NetFlix could easily be the next StarTV

Well, ever since NetFlix has started its streaming service, the adoption of the service has been incredible what with its  expectation to acquire almost 5m new subscribers this year. Interestingly, NetFlix has eschewed the traditional content (UCG like YouTube and Vimeo) and the traditional revenue model (ads). NetFlix focusses only movies and TV shows and only as a subscription-based model.

NetFlix Business Opportunity by Reed Hastings:

The beauty of this service is that the subscriber choice and segregation does not happen at a “channel” level (such as choose StarTV or Zee) or a “bouquet level” (News, Regional, GEC, etc.). It happens even more granularly at the episode (Season 1 Episode 1 of Scrubs) or the serial level (Scrubs). Hence, this kinda increases the signal-to-noise ratio (useful content to stuff I dont watch but have to pay for since it’s part of the bouquet). Right now, NetFlix is pursuing more of a catalog strategy (as in all the older episodes) rather than a premium TV channel with pay-per-view. But I believe that apart from this, this is the exact service delivery model that will dominate the media landscape in the future if  a single pipe-to-the-home kind of strategy is followed by the integrated teelcom operators i.e. the “bouquet” would be a landline, internet and cable / DTH. At the backend would be a content delivery server which will dish out the content as and when the subscriber requests it through a media interface (TV setup box/Internet webpage/mobile app).  In such a backend architecture, even my ad platform can easily be built to deliver customized ads to each subscriber. The ad purchase model would be based more like the AdWords model rather than the current media buying franzy that happens since content would not be broadcasted but delivered to a specific IP-based device.

But as Reed Hastings, CEO, NetFlix says in the presentation attached: ”almost no customers leave cable for netflix””. Why? We offer only a fraction of the content of the CST, and no sports

(CST refers to Cable / Satellite /Telcos)

Exactly ! One of the real hinges on which such a model could revolve is the giant libraries of content that will be required. If producers of such content are ready to work on such a platform, is there any reason we would need Star and Zee (from the perspective of the content which they aggregate and distribute – not the original content they produce)? Am I missing something here? What is the weak link in this argument/model ?
 

I have written about this earlier as well

Telecom Media Gateway – III: What needs to get done first

I talked about a different model of television here and the unique advantages here. Here, I just wanted to talk about the possible hurdles in that model

1. Cable operators: Practically, in India, they are a powerful albeit invisible lobby. Politicians are rumored to have their sticky little fingers in this business. The operational model lays waste to this middleman and they won’t go down without a fight

2. The dumb TV: Well, this is one of the biggest problems in the expected setup. For one, the service would have to be IP based and except for the higher-end televisions, televisions do not have their own IP or Internet address or any kind of unique identifier. Apple tried to create a smart box for the TV called as Apple TV. But that flopped because:

• It was configured to play only HDTV. Hence, normal resolution TVs would not work or create intensely grainy images
• Apple TV only displayed movies that were first downloaded on to your PC hence making it duplicating the effort required
• Limited format support.

If, however, we have a smarter set-up box to do some other operations, this kind of service could explode. These other operations would include:

1. Authentication: Already done by set up boxes for DTH or  cable
2. Profiling: Currently, a DTH set up box only acts as a filter blocking signals from some channels and allowing others. A profiler would basically allow you to create profiles for each member with an authentication protocol. It would track the profile’s viewing habits and log the same for further customizing the service. This is an implicit profiling pattern. The box would combine this data with the explicit profile (where the subscribers state what content they like to see or want to see)
3. Updating: The box would typically query the content server to check for any new content (episodes, songs, etc.) that have been updated in the server. This would be based on the profile (explicit / implicit) of the particular login id (unique identifier for the profile).
4. Advertising: This would work on a client-server basis. The advertiser would choose the content and the location (e.g. Bombay, Nagercoil, Dadar, if possible) and based on the IP address of the box, the advertisement would be correspondingly displayed.
5. Reaction: Part of (4), but like Google ads, ads which are ignored are subsequently removed from the system. This would help even the advertisers to choose which ads to broadcast and which are not worth the money spent on it.
6. Assistance in transactions: Not to get too detailed on this, but if we have a common pipe, the box can direct the customer to a site for purchasing items displayed in the ads.

