Open Mic - Challenging opportunities for delivering personalized content, advertising

Wed, 12/31/2008 - 7:15pm
Joe Matarese, Vice president and general manager of the On Demand Business Unit at Arris Media Communications Systems

Broadband video on the Internet is going through an explosive growth.

We know we live in an “on-demand” world. From the early days when consumers set their VCRs to record a broadcast program at a specific time, through pay-per-view, hard drive disk recorders and VOD services, there has been a steady growth in consumers’ ability to capture and view content on their own schedule. VOD titles have grown more than 35 Joe Mataresepercent in 2007 to 186,000 unique titles, and VOD orders grew more than 51 percent in the same period to three billion orders. Similarly, DVR and VOD viewing has grown from 2 percent in 2005 to 6 percent in 2007 for all TV viewing per household. Now, with ever-faster high-speed data offerings from service providers, high-quality “over-the-top” video, advanced by sites like Hulu, has begun to proliferate.

To anticipate the ultimate endpoint of this trend, one need only look at the Internet to see a pure unicast delivery model with all known content available on any device at any time. Broadband video on the Internet is going through an explosive growth, and new broadband video aggregation sites are seeing video consumption triple in 2008. YouTube uploads more than 13,000 hours of new video per hour on a daily basis.

Although the endpoint of ubiquitous on-demand video is in sight, there are still technical and market challenges that fall into four broad areas: bandwith capacity, business models, content rights and intersystem (“multiscreen”) architectures.

Under the appropriate cable TV network design, the bandwidth to support two-way, unicast home delivery is within reach, as can be demonstrated with some simple, back-of-the-envelope arithmetic. Assume an average narrowcast service group contains 500 digital tuners. A concurrency rate of 60 percent, reflecting peak busy hour TV viewing, implies that each service group must support the delivery of 300 video streams simultaneously. Factoring in reasonable blocking probabilities (1 percent) that result from traffic analysis, such delivery requires at least 33 digital 6 MHz channels (often abbreviated as QAMs) if all of the video is SD. Considering MPEG-4 AVC HD video compressed at 6 streams to a QAM, at least 55 QAMs are required at reasonable blocking probabilities. Although spetctrum must continue to be shared with data services and with the remaining broadcast analog television services, the cable industry is clearly within striking distance of sufficient bandwidth for this Utopia.

Assuming sufficient bandwidth, there is also the issue of business models that we contend will be subsidized by advanced advertising. Advertising in an on-demand world is highly personalized to the content and household, making the ads more relevant and valuable. While interactive and addressable advertising promises an important differentiation point for cable operators, dynamic VOD advertising, first pioneered by cable operators and now gaining popularity for online video distribution, remains the most true to the notion of television as a “lean-back” entertainment experience. With a 300,000-subscriber VOD system, an operator can generate gross advertising revenue of $625,000 per month, assuming four ads per asset and $65 cost per thousand impressions. This equates to more than $7 million per year, shared with program suppliers. Expand this to larger systems and the industry can achieve close to $2 billion in new ad revenues per year.

Closely connected to advertising-savvy business models are content rights. While transactional and subscription programming will persist (requiring digital rights management systems that protect copyright holders from unauthorized, unpaid viewing), advertising promises to expand content availability precisely through the authorization and proliferation of unpaid viewing, as long as the end-use ad placement can be verified.

Lastly, multiscreen applications offer a bold frontier for the construction of compelling and convenient services that add to cable’s “bundle.” Perhaps the greatest challenge in this arena is to resist the temptation to replicate every service across every screen, as naively advanced in a recent advertisement by a large telco service provider, and instead focus on intersystem synergies. Personal computer applications will continue to dominate in usefulness wherever subscribers desire to perform significant data gathering and analysis, perhaps associated with multi-personal communication. Home entertainment systems will only increase in sophistication as the best venue for an immersive multisensory experience in a passive setting. The strength of the overall service bundle depends most heavily on harnessing not the similarity in platform capabilities, but rather the diversity.

In summary, individual, demand-driven content in an anytime and anywhere environment is within the reach of reality. In the next two to five years, we will experience continued growth in on-demand media extending beyond the 10-foot TV screen into new media platforms that will be driven through highly personalized advertising and commerce transactions. At long last, we truly have reached the home stretch.

Guy Cherry and Paul Delzio of Arris contributed to this article.


Next month: the Comcast Media Center’s John Roy
will write about the cable industry’s transition to an all-digital environment.

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