THE VOD FACTOR THE CONVERGENCE OF BROADCAST AND DIGITAL

THE VOD FACTOR

THE CONVERGENCE OF

BROADCAST AND DIGITAL

TABLE OF CONTENTS

Introduction ... 2

VOD Industry Today ... 4

The Future: A Unified Broadcast and OTT Model ... 6

Today’s Needs and Considerations ... 8

Broadcast VOD ... 8

Over-the-top (OTT) VOD ... 10

Monetization: Charting Your Course ... 14

Comcast Technology Solutions: Your Convergence Point ... 18

INTRODUCTION

It’s an exciting time on both sides of the media

delivery spectrum. For audiences on the other side of any screen, video on demand (VOD) isn’t a separate component or “nice to have” luxury anymore. The ability to watch what we want, when we want it is seamlessly and permanently integrated into our video experience. For content providers and programmers, meeting audience demand for differentiated content — and building a flexible monetization strategy around it — must remain at the core of your business model. Innovations are elevating video consumption to seemingly unlimited heights, and customer expectations for high quality are as device-agnostic as your delivery strategy must be in order to succeed.

THE ENTIRE INDUSTRY IS

OPERATING IN A CLIMATE OF

UNPRECEDENTED CUSTOMER

CHOICE, COMPETITION, AND

COMPLEXITY OF DELIVERY.

No matter what device an audience member prefers, a winning VOD experience has to consistently delight with broadcast-quality playback and engaging content. This ebook takes a look at the state of today’s time-shifted video delivery, what the future holds, and what video brands are doing to win hearts along the way.

67%

OF U.S. TV HOUSEHOLDS SUBSCRIBE TO OVER-THE-TOP VOD SERVICES5

$14.3

BILLION

2016 NORTH AMERICAN VOD MARKET3

ON INCREMENTAL VIDEO-RELATED ENTERTAINMENT BEYOND PAY-TV4

$29

AVG/MONTH

VOD INDUSTRY TODAY

The global appetite for VOD services is insatiable. It’s already a $14 billion market in the U.S., and according to Global Industry Analysts, the global market is on track to surpass $90 billion by 2020.1

Access to an entire world of time-shifted viewing is also changing media spending habits, with the average American customer

spending $29 extra every month on video purchases that are above and beyond their pay-TV bill. Global operators and advertisers alike have more opportunities than ever to apply technology and out-of-the-box thinking to monetization models and ad delivery. Dynamic ad insertion — the ability to continuously tailor the ad load associated with a program during its time-shifted life cycle — is already a billion-dollar industry in the United States alone, according to DAI provider Canoe Ventures.2

In today’s “information economy,” a high-quality VOD offering is bringing in more share of wallet than ever. Two-thirds of U.S. TV households subscribe to over-the-top VOD services; but as more and more video-centric destinations come online, quality matters even more because consumers often have multiple sources from which they can purchase the same program. A top-tier film, for example, might be available to one viewer through the cable provider, and again through multiple OTT-based services. Audiences have made it clear: they want their content on their time, and on their screen of choice — and they’ll pay for that freedom if the quality of experience is consistently high.

54%

OF VOD VIEWING TAKES PLACE THROUGH A CABLE PROVIDER6

AVERAGE TIME

VIEWED PER

30-MINUTE

TELECAST

40+

1,263

According to SNL Kagan, there are now 1,190 over-the-top services in operation worldwide, which is already up from the 978 reported near the end of 2016. That said, Nielsen’s fourth-quarter Comparable Metrics Report still shows that traditional cable remains the dominant VOD destination in an increasingly fragmented market.

The strong growth of over-the-top (OTT) services continues, but today over half of all on-demand viewing is still coming through traditional cable providers. This jibes with Nielsen’sfinding that even with a surge of new ways to connect with video, 92% of all video content watched by adults is still happening on TV and TV-connected devices.

The phenomenal quality of today’s TV experience continues to shape consumer expectations no matter what platform is used to watch video (and right now, there are more than 40 different platforms according to SNL Kagan). Consumer patience runs thin when it comes to latency or buffering issues, and a different source is usually just a click away.

None of this changes the fact that job one is to supply and monetize an engaging content experience. With new quality benchmarks and delivery platforms on the horizon, programmers and providers have a lot to prepare and solve for.

