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The New Imperative of Business Model Agility
15th July, 2008
Communications, Media and Entertainment
Terry Hinton Chief Technologist, Office of the CTO
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June 16, 2009
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Agenda

• Industry Transformation
• New Dynamics in Video and Data Distribution
• Advertising Business Model dynamics
• Infrastructure Implications
• Maturity steps

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The splitting of the transmission and service
planes

• 1970 Services embedded in networks
• Geographic and alignment of services with network
  reach
• High capability of network infrastructure to
  support business services and SLAs
• All service value returned to network provider
• Today Separation of the service and
  transmission planes
• The old model still exists but there is a new OTT
  model enabled by the Internet
• Over the top model non geographic - few SLAs,
  multiple networks addresses a community. But the
  OTT model has limited capability to deliver
  services or end to end service management.
• Little of the service value in the OTT model goes
  to the infrastructure providers

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The end to the double infinities ??
Bandwidth Price
With infinite bandwidth the OTT Services could
deliver all types of services ??
TELCO
Time
Demand for online video websites such as YouTube
and the BBC's iPlayer are putting the internet
under so much strain it may collapse within two
years, experts have revealed. The success of
the BBC's iPlayer is putting the internet under
severe strain and threatening to bring the
network to a halt, internet service providers
claimed yesterday. April 10, 2008

• Three years from now, Internet video traffic
  will be twenty times what it was in 2006.
• Driven by video, Internet traffic will quadruple
  by 2011.
• In 2011, online video will generate 1 billion
  DVDs worth of traffic each month.

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Video Content DistributionLegacy Model
Content Consumption
Studios, Networks, Broadcasters
Cable, Sat, Broadcasters
STB, Antenna, Receiver

• Proprietary and single threaded content flow
• Very limited competition for content
  distribution
• Content relationships multiyear, highly
  protected, exclusive deals
• Broadcasters and Networks get majority of the ad
  revenue based on a sampling of viewing performed
  by Nielsen

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Video Content DistributionLegacy Model
Content Consumption
Studios, Networks, Broadcasters
Cable, Sat, Broadcasters Telco (IPTV)
STB, Antenna, Receiver

• Proprietary and single threaded content flow
• Very limited competition for content
  distribution
• Content relationships multiyear, highly
  protected, exclusive deals
• Broadcasters and Networks get majority of the ad
  revenue based on a sampling of viewing performed
  by Nielsen

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Video Content DistributionEmerging Model
Joost, Amazon, Google Sezmi, Netflix, Blockbuster
Content Consumption
Network Enabled TV
Studios, Networks, Broadcasters. User generated
content, i.e. YouTube
Cable, Sat, Broadcasters Telco (IPTV)
STB, Antenna, Receiver, TivoAmazon Unbox

• Emerging model - radically different competitive
  landscape
• Higher bandwidth to the home will further enable
  disruptive competitive field
• DMAs Game Controllers are new set-top service
  competitors
• Subscriber data mining targeting monetizing
  market advantage
• Younger generation not wedded to appointment TV

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last 90 days

• Netflix to ship 99 STB with Streaming HD
• Hulu passes all online networks after 1 month
  with 63M streams in 1 month
• Amazon Unbox TIVO plan to begin HD downloads
• Blockbuster announces plans to offer a Set-top to
  stream movies
• Building B announces a Set-top that integrates
  broadcast, broadband, network programming, and an
  integrated 1Tb DVR
• Blyk gets 100,000 subs 6 months ahead of target

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Video Content DistributionEmerging Model
Joost, Amazon, Google Sezmi, Netflix, Blockbuster
Content Consumption
Network Enabled TV
Studios, Networks, Broadcasters. User generated
content, i.e. YouTube
Cable, Sat, Broadcasters Telco (IPTV)
STB, Antenna, Receiver, TivoAmazon Unbox

• Emerging model - radically different competitive
  landscape
• Higher bandwidth to the home will further enable
  disruptive competitive field
• DMAs Game Controllers are new set-top service
  competitors
• Subscriber data mining targeting monetizing
  market advantage
• Younger generation not wedded to appointment TV

