IPTV Monthly Bulletin

IPTV BULLETIN MULTIMEDIA RESEARCH GROUP, INC. JULY 2011

AT&T and Verizon Continue to Gain Subscribers

AT&T and Verizon’s Subscriber Numbers

CONTENTS

COVER STORY

AT&T and Verizon Continue to Gain Source: MRG, with Company Financial Data Subscribers...... ! 1-2 Netﬂix Raises Prices By 60%!...... 1-2

AT&T added 202,000 “U-verse” TV subscribers in Q2/2011, bringing its total to 3.4 million, a growth of 36% from a year earlier. In FEATURES Broadband, AT&T lost 451,000 traditional DSL subscribers, but gained Corrections...... !2 Financial/Legal!...... 12 439,000 higher-speed U-verse Broadband subscribers to reach a total Transmedia: A New Concept in Multi-Platform Production!...... 13-14 Continued on Page 2

IPTV TRENDS Regional Updates!...... 3-7 ! Asia, Australia & India...... !3 ! Europe!...... 4-5 Netflix Raises Prices By 60% ! Eastern Europe...... ! 5-6 ! North America!...... 6 ! Rest-of--the-World!...... 6-7 Netflix announced price changes for DVDs Hardware & Software!...... 8-12 by mail and streaming options for ! Advertising!...... 8 subscribers this month, drawing criticisms ! Cloud-based Services ...... !8 from many customers. The lowest cost plan ! Content Security/DRM !...... 8 ! Home Networking!...... 8 with one DVD out and streaming increased ! Middleware!...... 9 from US$10 to US$16 per month. A new ! Multi-Screen Distribution...... !9 streaming only plan now costs US$8 per month, however. And a new ! OTT Systems...... ! 9-10 DVD only service also will cost just US$8 per month. This clearly ! Research!...... 10 ! Set-top Boxes!...... 10-11 separates the streaming service from any physical DVDs, and may end ! Social TV...... ! 11 up creating more of a demand for the streaming service. ! Video Quality and Monitoring...... ! 11-12 Netflix is putting a big focus on its streaming services and is making corporate changes to reflect these changes. A new Netflix executive CABLE, SATELLITE & DTT was appointed to take charge of the DVD by mail service, which will TRENDS ...... 7-8 free other executives to focus on the streaming business. Apparently business is still going strong for Netflix. In Q2/2011, it added 2 million new subscribers to reach 25.56 million (24.6 million in ...... 13 CALENDAR the U.S., 970,000 in Canada), a growth of 70% from a year earlier. For the quarter, Netflix had revenues of US$789 million, and net income of US$68 million. Churn in the U.S. increased from 3.9% in the first quarter to 4.2% in this quarter.

AT&T and Verizon Continues to Netflix Raises Prices By 60% Gain Subscribers (Continued from Page 1) (Continued from Page 1) Average revenue per subscriber went down quarter- of 16.5 million subscribers, up 3.3% from a year over-quarter, from US$11.97 to US$11.49 in the earlier. In all, U-verse services represent US$6.5 second quarter ended June 30 because 75% of new billion in annual revenue, based on the previous subscribers signed up for the streaming-only plan. quarter’s earnings. AT&T’s U-verse network now reaches 29 million living units and overall According to an analysis by investment firm Piper penetration of eligible living units is 15.5%, while Jaffray, it costs Netflix up to US$0.75 cents to mail penetration in areas marketed for 36 months or a physical DVD, but only US$0.05 cents to stream. more is 25%. According to the company, over three- That’s probably why Netflix is increasing the price quarters of AT&T U-verse TV subscribers have a for DVD subscriptions. The company believes that Triple- or Quad-Play option. Additionally, the shipments for DVDs have peaked, because of the average revenue per unit (ARPU) for U-verse Triple- popularity of the streaming service. During an Play customers in the quarter was US$170, up 8.3% analyst call, Netflix executives said that they are year-over-year. following the competition from Amazon, Hulu and HBO Go. However, they said that the haven’t AT&T’s total wireline revenue for the quarter was US “detected an impact on our business from Amazon $14.9 billion, down 3.2% from a year earlier, while Prime.” its consolidated revenue for Q2/2011 was US$31.5 billion, up 2.2% from a year earlier. Net income was In the future, Netflix is looking to expand its down 10% to reach US$3.6 billion. streaming service into 43 countries in Latin America before the end of 2011. AT&T additionally said it had expanded U-verse services into more than 1 million units in the Atlanta, Analyst Comment: Despite the cries of Georgia, U.S.A. area, after first launching in the area agony of some of its customers protesting in December 2007. The milestone is significant this price change, Netflix will probably gain because Atlanta has been popular with Cable in the long-term, so long as it improves its Providers, and has not had much competition for online offerings and streaming services so Pay-TV services. U-verse TV will compete against that most subscribers can see the added Cable Providers Charter, Comcast and Cox. quality and choice of titles. Given the high cost of developing new/compelling content, Netflix appears Verizon added 184,000 “FiOS TV” subscribers in to have made the right decision with this price the quarter, bringing its total to 3.85 million. This change. n makes it the number 7 Pay-TV Provider in the U.S. For Broadband, Verizon gained 189,000 customers and now has 3.965 million subscribers. Overall, the FiOS business unit generated US$2.03 billion in the Corrections quarter, up 20.7% from a year earlier, accounting for 57% of consumer revenue. FiOS TV penetration In the August 2010 issue of the IPTV Bulletin, we was 29.9% compared to 25.9% a year earlier, while reported that Portugal Telecom had 702,000 IPTV FiOS Internet penetration was 33.9% (compared to subscribers. However, this number was actually the 29.9% in the second quarter of 2010). In total, the total Pay-TV (IPTV and Satellite) subscribers. MRG FiOS network passes 16.1 million premises as of the estimates about 1/3rd of Portugal Telecom’s total end of June 2011. Verizon also announced this subscribers are using IPTV, or about 234,000. month that Lowell McAdam will succeed Ivan Seidenberg as CEO, effective August 1st. McAdam In the March 2011 issue of the IPTV Bulletin, we is currently President and COO of Verizon. reported that Deutsche Telekom had 1.6 million IPTV subscribers as of the end of 2010; however, Overall, Verizon posted Q2/2011 revenue of US the correct number is 1.1 million subscribers. As of $27.5 billion, up 2.8% from a year earlier. Net Q1/2011 that number has now increased to 1.3 income was US$1.6 billion, compared to a net loss million IPTV subscribers. of US$1.2 billion a year ago. For the 1st half of 2011, Verizon’s capital expenditures was US$8.9 billion, Also, in the March 2011 IPTV Bulletin, it was compared with US$7.6 billion in the first half of reported that Orange/France Telecom as having 2010. n 3.5 million total subscribers; however, we attributed IPTV to one-third of subscribers or 1.1 million subscribers, with the rest for the company’s Satellite TV service. However, upon further review, we are now attributing 3.1 million to IPTV and 400K to Satellite. n

