Primer on Over the Top Video


What is OTT Video? Definition Different Approaches Who is using OTT? Current Behavior PC vs. TV viewing Cord-Shavers vs. Cord-Cutters What is the Industry Response? Pay TV Providers Content Players Where is the Market Headed? Scenarios Adoption Dynamics

Over the top video is commercial video content delivered over an open Internet connection with no monetization by traditional multichannel (pay-tv) providers

Cable MSO Household Example
Three Conditions for OTT

Professionally
Content =
produced content


Sources: AV&Co. Analysis




OTT Developments . Last 12 Months

Key recent developments include the entry of Facebook with a WB deal, extension of Amazon Prime to include OTT, and Netflix securing exclusive, original content
2010 2011
May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May
NBA with Neulion to WB starts streaming rental enhance NBA League offer on Facebook for “The
Pass International Dark Knight”
Time Warner Comcast TV Jan: AT&T announces usage caps for Blockbuster Cable starts “TV Everywhere Comcast / DSL and fiber customers at files for Everywhere” goes NBC-U 150GB and 250GB respectively.

bankruptcy trials in NYC nationwide approved Additional 50GB at $10 Y Tb

YouTube Hulu Plus unveils $10 Hulu Plus to Viacom brings back Amazon Prime announces announces subscription, lowers price to play on Roku Colbert Report to hulu, video-streaming service, major movie

$8 later and TiVo extends library to hulu plus Netflix stock plummets
deals
Vudu acquired Netflix Netflix closes 2­Netflix to stream Netflix closes Netflix secures exclusive rights to by Walmart for introduces $8 year deal with CBS Paramount, deals with Epix “House of Cards” TV show . reported $100M streaming only for “select Lionsgate movies and NBC Showtime decides to end NFLX (March) option programming” deal by Mid 2011 two days after

Apple Google TV Samsung lets Google announces unveils new unveiled by owners of Smart TVs Android market on Apple TV Logitech and stream to tablets and Google TV by EOY
Xbox 360 and ESPN Sony TV smartphones 2011

enter into exclusive
streaming deal

Roku licenses streaming media player platform, Boxee raises $16.5M
Netgear as first OEM partner in funding
Devices OTT Aggregators Distributors
Content
Sources: Company press releases

There are multiple approaches to OTT Video in the market today . with different viewing platforms, different business models, and different delivery methods

Business Model
Smartphones,
Mobile Apps
tablets, PMPs
Browser,
PCs
desktop apps




OTT Video delivered to the TV is the key long term threat to traditional pay TV providers;
Content Availabiility

so far, no offer combines a wide array of fresh, popular content with access to the
OlderMoost Popular
television
Less Popular Moost Recent
OTT Video Content Availability and
Appeal


. Many services available providing broad content to the web,
Mass Market Mass Market Substitute Complementary Service Threat Of Cannibalization smartphones and tablets
. Wide adoption but complementary
usage patterns Nff h
No offers here yet

. Netflix has largest installed base with TV access
Niche Opportunities Mass Market . Netflix expanding content to Complementary Service
broaden appeal (including original programming, more TV, and newer movies)
.
Hulu moving to the TV with Hulu Plus

.
Broad, affordable content to the TV will drive OTT substitution


Device Accessibility
PC And Other Devices TV


Within five years there will be millions of Internet-connected TVs . either directly or through game consoles or Blu-Ray players


Wii Xbox 360 Playstation 3 Blu Ray player Roku



In the long run, OTT video players could gain an advantage through global economies of scale and scalability of their offers
In the long run, global OTT Players There are significant economies will have the advantage in of scale in content costs economies of scale
70%

600+
60% 50%
Charter DirecTV
40%
Time Comcast
30%


Over the top is already a mainstream activity on the PC and growing rapidly on the TV

2010 US OTT Adoption
(% of US Households)
76%


.
OTT video is a mainstream activity on the PC today, complementing traditional TV viewing

.
Over time, OTT Video adoption will move to the right, with more TV viewers adopting first as a complementary service and some of those, finally, cutting the cord


Sources: AV&Co. Analysis, SNL Kagan, e-marketer


“Cord-Shaver” vs. “Cord-Cutter”

Tech savvy consumers can already realize significant savings and continue to enjoy much of the content they are used to

Complementary users can draw on either a game console or dedicated STB to complement their viewing needs and save money at the same time