The goal for providers is to provide an extraordinary experience on any screen while also returning focus and resources back to job one.

In the face of clear and present change, how are companies limbering up for the adventures ahead? For the most part, it’s a matter of figuring out a way to manage existing components (both physical and procedural), and to integrate improvements seamlessly. Things like:

• Implementing workflows that can evolve organically without relying on proprietary elements

• Executing business models with baked-in flexibility • Leveraging the strengths of both digital and broadcast

delivery methods

Competition for “share of eyeball” is going to remain fierce, but broadcasters and OTT providers are building a new ecosystem of win-win scenarios.

DIGITAL AND BROADCAST: THE COMING SINGULARITY

The unification of IP/OTT and traditional broadcast workflows has really taken off. Linear and digital content providers are delivering huge benefits to each other (and to viewers) by combining and harnessing all the strengths of traditional broadcast and OTT experiences. As this convergence culminates, programmers and providers benefit not only from leaner operational cost, but also consistent broadcast performance and the ability to create highly targeted and personalized experiences across every screen.

SWAPPING “PROPRIETARY” FOR “MODULARITY”

An effective, elastic content delivery ecosystem is one that’s

positioned to adapt to every permutation of change. A tectonic shift in the media landscape doesn’t occur in a vacuum, of course; but today’s content providers need a) the foresight to see how these three areas of change are coalescing to shape the future, and b) the operational agility to capitalize on them. Proprietary systems or processes can hamstring the adoption of new innovations by adding complexity and cost to future business requirements. A preferable strategy for your direct-to-consumer VOD experiences may be one that takes a more modular and

standards-based approach that allows each content provider to construct their own tailored, best-in-class content management, distribution, and monetization platform.

A good example would be your choice of a content file origin solution which is not wedded to a specific content delivery network (CDN) for delivery, and that supports the myriad of formats, DRM, and dynamic ad-insertion methods. Bottom line, if there are advantages to replacing a specific “brick” in your overall capability stack – a custom UI from a boutique vendor, for instance, or a specific ad decisioning engine — then you should be able to do it easily with little-to-no up or downstream implications.

CONTENT PROVIDERS

ARE QUICKLY SEEING

VALUE IN CONVERGING

BROADCAST AND OTT

WORKFLOWS INTO A

SEAMLESS EXECUTION

— LEVERAGING THE

STRENGTHS OF EACH WITH

DIFFERENT MONETIZATION

STRATEGIES.

BROADCAST VOD

For broadcasters, accelerating the delivery journey between a program’s initial airing and its availability for on-demand viewing translates directly into improved ROI. Nielsen’s C3/C7 audience measurements (the 3- and 7-day periods after an initial live airing) are still a critical factor in establishing the advertising value of content. Even a small delay in time-shifted availability can impact the size of the captured audience.

A VOD provider should not only deliver assets, but maintain a robust portfolio of monetization tools and services, including C3/C7 capture, enablement of dynamic ad insertion (DAI), and support for electronic sell-through to fully maximize content monetization models. To get there, a broadcast VOD solution can:

• Simplify processes with seamless end-to-end workflows that extend through asset ingest, encoding, storage, metadata transformation, quality control, and delivery.

• Turn large content volumes quickly to meet viewer demand and maximize C3/C7 ad revenue.

• Deliver VOD content in HD, SD, Mezzanine, and other IP friendly formats.

• Ensure your programming reaches viewers securely, in the highest quality, and to the broadest possible distribution footprint. • Support TV Everywhere experiences and delivery to key

OTT operators.

DAI: A MONETIZATION MUST-HAVE

Combine an engaged audience with a compelling ad that can be dynamically inserted into a VOD asset to improve your advertising inventory and yield considerable revenue. Comcast Technology Solutions is leading the way in DAI, with an approach that’s cross-compatible with CableLabs standards and direct delivery to VOD sites.