IPTV Trends Telkom Indonesia launched its IPTV service, called “Groovia TV,” available in a few areas around the Regional Updates capital Jakarta. Currently, Groovia TV includes a “basic” package with 40 channels, time-shift TV and a VOD service. The service will include Triple-Play offerings that costs IDR695,000 (US$82) per month Asia, Australia & India for 1 Mbps of Broadband and a 3 Mbps download service for IDR1.745 million (US$205) per month. Telkom Indonesia has about 1.65 million Broadband subscribers and said it hopes to reach 1 million IPTV China Telecom is working with Alcatel-Lucent (A-L) subscribers within three or four years. The IPTV to implement an IMS (IP Multimedia Subsystem) service was first announced almost three years ago, solution to unify communications across the Telco’s after inking a deal with Hong Kong’s PCCW. Set-top fixed, mobile and Web services. The companies will boxes will be available to rent for IDR195,000 (US develop advanced services, such as unified network $23) for an SD version and IDR225,000 (US$27) for address book, multimedia instant messaging HD. (including SMS, text and video) and media sharing. A-L’s division in China, Alcatel-Lucent Shanghai Bell, has been testing its IMS system in the Shanhai and Shandong provinces, with the expectation to expand to more provinces across the country. China Telecom said it is looking to evolve its network infrastructure from PSTN to an all IP system that should make it easier and less costly to operate. Analyst Comment: This makes sense as a way for China Telecom to expand its IP core network until the regulators give the “green light” to expand its IPTV services. Australian Telco Telstra said it is closing its DVD rental service “BigPond Movies” in September 2011. The InterContinental Grand Stanford Hong Kong, Australian DVD rental company Quickflix will a 5-star hotel in Hong Kong, has upgraded to Hong acquire BigPond’s library of DVD and Blu-ray discs Kong Broadband Network’s (HKBN) Fiber-based and equipment. Since Telstra’s launch of “T-Box” in 1 Gbps service, an upgrade from just 25 Mbps in the July 2010, customers purchased over 1.5 million hotel. The company said it upgraded the speed (streamed) movies from the service. In February because of growth in the popularity of Internet 2011, Telstra announced that it has sold 120,000 T- connectivity, and as a way to differentiate itself from Boxes in the country. The BigPond DVD rental other hotels in the city. HKBN is owned by Telco service was launched about 7 years ago, but Telstra City Telecom, which also operates an IPTV service apparently wants its customers to begin using its in Hong Kong. online service rather than physical DVDs. However, not all content will be available via T-Box. Currently it only has 2,500 titles online, while the DVD service has about 45,000 titles. Quickflix also announced that it signed a deal with Sony Australia, in anticipation of beginning its online movie streaming service. With the deal, Quickflix will provide a movie streaming service on Sony’s BRAVIA Smart TVs, as well as some connected Blu-ray players and even SK Broadband announced it added 9,427 IPTV Sony VAOI computers. Quickflix will launch its subscribers in June 2011, bringing its total to BRAVIA streaming service later in 2011. 911,216. Broadband subscribers were up to 4.11 million. Analyst Comment: It should be interesting to see how the movie streaming Analyst Comment: The Telco had been competition works out especially if there is losing IPTV subscribers in the last few an overlap of titles offered by Quickflix months, so this growth-while modest-is still and Telstra. n a good sign.

