March 5, 2012
By Jake Ward Business Development Director
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For the rest of the Spring 2012 (Sourcebook) issue of Streaming Media magazine please click here

The State of Media and Entertainment 2012

This article appears in the February/March 2012 issue of Streaming Media magazine, the annual Streaming Media Industry Sourcebook.

The media and entertainment landscape in Europe is being dominated by two trends: new and old players trying to dominate the living room entertainment space and the land grab for content rights by all comers in the market.

The quest to dominate the entertainment space in the living room is likely to be a long-running battle with a number of new and old protagonists joining the fray, driven by the increased penetration of connected TVs platforms, connected Blu-ray players, and the rumoured launch of an Apple television complete with voice and motion control.

In Search of the Perfect Interface

One of the big corporates trying to gain a foothold in the space was Microsoft, which, with December’s update to the Xbox 360, added significant living room media hub functionality into the console with a number of applications for YouTube, blinkbox, LOVEFiLM, 4oD, and ITV Player offering up a significant and diverse mix of content. A deal was also finally made to bring the BBC iPlayer to the console in some form in 2012, a service that is already available on both Nintendo’s Wii and Sony’s PlayStation 3.

Combined with the Kinect peripheral, the Xbox enables users to find and control content by using voice and gesture commands as well as search using voice commands. This is an attempt to tackle one of the increasing problems in the on-demand video market. The overall growth in the number of platforms that content can be consumed on has increased massively, but the search for some standard user controls continues as the user experiences become more and more fractured. The Samsung apps store alone now has more than a thousand applications, all offering different ways to access content, and user search and discovery is rapidly becoming an issue that must be tackled if these platforms are to become accessible to all.

If the rumours of an Apple iTV launch currently circulating do turn out to be accurate, then the iTV is likely to also have a similar gesture and voice command-based functionality and, of course, only one delivery platform: iTunes. This may well be the most cohesive user experience at the cost of diversity of platform. It will also be an interesting new area of product development for Apple, switching from products with a yearly update life cycle and a replacement time of every 2 years to an industry where products on average are replaced once every 8 years.

Other hardware manufacturers are looking to get around the need for constant product innovation by offering cheaper, more easily replaceable products. The first of these to reach the market is Roku, Inc.’s Streaming Stick, which can plug into any TV’s MHL HDMI socket to convert it into a connected TV. By having the hardware in a separate unit, it can be replaced at a much lower cost and can be regularly updated with software upgrades. The only issue at the moment is that TVs currently manufactured with MHL HDMI ports already tend to be high-end connected TVs with their own integrated platforms. However, this could be the way forward, as any major hardware upgrades can be offered by selling a new version of the existing stick, and MHL HDMI ports are likely to become more common in the coming year. Samsung has also introduced a new system with its latest range of smart TVs that allows for a physical upgrade of the TV set hardware through an external port, enabling it to run more powerful applications.

The issues around simple user experiences have not stopped content providers from expanding their multi-platform approach, rather than trying to consolidate their offerings around their own platforms or affiliated services. Broadcasters such as the BBC and Sky have developed services that work over their traditional distribution methods, digital terrestrial and satellite, as well as through third-party networks such as Virgin and on multiple devices as pure internet TV solutions.

In this space, BBC iPlayer continued its dominance of the market in the U.K. with more than 187 million views in December 2011; it launched on yet more platforms (including, as of late January, Sky Anytime+), and there’s now a 3G version for mobile. The number of requests from connected TVs alone in December was up 1,000% year-on-year to 7 million. There was also the launch of an international iPlayer in 11 European countries in July, which charged a monthly subscription for access to content, a first for a corporation that is used to a free-to-view model based on the U.K. TV license. Like many other content providers, the BBC was not simply content with expanding its own iPlayer application. It also wanted to spread its content onto new pay-per-view platforms by signing deals with Amazon’s LOVEFiLM service and Netflix’s U.K. startup service.

According to Simon Morris, chief marketing officer of LOVEFiLM, the BBC has been fundamental in normalising the idea of catch-up TV, to the benefit of the market as a whole. “The service went a long way to explaining to middle England that streaming content was normal,” he told TechRadar in November.

Many of these platforms are available through connected TVs, but this hardware format may still struggle to make an impact on the industry. In a “mystery shopper” exercise, Informa Telecoms & Media found that high-street stores “failed to educate consumers” about the capabilities of watching streamed video on the TVs.

Despite this, many analysts still predict that 2012 will be a breakthrough year for on-demand television in the U.K. as many more devices come to market. Adoption will also be driven by the Olympics, as a higher-than-usual number of people normally replace their TVs in the run up to big sporting events.

