NBN and IPTV
The creation of the national broadband network will mean a great challenge for broadcasters as audiences gain the ability to access IPTV. David Braue looks at the environment they will have to embrace.
If Robbie Minicola has her way, the next generation of TV broadcasting won’t be broadcasting at all. Rather, consumers will be able to pick and choose whatever content they want to watch – in particular, current and past television episodes – and stream them right to their lounge rooms.
It’s hardly surprising that her vision revolves around on-demand video: she is CEO of Hybrid Television Services, the local distributor of the TiVo personal video recorders (PVRs) whose runaway popularity in the USA almost single-handedly created the crisis in which many broadcasters find themselves.
TiVo’s time-shifting and ad-skipping challenged traditional advertising-funded models, all the more so because they were hugely popular with consumers. Yet even as the free-to-air (FTA) broadcasters close ranks around Freeview – their industry supported, feature-limited alternative to TiVo and Foxtel’s own iQ PVR – a new development is threatening to rock their worlds and bring the on-demand vision to fruition.
That development is the National Broadband Network (NBN), which emerged from years of empty policy promises in July to see the first tender for construction works issued.
Tasmanian customers will be the first to benefit from the NBN, a $43 billion monster that will – assuming the political will remains, the technology works as expected and the funding can be found – propel Australia’s internet services to a whole new level.
Like the electrification of distant towns in the early 1900s, the NBN will bring a flood of data to towns large and small, urban and rural. Fibre-optic cables will reach 90 percent of Australian households and businesses – including many underserviced regions that, due to lingering vagaries of geography and the urban-focused telecommunications market, are still struggling with 1990s-era dial-up internet services.
The NBN is about much more than faster web surfing: health, education, business, and a myriad of other areas all benefit from cheaper, easier connectivity. But it is the TV industry that may feel the sting the most: broadcasters will face a dramatic power shift as consumers all across the country gain the ability to stream multiple channels of high definition video straight into their homes.
The airwaves will no longer be the only source of high-quality video, thanks to IPTV services carrying video content using well-established technologies that have learned to compensate for the historical lack of adequate bandwidth. Point those same technologies at a fat internet connection, and you’ve got a sea change in the way broadcast content is distributed.
Mike Quigley, appointed in July to head the NBN Co that will deliver the new network, made it clear early into his tenure that conventional broadcasters are on notice: “None of us knows what some of the [new] applications are going to be,” he told the Australian Financial Review within days of his appointment, “but voice over IP and video we will have to carry, IPTV we will have to carry.”
It’s a long-running vision that has been slow in the making, held back by factors including the limited reach of pay-TV, a lack of adequate broadband capacity, and reservations from networks and content producers nervous about diluting the value of their investment in digital TV and its attendant multi-channeling. Yet if PVRs empowered consumers to control their experience of old-school broadcasting, the NBN will allow them to bypass it altogether – and broadcasters will face a new environment whether they like it or not.
“The old business model of television is not going to be repeated over the NBN,” says telecommunications industry analyst Paul Budde. “Once you have 10 or 20 percent penetration of 100Mbps services, you start seeing that a whole new range of media are going to be developed. And the advertising-driven, sequential broadcast model is unlikely to survive; instead, it’s going to be much more like YouTube, but on steroids.”
EVERYTHING, ON DEMAND
That’s music to the ears of pundits like Minicola, who has overseen an Australian launch for TiVo that has failed to ignite the market as it did in the US a decade ago. PVRs are everywhere these days – in Freeview, in third-party devices, and even built into new TVs from LG and the inevitable slew of competitors.
TiVo needs a differentiator to secure its place in the broadcasting hierarchy, and Minicola is convinced the NBN is it. “The NBN is probably of similar importance to the analogue switchover to digital,” she explains. “This service is going to pump a lot of content and entertainment into this country.”
Over time, Minicola envisions TiVo allowing customers to not only watch the content they’ve recorded from on-air broadcasts, but to choose video from an ever-growing library of content that’s hosted by content providers. Missed an episode or ten of Lost?
No problem: TiVo will stream it over the NBN to your TV set-top box in real time. With a full HD video stream weighing in at well under 10Mbps, the sheer amount of bandwidth available across the NBN will finally eliminate the need for the technical compromises necessary for streaming video today.
The company has already taken its first steps towards delivering this vision: in April, it launched its Blockbuster Movies on Demand service, which pushes movies to customers’ TVs on an on-demand basis. Early trials confirmed customer interest: a four-month trial with just one movie per week found that nearly three-quarters of TiVo’s Australian customers downloaded movies – 61 terabytes’ worth of data, or around 60,000 movies.