Comcast Cable . Digital Starter Roku Box
.80 cable channels incl.. .Access to:
. Live sports (ESPN) . Netflix
. Cable News Channels . Amazon VOD
. Kids Entertainment . Hulu Plus
. MLB.TV
. Pandora
. Roku Newscaster
(news from CNN
etc)


Requirements:
.
Comcast Subscription ($63/m)

.
Roku Box ($60-100)

.
Broadband Connection (5Mbit+)



Strengths:
.
Access to thousands of movies in HD quality (incl. 1080p quality)

.
Savings of around $40 in cable subscription, somewhat offset by $8 Netflix streaming subscription and need for VOD purchases or rentals



Weaknesses:
.
Needs consistent high-speed internet connection for HD video

.
Sacrifices access to some premium cable TV shows . some of which can be rented


Sources: AV&Co. Analysis, Comcast website, Roku website


Substitute users can employ an ATSC antenna to get broadcast channels OTA and add a game console or similar device to stream additional content to their TV

ATSC Antenna Roku/Playstation 3
.Free HD channels: .Access to:
.
CBS


. Netflix
.
PBS

. Amazon VOD / PS Store
.
NBC

VOD
.
FOX

. Hulu Plus
.
ION

. MLB.TV
.
UNV

.
CW . Pandora

.
Indy . Roku Newscaster (news

.
My TV from CNN etc) (Boston)


Requirements:
.
ATSC Antenna (~$35)

.
Roku Box ($60-100) or Sony PS3 ($299 incl. Blu-Ray player)

.
Broadband Connection (5Mbit+)



Strengths:
.
Access to thousands of movies in HD quality (incl. 1080p quality)

.
Savings of $105/$63 in cable subscription, somewhat offset by $8 Netflix + $8 Hulu Plus subscription and need for VOD purchases or rentals



Weaknesses:
.
Needs tech-acumen and time
investment to set-up


.
Potential antenna signal issues

.
Limited access to any live sports

.
Limited access to live event TV (such as “American Idol”)


Sources: AV&Co. Analysis, Roku website


MSOs are responding to OTT by making content available on multiple screens at no additional cost
.
TV Everywhere is one of the primary defenses multichannel operators are using against OTT substitution

.
Delivery platforms are available on many mobile devices to compete with other OTT options and improve the multichannel product offering


Content Traditional Pay Pay TV Subscribers Provider TV Providers Devices

PCs, Macs, web-based access


Sources: SNL:Kagan, AV&Co. Analysis




TV Everywhere enables viewing across a wide array of devices, creating an effective response against today’s complementary OTT usage . other strategies will be needed to
Content Availab
Older Mo
defend against OTT to the TV
Less Popular M
TV Everywhere Content Availability
Mass Market Mass Market Substitute Complementary Service
Threat Of Cannibalization
MSOs moving content from TV hdi
TVs to other devices
Niche Opportunities

PC And Other Devices TV
Device Accessibility

.
Authentication model to make subscription cable TV content available to new device types (PC, tablet, smartphone, media players)

.
Addresses a wide-variety of lt

complementary use cases

.
Increases value of a Pay TV subscription and represents an effective response against non-TV viewing of OTT (a better offer at a lower cost)

.
Other strategies will be needed to defend against OTT to the TV as TV Everywhere does not address value-priced OTT plays on game consoles or connected TVs




Over the top release windows are paralleling traditional TV release windows, with most shows available the next day on network websites and Hulu.com
1st Year


1st Month


2nd 2nd 3rd 2nd Year 3rd Year 4th Year Live Day Week Week 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th month

Despite increasing competition from other media, traditional TV still occupies a huge part of people’s lives
. Nielsen estimates a household watches on average 35.5 hours of traditional TV per week
Estimated Viewing Hours by Content Type

2.9
21.5

11.2



OTT video is a complementary service to the PC today; it will move to the TV over the
next 5 years and will be a meaningful competitor to Pay-TV providers within 10 years

Base Case View of Market Development

Perceived Value to thee Customer


OTTas a

2010-2015
2016-2020


Over the Top Video will grow slowly at first with “complementary” trial and usage driven by game console capabilities; substitution and cord cutting will follow as content availability grows
Adoption and Usage Dynamics for OTT Video to the TV



Thank You.