Article by Analysys Mason Senior Analyst Cesar Bachelet:
Analysys Mason recently attended IBC (International Broadcasting Convention) 2013 in Amsterdam, which was an opportunity for a range of vendors to showcase 4K (Ultra HD) content and second-screen companion services. However, of most interest to us was the behind-the scenes debate about cloud-based services and the future of customer premises equipment (CPE). There is a continuum of opinion among vendors, ranging from the cloud-centric to the device-centric. This article looks at some of the reasoning behind the approaches of different vendors.
The impact of cloud-based services on CPE was one of the hot topics at IBC 2013
The most noticeable thing at IBC 2013 was the proliferation of demos featuring 4K (Ultra HD, also referred to as UHD) content, such as those from Elemental Technologies, Ericsson and SES. We anticipate that it will take some time for Ultra HD to gain traction among consumers despite the industry’s enthusiasm for 4K, notably because of the relatively high, albeit slowly declining, price premium for 4K TV sets.
We wrote about second-screen companion services following last year’s show, and it was interesting to note that the concept is now gaining traction among broadcasters. Some are investing in underlying technology such as automatic content recognition (ACR) and databases of contextual information from vendors such as Civolution, in order to be able to deliver such services across all their programming, rather than as ‘one-offs’ for specific TV shows.
Various vendors at the show, such as Alcatel-Lucent and Cisco, advocated cloud services, notably cloud PVR, for various reasons, including the following.
•It solves two problems at once: Not only do cloud PVR services enable operators to reduce the cost of CPE by doing away with expensive and potentially failure-prone hard drives within set-top boxes (STBs), but they also enable subscribers to access their recordings anywhere from any Internet-connected, video-capable device as part of a multi-screen proposition. This was one of the key benefits Alcatel-Lucent highlighted.
•Faster time to market: Cisco stressed the agility that cloud services can bring to operators. Cloud PVR services can be deployed rapidly all at once across the subscriber base, because individual consumers do not need to upgrade from a standard STB to a DVR in order to gain this functionality.
•Future-proofing: Cloud-based PVR services have the potential to offer storage capacity that increases in line with demand, as opposed to ‘physical’ DVRs, which are generally constrained by a finite amount of storage. This demand can then be monetised through tiered subscription packages or bundling strategies.
The approach is now gaining traction. An increasing number of operators, including telcos KPN (Netherlands) and Swisscom (Switzerland), as well as cable operator Telecable (Spain), have recently opted for cloud-based PVR services for their subscribers.
However, many other operators, including cable operators Com Hem (Sweden), UPC (Europe) and Virgin Media (UK), as well as satellite pay-TV operator Dish Network (USA), have recently invested heavily in CPE to enhance their video services. This approach seems to go against the trend towards cloud-based services, but it also has its justifications.
•Content rights: EchoStar pointed out that, although content owners are generally becoming more flexible in their approach, cloud-based PVR services are less viable in certain markets, such as the USA, because the operator is required to store individual copies of recordings for each subscriber.
•Bandwidth: As pointed out by SoftAtHome, cloud-based services increase the number of unicast streams on the network, and are therefore only viable if sufficient bandwidth is available.
•Local storage within the home: According to Netgem, some consumers still prefer to store certain types of content within the home. Local storage is not dependent on connectivity, so subscribers still have access to their recorded content in the event of network congestion or failure.
•Physical presence in the home: Devices such as DVRs are a highly visible symbol of the operator’s presence in the home. Many operators that recently invested heavily in devices partnered with desirable brands such as Samsung and TiVo, making them more affordable to consumers through the subsidised device model.
Cloud- and device-centric approaches are not mutually exclusive
Cloud-centric and device-centric approaches do not necessarily conflict with each other, even if that appears to be the case. Some operators are now opting for a hybrid approach, combining storage within the home with cloud-based storage in order to get the best of both worlds. Swisscom’s cloud PVR service stores subscribers’ recordings both in the cloud and on the DVR, and Liberty Global (UPC) plans to launch cloud-based versions of its Horizon service, making it easier to support delivery to multiple types of devices. Looking to the future, both camps acknowledge the need for an operator to supply CPE in order to ‘orchestrate’ various operator services in the home. This CPE needs to be more cost effective, at lower capex to the operator while enabling new revenue streams, including non-traditional services such as home monitoring and security. The only real difference between the two camps is where the video processing and content storage capabilities reside.