IPTV Trends existing core and access networks. FASTWEB was also using Cisco’s “Aggregation Services Router Regional Updates 9000 Series (ASR 9000)” for its next generation edge network. (Continued from Previous Page) In France, Telcos Free and Orange/France Telecom signed an agreement to co-finance and Europe develop FTTH networks outside major cities in the next two years. The new FTTH network will be open to all French Operators, so customers can choose any provider for their last mile connections. The new Belgian Telco Belgacom service will bring Fiber networks to over 3,600 i s l a u n c h i n g a T V French municipalities, covering 10 million Everywhere-type households by 2015 and 15 million households by service, which allows 2020. subscribers to watch “Belgacom TV” on any Maltese Telco device. Customers can now tune into the service via Provider GO is using a TV, tablet or a smartphone. Belgacom already has Entone’s “Kamai” an app available for Android devices, and the iOS hybrid OTT set-top app is awaiting release by Apple in the next few for its IPTV service. weeks. Although the service isn’t yet available on GO has created the desktops or laptops, the Telco said that it would island’s first Quad- allow viewing on PCs in mid-2011. The TV Play offering. Kamai Everywhere service includes the ability to watch includes either an Ethernet port (or an optional Wi-Fi linear TV (currently only 16 channels with more to connection), as well as a USB to connect an come later), as well as sporting events. On-demand external hard drive to use as a DVR. In addition, content is also available (currently only 34 movies Maltese Cable TV Operator Melita announced it was available initially), as well as remote PVR recording. launching the country’s first VOD service offering a Belgacom TV customers can use TV Everywhere for variety of TV shows and movies. Melita is working free during the summer, before the commercial with VOD aggregator On Demand Group and will launch in October of 2011. use its platform for the service. Belgacom also obtained the exclusive rights to U.K. Broadcaster ITV broadcast football games from the Spanish and launched its app for the Portuguese premier football leagues to devices iPhone and iPad, as well as including TVs, mobile devices and PCs. All games for various Android devices, from Spain’s La Liga will be broadcast live, plus the enabling consumers in the two best games each week from Portugal’s U.K. to watch TV programs Primeira Liga for free to Belgacom TV subscribers. from the last seven days from “ITV1,” “ITV2,” “ITV3” and “ITV4.” The apps include content recommendations and search so consumers can quickly find programs. Currently, the iOS apps need a Wi-Fi connection in order to work, and wireless networks are not yet supported. KPN has announced French IPTV Provider Bouygues Telecom added that it will begin offer casual games from France-based Video Game a n e t w o r k P V R Provider Playin’TV to its “Bbox” IPTV service. (nPVR) service for its Games that are now available include “Solitaire IPTV service Pyramid,” “Texas Hold ‘Em,” “Scrabble Words,” “Interactive TV” that “Incantatris,” “Carotte Mania Waterland,” “Biathlon can record up to 200 hours of programming from six 2010,” “Roll’Zy” and “Strike,” which cost €5 (US channels at the same time. Subscribers will need $7.20) per month. new set-top boxes that KPN is currently rolling out to new customers. KPN will offer the nPVR service for FASTWEB selected Nokia Siemens Networks €5 (US$7.15) per month. The Telco said that (NSN) and Juniper Networks to upgrade its IP subscribers must initiate a recording for a TV show, backbone network. NSN deployed Juniper and that it will not automatically record all Networks’ “T1600” core routers, added to a programming, so it is similar to a regular PVR. TV Multiservice IP Backbone and integrated with the Continued on Next Page ______4 Reseller Sample Copy — © 2011 MRG, Inc. All Rights Reserved Worldwide IPTV BULLETIN MULTIMEDIA RESEARCH GROUP, INC. JULY 2011

IPTV Trends French Telco SFR is now using Google’s search engine Regional Updates technology to help subscribers search and find linear and on- (Europe Continued from Previous Page) demand TV content. SFR will use Google’s search appliance to shows will be saved for up to a year. Additionally, for allow its “Neufbox Evolution” its DTT service “Digitenne,” KPN said that it was customers to search TV shows offering subscribers two tuners for €15 (US$21.45) a and films from both linear channels and on-demand month, rather than giving out smart cards. services. Using predictive search technology, consumers will be able to see the top 10 search Bulgarian Telco M-Tel added a movie rental service results as soon as they start typing. By the end of to its IPTV service called “Quarto.” Currently 50 titles 2011, SFR will allow consumers to search through are available, but the company plans to add 600 their own recordings and personal media stored on new titles in the net few months. Movies are the Neufbox Evolution hard drive. SFR also available for rental for BGN1.99 (US$1.46) for a 24- launched a new TV on-Demand portal located on hour period. channel 930 of the Neufbox TV service, or on the home screen of SFR’s Neufbox Evolution IPTV service. Subscribers will be able to watch select TV programs on-demand up to 4 weeks after their initial broadcast. In addition, SFR said it is adding a new catch-up TV service for 7 channels, and will expand to 20 channels by the end of 2011. The service will include content from “M6 Replay,” “Replay Disney,” U.K. Communications Regulator Ofcom said that “NRJ 12 Replay,” “Game One,” “Gulli,” “Canal Plus” digital TV penetration in the country was 93.1% at and “Equidia On Demand” when it launches. n the end of Q1/2011. Almost 40% of U.K. homes (10.1 million) are using DTT as their primary source of digital TV reception, with 75.7% of second TV sets already converted to digital. Consumers using Eastern Europe FreeView, the Free-to-Air Terrestrial service, increased by 700,000 as of the end of Q1/2011 and now total 2 million. Overall, in the U.K., 36.2% of homes had a Pay-TV Satellite service and 13.1% used a Cable TV subscription. Orange signed a deal to deliver Latvian Telco Lattelecom signed a deal with Huawei its content on Samsung’s Smart to deliver a new multimedia platform for linking TVs, as well as Blu-ray players mobile and fixed networks and offering a new voice and other networked devices from service integrated with social media networks. The the consumer electronics company said it has been upgrading its network company. The deal includes an since 2008 at a cost of about LVL62 million (US$125 Orange portal that has sports, million). radio stations, movie trailers and free content from Orange channels. Samsung already has content deals with French Broadcaster TF1, Poland’s TVP and Sweden’s TV4. Portugal Telecom added 44,000 IPTV subscribers in Q2/2011 reaching 919,000 total subscribers. Romtelecom announced it was stopping free The Telco said that its wireline access to its IPTV service “Dolce Interactiv” in business had its best performance August 2011. The change will affect about 10,000 in 19 quarters, and increased its customers out of 35,000 currently receiving the EBITDA by 1.1% from a year service. These customers will have to drop the ! earlier. service, or must move to packages costing between €4.9 (US$7) and €9.9 (US$14) a month.

