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The Giants Awake High-Speed Networks in the UK

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The Giants Awake High-Speed Networks in the UK Online TV 30.06.08 | MediaGuardian | A special report on the future of digital viewing In association with Brightcove The UK is a really competitive market with ! 150 pay-TV channels, Sky, Freeview, Tiscali " and BT’s TV service. Our video-on-demand service is a point of differentiation Malcom Wall, CEO of Virgin Media’s content division, p6 Introduction Revolutionised TV Online video has moved well beyond home movies of cats on skateboards and bad karaoke. In the last 18 months, video publishing has become a huge part of many websites and professionally-produced video content is being offered to growing online audiences. Meanwhile, telecommunications companies (telecoms for short), such as BT, have also recognised that offering TV and on-demand video services over broadband networks will help them to attract new customers (and keep existing ones). To do this they use a network technology called internet protocol TV (IPTV). In this supplement we look at how online video and IPTV are developing in parallel and, increasingly, in competition with one another and at the impact this is having on traditional media businesses. We investigate how the UK’s largest telecom, BT, is approaching it. Companies are testing the interactive capabilities of IPTV services and also looking at how to use them to target advertising. Video-on-demand services are being ramped up by pay TV operators as they look to stand out against rivals, such as BT. We look at the BBC’s ambitions to make the iPlayer work on a wider variety of devices and how its commercial sister service, Kangaroo, is starting to develop. Navigating the video content now available online and in IPTV systems is also explained. The online video revolution: websites such as YouTube, Bebo and MySpace have transformed how the moving image is used and viewed Rana Faure/Getty And we also explore how DVD rental businesses are changing to keep up with video on demand, iTunes and online video sites. Finally we look at the future of The giants awake high-speed networks in the UK. Without more and faster broadband connections, Britain risks being left behind. And we talk to Francesco TV channels and telecoms have scrambled to respond to the opportunities presented by Caio, the former boss of Cable & Wireless, who has been charged online video. But, as Kate Bulkley reports, none of them are quite sure what works yet with delivering a report on how to build and pay for upgrading the UK’s t is hard to believe that the phenom- Pay-TV channel Living is commissioning look at how to enrich the experience and for $1.6bn by Google and is the most- congested broadband network. enon we now know to be YouTube its first online drama series, but Jonathan be a little bit different.” watched video-sharing site, but it is still Kate Bulkley started barely three years ago. Webb, managing director of channel BT’s year-old video service is a case in estimated to be loss-making as a busi- Before this video-sharing website owner Virgin Media Television, says this point. BT Vision has attracted 250,000 cus- ness. Dan Cryan, analyst at Screen Digest, was created in mid-2005, watch- might cause problems. “I suspect there tomers who are able to order on-demand says: “Today it’s all about consumption, Inside ing and sharing online videos was will be constant tension between the team TV and films through a special set-top box not about revenue.” much more difficult and much less at Living and the online portal but that’s attached to their BT Broadband connec- This is particularly true with online content was available. fine and as it should be,” he says. tion. Unlike web-based online video, BT video from “free” sites. Online advertis- Since YouTube showed us the way, The burgeoning of online video has Vision offers a limited array of video to its ing is growing fast but most of the revenue 02 Delivery !online video watching has exploded and gone hand-in-hand with the availability users directly to their TVs and guarantees is from search engine advertising, not dis- Can phone companies compete in the video-sharing sites have proliferated. of broadband connections at an affordable a TV-like picture quality. “This is a man- play ads. Advertising attached to online crowded pay-TV market? Social networking sites, such as Bebo and price. According to regulator Ofcom, 57% aged service and we think we can give our video is still tiny when compared to total MySpace, were next to utilise the power of UK homes now have a broadband con- customers a better service if we can organ- advertising budgets. 