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So if you are an over the top providers you already have a challenge because you are coming on an unmanaged network, you are dealing with very variable bandwidths, you are dealing with very varied devices, people are watching everything from cell phone, through a tablet, through a big screen tv and you have to deliver to all those different environments.
Any change is therefore a change. We are talking about changing the picture, the most fundamental part of what you are streaming. And some of those devices are going to be capable and some of them are not. Over the next few years you are going to blend between this view.
You will have tvs that can do HDR but not maybe a wider color gamut. You might have devices, tablets that are in a wider color gamut but they can’t do HDR.
Then you still have hundred of millions of legacy devices out there that you have to serve.
So the challenge for OTT is how do you provide these enhancements to just the devices that need to see it, or can see it, whilst still maintaining a high quality of service for everyone else who hasn’t yet moved on?
A lot of these over-the-top providers are also producing content now as well, so they haven’t got the option of do we have to licence content, what do we licence? Do we licence HDR versions of content? Do we have all our content creators go back and recreate content? And what do we do?
Do we make all of our content going forward in a new format, break new boundaries, be the first to break new technologies?
The good thing about being an over-the-top provider is that you don’t have to worry about standards. You don’t have to worry about broadcast standards catching up, you don’t have to worry that there is a different standard in Europe than there is in the US. You can write your own standards.
So you own the apps, you build the apps, you do your own encoding, you do your own delivery and you are delivering over the internet.
So there is no one regulating the internet for you, there is no one defining when you have to upgrade your infrastructure to be a certain technology system. So you have a lot of choice and the downside is – you have lot of choice.
You have a lot of flexibility, when do you adopt things, when do you wait for the market to happen.
Our prediction at Technicolor is that enhancements like high dynamic range and wider color gamut are going to come fast. They are going to come a lot faster than 4K did because they are a lot more impactful for consumers.
They are a lot more bandwidth efficient, so you don’t have to send as much data as you send with 4K and when a consumer sees it they are going to be very attracted to the image and they are going to want to expect on lots more content.
WHICH TECHNOLOGIES TO ADOPT AND WHEN?
So if you are an over the top provider, we have already established that these things are going to move fast – the question is “how do you make the decision when to leap?”
The good news is that your consumers are going to tell you. If you are an internet provider you get very fast feedback, as to what is working and what is not working. You will know that consumers are very attracted to a certain type of content because it has a higher dynamic range, or it has a wider color space, or it is somehow more impactful because you can see that they are watching for longer, they are turning off less, they are transacting more often for that content when they see that it is available in a new video technology. These are your key metrics.
The great thing about over the top providers is that they live by metrics, so you are going to know what is impactful for your business line much, much faster than anyone in the broadcast world, or pay tv world where you don’t know who you are broadcasting to. That’s the good news.
The bad news is that you have a lot of work to do and you don’t know which one to pick.
So we can help with that. We can do consumer research, we can try these different technologies on different pieces of content, see what is really resonating. The most important thing is that this content is going to last for the next 50 to 60 years.
So don’t whatever you do, capture content now and miss out on a high dynamic range pass or think I’ll shoot in a broadcast only standard because that is what I need today. You don’t have time for that any more. When you are shooting content now you need to assume that the world is going to keep moving on and so you have to shot and prepare for that world.
INVESTMENT CONSIDERATIONS FOR OTT MODELS
The good news is that it’s not a big investment all at one time. You can test the water with this sort of thing. We can work in small incremental steps, so you can try one season of a tv show, try it in HDR and see what happens to the numbers. Do the same thing with a few movies, There are 5,000-7,000 movies on Netflix you don’t need to do all these at once. It is easy to pick off the ones that people really watching right now, such as the new releases and work on those and see what happens.
I would actually recommend going back and picking a few similar titles out of the library, similar sort of decades, shot on similar film stock regrade those in HDR, put them out and see which ones do better. Can you actually see the difference in viewership or transaction numbers when you improve the video quality and use that as the business case to go back and work out which ones to do for the library.
IMPACT OF DIFFERENT OTT BUSINESS MODELS
There are mutiple different ways of being an over the top provider. There is subscription video on demand, there is transactional video on demand, there is advertising based video on demand, they are all thrown together under this umbrella term ‘OTT’, but really they are very different business models and they have very different metrics.
If you are running a transactional store you put a card up with the information about the pieces of content and you need people to transact on that basis and maybe watch a trailer, but once they are in – they are paying. So you are all about how can I get people top pay for the highest value SKU (stockkeeping unit) that I’ve got and that normally means that’s where you put all your value.
That’s where you put your High Definition today, that is where you’ll put your 4K tomorrow, then wider color gamut and HDR. You have to get people to transact on that highest value product.
So that is a key difference between a key subscription provider, such as Netflix, as they have access to everything at every quality level. Then you are just trying to keep people to keep watching something. You are lowering churn, you have to keep offering more and more content, interesting ways, why watch it here when you can watch it in different places. It is much more about keeping the consumer attracted every month so they keep paying that bill.
Then you look at advertising. Advertising video on demand is a very different business, you have to do ad breaks and then you have to know what people are watching across as many different media types as you can, so you can pick a good advert for them, and you need them to watch the advert. Preferably they need to click through to prove they are watching the advert.
There are a lot of challenges with the next generation video content when you hit advertising.
You are watching a high dynamic range, really impactful tv show and then you drop down to a standard dynamic range tv commercial. People are going to think it looks dark, muted, the colors are all wrong, they are going to think that this product is a low quality product and advert.
So we have to avoid that. That implies therefore you are going to have start making tv commercials in high dynamic range and wider color gamut as well, just so they have a consistency with the programming. So many different considerations even in just OTT world.
THE CHALLENGE TO STAY AHEAD OF TECHNOLOGY PROLIFERATIONS
I think the challenge right now if you are in the OTT business is that you are in the internet driven world.
Everything is happening so fast, there are so many changes coming, you are trying to catch up with so many different device types and new app development formats and changes to the internet, in the infrastructure.
The challenge is how do you even stay focused on changes in video formats as well – but right now this is the one you need to be looking at right now. This is the one that is going to dramatically change the consumer viewing environment.
Higher dynamic range and wider color gamut are going to have a huge impact on consumers and therefore the economics of the OTT business globally for the next few years.Show less