Millions and Millions Served: the OTT Factor

8/3/2019 Millions and Millions Served: the OTT Factor

1/4

2010, All informa on contained herein is the sole property of Pipeline Publishing, LLC. Pipeline Publishing LLC reserves all rights and privileges regarding the use of this informa on. Any

unauthorized use, such as distribu ng, copying, modifyi ng, or reprin ng, is not permi ed. This document is not intended for reproduc on or distribu on outside of www.pipelinepub.com .

To obtain permission to reproduce or distribute this document contact [email protected] for informa on about Reprint Services.

Millions and Millions Served:The OTT FactorBy Tim Young

A ew weeks ago, my fance and I went to go see theDavid Fincher/Aaron Sorkin Facebook epic The SocialNetwork. On the movie poster and in the epilogue

to the flm itsel , it is mentioned that Facebook nowenjoys 500 million users. Thats quite a eat, to besure.

However, it reminded me o something I had read theday be ore, which was that, as o the end o 2009,Skype had 60 million MORE users than that vaunted

Facebook fgure. 560 million users, worldwide,responsible or 36.1 Billion skype-to-skype minutes in

the last quarter o 2009, alone (according to SkypesJonathan Rosenberg, quoted in GigaOm). Over a third

o those Skype sessions included video.

So Mark Zuckerberg may have 500 million riends,but Skypes got that, plus the population o Italy.

But its not just the sheer number o Skype users thathelps paint a picture about the current state o theover-the-top voice and video landscape.

A quick look at Skypes media center completes thepicture. Skype or Android now available just as it isannounced that Android users have eclipsed iPhoneusers in the US and Japan. Avaya and Skype SignStrategic Agreement, emphasizing Skypes growing appeal or the business community. Partnershipswith KDDI and Verizon Wireless paving the way or

www.pipelinepub.com Volume 7, Issue 6

Mark Zuckerberg mayhave 500 million friends, butSkypes got that, plus thepopulation of Italy.
http://www.pipelinepub.com/mailto:[email protected]://www.pipelinepub.com/http://www.nakinasystems.com/index.php?src=src=Pipeline_Nov10http://www.pipelinepub.com/mailto:[email protected]://www.pipelinepub.com/


2/4




Skypes growing mobile reach.

But Skype isnt the end o the story.

On the video side, over-the-top plays rom Hulu to YouTube to Net ix continue to allow consumers theoption o taking an end-run around the conventionalservice provider value chain. With a decentbroadband connection and a properly equippedset-top box ( rom the likes o Roku), gaming console(Wii/PS3/XboX 360), or web-enabled Blu-Ray player,combined with applications that enable web content

rom the likes o Net ix and Hulu Plus, makes ora solid video option at less than hal the price o adecent digital cable/IPTV bundle. (Heck, ever since

the switch to digital over-the-air TV, those whove

opted to cut the cables even have a surprising number o news, weather, and sports coverage rom their local network a fliates, o ten in stellar HD.)

So while OTT services have been utilized assupplements to regular pay TV services or some time(with short- orm video sites like YouTube carrying

the lions share o the web tra fc), signs point tomore and more subscribers getting rid o the pay TValtogether in avor o over-the-top video exclusively.A report rom Yankee Group released in April o thisyear predicted that in the twelve months ollowing thereports publication, 1 consumer in 8 would cut or

reduce their pay TV service and get their video romsome other source.

Why? Yankee Group analysts Vince Vittore andDmitry Molchanov attribute the move to rising costsassociated with pay TV services (and, to quote the oldpolitical chestnut, its the economy, stupid. We know

that programming ees are spiking, but we also know that consumers are in a cost-cutting mode these

days), as well as the proli eration o connected TVsand devices that unction as set-top boxes.

However, I think its also worth mentioning that there has been a substantial shi t in the way peoplelook at (no pun intended) television. DVRs andvideo-on-demand shot an arrow through the heart o appointment-based television, teaching consumers

that they can sidestep scheduling overlaps andendless commercial breaks by moving towards time-shi ted viewing. Once consumers get used to the ideao watching what they want with limited orethought,

the source o the programming becomes immaterial.

The idea that the foesare becoming friends is an

interesting developmentindeed.
https://event.on24.com/eventRegistration/EventLobbyServlet?target=registration.jsp&eventid=260445&sessionid=1&key=6695706DE6264C327BD30DEF63F5494B&sourcepage=register


3/4




The user experience is not terribly di erent or aconsumer watching Net ix on-demand rom a web-enabled Blu-Ray player than it is or a consumerwatching on-demand video rom a cableco.