03 Personalisation of video; they are now commissioning TV- nection, up from 53% in 2007. ise it and present it in a friendly way,” says Screen Digest expects total annual IP Matching content to individuals keeps like dramas for their viewers. Dan Marks, chief executive of BT Vision. revenues from paid services — includ- both audiences and advertisers sweet Traditional media may have taken a Keeping customers Marks admits that BT Vision is first and ing both online video and revenues from bit of time to catch on, but now newspa- The spread of broadband connections foremost meant to help BT attract and managed services, such as BT Vision — 04 The BBC pers, radio stations and TV channels are has not only spurred the growth of video keep its broadband customers. This is an to reach £333m in 2012, up from £31m in The iPlayer has been a massive success. all rushing to add video to their online viewing on the internet. The big broad- important part of the telecommunication 2007. The bigger share will come from What can competitors learn from Auntie? offerings. The UK’s biggest broadcasters band providers — including telephone company’s business model. But Marks also managed IPTV services, although this are all offering online catch-up TV serv- companies, such as BT — are increasingly says that once they get more subscribers excludes advertising, which is expected 05 Navigation ices led by the success of the BBC’s iPlayer, using video as a way to add value to their — the goal is two million BT Vision custom- to account for a large portion of total rev- What’s the best way to make sense of the which in its first six months has already broadband services, in effect bundling ers in the next two years or so — the service enue. Screen Digest estimates that adver- huge amounts of online TV and video? had 100m requests to view programmes. phone and broadband connections with can be profitable in its own right. tising will make up about £97m or half of Last month it was logging 700,000 online on-demand TV services. Already some 68% of BT Vision’s online TV revenues in 2012; but perhaps 06 Video on demand views a day. New Amazon-style recom- “Most telephone operators are in land- 250,000 customers pay for some kind of the figure to keep in mind is that by 2012 Can providers keep up with expectations? mendation tools, a “last played” service grab mode right now,” observes Steve TV or film programming package, quite the pay-TV market in the UK will be worth And how can they make a profit? that remembers the last 10 programmes Farmer, head of business development an achievement for a service that, unlike £6.4bn, up from £4.4bn in 2007. a user has watched on iPlayer and the at Motorola. “For them, it is about how to Sky TV and Virgin Media, doesn’t require “Online video is the hottest advertising 07 Bandwidth/DVDs addition of BBC radio programmes are all deliver a me-too, digital TV service to com- an ongoing subscription. “I think 68% is a media going right now in terms of brand Plans to improve the national broadband part of a new test version of iPlayer that pete with cable and satellite pay-TV. When sustainable number,” says Marks. marketing,” says Adam Berrey, vice-pres- network, plus will DVDs survive? launched last week. they get to numbers in the hundreds of ident of marketing and strategy at Bright- By the end of the year, ITV, Channel 4 thousands of users, then they will begin to Where’s the profit? cove, a technology company that supplies Commissioning editor Kate Bulkley and BBC Worldwide, the commercial arm Despite Marks’ sanguine view of BT online video platforms to clients including Produced for Guardian Professional, of the BBC, will launch a shared online site Vision’s future, the formulas for money- Channel 4 and the Daily Telegraph. “The a commercial division of Guardian (known as an aggregation site) that will ‘Most telephone making out of both web video and man- problem is that there is a lot of consumer- News & Media. All editorial content include programmes from all three broad- aged systems, such as BT Vision, that use made video on the net but a lot less pro- is independent of the sponsor and casters. The new site, with the working operators are in land- internet protocol technology to deliver TV fessional video that brand marketers are commissioned by the Guardian. name of Kangaroo, is expected to include (IPTV) to users, are still being written. comfortable with.” Paid for by Brightcove advertising and subscription services. grab mode. It is about There are big questions about how Berrey believes that, for at least the Advertising contact David Clayton at The online opportunity — especially for how to deliver a me- fast online video can become money- next 18 months, there will be many dif- Guardian Professional on 020-7131 7086 pay-TV channels looking to expand their making, or if it ever will.
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