Yes. In this world, the box is the centre piece.

3. Adoption: The toughest part. It would all hinge in how user friendly the interface is, how the pricing structure should benefit the subscriber, what technology is being used, e.g. I could recommend HDTV quality movies if I know that the subscriber is using a plasma or an LCD TV. The benefits of customization should benefit the customer first and only then the service provider.

4. Security: If I recommend a profile, I have to recommend that there should be adequate security controls and permission controls so that the personal habits of a person is not displayed for the world to see. Also, if the content is streaming, no subscriber should be allowed to hack the box to download the content resulting in copyright infringement.

5. Architecture: Joost has launched it own peer-to-peer technology for on-demand TV for desktops. Given, that PC penetration in India is abysmally low, a parallel paradigm would be required for television. A PC will just not do. The question is what would be more appropriate: A client-server model, mainframe or the brilliant P2P model.

Wait a minute ? Instead of a setup box, could I use a mobile phone as a profiler?

Telecom Media Gateway II: Unforseen advantages

In the previous post, I talked about a different model of content delivery and what are the upfront benefits we see. Now, for the unseen advantages of such a delivery mechanism

1. Pay models – With DTH and Setup boxes, we have been able to create bouquets of channels so that it becomes easier for subscribers to choose specifically which channels they do not want to pay. However, the problem with this is that the creation of bouquets is standardized and may not match what we want to see. For example, in our family, I watch Star World, Star Sports, ESPN, Discovery Travel and Living and Discovery, CNN IBN, VH1. Dad watches Nat Geo, Star Cricket, NDTV, Animal Planet. Mom watches soaps occasionally and Marathi channels while my Granny watches the Tamil language channels. In such a scenario, we end up choosing a large number of bouquets (courtesy the mode of creation of bouquets by the channel providers). This basically makes it more expensive for us to actually choose a DTH connection and hence, we revert to the original cable channel providers.  The model I describe can be actually used to create bouquets a content level rather than a bouquet channel. Example, a bouquet that allows me to watch F1 on Star Sports, NBA on ESPN, Engineering Marvels on Nat Geo and Hip Hop Hustle on VH1. That would be a bouquet I would prefer to buy and if the same is cheaper than what I pay, then why not. I could also add Animal Planet wholesale to this bouquet. Actually, rather than a bouquet, I would prefer to call it a shopping cart where I can add and remove channels and programs (“content”) at random.

2. Interactive TV:  Not the way that DTH operators define it. Given the previous analogy of a shopping cart, this model would create an Amazon.com for television where I can read other people’s reviews on that program, movie or whatever. I could add discussion forums and stuff on a separate server which I can access prior to acquiescing to content delivery. This is a benefit of delayed watching (asyncronous delivery again)

3. Better targeting of advertising. With the current broadband operations, it is incredibly difficult to clearly identify customer preferences and dislikes. Everyone depended on TRP ratings for the same (which in my understanding is incredibly suspect) for the lack of a better mechanism of rating programs. Advertisers could only take a stab at the demographics of the people “consuming” (watching) the content (programs broadcast). Now, if digital delivery is based based on the IP of the “television” (will come to this later), it is very clear what each “IP” is watching (An IP would pertain to the particular node where this content is being delivered. In the current explanation, that would be the television). Hence, two people watching the same program would have different advertisements displayed based on not just the program that their currently watching, but what they have watched previously as well. It’s a kind of profiling which I will come to in another post.

4. Oops! Did I just make the cable operators extinct? Considering that Airtel and Tata both provide the pipe, the DTH infrastructure and the internet services, the extinction has already been set in motion.

Obviously, there ARE problems in the proposed model. Most of which pertains to the dumb TV. More on that in the next post

Update: Just realized another real brilliant advantage is to create a mini-youtube kind of thing. Not to simply replicate the original one but to give a subscriber multiple points of view of the same action for example in sports. Details are in this post.

Telecom media gateways – Part I

It’s a real sad state of affairs when you wildest fantasies include how 3G can change the way media will operate in the distant future.

