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By David Keeble
When Cartt.ca was in Banff earlier this month, senior editor Lesley Hunter quoted the CRTC Chair Konrad von Finckenstein saying, with respect to over-the-top video (OTT), that he prefers to deal with “facts, not spidey sense.”
I sympathize. The broadcasting industry has sometimes had a tendency, in the current parlance, to “embellish” a bit. “Death Star”, anyone? And in the absence of a spidey-sense (a very high standard, incidentally – I don’t recall that it was ever wrong) it’s not always easy to distinguish fact from creative invention.
However – “facts”, as they appear to the Commission, are usually events that occurred more than a year in the past – it takes that long to measure and report. And we no longer live in an environment that gives us the luxury to respond at that speed. John Chambers of Cisco Systems, in his 1999 keynote address to the Consumer Electronics Show famously said, "If you miss the market by one quarter, you lose 20% of the market. If you miss it by two quarters, you might as well not enter it at all." In other words, if you want to stay in business, you have to respond to developments that aren’t “facts” yet. And to his credit, the Chair also said, “It’s moving very fast and I don’t want to have to deal with it when it’s too late.”
So you have to project, to predict. And I must say, in a consulting career in which I’ve spent considerable time predicting technology adoption (lifetime average: not bad), no trend has been as complex to predict as the growth of over-the-top video.
To begin with, there are lots of platforms involved in the mix. Typically, technology adoption involves one platform displacing one or possibly two others: how fast will DVD replace VHS, or HDTV sets replace NTSC sets? When it’s a direct substitution, one compares the convenience, cost, and content choice of the new platform against the old one, and plots an aggressive or a conservative S-curve of adoption.
In some cases, one has to factor in the interests and inertia of established players, a lesson I learned when, in 1999, I overestimated the speed of PVR adoption - a compelling technology, but one that ultimately needed an established content and data distribution infrastructure behind it before it could take off.
But OTT is another animal altogether.
OTT is not a new platform in itself, but a business subcategory within online video, and online video is one of five platforms competing to do the same thing: provide the viewer with on-demand television.
So the first question is on-demand versus linear. There are those in the industry who believe that everything will be on-demand in the medium term – at least on odd-numbered days. On even-numbered days they can see the strength of linear, which, one has to admit, has proved remarkably resilient despite popular predictions of its demise.
And then, within the on-demand experience, one must recognize that the viewer can satisfy it through at least five platforms: through physical media – DVD/Blu-Ray; through electronically purchased digital media (e.g. iTunes), through the use of the PVR; through the use of BDU-delivered VOD; and through the use of online video-on-demand, further subdivided through computers, internet-connected TVs, tablets, game-platform-connected TVs, and, lest we forget, mobile devices of various kinds – adding the dimension of location ” to the mix.
These on-demand platforms compete with each other in a free-for-all, so the prognosticator must compare them all with regard to convenience, cost, and content, while considering whether various players already in the value chain will inhibit or encourage the new platforms.
With respect to the “content choice” comparison, it was generally accepted, until Netflix came along, that there wasn’t much of a business case in providing content to consumers over the Internet, but the threat of content piracy led providers to do it anyway. (Seemingly, the growth of Netflix has changed that perception, though Netflix also has its nay-sayers, too.) So it’s necessary to factor some supplier reluctance into the “content choice” side of the equation.
And finally, one must consider that there is no such thing as “the viewer”, in this context. Different demographics behave differently with respect to these platforms, so any prediction has to consider the weight of different demos in the population, now and in 5-10 years, and also how each demo’s behaviour may change over time.
I realize that this may make it sound as if projections are impossible. They aren’t, though: they’re just complex. In fact I did some projections a year ago, in the context of a “future of broadcasting” project undertaken with Peter Miller. At that time, we calculated a conservative estimate that on-demand would constitute 17% of all viewing by 2016, and a more aggressive estimate – one significant differentiator being the development of a successful online video business case – would place it at 23%. Online VOD was projected at 4% and 7% of all viewing in the respective scenarios.
A year later, these figures will appear quite modest to some in the industry, given the arrival and growth of Netflix in that time.