HOW COMCAST DELIVERS BROADCAST VOD:

A single ingest and workflow engine for the fastest & most reliable multi-platform delivery for C3/C7 & D4 assets Your VOD library,

live capture, metadata & ads

Reliable distribution to 99% of MVPD set-tops and TV Everywhere subs in the U.S. & Canada and to the largest OTT destinations

COMCAST

BROADCAST

VOD

INGEST

Ingest your assets, metadata, and ads once

using a single process

PUBLISH & DELIVER

Carrier-grade delivery engine ensures always-on

delivery to the broadest MVPD & OTT distribution

footprint

OTT SERVICES TRADITIONAL MVPDs

TRANSCODE & STORE

Create all the bitrate variants and formats needed for your STB & OTT destinations in

near-real time

QA

Our full service 24x7 operations team monitors

your workflows in real time to ensure all assets meet quality and delivery timeline commitments

MONETIZATION

Fully maximize C3/D4 windows and easily prep your content for RTVOD, including integration with

OVER-THE-TOP (OTT) VOD

With more than 40 platforms to deliver to, and even more formats, a VOD managed service should effectively address the growing challenge of reaching multiple screens quickly by streamlining content processing and preparing for new delivery destinations. A true full-spectrum service provides an optimized media library, comprehensive transcoding, and the ability to implement the most effective CDN strategy.

Media Library

• Ingest your high-resolution mezzanine files via FTP, SFTP, or Aspera. • Store content in an optimized media library for quick access to

transcoding services.

VOD Origin

• Simplify and optimize your digital video workflow with dynamic, just-in-time packaging and encryption.

• Ingest a single format and distribute on-demand in a variety of adaptive bitrate formats to maximize your reach.

• Enable CDN-agnostic delivery strategy.

Transcoding

• Make your content available to your audience on more devices, as quickly as possible.

• Access content when you need it — our accelerated, scalable transcoding services act as a hub for digital distribution and origination of on-demand video content.

• Ensure all destinations and required output permutations are covered with our comprehensive array of broadcast-quality codecs and features.

HOW COMCAST DELIVERS OTT VOD:

INGEST

ORIGIN & PACKAGING

JITP & STORAGE THIRD-PARTY

TRANSCODE • All formats HLS, MPEG-DASH, MSS, HDS • Full DRM support • Multi-PB storage COMCAST CDN THIRD-PARTY CDN CDN SELECTOR VOD TRANSCODING YOUR MEZZANINE CONTENT

MULTI-CDN DONE RIGHT

A content delivery network (CDN) service is crucial — not only for delivering an optimal playback experience, but also for protecting your content origin from attack. A multi-CDN structure leverages multiple networks to improve reach, optimize traffic, and enable a provider to utilize the best performing, most cost-effective CDN at any given time.

What should global providers look for when selecting a CDN as either a pure-play content delivery network, or as the anchor for a dynamic multi-CDN architecture?

• Many Physical Locations: CDNs improve playback by caching content closer to the viewer; so a broad distribution of caches across the largest metropolitan areas will result in a better experience for more end users.

• Network Redundancy: Network congestion can happen anywhere, at any time. A CDN with multiple pathways to avoid traffic jams makes for a more consistent end user experience. • Tiered Architecture: Multiple tiers of caching ensure a

higher level of efficiency, as well as better protection for content origin servers.

ABOUT THE COMCAST CDN

The Comcast CDN is purpose-built for video, and optimized to provide broadcast-quality media experiences on any scale with over 100 physical cache locations in North America across 28 metro networks, 18 core backbone nodes, and more than 250 network interconnects. The Comcast CDN’s open architecture, coupled with its strength as one of the most broadly deployed caching platforms in North America, is a premier choice to anchor your CDN solution.

85.1%

LOADING TIME

TOOK TOO LONG

85%

STALLING AND

REBUFFERING

67.5%

REPEATED

PLAYBACK ERRORS

57.3%

PICTURE QUALITY

WAS TOO POOR

US DIGITAL VIDEO VIEWERS WHO HAVE STOPPED WATCHING A VIDEO DUE TO SELECT STREAMING ISSUES Q1 2017 (% OF RESPONDENTS)8

Broadcast and OTT VOD have something in common: when it comes to monetization strategy, course correction and adaptation are the norms and not the exceptions. Success is out there for the companies able to deliver a truly differentiated experience, but once you’ve got an audience’s attention, is there a golden compass that keeps you on a path to profitability?

WHAT DO YOU PAY FOR AND WHY?

Think about your own viewing habits for a minute. Let’s say you’re exploring an inviting new service and you’re finding plenty of stuff you’d like to watch:

• What makes you want to actually spend money for it? • What makes you want to keep paying for it?

