way this is going to change is if you start from scratch, tear up the
box, redesign and get it to the consumer in a way that they want to buy it. But right now, theres no way to do that. The TV is going to lose until theres a
viable go-to-market strategy. Thats the fundamental problem with the industry. Its not a problem with the technology, its a problem with the go-to-market
strategy. Im sure smarter people than us will figure this out, but thats why we say Apple TV is a hobby.
Steve Jobs
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Source: 8 DirecTV SEC filing

Any time, place, ... device


Giving viewers what they want (as long as they subscribe)

TV Everywhere
TWC & Comcast initiative to allow their subscribers to access content on-line
Free access to subscribers
Giving subscribers greater choice of device (and therefore time and place)

Federated approach allows Content Owner portals


No single gatekeeper
Supports important brand identity of creators / aggregators

BSkyB Sky Player


For subscribers:
Access live streaming and On-demand
Through XBox360 and PC
IP is the common communication language of Connected Devices
whether Games Console, Phone, PC or STB...

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Over-the-Top
Summary so far

Successfully being used by Subscription PayTV to complement and enhance


their broadcast offerings with on-demand

Free OTT TV is highly unlikely to replace subscription PayTV (business


model dependence on distribution fees)

Most likely to impact traditional video rental

Initiatives to meet consumers multi-device demands are underway (any time,


any place)

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Technology
Technology

Technology

13

Interactivity
OTT is an interactive app.

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Connected TV
Standards & Specifications

(Software) components of an OTT enabled device:


IP delivery :
Signalling and broadcast service integration :
Presentation and navigation :
Security / DRM :
Metadata :
Audience measurement :
Application run-time and management :

Many pieces no common solution

15

Technical Standards
DVB, ETSI, IEC, IETF

Platform Specifications
DTG

Device & Platform Specifications


Canvas, Bespoke

Solutions for specific technical


tasks

Profile and selection of TSs for a


specific service

Further includes detailed


specification of user experience
(interaction, presentation, quality)

Connected TV
Technology : choices, choices

HbbTV Hybrid Broadcast Broadband TV


European broadcaster supported initiative
Blended not alternate experience
TV optimized browser (HTML / JS / remote control)
Minimal specification to ease implementation
Middleware and device friendly
Completed Nov2009 sent to ETSI for Standardisation

DTG DBook 6.2


Connected TV feature : MHEG xPlayer
Published Mar2010
DTG DBook 7
Working with Canvas and other stakeholders

BBC + Arquiva, BT, C4, Five, ITV, TalkTalk


Detailed and open specification of an internet TV device & platform
Technical details currently confidential / and not yet all available
A solution available without [a content] subscription
(that also allows a pay/subscription business model)
Keeps control over user-interface / navigation and presentation
Seeks to avoid a defacto proprietary solution emerging
Started Dec 2008 products due Spring 2011
Technical homogenisation can not provide the Subscription TV industry with competitive differentiation
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Connected TV
TVs with web

CE Industry
(Walled garden aggregations)
Sony Bravia Internet Video
Panasonic Viera Cast
Samsung Internet@TV
Philips NetTV

Custom integrations

Is there a long-term commitment to maintaining portfolio of content / device software?


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Connected TV
Through a Managed Service Platform

Pace - Innovation Partner


Remember STB is a bespoke managed service platform software updates...
Pace is currently demonstrating Flash Lite apps running on our US HD Cable STBs
Internet applications :
Social networking
Video streaming
Information

Network Services:
In-band
Docsis
OTT
Flash
Lite

Paces EnginewareTM

...

Subscription TV managed STBs offering video rich, OTT applications


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Over-the-Top
Summary

Paces customers (Subscription TV Providers)


OTT expands their service offerings
Being used today : DirecTV, Viasat, Canal+, ...
Robust, secure, upgradeable Managed service

Pace : Trusted Partner, Innovator and Leader


Delivering : Hybrid (OTT), Whole-Home, ...
Demonstrating : Advanced interactivity (OTT)
Increasing need for higher performance and connected STBs

Convergence : expanding Subscription TV with Over-the-Top

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Great products to our


customers every time.