The narrowing o the substantive gap between traditional CSPs and OTT providers can also beseen in the voice realm. A June 2010 report byBusiness Insight points out that conventional

telecommunications companies are among thelargest providers o IP voice services. While theprocess is undamentally di erent rom the CSPsperspective, in terms o the direction o revenue andwho is stuck with the bill or network maintenanceand expansion, the experience o the end user is not

undamentally di erent, in many cases.

Add to that undamentally shi ted user behavior the success o Skype. Throw in the proli eration o Google Voice. Add on other applications that cutinto traditional revenue streams like Text ree (whichenables texting or those with no text plan) and, rom

the same company, mobile VoIP app Pinger. Not onlydo you get a possible reduction in ARPU, you get asituation in which some users can opt to use an iPodTouch, plus some OTT apps, rather than an iPhone.

But there are, some may say, undamentaldi erences in user experience or OTT applications.As a whole, over-the-top providers lack the networkvisibility that traditional CSPs have. Furthermore,while subscribers may stick to low- or no-cost voiceand video applications, QoS is a real problem, and

thats without even getting into net neutrality issues.(By the way, i you havent checked out Ed Finegoldsarticle on net neutrality in this issue, its defnitelyworth a look.)

And revenue continues to be an issue. Skype gets bywith its SypeOut revenue, but as an IPO looms closer,revenue will increase as a concern. Meanwhile,

ComScores ormula or keeping track o OTT videoratings has undergone changes that have hurtproviders, like Hulu, that depend on ad revenue

to pull in their bucks. This summer, ComScoresaccount o Hulus viewership plummeted rom 43.5

million in May to 24 million in June, according to theLA Times, a ter the company revised its methodology.

In that same LA Times article, Tim Hanlon, a Chicago

digital media strategist, is quoted as saying, Itsmaddening. You would think 15 years on, we wouldbe in a better place. But were still talking about

undamental discrepancies in things like pagecounts. (Article here: http://articles.latimes.com/2010/jul/26/business/la-f-ct-hulu-20100721 ).

In addition, Google has hit an uncommon snag (i youdont count that whole China thing) as its Google TVservice ran into opposition rom execs at the majornetworks over business model protection, though thatstory circles back to the issue thats at the heart o

the struggle between CSPs and OTT plays.However, there are reasons to believe that, at leaston the video side, OTT plays may not be quite asdisruptive as was once believed. Tal Givoly, Chie Scientist or Amdocs, sums up the potential reasons

or the possibility or reduced divisiveness in his blog,noting that customer demand or OTT video alone,without pay TV, is still marginal, noting that what theyreally want is enhanced unctionality with as littleadded complexity as possible.

Givoly also points out that there is a clear reason or

an alliance between satellite players and OTT videoplays, since most o the OTT video will actually beconsumed across someone elses network. Also,IPTV players, who generally own less paid content andhave a newer set-top box environment, or the mostpart, have a rational interest in supporting OTT video.That leaves cablecos who, once their chie access-

technology rivals have allen in line, will get on boardwith OTT as a me-too maneuver. This leads Givoly

to predict that all TV providers will have OTT videoaccess capabilities built into their set-top boxes within

the next ew years.

And it is within this potential usion that many o the core OSS issues associated with OTT servicescan be resolved. CSPs have the level o access to

the network that can complete the QoS puzzle orOTT plays, and a visible partnership will eliminate
http://articles.latimes.com/2010/jul/26/business/la-fi-ct-hulu-20100721http://articles.latimes.com/2010/jul/26/business/la-fi-ct-hulu-20100721http://articles.latimes.com/2010/jul/26/business/la-fi-ct-hulu-20100721http://articles.latimes.com/2010/jul/26/business/la-fi-ct-hulu-20100721


4/4




the need to uriously protect networks against OTTrevenue.

Going back to the Skype example, 560 million is

a huge number, and this growth is in spite o thevery quality issues that are central aspects o thearguments that OTT plays cannot truly replace

traditional communications services. With skirmishesover net neutrality, network access, marketshare, andinnovation raging, however, the idea that the oes are,in many cases, becoming riends is an interesting development indeed.

Documents

Millions and Millions Served: the OTT Factor