TiVo Australia now offers nearly 200 on-demand movies at a casual rate of $5.95 for new releases. Partnerships with Internode and Adam internet offer the crucial ability for customers to download content without incurring extra bandwidth charges, something Minicola says will be even more important over time as the NBN’s massive bandwidth brings video-on-demand services into the mainstream – and empowers TiVo to expand its range of on-demand content to include TV shows and music libraries.
In the NBN future, all video content could be available for consumers to stream at will – potentially delivering a knockout blow to protectionist models of content distribution that have for years been based around artificial release windows and regional restrictions. “Linear delivery of long-tail content is simply going to disappear,” Minicola explains. “In two years, if we have not wowed Australia with a prolific, exhaustive library of downloadable TV and movie content, we will have done the NBN a disservice.”
IF YOU BUILD IT, THEY WILL COME
While greater access to on-demand content might seem like the beginning of the end for broadcasters, the FTA giants are hardly going to take the change lying down. For example, experiments with on-demand video (as espoused by the ABC’s iView service) and catch-up video (used to great effect in series such as the Ten Network’s recent Masterchef run) have confirmed the Australian public’s appetite for getting their on-demand content online.
Figures from SBS confirm its extensive online broadcasting of the Tour de France and Ashes cricket helped propel the network to unprecedented viewer numbers: video views for the month reached 3.1 million, up 51 percent, while visits to sbs.com.au were up 44 percent over the same time.
Attractions such as live streaming of all Tour de France events added to the appeal, with visits for the bike race site (www.sbs.com.au/tdf) up 68 percent over 2008. SBS reported that it delivered an average 246,000 video streams during the month, with viewers watching for an average of 26 minutes each.
Such results suggest a voracious appetite for online sports, and the greater bandwidth of the NBN can only improve the opportunities for broadcasters as boosts to bandwidth allow content to be distributed at even higher quality. “The key issue for iView is the whole way that broadband is sold in Australia,” says Kim Dalton, director of television with the ABC and chair of Freeview. “Australia is just increasingly out of step with the developed world in terms of the fact that our broadband services are still capped.”
Recent efforts confirm the broadcast industry’s acknowledgement that on demand video is inevitable: the Freeview specification, for example, includes an Ethernet plug that will facilitate streaming video and content services.
Proliferation of such devices will facilitate a restructuring of FTA and pay-TV business models, both around geographic reach and availability of content. FOXTEL, for example, has already shown great interest in IPTV, trialling the technology some time ago in anticipation of an NBN that will pass around 10 million properties. FOXTEL stopped expanding its own network a decade ago, but access to the NBN’s fibre will allow it to potentially quadruple its current base of 1.5 million subscribers in 2.5 million cabled homes.
Other operators will be able to access the same market via the NBN with competitive IPTV offerings, theoretically offering an unprecedented range of choices for consumers. “Freeview will be delivering online TV this way within 12 to 18 months,” says Dalton. “Our audience will see this as part of the Freeview experience and part of the FTA experience. And the NBN is going to offer enormous opportunity for broadcasters to have a more diverse, rich, and fundamentally on-demand relationship with our audiences. And within that on demand environment, there are all sorts of opportunities for looking at new business models.”
Many of those models could involve giving consumers unprecedented choice and control over their content – potentially to the detriment of local aggregators. An NBN customer could pay a few dollars a month to directly access an IPTV service from a network like the US-based HBO, for example, completely bypassing Australian pay TV operators and their habit of bundling different types of channels.
RELATIONSHIPS STILL MATTER
It may be ambitious to expect a content free-for-all, however: IPTV operators will still have to build relationships with content producers that FOXTEL and the FTA networks already have in place: geographical restrictions and licensing terms, after all, will still dictate the actual availability of content even when it can be streamed over the NBN.
FOXTEL and the FTA broadcasters have a significant investment in those relationships, and they’ll fight hard to preserve them. This is reflected in TPG’s anaemic line-up of IPTV channels which, after several years in operation, is still limited to mostly foreign-language programming and news broadcasts rather than any ‘premium’ content of the sort found on FOXTEL.
Yet Dalton doesn’t think Minicola’s everything-ondemand vision will necessarily result: “I don’t think the importance of brand – the ability to aggregate content and to promote and present that content – is going to go away,” he explains. “I think it’s a mistake to go into this saying the NBN is going to deliver this world where you can access any program, you want, anywhere in the world. The relationship between broadcasters and
producers is going to remain central, and very robust.” It’s a major point that even Minicola cedes:
broadcasters will be loathe to let loose their grip on prime-time programming that generates the majority of their advertising model and, in so doing, is fundamental to their commercial viability. So while archives of older TV shows might well be available over the NBN on an on-demand basis, production companies will still want to maximise revenues and distribution opportunities.