I always felt telecom was going to be big if for no other reason except how indiscriminately digital pipes can bring all sorts of information into your living room. Anyways, till now this was more from the  perspective that you needed a landline to get a broadband connection. So, there was one pipe that came into your house and there was this thing I felt (before I joined my company, I was a novice remember? ).

In IIT, we had three key things (for lack of a better word) that always helped us watch whatever movies we wanted, whatever music we listened to and whatever applications we installed. The first one was a series of FTP servers set up by students all across the campus (Initially, each hostel had its own server but those were banned since stuff on these servers were pirated). The second was this incredible bulletin board / forum called “Bizarre Bazaar” (BB). This was our “content delivery mechanism”. The third was FTP software used to download the application/ movie/ music. This was the “content”.

“Content” entered our hallowed portals like this:

1. Obtain content from wherever i.e. legally purchased DVDs, CDs, ITunes or illegally like BitTorrent, Warez, etc.
2. First kept in an FTP server
3. Announced to whole campus on BB with the FTP server and u/n and pw (if any)
4. We would visit BB and see the new content
5. Download the content on our hard disk
6. Thank the initiator for the content

7. If we had FTP servers, we would copy the same there and then update the initial post with our server ip address as well so that there was less load on the original server

Steps (5) and (6) were interchangeable in order

And that was the “content delivery” mechanism and the FTP server’s owner was the “content provider”. It was the simplest way to get content that you wanted. Please note the stress on the words “you wanted”. Anything else on these servers were never necessary for you and hence, the infrastructure was never “wasted” in sending it to you. This reduced the server utilization time, the utilization of the wireline infra (of IIT) and your PC utilization.

But when, we come back home, we see the exact opposite i.e. broadcasting. Where all the content (whether you “use” it or not) is delivered to your television.  All those “pipes” are wasted in their utilization simply because the transmitting station has no idea what you watch and when you watch something. Secondly, television is a synchronous medium i.e. even if wanted to watch it, if you weren’t there, it would be “wasted” transmission. Obviously, nowadays, you have TiVo to reduce this problem but the issue of “wasted” transmission just remains.

I always had this idea that if every consumer gave an operator/ service provider permission to pull a cable into his house ( a pipe if you will), then we could deliver any digital content we would want over that one line. Whether it was Internet, a landline, television, radio…anything ! Obviously, there are still walled gardens to be crossed, but I have never understood why channel operators didn’t simply rent the landline operator’s cable instead of stringing their own cable into the house. I always kinda envisioned (big words I know but I couldn’t find a better word) a single server for all types of content. Where television worked like the IIT infrastructure mentioned above.1. Cable operators (Hathway, CCC, SCV, etc.) obtain licenses to distribute content from the channels (Star TV, NDTV, etc.) – the equivalent of obtaining the content from ITunes, DVDs, Torrents, etc.
2. Rent out server space from the content providers and uploading copies of the same content at all these servers – the equivalent of uploading the content on the FTP servers.
3. Building a simple, elegant user interface so that everytime there was fresh content (example, the next episode of Friends, Boston Legal or a new movie like Inglurious Basterds) on the servers, the same would be intimated to the subscribers when they turned on the television.(equivalent of announcing the content on BB and subsequent visit by the IIT junta to see whether any new content was uploaded)
4. Subscriber requests movie or serials to be streamed / downloaded (Equivalent to downloading the content from the FTP server)
5. Payment made based on the business model chosen (further details down the post)

This kinda model is being used in hotels in China and Japan to deliver paid content (usually adult). No, I did not test whether it worked or not for a simple reason that it was too expensive to watch porn

I can see some major advantages in this model. Let me state the obvious ones first:

1. Better utilization of the content pipe. A lot more content can be pushed down for the same given bandwidth

2. Narrowband technologies instead of broadband technologies. I’m not sure about the impact of power consumption but I can guess it will be less.

3. More asynchronous delivery of content

4. Single pipe multiple comment: A corollary to point of better utilization; this is already prevalent in the current DTH platform

So what are the real unforseen advantages in this kind of delivery. That’s all in the next post

(This post does not condone or condemn illegal content – that is irrelevant to the post)