So the question is, what projections will be offered in the CRTC’s current OTT “Fact-Finding” exercise? If the industry consensus is near our earlier projections – or higher – it seems to me the Commission ought not to wait for this to happen, measure it, and respond two years later.
Viewing numbers like those certainly challenge the notion that regulation of “new media broadcasting” would not contribute to achieving the goals of the Broadcasting Act. Clearly, we haven’t reached those numbers yet, (CBC’s Director of Strategic Analysis, Mark Allen, put online video at 2% of all viewing in a CMPA presentation this year) but OTT is here – it is a “fact” if you like – and it’s a fact that’s growing. The only question is how to integrate it into the system.
And that means some kind of regulatory change – but it also means changes in how we do business. So it will be interesting to see how the parties deal with two strategic questions.
The first is measurement. If Internet delivery is to be part of the system, the integrated system that chairman von Finckenstein described, then we have to come up with a better way to do cross-platform measurement: apples-to-apples comparisons of the various platforms that are competing for viewer video time. This kind of tool is needed to understand the impact of these changes, and for practical purposes like a multi-platform advertising currency.
Publicly available data either leaves out some platforms when making a comparison and/or employs different methodologies for each, so that a cross-platform comparison requires translation – of “videos viewed” to “time spent”, for example. There is survey data, of course, which is useful for adoption rates, but adoption is not usage – and it’s been demonstrated that survey respondents substantially over-report their usage of new “cool” platforms and under-report the traditional. So it will be very interesting to see what metrics the integrated companies have been able to assemble, and what they are willing to share.
The other issue is identifying the emerging consumer trends, not just those that are here already, like OTT.
In 2006 I proposed, in a paper written for the Canadian Association of Broadcasters for the CRTC’s Technology Review, that the battleground of the multi-platform future was is the consumer’s drive for seamless availability of the media experience.
Technology changes cycle – sometimes integrating all functions onto one device, other times exploding into multiple devices and experiences. Currently, consumers are faced with a disaggregated multi-screen media experience. They must negotiate multiple connections and multiple subscriptions and must re-connect as they move from one device to the next. The provider that can solve that major convenience problem – combining it with a good choice of content and reasonable cost – will win.
Currently this need is not top-of-mind in the industry, though some firms are moving to address it. Perhaps the problem can be solved with software combined with all-Internet delivery – Apple certainly seems to be heading in that direction – and that may serve the active video consumer very well.
I suggest that this is an area where the Canadian integrated companies can shine against their OTT competition through their mastery of multiple connections? They can have an advantage here – knitting linear, on-demand, and interactive experiences together over both traditional and new infrastructures. This goes well beyond bundling of costs and into the experience itself. They are well positioned to create a seamless experience, though adapting their legacy infrastructure and cultures will be challenging.
Where they are at a real disadvantage, however, is in regulation. There is no question that the licensed television system is very thoroughly regulated, and yet their direct competitors in the “new media broadcasting” world have no obligations whatever. No Canadian content offer, no CPE, no reporting requirements, not even closed-captioning or described video. Peter Miller’s recent paper on rights for the CRTC deals with some of these issues in his discussion of a separate Canadian rights market. The intervention of regulatory imbalances deserves a thorough analysis.
It seems to me that Canadian companies need to make a strong case in this “fact-finding” exercise and the proceedings that hopefully arise from it. They will have to go beyond “facts” to do it, however – let’s hope the Commission is prepared to take their projections, their strategies, and their imminent challenges into consideration as they consider their next steps in adapting to the multi-platform world.
David Keeble is an independent consultant in Ottawa focusing on broadcasting, new media and the cultural industries, particularly the impact of new technology. His clients have included, among others, the CRTC, Rogers Media, the Department of Canadian Heritage, Astral Media, the Ministry of Culture for Ontario, and Bell Canada, as well as the CAB, for whom he was also the senior vice-president of policy and regulatory affairs (2004-2006), and the CBC, for whom he was senior director, strategic planning and regulatory affairs, up to 1998.
Source: Cartt | June 28, 2011
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