• When is advertising okay for you, and when is it bothersome? • How often do you just find something else to watch? For the purpose of this exercise, let’s just pretend that performance isn’t an issue (although, of course it is). Great content and an extraordinary playback experience over any device are critical metrics, but they don’t automatically translate into viewers eager to throw money at the screen. The value proposition for a VOD brand is as personal as the answers to the above questions. And, if the trend towards more localized content continues as expected, it’s going to have a profound impact on how your service is valued at the individual level.

FLEXIBILITY IS KEY TO LONG-TERM HEALTH

Providers and advertisers will continue to come up with new ways to monetize; but the only real constant in the equation is the need to move your service and your audience into a more meaningful dialogue with each other. VOD providers have a delicate balance to maintain if they want to build a profitable brand without making viewers feel like guinea pigs. Everything hinges on staying relevant and engaging to consumers. The constant push to compress time-to-market and maximize ROI means that monetization strategies need to demonstrate a keen awareness of where your service sits on each viewer’s priority list — and respond accordingly.

There are currently three primary OTT monetization models, each with their own challenges. Keeping engagement high and churn low is an obvious and constant assumption across the board.

SUBSCRIPTION-BASED (SVOD)

The subscriber-based model currently rules the roost — think Netflix, Hulu, Amazon Prime, or any number of others. With so many new video services, the days of being valued solely on library depth are gone. Original content that keeps subscribers glued to the screen is expensive to either create or purchase.

From a strategic standpoint, a standalone SVOD destination — especially a niche-focused one — might have an entirely different mission than one that exists to augment a larger brand. Does your long-term success hinge on gaining a rapid ROI? Are you opening up an SVOD destination as a way to expand viewership, or to establish a new delivery platform? Does your operating capital provide the flexibility for heavy experimentation with introductory pricing? A large company that’s diversifying might be able to afford a negative margin while it works the kinks out, but a shiny new brand with an unknown fan base needs to get it right the first time. Unless it has the leeway to ignore profit as a success measurement, an SVOD offering needs to enter the fray with eyes wide open and an agile, efficient direct-to-customer (D2C) operation.

SSAI: MAKE SURE YOUR ADS ARE SEEN BY “EVERY EYE YOU BUY”

Video ads are worthless if they’re not viewed. Over 25% of internet users are now using an ad blocker, of whom 74% won’t visit a destination that requires adblocks to be turned off. To restore ad viewers — and in return, revenue — server-side ad insertion “stitches” ads into a content stream before it’s delivered to a player so that it’s just “part of the show.” Additionally, SSAI works seamlessly across all platforms, reducing the complexity of installing across multiple players. SSAI also speeds up load times and skips the potential latency issues of a client-side ad, resulting in a win-win for viewers and providers.

TRANSACTION-BASED (TVOD)

Simply put, a TVOD service puts content out there for consumers to purchase or rent by the slice. On one hand, it’s a less

complicated way to set up an OTT shop, but there are a lot of places out there to buy content. Aside from the costs of using an established platform and managing the day-to-day transactions, the big challenge (outside of playback quality) is pretty traditional: you’ve got to sell enough to stay in business.

ADVERTISING-BASED (AVOD)

Ad-based services are not just here to stay — they’re getting better on every front, and consumers accept them as long as they don’t over-encroach. Technology and process improvements are improving the industry’s ability to determine the true value of a piece of content across platforms, channels, and time-shifted consumption. At the same time, innovative business strategies are emerging that drive customized and creative experiences for customers. Still, AVOD services need to be attractive to advertisers who have a lot of options for their media spend — and those options increase with every new OTT service.

PRO-TIP: EMPLOY A “BLENDED FAMILY” OF XVOD MONETIZATION MODELS

A mature OTT monetization strategy will likely emphasize one of the above “big three” models, but a creative hybrid approach can really pay off, too. Strong content is an awesome revenue generator that can hold up to some interesting new combinations. Subscribers might be fine with the judicious use of advertising in some instances. TVOD has demonstrated value as an effective first-tier relationship, leading into a more reliable subscription payment. Maybe your audience will respond to a hybrid “metered” approach where the lines between ad-supported and subscription are blurred, with access to a full content library with a subscription. A successful monetization strategy is anything but static. It has to be built on a foundation that allows for scalable quality and highly informed trial-and-error. More than just “price,” the decisions made on how to organize and monetize content have an immediate impact on how your audience relationship develops. The word “holistic” gets thrown around a lot in business, but in this space, it’s crucial. OTT destinations need to understand their audiences, and build their revenue strategy with a concerted effort of