IPTV Trends the market. The Telco will also begin offering electric service to residential customers via a partnership Regional Updates with Viriden Energy. It already has signed up 1,400 (Eastern Europe Continued from Previous Page) customers since the service launched in June 2011. U.S. regional Telco Hickory Telephone Company said it used FTTx products from Zhone Technologies to deliver its Triple-Play services. Hickory is using Zhone’s “MXK” Croatian Telco T-Hrvatski Telekom (T-HT) acquired solution at its core multi- the exclusive rights to broadcast the country’s service access platform for premier football league live on its IPTV service both copper- and FTTx-based networks, in order to “MAXtv.” T-HT will offer over 100 live games to migrate from legacy POTS system to the new subscribers, instead of the previous 30. The Telco GPON technology. Hickory said that it chose Zhone will also become the primary sponsor of the Croatian because of its flexibility and scalability for both first division, which will now be known as the MAXtv copper and fiber networks. Zhone said that over Prva liga (MAXtv First Division). 1,350 MXK platforms are currently deployed around Lithuanian Telco TEO LT the world. released its Q2/2011 results Verizon added some new music products to “FiOS showing revenues of LTL369.8 TV.” It added Music Choice’s “SWRV” interactive million (US$154 million), with music video network in all FiOS TV markets, plus it TV revenues at 6.1% of that also added Internet radio Pandora. total. In terms of overall subscribers, TEO LT said it had 142,500 customers for its IPTV Independent U.S. Telco Warwick Valley Telephone and DTT services, a growth of (WVT) is acquiring Alteva, a Cloud Services 24.9% from a year earlier. However, the Telco does Provider, for US$17 million. Alteva, based in not release the number of IPTV customers, and it is Philadelphia, Pennsylvania, offers cloud-based estimated at about 72,000 (or just over half of the services for VoIP and other unified communications total subs). Total Broadband subscribers increased systems. WVT said it will merge its existing CLEC 7.7% from a year earlier to reach 325,600. Overall and enterprise operation, USA Datanet, into Alteva. company revenues were at LTL76.6 million (US$32 WVT provides Telco services to 26,000 customers in million). New York state. Türk Telekom reported Q2/2011 results with Analyst Comment: This acquisition, while revenues at TL5,855 million (US$3.4 million), up modest, illustrates the growing importance from TL5,250 million (US$3.1 million) from a year of cloud-based services for Telcos of every earlier. EBITDA was up slightly to reach TL2,531 size. n million (US$1.5 million), while the net income was at TL1,115 million (US$659 million). The Telco said that it now has 1.1 million subscribers to its Web TV service, although it did not say how many subscribers the IPTV had. The IPTV service is now Rest-of-the-World available in 30 cities, and its FTTN network covers just over 3 million homes. n Belarus Telco Beltelecom launched an interactive TV portal for its “Zala” IPTV service that offers news, weather, finance and other information from the TV screen. Subscribers will also be able to do online North America banking via the TV through local banks Belinvestbaknk, Belarusbank, Belagroprombank U.S. Telco Cincinnati Bell said it will begin offering and BPS-Bank signing up so far. FTTH, IPTV and other services to its 80,000 customers in Cincinnati and Northern Kentucky. The Telco said it would pass an additional 70,000 homes with Fiber in the future. First, however, the company plans on offering IPTV over copper lines followed by Slovak Telekom announced it has over 150,000 Fiber. Cincinnati Bell said it has already invested US combined subscribers for its hybrid “Magio TV” $140 million and has only covered about 12-15% of service, including IPTV and Satellite. The Magio Sat

IPTV Trends consumers must initiate a recording before using this option. Regional Updates TV EPG Provider Rovi said (Rest-of-the-World Continued from Previous Page) that it has signed U.S. Cable company Charter Communications as a DTH service was launched at the beginning of 2010, customer of its Rovi’s “Total while its IPTV service has been active since 2006. Guide” search platform. The Magio IPTV service has 86 channels, while Charter has 5.5 million Magio Sat has up to 102. customers (across 27 U.S. states), so this is Rovi’s largest deal yet. Rovi’s Total Guide platform includes reviews, personalized recommendations, and data on more than 2.5 million TV episodes, 120,000+ celebrity profiles, and thousands of films. The agreement also includes access to Charter subscribers using Internet and mobile devices, including smartphones and tablets. YouTube, the popular video Website from Google will now adorn the “Invision” IPTV service offered by Saudi Telecom (STC). Subscribers will be able to watch YouTube videos while downloading other video from its VOD service. STC is currently installing Fiber Optic lines in various cities and it now has 50,000 homes passed. n Sky Italia built an IP backbone between Rome and Milan using ATEME’s encoders and decoders. The multi-channel service will span over 4 Points of Presence initially, and will be used for content Cable, Satellite and DTT Trends exchange across sites, primary distribution, and disaster recovery. The network is based on 10 Gbps and 2 Gbps circuits supporting low delay BSkyB announced that it was freezing subscription uncompressed video feeds on the optical layer, prices until September 2012 across all of its TV, together with JPEG2000 and MPEG-4 compressed Broadband and phone products. The reason behind feeds over IP. Sky Italia, owned by News the move was the continuing tough economic Corporation, launched in 2003 and now has conditions affecting many customers. Last month 4,920,000 Satellite TV subscribers as of March Sky launched its “Sky Go” service available on PCs 2011. The service includes over 190 channels (with and game consoles. Sky Go will soon be available 36 in HD). on mobile phones and tablets. According to Cable Provider Suddenlink, its Cablevision is using software from Affinegy to help recently launched TV Everywhere service has been subscribers set-up their home networks. Affinegy’s very popular. Research by the company found that Home Portal software helps customers install and customers streamed video content through secure their home networks and connect other Suddenlink2Go more than 630,000 times in June equipment like PCs, game consoles, printers, 2011, for a weekly average of nearly 160,000 connected TVs and other devices. The software also streams. The number of weekly streams increased actively monitors and diagnoses connections to more than 19% in the last week of June compared ensure a high level of service, allowing Cablevision to the first week when it was first launched. Total technicians to view remotely their subscribers’ page views for Suddenlink2Go’s Website in June wireless networks through the “Care Portal.” The 2011 were more than 740,000, which meant that software makes it possible to pinpoint the root cause customers were viewing a little more than 1 page of a performance issue, driving a better service. (1.17) before they selected and streamed anything. Cablevision has also expanded its network DVR Suddenlink2Go was developed in partnership with (also known as network PVR or nPVR) service to Synacor, which also built the service for Charter customers in Brooklyn, New York. The Operator has Communications’ TV Everywhere trial last year. been adding new regions during its rollout of nDVR. The new DVR Plus service works with any Cablevision set-top box and is US$10.95 per month for 160 GB of storage, the same price as Cablevision’s regular DVR set-tops. The service can also pause live TV for up to 15 minutes, although

