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Is It Time to Outsource Your TV Service?

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Is It Time to Outsource Your TV Service? Is it time to outsource your TV service? By Kerry Travilla VP Technology, MobiTV and Bill Routt COO, MobiTV Is it time to outsource your TV service? Executive Summary: This paper outlines the mounting pressures pay TV providers are facing to evolve their TV service from legacy multicast QAM/IP to unicast IP. Key takeaways from this paper include highlights of the daunting capital costs pay TV providers face when making that transition internally, and potential paths that assist in taking existing TV services to the cloud, with an application- based approach that delivers a rich new set of user experiences without requiring a large infrastructure investment. Introduction Traditional pay TV operators are facing pressure from consumers, regulators, and technology trends to revamp their approach for delivering in-home viewing experiences. Making these changes can lead to large capital expenditures which can be difficult to justify with the typical margins on pay TV services. The maturation of retail “Set-Top Box (STB)” devices (AppleTV, Roku, Amazon Fire, Android TV, gaming consoles, et al) creates an opportunity for transitioning to IP delivery of TV services through a managed service (TV SaaS) approach aimed at significantly reducing capital expenditure in favor of a more profitable and scalable business model. Pressure to Change Traditional Pay TV operators continue to face pressure from consumers, regulators, over-the-top (OTT) competitors (e.g. Netflix, Hulu, Amazon, Showtime, HBO, Sony Vue, Sling TV and others) and new technology trends (e.g. 4K video and virtual reality) to revamp their approach to delivering in-home viewing experiences. The most important pressure is coming from the consumer, as viewing habits continue to evolve, favoring richly integrated experiences across a wide array of applications and devices. Features such as any time, any place, multi-screen, personalized, on-demand and bingeable content are just some of the expectations of today’s TV viewer. This is combined with pressure of delivering smaller channel bundles and over-the-top options to choose from. In addition, pay TV provider networks are naturally going to carry more and more unicast IP video traffic; the question is how can the pay TV provider compete, monetizing their network investment and protecting subscribers at the same time. Regulators are weighing legislation to force delivery of TV services to retail STBs, many of which do not support legacy video delivery protocols. Most, if not all, retail STBs (e.g. Amazon Fire, Apple TV, Roku, Android TV and others) are built with HTTP streaming (including Dynamic Adaptive Streaming over HTTP, or DASH) support as their native way to secure and deliver both live and Video on Demand (VOD). Indirectly, regulators are driving TV providers towards pure IP delivery through this public discourse. OTT competitors are already monetizing OpCo networks and siphoning off their subscribers. Netflix, HBO, Showtime, Hulu, Sony Vue, Sling TV and others are already delivering live and on-demand video over unicast HTTP on top of the OpCo’s legacy networks. Finally, ever-evolving technology trends are creating pressure for changes in TV delivery infrastructure. Both HDR and 4K are good examples where legacy STB equipment may not be capable in their current condition to support these, resulting in a tough replacement strategy decision for TV operators. And no one expects technology to be static. Therefore, any choice to replace or upgrade has a life span uncertainty attached to it. Technology advancements are driving TV providers towards pure IP delivery as a way to be future-proof. Description of Change The change being driven by the forces outlined above boils down to Pay TV operators supporting retail STBs like Apple TV, Roku, Amazon Fire, etc. It’s important to note, there are three fundamental adjustments required to deliver TV services to these devices. The first is using an Adaptive Bit Rate (ABR) streaming protocol rather than a single rate multicast protocol. This change requires additional encoding resources to transform the source video signal into a set of recipes (a combination that includes bit rate, frame rate and resolution) designed to deliver the highest quality video experience possible across multiple screens and networks used by the consumer. The second change implied by the shift to a streaming protocol is a content delivery strategy. Scaling unicast streaming is essential to making this transition a success. Fortunately, HTTP video is stateless, which means it is possible to store a single asset in a cache near the edge of the network, and serve that single stored asset to multiple subscribers, greatly reducing traffic back to the core network. The final change requires replacing the hard drive in a traditional STB with cloud-based storage, Network DVR (nDVR), to provide the consumer