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Video Content DistributionEmerging Model
Joost, Amazon, Google Sezmi, Netflix, Blockbuster
Content Consumption
Network Enabled TV
Studios, Networks, Broadcasters. User generated
content, i.e. YouTube
Cable, Sat, Broadcasters Telco (IPTV)
STB, Antenna, Receiver, TivoAmazon Unbox

• Emerging model - radically different competitive
  landscape
• Higher bandwidth to the home will further enable
  disruptive competitive field
• DMAs Game Controllers are new set-top service
  competitors
• Subscriber data mining targeting monetizing
  market advantage
• Younger generation not wedded to appointment TV

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Business Model at the Services Layer
Social Networking
Search
Hosting
Recipes
Genealogy
Spreadsheets
Encyclopedia
Reviews
Wordprocessing
Games
Currency Calculators
Search
Music
DIY
Currency Calculators
Graphics
Shopping
Encyclopedia
VOIP
Travel
Blogs
News
Books
Health
Medicine
Maps
FREE
Infinite sea of new services that are compelling,
reliable and free for the end user
Directions
Financials
Movies
User Video
TV Shows
Directory Assistance
Photos
TV Guide
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Better than Free

• Immediacy
• Personalization
• Authenticity
• Accessibility
• Embodiment
• Patronage
• Find-ability

Source Kevin Kelly, Editor Wired Magazine
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Service Provider Advertising Business Drivers
Constraints

• 800B - 1TAd Run-rate
• Money being shifted among ad categories
• Operators have rich subscriber info for
  contextual, behavioral, location targeting of ads

• Privacy Protection
• Legal
• Perceptual

Constraints

• Current Subscription Models Under Pressure
• Web 2.0 largely free, ad-sponsored
• Operators need to deliver new IP Services to an
  audience with free expectations

ARPU

• Advertiser Spending Criteria
• Audience Reach
• Addressability
• Measurability
• Engagement

Constraints

• Advertising Elegance
• Not intrusive
• User value

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Service Provider Advertising Business Drivers
Constraints

• 600B - 1TAd Run-rate
• Money being shifted among ad categories
• Operators have rich subscriber info for
  contextual, behavioral, location targeting of ads

• Privacy Protection
• Legal
• Perceptual

Constraints

• Current Subscription Models Under Pressure
• Web 2.0 largely free, ad-sponsored
• Operators need to deliver new IP Services to an
  audience with free expectations

Business Model Agility
ARPU

• Advertiser Spending Criteria
• Audience Reach
• Addressability
• Measurability
• Engagement

Constraints

• Advertising Elegance
• Not intrusive
• User value

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Advertising Platforms and Channels
Mobile
Other
Video
Broadband
Coupons MMS Ads WAP Ads DA Loyalty SMS Ads Search
Gaming Video
Linear Ads VOD Ads Telescoping Interactive
Coupons Contests
Yellow Pages Signage Digital Cinema
Banner Video Search Gaming
Multiple Platforms with unique advertising
channels Varied stages of maturity Unique
ecosystems of value chain enablers Fragmentation
high, Standards low in less mature segments
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Advertising Integration PlatformBuilding a
shared architecture
Advertising Integration Platform
Mobile
Other
Video
Broadband
Gaming Video
Coupons MMS Ads WAP Ads DA Loyalty SMS Ads Search
Yellow Pages Signage Digital Signage
Linear Ads VOD Ads Telescoping Interactive
Coupons Contests
Banner Video Search Gaming
Ad Network Integration MetaData
Dashboard
Privacy Assurance
RT Decision Analytics
Offline Analytics
Interfaces to core infrastructures such as SDP,
OSS/BSS
CentralView
Insight Manager
Universal Campaign Manager
NeoView
Usage Mediation
SDP
Legend
HP
Contracts/Billing
VIP Broker
ISM
3rd Party
HLR
Customer Data
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Value Chain

• Advertiser
• Creative agency
• Ad agency
• Ad network
• Publisher
• Operator

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Mobile advertising models

• Operator-centric CPM mobile advertising model

• Non-operator-centric CPM mobile advertising model

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Privacy Intrusiveness

• Legal
• Country based
• FTC EC
• Perceptual
• Context based
• Experience disruption
• Context based

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Maturity Process
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June 16, 2009
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The New Imperative of Business Model Agility
15th July, 2008
Communications, Media and Entertainment
Terry Hinton Chief Technologist, Office of the CTO
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June 16, 2009