• BROADCAST VOD: Time and reach matter. How do you get the most out of your VOD content when delivering to set-top boxes? Ads and viewers. For that you need the reach to the entire broadcast footprint, and you need to get your VOD asset to the destinations as soon as possible after the live linear broadcast. Comcast Technology Solutions has been delivering VOD assets to set-top boxes for Comcast Cable and other major entertainment brands since the inception of VOD. Since then we have been evolving and improving to bring the highest possible value to our customers. Our service also includes a syndication option that can deliver VOD assets to content aggregators like Hulu and YouTube.

• OTT VOD: OTT Digital Distribution addresses the growing challenge of reaching multiple screens quickly and efficiently by streamlining content processing. Ingest, encode/

transcode, validate, protect, and distribute in a single automated workflow. Our modular approach means you can create the best solution for your business needs,

whether that means outsourcing the whole delivery process to Comcast Technology Solutions, or using parts of the workflow that work best for your business.

COMCAST TECHNOLOGY SOLUTIONS: YOUR CONVERGENCE POINT

Video on Demand is a mission-critical component to any video monetization strategy. Comcast Technology Solutions has designed a comprehensive set of VOD solutions to deliver your content where it needs to go — set-top boxes, content aggregators, virtual MVPDs, over-the-top, or directly to your consumers. Ingest your VOD library from anywhere, store, process, and distribute it, and monetize it through traditional broadcast ads, dynamic ad insertion, syndication to a content aggregator, or directly to consumers through a AVOD, SVOD, or TVOD model. Our VOD services include:

OUR VIDEO ON DEMAND SUITE

Deployed as a comprehensive solution, Comcast Technology Solutions elevates the quality of your audience experience, with innovations and integrations that improve the technical and financial performance of your organization into the next decade and beyond. • Reach nearly all traditional broadcast STB outlets and OTT

destinations with the end-to-end Broadcast VOD solution. • Power your OTT content delivery experience with a

comprehensive set of solutions:

• Full video processing workflow including acquisition, storage, transcoding, just-in-time packaging, and DRM • Multi-CDN support including CDN fabric, multi-CDN origin,

and intelligent multi-CDN routing

• Online video platform, which provides content and metadata management, workflow and publishing orchestration,

entitlements and policy engine purpose-built for video and fast, multi-platform playout

• Full monetization support including subscription

management, billing, merchandizing, frictionless payment, robust ad policies and a full set of dynamic ad-insertion capabilities — both client- and server-side

• Open and flexible platform with pre-built, proven integrations across the ecosystem from leading analytics providers, ad descisioning partners, user experience platforms, recommendation engines, and more

ABOUT COMCAST TECHNOLOGY SOLUTIONS

Comcast Technology Solutions provides a portfolio of media, entertainment, and technology solutions. We invent technology that solves industry challenges, reimagines what is possible, and transforms business through new innovations. Built on Comcast’s know-how, proven facilities, platforms, and infrastructure, Comcast Technology Solutions offers more than 20 years of reliable real-world broadcast and digital experience. We partner with customers to redefine business strategies and deliver the future to global audiences.

FIND OUT MORE

800-824-1776 | ComcastTechnologySolutions.com [email protected]

REFERENCES

1: “Global Video on Demand Market – Trends, Drivers, and Projections.” Global Industry Analysts, January 2016. 2: “Cable VOD ad impressions up 21%, Canoe says business now bringing in $1B a year.” FierceCable, April 17, 2017. 3: “Q4 2016 Digital Video Trends: Monetization, Audience, Platforms and Content.” eMarketer.

4: “OTT Video Market Tracker.” Parks & Associates, 2016. 5: “Subscription VOD Metrics Chart.” eMarketer, 2016. 6: “Global VOD Survey 3Q15 North America.” Nielsen, 2016.

7: “OTT Services And Devices By Service Name.” SNL Kagan, April 2017. 8: “2017 Video Streaming Perceptions Report.” Mux, April 13, 2017.