Monaco Telecom will be able to begin using the new Cable, Satellite and DTT Trends cloud-based TV service via a software update to its subscribers. n

(Continued from Previous Page) Content Security/DRM U.K. Cable Provider Virgin Media is one of t h e f i r s t P a y - T V The Digital Entertainment Content Ecosystem Operators to feature the (DECE) announced the launch of its UltraViolet music streaming service, licensing program for content, technology and Spotify, on TVs and Service Providers. DECE also published its mobile devices. The deal technical specifications that define how various between the two ecosystems work together to bring UltraViolet to companies means that consumers. The DECE has 70 members in 10 Spotify’s 13 million tracks will be available to Virgin countries, but among those not in the group are Media’s Broadband customers, including those that Apple and Disney. use the new TiVo set-top box. n

IPTV Trends Hardware & Software Updates Irdeto acquires Blu-ray BD+ technology from the Rovi Corporation. The technology will be Advertising integrated into the company’s “Irdeto ActiveCloak” digital content security solution. The company said BigBand Networks announced that including BD+ into Active Cloak would help n that AT&T was deploying its secure Blu-ray content. “BigBand Media Services Platform (MSP)” for U-verse TV’s local ad insertion solution. Home Networking BigBand’s advertising solution helps Operators increase The Digital Living Network Alliance (DLNA) advertising revenues by splicing announced it has certified over 1,000 TV models local ads into national program during Q1/2011. The number of television models feeds. BigBand said its certified by the DLNA in the first three months of the advertising solutions supported over 1 billion ad year was greater than the total number certified in transactions in the last year for North American the first four years of the program, said the group. Cable Operators. n There are now more than 4,000 certified television models available, capable of using the DLNA specification. By 2015, total shipments of connected Cloud-based Services televisions are expected to reach 138 million worldwide, according to DisplaySearch, a U.S. market research company. The HomeGrid Forum announced that two additional Silicon Chip Vendors, Metanoia Communications and Xingtera, have joined the group. The organization said that attracting the most Silicon Vendors and customers will help move the Netgem launched its new software solution called market towards a unified networking technology like “The Cloud,” which offers live and VOD services G.hn, which works over coaxial cable, phone lines, delivered via the Internet to any connected device in or powerlines. n the home. The first implementation of The Cloud will be an iPad app that allows users to receive all linear TV channels on their devices. The first customer will be Monaco Telecom, which is currently using Netgem’s solutions for its own IPTV service.

IPTV Trends Hardware & Software Updates Avail-TVN is also offering a service called “Linear Complete” for smaller Cable Operators looking to (Continued from Previous Page) move to MPEG-4. It delivers over 300 SD and HD linear channels, as well as more than 10,000 hours of VOD content from its super headend facility in Burbank, California. Moving from MPEG-2 to Middleware MPEG-4 will give Cable Operators more efficient delivery, since MPEG-4 takes up about half as much bandwidth as MPEG-2. However, most Cable Operators would have to replace the set-tops in a customer’s home to support MPEG-4. Avail-TVN said that it has partnerships with set-top companies to offer MPEG-4 boxes to any companies looking to Video delivery company Bluestreak Technology switch. The “Linear Complete” solution includes launched an IPTV consultant service for Content reception, transcoding, encryption, content delivery Providers, Cable, Mobile and IPTV Operators. over Satellite/Fiber, hosted conditional access and Bluestreak already works with Operators like management of set-top boxes. So far, Linear Bouygues Telecom, Orange and Time Warner Complete is already being used by Zito Media, a Cable to develop multi-platform solutions, as well as small Cable Operator based in Coudersport, OTT applications. The company offers a Flash- Pennsylvania, U.S.A. n based interface (as well as one using HTML5) to deliver video to various platforms like connected TV, devices and PCs, via the Web. OTT Systems Indian IT firm Tech Mahindra signed a deal with Microsoft to set up a lab for video encoders for use in Mediaroom platforms. Tech Mahindra set up the lab at its Bangalore facility. Encoders from OEMs During Logitech’s quarterly will be tested and qualified against the conformance earnings conference call, parameters set by Microsoft for the “Mediaroom” executives said that its Google platform. n TV-based “Revue” product has had “very modest sales.” In addition, Logitech said that there Multi-Screen Distribution were more customer returns than actual sales. In response, the company said that it would lower the price of the Revue set-top from US$249 to US$99, a price which may make it more appealing to consumers. Analyst Comment: Apparently Google is still committed to Google TV, and said it would release an updated product later this year. Perhaps the new product will Avail-TVN said it is launching its “AnyView” multi- have a DVR and other technology from screen video offering to Tier-2 and -3 Service SageTV, which Google acquired in June Providers. The new service will allow Operators to 2011. Google must compete against Apple, Boxee, quickly offer “TV Everywhere” multi-screen offerings Roku and other set-tops that appeal to cord cutters to PCs, smartphones, tablets and other connected and rely on Over-the-Top Internet services. devices. The company said it is investing US$30 million into AnyView, and has a super headend in Burbank, California. The AnyView service is Video publishing company thePlatform has currently in trials with four North American Service assembled its senior management team in Europe Providers and the commercial launch will happen in in order to attract more business in the region. The 2012. team will look to offer its cloud-based TV services Analyst Comment: This too will be and video management solutions to Pay-TV interesting to watch regarding the ROI data Operators in Europe. thePlatform already provides that come out of these trials. This should online video management services to Pay-TV allow small Operators to jump in the TV Operators like Cablevision, Comcast, Cox Everywhere bandwagon yet this year if needed. Continued on Next Page ______© 2011 MRG, Inc. All Rights Reserved Worldwide — Reseller Sample Copy 9 IPTV BULLETIN MULTIMEDIA RESEARCH GROUP, INC. JULY 2011