In total, about 10 million television sets were sold in the U.K. in 2010, and the vast majority now being sold will come with internet connectivity, whether users realise it or not. Currently, however, these TVs account for just 9% of the market in the U.K. But with their cost dropping in price to as little as £225, this percentage is sure to grow significantly in 2012.

Talking to The Telegraph, Simon Woodward, of digital TV specialist ANT, claimed, “2012 signifies a tipping point for the connected TV market. Manufacturers and retailers have been talking about the connected TV experience for some time, but in reality, the benefits are yet to be realised by the majority of consumers. 2012 is the year where this is set to change—and we’re expecting a host of services ... to be launched in the coming twelve months as the market responds to growing consumer demand.”

While Microsoft and the connected TV manufacturers were trying to move into being at the centre of the living room experience, YouTube was trying to solidify its position as a content provider by becoming a true content developer, with discussions abounding about the plans to launch news channels of content in 2012.

YouTube also played a pivotal role in the big streaming event of the year, the royal wedding in the U.K., which produced at least 101 million live streams of video views with more than 72 million of those streams coming from the official live YouTube stream. Of course, ahead of the wedding in April, YouTube finally began to offer users the ability to stream content live, but at the time of writing, this service is still only available to selected partners. So how widely available this option may become is still unknown—a sign, perhaps, of its continuing work to develop itself as a both a platform for large events as well as a content creator.

With YouTube in discussions to develop channels of content, Google will be challenging the incoming and existing providers of content, as well as potentially existing suppliers of both free consumer live streaming (Livestream, Ustream, etc.) and more professional live streaming services through its YouTube Live option. However, for professional live streaming services, there is still a need for encoders, QOS checks, etc. And until YouTube starts rolling out its own brand of encoders, this is still a step too far for most organisations without in-house skills looking to broadcast their events.

Chaos in the Content Market

The expansion of the content provider market continued apace ahead of the imminent arrival of YouTube, with Netflix and Roku both launching services in Europe. This triggered a land grab for content across Europe, as the two companies and LOVEFiLM, which is rapidly evolving from a disc distribution business to a streaming content company, sought to secure content in long-term deals with both TV and film content providers.

Of course, one of the key areas for distribution for these services is smart TVs, and Samsung’s and LG’s smart TV platforms have certainly won the plaudits in this space as the most accessible systems. But competitors such as Sony are already looking to radically overhaul its platform in the coming year. While this constant innovation means rapidly improving experiences for the consumer, it has lead to a highly fragmented market in terms of both platforms and experience, which means that content providers have to develop apps that work across a range of platforms.

One solution to this plethora of standards in the U.K. was the formation of YouView by a number of both content (BBC, ITV, Channel 4, Channel Five) and infrastructure providers (TalkTalk Group, BT, and Arqiva). The project is developing an internet-connected device that can stream both live TV and 7 days of on-demand content; it is also based on open standards, which allows development of both applications and use of the platform on other devices.

However, the service has not had an easy road to market losing a chairman and a set-top box provider and, in October 2011, making its entire PR and marketing team redundant. It has slipped from a 2011 launch into 2012 and must realistically launch in the first half of next year to stand any chance of not being crowded out of the market.

Ian Maude, head of internet at Enders Analysis, said in an interview with The Telegraph in early 2011, “The later YouView leaves it to launch, the market opportunity will shrink, with consumer demand being soaked up by other services and web TV applications. If they can’t get it out before the Olympics, which is looking less and less likely, I wouldn’t bother.”

The standards for the system have now been approved by the Digital TV Group, and a friends-and-families beta by TalkTalk is expected to take place in the first quarter of 2012. But the impact that such a system can have coming so late to market may be limited.

The big trend for the coming year looks to be the further integration and formalisation of social media with television viewing. Samsung and other manufacturers already have social functionality built into the TV, as well as Facebook and Twitter apps. But there are a number of third parties that are looking to bring the experience together for the average user. Sky has just bought a significant stake in zeebox, which recently launched an app in the U.K. to integrate Twitter with TV viewing. It is able to give users TV listings with additional information about what friends (and celebrities) are watching and commenting on. Interestingly, it can also double as a remote control, switching to a channel when the user simply clicks on a programme.

So the past year has seen vast growth in the number of platforms available and the fragmentation of the platform market. We have had some of the big corporates make their plays for the living room entertainment market and some that look like they may be making that move in the coming year (Apple). The big challenge remains user awareness and discovery of content, and the company that finds a unifying solution to that problem and has a good body of content is likely to reap significant benefits.

This may not need to be the most advanced technical solution; it may simply need to be the one that works for the majority of users. If you have any doubt over whether that kind of strategy can work, look at how the iPlayer launched a simple user experience with great content and built a standard from there.