Of course, those same companies have never before been able to reach consumers directly, anywhere in the world, as they will when the NBN – and similar projects elsewhere – becomes reality. Korea’s world-leading broadband services, for example, have seen the development of a robust IPTV infrastructure, while around 2 million of the 2.5 million subscribers to US based telecommunications carrier Verizon’s FiOS service (a fibre-to-the-home network similar to the NBN) are also taking FiOS TV services. FiOS TV includes up to 270 TV channels and a videoon- demand library with over 11,000 titles.
Time will tell just how extensively NBN-led on-demand services can encroach on the networks’ sacrosanct primetime programming. For IPTV to work, however, one thing is sure: content providers will have to provide much more than the usual assortment of on-demand movies.
So says Tony Aduckiewicz, managing director of
Video on Demand, a subsidiary of Civic Video that was created years ago on the back of enthusiasm for delivery of movies over the internet. That early vision was hindered by the reality of Australia’s anaemic broadband over the course of the decade, forcing the company to redirect itself to a more certain market: providing on-demand movies within closed environment such as hotels, whose networks offer a performance that today’s internet just cannot provide.
The ability to control every aspect of the experience helped make VOD’s business viable, but managing director Tony Aduckiewicz concedes that the limited reach of those networks – and competition from other content – has started taking its toll. “We’re seeing the business begin to slightly crumble,” he explains. “We have movies in theatrical release around the same time they go into multiplexes for the hotel market.”
“At all times in the lifecycle, the propensity to buy is becoming less and less,” he continues. “I’m starting to believe that, between Twitter and Facebook and so on, that people have so many choices for entertainment now that movies aren’t as important as they used to be. We look forward to the ability to send movies around the country [via the NBN] but I can’t see that being the business that pushes this model forward.”
FINDING A BUSINESS MODEL
Despite the myriad possibilities the NBN will provide, broadcasters are sure to be preoccupied with finding the right balance of consumer choice while protecting their revenue streams.
A central issue, of course, is advertising: commercial television is built around it, and FTA broadcasters will loathe ceding revenues just to give consumers more choice. Yet consumers can already buy ad-free TV shows for a few dollars per episode through services like Apple’s iTunes Store, so broadcasters will need to find a more profitable, and more appealing, alternative.
Rather than charging consumers for on-demand content, Minicola believes TiVo and broadcasters would do well to consider technology that injects ads into online content that’s made available for free. This model has been adopted by a range of IPTV early adopters, and even YouTube has managed to introduce ads into its video feeds without alienating consumers.
Another key response will stem from content differentiation, says Bruce Meagher, director of strategy and communication with the SBS, which has pushed its agenda of multi-cultural and sports programming in its recent broadcast expansion.
“The key to surviving in the broadband world will be distinctiveness,” he explains. “There will be so much content and it will be easy to go to the original source, and broadcasters will be vulnerable in that what has traditionally been a source of relatively cheap content may not be available to them.”
With low-value content gone, Meagher says, broadcasters will have to work even harder to counter the NBN’s threat. “If the audience does fragment and the capacity to aggregate lots of eyeballs becomes harder – and your advertising revenue fragments – can you still afford to create that sort of high end drama and more-expensive TV programming?” he asks.
“The big advantage we all have is brands that people know and understand, so we’re in a better position than others given that we start from a position of strength. But you’ve got to adapt rather than desperately clinging onto the old model and hoping it doesn’t go away.”
Minicola sees an equally promising future in turning TiVo into a one-stop link to the outside world – with services such as TV-based calendars, shopping, and the like – but Aduckiewicz has already been down that path and says it’s not enough on its own.
“We had a very good run at what could and couldn’t be done when we were trying VoD over [ACT-based operator TransACT],” he explains. “We tried TV commerce so you could order a pizza across your TV, or could buy stuff connected to the content. And from our perspective, it’s very difficult to find an exciting revenue model there. It’s not like you could run around and say ‘it was a fantastic model that would bring in money’. I’ve yet to see anybody who can show me how you get the money to make this all happen.
“Therein lies the challenge for broadcasters, who face the need to service an increasingly distracted, demanding public that has been empowered by YouTube, emboldened by the disintermediation of the internet, and enabled by the rapid convergence of the internet with broadcasting. The saving grace so far has been that most internet connections can’t support streaming HD video – but as the NBN is rolled out over the next eight years or so, that will all become history.
“Broadcasters have realised they can’t survive without the internet anymore, and they won’t survive simply by sticking the internet onto old models of broadcasting. What they need is new money spinners that will only be found by moving forward into the future and finding new models. Broadcasters are dead, but if they can shift to transmitting over the NBN they will be OK. If we get it right with the NBN, we will be five years ahead of the rest of the world.” ■