to the popularity of online TV and movie offerings. IPTV Trends Those cord cutters may increase even more if Hardware & Software Updates Apple releases the long-rumored HDTV set with built-in iTunes and TV apps, said the companies. (OTT Systems Continued from Previous Page) Also according to the Consumer Electronics Association (CEA), revenue for consumer Communications, Rogers, Sky New Zealand, electronics will reach US$190 billion in 2011. Tablet Telstra and Time Warner Cable. sales will reach 26.5 million units, and smartphone sales will increase by 45% to reach US$23 billion. In the TV market, the market will reach US$18 billion in revenue, including more than 10.4 million units of connected TV shipping this year. According to a new FTTH Council study, conducted Video processing company Elemental Technologies by U.S.-based research company RVA LLC, overall announced that it was selected by Comcast to satisfaction among FTTH users continues to lead provide all the video processing and transcoding for that of other Broadband subscribers. Those who Comcast’s “XFINITY” TV service. The service will answered “very satisfied” were at 74% — up from include mobile and Internet content for VOD. 71% a year earlier — compared to 54% for Cable Elemental will be working with thePlatform, which is users and 51% for DSL. The survey also discovered providing content management and metadata. that FTTH subscribers pay US$2.91 a month per Elemental will take a file, create 18 output files, and megabit of bandwidth, compared to US$3.83 for deliver it to the file system that handles DRM Cable subscribers, US$16.40 for DSL, and US processing.n $49.38 per megabit for fixed wireless services. According to U.S. Consumer Research company J.D. Power and Associates, only 3% of U.S. Research consumers are cutting the cord for Pay-TV, with “young adults” most likely to do so at 6%. However, ATIS announced that its Cloud Services Forum the survey found that 52% of television customers (CSF) released the CDN Interconnection Use Case said they still watch regularly scheduled Specification and High Level Requirements programming as it is broadcast. The study also standards document. The standard provides an found that 27% of consumers watch videos on initial description of content distribution networks smartphones or tablets. Interestingly, of all mobile (CDNs) and includes use cases and requirements to phones are the most commonly used device for support passing content distribution requests watching videos at 15%, tablets and music players between two Service Providers. The group said that were both at 12%. Even more importantly, customer the new standard allows CDN interconnections by satisfaction for those consumers using mobile providing common interfaces between Providers’ devices to watch TV are above average. The operations systems, back office interfaces, routing research was completed in April 2011, and surveyed equipment, and network interconnections. 6,815 U.S. homes. n The Broadband Forum announced that over 15.2 million Broadband subscribers were added in the first three months of 2011, a growth of 2.9%. The Set-top Boxes group said it was the biggest quarterly increase in the last two years, and would represent an annual Set-top box company growth rate of 11.93%. Currently, Asia represents AirTies h a s the region with the fastest growth of fixed-line integrated middleware Broadband services, with a growth of 16.21%. Asia’s from BeeSmart into fixed Broadband subscribers now make up 42% of its boxes. The the global total, up from 40% from 2010, with integration will now Europe and the Americas with 30% and 25%, support linear and VOD video, as well as social respectively. The growth is Asia comes from the networking and other OTT content. success in China, with 42% of the net additions coming from China in the last quarter. Motorola Mobility U.K. announced a new DVR storage solution that allows consumers to install According to a survey from the U.S.-based their own additional DVR capacity via a plug-in Consumer Electronics Association (CEA) and module for its Motorola “VIP1853” set-top. The Credit Suisse (a global financial firm based in company said that the box and module can help Switzerland), about 10% of U.S. households may reduce overall set-top box deployment costs for cancel their Cable or Satellite TV subscriptions due Continued on Next Page ______10 Reseller Sample Copy — © 2011 MRG, Inc. All Rights Reserved Worldwide IPTV BULLETIN MULTIMEDIA RESEARCH GROUP, INC. JULY 2011

Social TV company TV IPTV Trends Genius launched its Hardware & Software Updates Facebook-integrated TV guide solution. The new (Set-top Boxes Continued from Previous Page) service uses TV Genius’ “ C o n t e n t D i s c o v e r y ” Operators. The VIP1853 includes a built-in 8GB platform to show in a TV DVR, but it can be increased to 160, 320 or 500 GB grid display what TV for full featured DVR functionality. The Motorola shows are being watched. VIP1853 is expected to be available for delivery globally from Q3/2011 and will be launched by a major European Operator by the end of 2011. Screenshot of Integration Between TV Genius and Facebook

RIM, maker of the BlackBerry smartphone and OS, is reportedly working on a set- top box to compete against Apple TV. The new box would be based on the Blackberry OS, and is code named the “Cyclone.” Features would include an HDMI connection, Wi-Fi, and access to Netflix, YouTube and other content.

