MINI CASE STUDIES
23.6.1 BT TV (United Kingdom)
As mentioned, telephone companies often provide IPTV services as a part of their bundling packages to attract consumers. British Telecom (BT) in the UK employs a similar strategy.
BT launched its IPTV service BT Vision in December 2006. With a set-top box, subscribers of BT could access video-on-demand services through BT Vision (later rebranded as BT TV). In addition, BT has decided to take part in YouView, a partnership forming a new digital distribution platform. The YouView set-top box provides access to and allows recording of the free-to-air digital terrestrial TV services in the UK. Six players including the BBC iPlayer, ITV Player, and BT Vision Player (for BT customers only) are available and provide access to free and selected premium channels.In an interview conducted on 2 July 2013 by the author with the executive in charge of TV strategy, BT emphasized that allowing viewers to ‘get access to the whole world of content’ is a way to increase its competitive edge in a world of highly converged content delivery:
It’s actually a potential opportunity for us [to join YouView] because it makes the YouView platform a strong platform. That [being] said, it could disrupt the market for SkyTV, since they have over 10 million subscribers now and we have less than 1 million subscribers. It will drive the users to YouView. And that’s a good thing [for us].
Although YouView and BT TV originally had two separate set-top-boxes, they eventually decided to integrate them to allow BT subscribers to access to content available on YouView. BT TV subscribers can now watch programs provided by YouView on BT TV.
23.6.2 KT (South Korea)
According to the OECD (2014), as of June 2013, South Korea’s fixed (wired) broadband subscriptions per 100 inhabitants ranked number four in the world, behind Switzerland, the Netherlands, and Denmark.
Telcos such as KT, Hanaro Telecom and Dacom all provide IPTV services. KT’s IPTV has the largest share in the IPTV market. KT offers three IPTV options: HomeN service, TV portal and IP media (ROA Holdings, 2010). In December 2012, KT launched the Olleh TV smart pack. In essence, the smart pack utilizes a hybrid set-top box that allows viewers to receive content from both IPTV (Olleh TV) and DBS (Skylife). With the smart pack, subscribers no longer need a satellite dish to receive content for DBS. As of January 2013, Olleh TV dominated the South Korean market with roughly 61 percent of the market.According to a 4 April 2013 interview by the author with KT’s IPTV manager, ‘[although] cable currently offers more programs than ours, we jointly with the satellite company, Skylife, offer high-quality channels. The HD quality we provide is better than cable TV. And we have the most HD channels among all the pay-TV providers in Korea’.
The new service provided by the Olleh TV smart pack offers up to 87 interactive services and 138 channels, of which 22 are of foreign origin. Although cable TV currently has more channels than IPTV, the latter makes up for content via satellite broadcasting. The major difference between IPTV and cable TV is not the content available on these platforms, but the available interactive services such as karaoke. In November 2013, KT’s broadband subscribers reached 8.1 million and its IPTV subscribers grew to 4.9 million.
23.6.3 NOTTV (Japan)
Multimedia Broadcasting Inc. (mmbi, Inc.) is a multimedia broadcaster based in Tokyo, Japan. Established in 2009, mmbi, Inc. is also a subsidiary of NTT Docomo of Japan (Bloomberg Business, 2014). A mobile TV service, NOTTV was launched in April 2012. As the parent company of this new mobile service provider, mmbi facilitates NOTTV in providing original content for its channels. NTT Docomo is a major investor of NOTTV and the service is currently only available on NTT Docomo’s cell phones. NOTTV offers three real-time channels, where one of the channels offers news from Nippon Television (NTV) and TBS.
Meanwhile, the fourth channel serves as a database for videos downloaded by users. This particular channel also emphasizes the time-shifting feature of NOTTV5Since the launch of its services, NOTTV has attracted approximately 1.5 million paid subscribers. These subscribers contribute 99 percent of the revenue generated by NOTTV. At the beginning of the launch, NOTTV included shopping programs. It also offered additional discounts in subscription fees with purchases from the shopping programs. However, NOTTV explained in an interview on 29 August 2013 that ‘there were not enough subscribers to support the shopping programs’. The insufficient number of subscribers eventually led to the cancellation of shopping programs due to the lack of profits.
In terms of content, 50-60 percent of original content acquired by NOTTV is produced by mmbi. It also purchases broadcasting rights for major sporting events. In addition to that, NOTTV also has access to soap operas since mmbi co-produces with Fuji TV to increase its competitiveness. In brief, most of the content broadcast by NOTTV is original, while a limited amount of content is exclusive. Another mobile TV service available to consumers is One Seg, which solely provides programs from terrestrial broadcasters. According to the author’s interview with NOTTV, ‘[we] are not competing [with One Seg]... One Seg does not have any strategies because it only broadcasts programs. Instead, YouTube is more like our competitor and [our strategy is that] we want to keep the quality of our content’. Interestingly NOTTV sees YouTube rather than One Seg as its main competitor.
