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Overview

The online video distribution business model faces increasing challenges, particularly as explosive traffic growth is driving some costs faster than revenues. This is unsustainable – and there are many other changes: in content creation, aggregation, and distribution; in devices; and in end-user behaviour.

The Online Video Value Chain

This new Briefing summarises the evolution of the key technologies, the shifting industry structures, business models and behaviours, the evolving scenarios and the strategies required to prosper.

Who should read the report

Telco: Group strategy director, business development and strategy teams, data and IPTV product managers, CIO, CTO, CMO; Media companies; Broadcasters; Content players.

Key Challenges

In theory, telecom operators should be well-poised to benefit from the evolution of video technology. Fixed and mobile broadband services are increasing in speed, while phones and set-top boxes are becoming much more sophisticated and user-friendly.

Yet apart from some patchy adoption of IPTV as part of broadband triple-play in markets like Japan and France, the agenda is being set by Internet specialists like Google/YouTube and Joost, or offshoots of traditional media players like the BBC’s iPlayer and Hulu.

Many consumers are also turning to self-copied and pirated video content found on streaming or P2P sites. And although there is a lot of noise about the creativity of user-generated video and mashups, it is not being matched by revenue, especially from advertisers.

These changes present commercial challenges to different players in the value chain. Changes in user demand challenge the economics of “all you can eat” data plans (see "iPlayer nukes ISP business model"), content creators face well known issues relating to digital piracy and content protection, while aggregators face challenges monetising content.

Which Scenario will win - and who will prosper?

Our new research uses scenario planning to map out and analyse the future. The methodology was designed to deal with many moving parts, uncertain times and rapid change. We identified three archetypal future scenarios:

• Old order restored: Historic distribution structures and business models are replicated online. Existing actors succeed in reinventing and reasserting themselves against new entrants.
• Pirate world: Distribution becomes commoditised, copyright declines in relevance and the Internet destroys value. A new business model is required.
• New order emerges: New or “evolved” distributors replace existing ones, with content aggregation becoming more valuable, as well as delivery via a multitude of devices and networks.

Which of these scenarios will dominate, when, and what can operators and other players do in order to prosper?

Key Topics Covered

• Current market and variation across national markets
• Significant changes and trends in content production, aggregation and distribution
• Significant changes and trends in devices and end-user behaviour
• Detail on the scenarios and the likely market evolution
• Consequences of the changes by content genre (movies, sport, user-generated, adult)
• Strategies to prosper as the scenarios evolve

Contents

Key questions for online video distribution

• Online video today
• Bandwidth
• Penetration
• Other factors

Emerging industry structure

• User-generated vs. professional content
• Aggregated vs. curated content
• Market size

Future challenges for the industry

• Content creation
• Aggregation
• Distribution
• Customer environment and devices
• Supply and demand side issues

Future scenarios for online video

• Genre differences
• Mobile video evolution
• Regional differences

Strategic options for distributors

• Threats
• Weakness
• Strengths
• Opportunities
• Strategic options

Conclusion

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