Analyst Comment: RIM has traditionally Source: TV Genius Website been successful in the enterprise market, especially with its Blackberry smartphones, so a move to the consumer entertainment The service, based on cloud delivery, is available on business, especially TV, would be quite a various platforms, and allows consumers to find their departure for the company. RIM is friends and family and what programs they are competing head-on with Apple in the tablet market watching. n with its recently released Playbook tablet. But critical reception has tempered sales of PlayBook. n Video Quality and Monitoring

Social TV Cheetah Technologies released its new video monitoring solution, called V-Factor 2.6, which now includes data from MOS (mean opinion score) for video streams. Cheetah’s V-Factor 2.6 examines the network, packet, transport, video coding layer and the digital video stream to determine the quality and MOS grade. It bases the analysis on three metrics: blockiness, blurriness and jerkiness. Orange/France Telecom said it released a Social TV app called “TVcheck,” that automatically recognizes which TV programs users are watching based on visual recognition. The iPhone app is available free, and works with 19 French DTT channels. The application also allows viewers to chat with friends and share what they are watching by logging into Facebook. IPTV Software Provider Oregan Networks launched a new software module that enables monitoring and management of customer premises equipment, based on the Broadband Forum TF-111, RT-69 and TR-135 specifications. The new solution allows Operators to perform bi-directional monitoring and diagnostics of network and video quality-of-service parameters, such as connectivity, Continued on Next Page ______© 2011 MRG, Inc. All Rights Reserved Worldwide — Reseller Sample Copy 11 IPTV BULLETIN MULTIMEDIA RESEARCH GROUP, INC. JULY 2011

NDS announced the appointment of Dave Habiger IPTV Trends as CEO, with previous Chairman and CEO, Dr. Abe Hardware & Software Updates Peled, taking over as Executive Chairman of the company. Dave Habiger was President and CEO of (Video Quality and Monitoring Continued from Previous Page) Sonic Solutions, and helped lead the sale of Sonic to Rovi Corporation in early 2011. bandwidth, packet sequencing and video decoder Netgem announced its Q2/2011 financial results, n performance. showing revenues of €19.5 million (US$28 million), compared with €12.3 million (US$17.6 million) a year earlier. In France, its revenues were down Financial / Legal more than one half reaching €23.7 million (US$34 million), down from €62 million (US$89 million) in 2010. However, in June 2011, Netgem renewed its contract with SFR for three years, which should improve its financial results in the next quarter. The Open IPTV Forum (OIPF) named Nilo Mitra, an Engineering Director at Ericsson, as its new Amino Technologies reported Q2/2011 financial President. Mitra has been involved with the OIPF results with revenues reaching £24.7 million (US$40 since the foundation of the forum four years ago. In million), a growth of 36% from a year earlier. Gross addition, Luca Pesando from Telecom Italia and profit for Amino reached £6 million (US$9.8 million), Mohammed Dadas of Orange/France Telecom an increase of 35.5%. joined the group as joint Vice Presidents. The OIPF Apple unveiled its fiscal Q3/2011 results showing also recently named Darren Vogel (formerly from record quarterly revenue of US$28.57 billion and consulting company Accenture’s Digital Media record quarterly net profit of US$7.31 billion. Apple Services division) as Marketing Director and Co- sold 20.34 million iPhones in the quarter (up 142% chair of the OIPF Marketing Committee, alongside from a yer ago), while iPad sales were 9.25 million Arnaud Vilain of Orange/France Telecom. (up 183% from a year earlier). The one downward Set-top box company Pace announced Q2/2011 trend was sales for iPod music players, which were revenues that are up 21% from a year earlier down 20% from a year earlier. Executives said that it reaching US$1,187.1 million. The company’s was the company’s best quarter ever. EBITDA decreased from US$73.3 million a year earlier to US$68.4 million in the last quarter. Access Provider Tellabs is laying off about 330 workers, o r 1 0 % o f i t s CenturyLink announced that it has completed its w o r k f o r c e , a s acquisition of Savvis, a managed hosting and revenues dropped in the last quarter. In Q2/2011, colocation provider, in a stock/debt deal valued at Tellabs reported a drop of 21% in revenues from US US$2.5 billion. Within a few months, CenturyLink $423 million to US$334 million. In North America, plans to integrate its hosting business with Savvis’ revenue dropped 46%, compared to a year earlier, managed hosting and cloud services to focus on although international revenue was up 70% during increasing CenturyLink’s market share in these the same period. Tellabs said the layoffs will save services. The integrated hosting business, which will US$50 million. n operate under the Savvis brand for the foreseeable future, will be based in St. Louis, Missouri, U.S.A. and led by members of the Savvis leadership team. Cisco announced it has sold off its set-top manufacturing facility in Juarez, Mexico to Foxconn Technology Group, a Taiwanese electronics outsourcing company. Although Cisco did not reveal the details of the transaction, it did say that it will save about US$1 billion in expenses during its current fiscal year as part of the deal. Apparently, Cisco was looking to outsource its set-top manufacturing (from its Scientific-Atlanta acquisitions years ago) to better manage costs.