23.6.4 T-DMB vs S-DMB (South Korea)
Between 2005 and 2006 South Korea launched its mobile broadcasting service via digital mobile broadcasting (DMB). It was deployed in two types - terrestrial (T-DMB) and satellite (S-DMB). SK Telecom introduced S-DMB via its subsidiary telecommunications operator, which was the majority owner of TU Media (‘TV for you’).
Only a few months later in 2005, TU Media, together with other broadcasters such as Korean Broadcasting, started to offer T-DMB. Companies such as Samsung Electronics and LG Electronics had been introducing handsets that supported mobile broadcasting (Paulson, 2006). However, despite the fact that these two types of mobile broadcasting were launched around the same time, observers predicted that T-DMB would become more popular since it was free and its content from terrestrial television included the nation’s most popular TV programs (Galbraith, 2005). Due to lack of profitability the S-DMB service was shut down in August 2012.In an interview conducted by the author with SK Telecom on 5 April 2013, it was explained that S-DMB started in 2005 but only lasted for seven years:
S-DMB only survived because of the support from SK Telecom. The first reason is the incompatibility with the mobile handsets. Most of the feature phones in Korea are only compatible with T-DMB. And there was not enough incentive for manufacturers to produce devices to match S-DMB since the number of subscribers for S-DMB is too small. The second reason is that most consumers prefer T-DMB over S-DMB, since T-DMB offers five major terrestrial channels for free.
In addition to viewer preferences, the high license fee also played a role in SK Telecom’s decision to terminate S-DMB. Furthermore, S-DMB was unable to compete with attractive content from the free channels provided by T-DMB. While SK Telecom sought government intervention to get access to terrestrial content, the regulator did not support this request. Consequently, SK Telecom decided to shut down S-DMB due to its weak performance.
23.6.5 Hulu and Netflix (USA)
Hulu and Netflix are two major OTT video service providers in the USA. As of 2011, Netflix already had more than 20 million subscribers. In 2012, Hulu and Netflix both premiered their own original series within an eight-day period. Netflix started to provide more original content in 2013 with award-winning series such as House of Cards and Orange is the New Black (Morabito, 2013).
Hulu has also released exclusive and original pieces of content in the same year (Fixmer, 2013). The number of subscribers for both services increased rapidly. Founded only in 2010, Hulu already had 3 million subscribers by the end of 2012, reached 4 million by March 2013 (Perez, 2013), and by 2014 claimed 6 million paying ‘Hulu Plus’ subscribers. Netflix reached a total number of 29 million domestic streaming subscribers and over 1 billion in revenue by the first quarter in 2013 (Cooper, 2013). After rapid growth in the US market, Netflix started to expand internationally and by 2015 claimed more than 60 million streaming customers worldwide.Taking Hulu as an example, users may view free content on the site, or subscribe to paid, premium content via Hulu Plus. The user-friendly interface and quality content have won Hulu much support from its viewers. Essentially, paid subscribers on Hulu Plus can now enjoy the original and exclusive content at a cost of $8 per month. The same strategy also applied to the original production House of Cards on Netflix, where Netflix released all episodes in the series at once. Netflix has kept a strong stance in favor of an advertising-free experience, as emphasized in a 7 August 2013 interview with the author:
It distinguishes us from the advertising supported channels... that we do not have to have a million people sit down on Thursday at 8 pm to show that there is value and to get advertisers to support us. For us, it is more about how our members enjoy [the content] over the entire licensed period.
23.6.6 Dailymotion (France)
Dailymotion is a video-sharing website owned by the French telecommunications company Orange. Similar to YouTube, it was launched in 2005. The site now has about 120 million unique monthly visitors and 2.5 billion viewers on a monthly basis (Abboud, 2013). Dailymotion invested in a 600 m3 studio in the middle of Paris in 2013. Since December 2013, people have been able to book appointments at no charge from up to one hour to a day to use the studio for their own content production.
While the users assume the property right of these videos produced inside the studio, they must provide the content to Dailymotion in exchange for using the facility. Moreover, Dailymotion also employs the co-production approach. In an interview with Dailymotion conducted by the author on 9 July 2013, Dailymotion explained its role in production: ‘[Sometimes] we can be sponsors and co-producers, but we do not do that solely for the TV rights. The reason why we co-produce is because we want to let the media environment know that we are able to promote their content by providing the platform’. Although Dailymotion is a French company, only 15 percent of its web traffic comes from France, with its biggest source of traffic being the USA. It therefore also plans to launch production studios in the USA (Digital TV Europe.net, 2013).6 By doing so, Dailymotion can attract more quality content and provide that to the viewers.In addition to establishing a studio and co-producing original content, Dailymotion also takes actions against the issue of piracy. According to Giuseppe de Martino (interviewed 9 July 2013), users do not feel safe to upload original content if it is susceptible to Internet piracy. Therefore, Dailymotion takes the initiative to implement a safeguard mechanism by ‘fingerprinting’ the original content. Although it is not a legal obligation, Dailymotion is willing to invest to protect the content. As of 2015, content was available in 18 languages and 35 localized versions.
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