with a way to time shift the content they want. When it comes to recording in the cloud, content owners have different perspectives on whether or not a channel or program can be stored once and shared across many users; or if each user must have a completely private recording. OpCo’s need to choose a nDVR solution that works for both shared and private copy, and that has the flexibility to adapt to a fluid rights and regulatory environment. nDVR is also a major driver of capital spend, as in-network storage tends to scale as an expensive step function. Today Tomorrow Pay TV Headend Pay TV Headend Channel ingest Channel ingest Single rate encoding Multi-rate encoding Storage Edge cache IP Multicast Unicast Managed STB OTT device Apple TV, Roku, Amazon Fire, Android TV Figure 1 - Evolution from QAM to IP Cost of Change While this transition looks straightforward, the reality is that the cost of investing in this change can be large, especially for the small to medium OpCo. Pay TV providers are best served to choose a solution where the economics scales linearly with subscribers. Consider an example that focuses on just encoding resources needed to satisfy a 200 HD channel lineup. Based on a set of four encoding recipes (bare minimum required for multiscreen) and a state-of-the-art encoder, each encoder can supply output for approximately 10 HD channels or 24 SD channels. This means a minimum of 20 encoders required for our example (additional for failover) with a nominal retail price of $25,000 means a capital expenditure of $500,000 for encoders alone. Adding storage for Replay TV and nDVR only drives the cost much higher. Infrastructure Element Price Range Description/Assumptions Encoder $550K 200 HD channels and 10 channels per encoder + 2 for failover at $25K per encoder Content Delivery Solution $20K to $100K Open source reverse proxy with HTTP cache and SSL termination Cloud Storage $500K to $1.5M Recipes totaling 10 Mb/s for 200 channels with 3 days of Catchup/Replay TV and 100 hours of personal DVR per user at $350/TB storage cost Total Capex $1M to $2M Figure 2 Alternative to Change Clearly one option is to make the capital investment and implement a streaming TV service; fortunately, there are other options. Alternatively, an OpCo can find a Software-as-a-Service (SaaS) provider for their TV service, and outsource that service for a per-subscriber fee using a shared (multi-tenant) infrastructure with a white label offering to maintain their brand and relationship with their consumer. Picking the right TV SaaS Here are the fundamental characteristics to look for in a TV SaaS: End-to-End service provider OpCo’s need more than a headend in the sky, which is focused only on delivering content. Instead, a robust TV SaaS solution needs to provide an entire platform in the sky, with support for all of the leading-edge features such as seamless universal search and recommendations, analytics and personalization. The platform offering should also include white label client applications for all of the popular retail STB and other devices. To ensure HD delivery to the home screen, the TV SaaS has to support all native Digital Rights Management (DRM) solutions across all retail STB platforms. Highest Video Quality Provides the highest visual perception quality for all screens and on all networks. This requires more than high quality source feeds, state of the art encoders and support of native platform DRM technologies. To deliver the highest quality video possible, the backend platform in the TV SaaS solution must have a flexible media distribution policy service so that each screen on each network for each OpCo can be fine-tuned to start fast with high quality, change channels quickly (sub- second) and avoid buffering. Content Protection Provides DRM support for HD delivery to all retail STB and complies with content provider requirements for content protection. This usually demands a multi-DRM strategy to support FairPlay, Widevine, and PlayReady DRM systems. To do this at scale, the TV SaaS solution should also support Common Encryption (CENC) format, to avoid the cost of storing each video at least three times. Multi-tenant Support Provides billing and authentication integration with multiple providers to create custom channel lineups and service features on a tenant-by-tenant basis. A TV SaaS that is multi-tenant means that as new OpCos are added to the service, no new hardware or software is required by the TV SaaS provider, only configuration files to define the additional tenant. Operational Excellence Arguably the biggest difference between various TV SaaS providers is going to be their respective operational and support performance. OpCos should not settle for anything less than 99.999% availability, and should make sure that the TV SaaS provider has the architecture and pedigree to meet customer expectations. The Path to TV SaaS TV SaaS can be deployed as either a replacement service or an augmentation to the existing pay TV service.
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