Transmedia: A New Concept in Multi-Platform Production IPTV Called a game changer by some for the way it interacts with stories and brands, Transmedia is gaining notice as a concept and technique for producers to engage with consumers across multiple connected devices. INDUSTRY It is a logical extension of ideas such as cross platform and 360-degree CALENDAR production, but its roots lie decades back, albeit in other guises. Stories were extended onto different platforms for “Star Wars,” where it was mostly seen as a marketing and merchandise exercise. Now the Web Conferences, Reports, and More allows the audience to immediately feedback their thoughts to writers and producers so that the audience becomes a participant in the story’s creation. The term itself was first floated in the early 1990s to represent the idea that narrative can flow from one media platform to the next and AUGUST resurrected in 2006 by MIT professor Henry Jenkins whose work “Convergence Culture” lent the movement a conceptual template. MRG’S IPTV Global Forecast Report In April last year, the credit “Transmedia Producer” was officially ratified by the Producer’s Guild of America, as the person “responsible for MRG’S CDN Report shepherding narrative content across at least three different media platforms.”

For its exponents, transmedia is not simply about porting the same SEPTEMBER content across multiple media platforms, but doing so in such a way that each platform contributes a new and unique aspect to the story. MRG’s Hybrid STB Report Transmedia storytelling can be envisaged as a giant jigsaw, where the pieces exist across platforms and as the user consumes these isolated 8-13 IBC story chunks, they combine to create a bigger story. Amsterdam Speaking at an IBC conference session on the use of social media, Tom McDonnell, Founder of cross platform content specialist Monterosa, explained, “Large studios and Broadcasters, as well as Indie Producers can tell various parts of the same story using distinct media, exploiting the qualities unique to each platform. So when you watch a TV show, you OCTOBER might follow a subplot that spills on to the Web, then read the dénouement in a graphic novel.” MRG’S IPTV Market Leaders Report “Lost,” “Heroes” and “Skins” are examples of linear TV programs conceived with a complementary online narrative that feeds characters 11-12 IP&TV Forum Eastern and subplots back into the TV show. Europe & EurAsia Istanbul Characters may be given Facebook pages so that between episodes fans can keep up to date with them via video blogs and status reports. A transmedia approach gives the story depth and keeps it alive long after 12-13 IP Workﬂow the basic TV content has aired. Rather than producing a TV show which is London aired once and forgotten about, transmedia permits the creation of persistent storyworlds, which can expand the life of the episode. 25-27 TelcoTV New Orleans Other classic examples come from feature film (“Head Trauma”) and gaming (Electronic Arts’ “Dead Space”). The Spanish version of 26-27 CDN World Summit Endemol’s “Big Brother” has its own 24 hour program, clothing brand, London online games, Websites and social network communities to generate much more of a story than the straightforward audiovisual product.

The multiplicity of net-enabled devices and near instantaneous Broadband connections have certainly helped evolve cross-platform projects into transmedia ones, but smartphone growth has arguably been the biggest catalyst for its take-off.

Transmedia: A New Concept in Multi-Platform Production (Continued from Previous Page) IPTV BULLETIN July 2011 Since people carry mobiles with them everywhere, the phone - especially those with GPS functionality - can be used to weave in all manner of locations, objects or events into a narrative, blurring the line between The IPTV Bulletin is a monthly reality and fiction. summary of IPTV related news and analysis, published by Multimedia “The crux to getting transmedia right lies in the interface between Research Group, Inc. technology and narrative,” advises McDonnell. It’s no coincidence that Nokia has a big impact in this space having sponsored a number of projects and even created one of its own STAFF (“Conspiracy for Good”). Publisher Brands can of course be co-opted to fund transmedia projects in the first place. Indeed what may define its potential is whether transmedia can Gary Schultz generate new revenue streams for Broadcasters to invest in content. The [email protected] attraction of transmedia to brands is that it encourages participation and a chance to shift from intrusive display advertising into genuinely Editor compelling experiences (through product placement, for example). Jose Alvear It could all of course be a passing fad, but to others transmedia [email protected] represents a paradigm shift in content production. They argue that, if done properly, it speaks to a generation of people who Managing Editor are already moving rapidly and instinctually from one platform to the next. Michelle Kabahit The problem right now is that most of their content is not moving at the [email protected] same pace with them. Analyst Comment: Media guru Marshall McLahan could, once Contributor again, say “I was right” by reciting his famous (1950s) Tanuja Chati observation that “the medium is the message.” Or have we just Digital Video Analyst returned (again) to the idea that viewers pick viewpoints and [email protected] endings of dramatic movies that was first promoted a few decades ago? What makes it different this time around is the introduction of multi-screen display joined with social media or social TV. The younger generation will have to sort this one out, since most of my Subscription generation like storytelling with a single beginning, middle and ending. Inquiries Yet, the intriguing thing about Transmedia storytelling is its ability to give depth, breadth and texture (i.e. “backstory”) to characters and places in North America & Paciﬁc Rim the main storyline of a dramatic or documentary piece. Otherwise, it’s just John B. Jackson gimmick. n [email protected] 1-714-777-2033

Europe, Middle East & Africa Grace Moyles [email protected] +44-161-799-7090

Multimedia Research Group, Inc. (MRG, Inc.) 1754 Technology Drive, #132 San Jose, CA 95110, U.S.A. www.mrgco.com 1-408-453-5553