I’ve been participating in the X Media Lab for the past 3 days. It has been an invaluable experience. Talking with each of the mentors at the lab opened up opportunities to look at different business models, interfaces to content and financing opportunities around the world. Some of the mentors have been working on projects directly related to work Suma has been involved in.

Priya Prakash is the product manager for the BBC’s iPlayer (nee iMP). She did the interaction design for the initial prototypes of the BBC iMP and was then made product manager for the release product. Suma have looked at the iPlayer model in some detail so it was interesting to get to speak directly with the owner of the product. Many of the issues we’ve identified with the player (the difficulty of the BBC being able to build a scaled platform and the variety of limitations around viewing the content) where identified by her as well. In fact we commisserated with each other on the number of stakeholder hoops that need to be jumped through in order to deliver a IPTV/video on demand service from inside a public broadcaster.

Discussing the issues round DRM and time limits on viewing as well as opportunities to sell content it became clear where the strengths of the BBC model lie. Being completely open about the limitations of the content and making those limitations a clear part of the interface. Television programs are available in the iPlayer for 7 days after broadcast after which users can pay to view. The may also be able to purchase the content (depending on the deal established). The ‘you’ve got 5 days to watch this show’ is both an annoyance and a powerful call to action. It will be interesting to see how this plays out.

There will be an international version of iPlayer with most of the content available on a pay-to-view basis and it will be advertising supported. With the brand clout that the BBC has it’s likely that the iPlayer will gain enough users to support their public service remit what is more interesting is whether the iPlayer can become a wider pay platform with enough critical mass to make it attractive to other content owners to use it for distribution.

Robert Chua is the founder and CEO of The Interactive Channel. This channel is available online and through several pay platforms in Hong Kong. Most of the programming is panel, chat, interview or competition oriented. Production values are not the most important element. Interactivity rules. Viewers are able to participate with live programming via the web and mobile phone, their comments displayed in real time and reacted to by the hosts. In fact users are able to join the panels. Logging in via web cams and participating live on shows. Interviews are conducted with guests via web cams from throughout the world.

It strikes me that most broadcasters are simply trying to add ‘a bit’ of interactivity to their programming while The Interactive Channel is exclusively about interactivity. There are no programs that don’t have audience participation at the core of the format. It seems to have built a loyal audience in Hong Kong and seems to be a good fit with some brands in Australia particularly event brands like Big Brother and Idol.

Dale Herigstad of Schematic is an interaction designer. He develops interfaces for content that extends film and TV programs. Most interestingly he has been working on interfaces that facilitate the intuitive manipulation of the meta-data associated with content. We had a long discussion about the inherent power of aggregation but how the existing ‘click on what seems to be the most appropriate link’ method for moving through content is insufficient when it comes to seeking an understanding of how content relates to other content.

We talked about how to represent space and time in an interface, enabling a user to move intuitively through layers of subjects across a geographic and temporal base line. I have to say that the work he is doing on HD-DVD interfaces, where the DVD content is linked via broadband to a wealth of extended content really blew me away. He showed me an excellent example of visual aggregation of content, 10by10 which builds a grid of news images based on which stories are currently hot.

All in all it was seeing that business models I’d hope would exist do. Digital content isn’t just a site of fear for content owners (which if you spend your life reading MPAA and RIAA press releases it would seem to be) but rather the site of extensive entreprenurial activity throughout the world. I think it’s interesting that the better executed cross-media content initiatives are coming from places like India and Hong Kong. I’m glad our business has an Asia-Pacific focus. I’m not sure we’d have a future without it.

Robert’s interesting post on Shemaroo in “End to end digital content business” helps clarify that one of the issues with cable and PayTV services as currently constituted is that they are still organised around the old model of defining market segments and trying to sell them a subscription for what they want plus a whole lot of stuff they don’t need.

You can do this if you’re an ISP charging for broadband data because it’s a substitutable commodity - I might be paying for way more of a data cap than I’ll use this month, but I’ll do it because I might just use it if I spend more time downloading movies or get some time to watch some NCAA basketball.

With pay TV it’s more problematic - I’m paying for not just unused capacity to watch, but really specific content which I might not actually like in my bundle, and have a negative reaction to close to billing day. Pay TV hasn’t always had the capability to go a la carte with programming, but more importantly they’ve not pushed toward it because they’ve had a largely ologopilistic business model where they can maximise revenue per user (ARPU) by bundling channels.

As Robert points out, digital changes everything and Shemaroo become a great source of inventory for the platforms which need a la carte content, such as AppleTV. As Carl at Blackfriars suggests, the availability of that content is really going to put a dampener on the value of the channel bundle - why would I pay for 24 hours’ content when I only have time to watch 1? A new distribution chain is opening here and however the technology platforms play out, it’s clear that Shemaroo are well-prepared for the future.

I’m in Mumbai at FICCI-Frames at the moment. As a conference it probably isn’t my thing. Big panels arguing irrelevant points. You’re probably not going to learn anything at any of the plenary sessions. That’s not why you attend conferences though. It’s all about networking.

I’ve met some very interesting people but most interesting so far has been Smita Maroo from Shemaroo. Her company is a distribution, production, post-production house. They have been distributing Indian film and music video content for many years, branching out into post-production and then production. What makes them so interesting is how prepared they are for the world of digital distribution.

I’ve just gotten back from a tour of their post-production facility where they do up to 80% of all film related digital post for satellite and cable TV in India. They own a substantial catalogue of Indian films (in several languages) and are moving into substantial film production. What is most interesting is their approach to digital distribution. They are set up to provide niche language programming to the Indian diaspora. This might not sound like a huge opportunity but in fact it is. There are over 100 television channels in Mumbai. Once you’ve paid your local cable provider they are essentially free. Most of the channels play some form of original Indian content. That’s a lot of hours of programming.

For Indian communities overseas they may just be able to get one or two Indian premium channels in the countries they live in. It is just too expensive to set up niche programming channels on cable and satellite services. This is where digital distribution comes in. Shemaroo are beginning to set up deals enabling them to distribute their catalogue onto download and streaming platforms throughout the world. The cost of distribution is covered. Shemaroo simply take their share of the revenue. They are able to provide content to their partners in whatever form required. From there it is simply a case of watching the incremental revenues come in.

What is so special about that you might ask. It’s Shemaroo’s ability to grow its catalogue that makes their model so special. They are buying negatives from producers who are getting out of the business, producing their own films and creating programming out of pre-existing successful cultural forms like regional language plays. Mumbai has a vibrant dramatic and comedic performance scene. Many of the plays staged are in regional languages like Marathi or Gujarat. These plays are restaged in a TV studio multi-camera shoot. For very low production costs Shemaroo have another hour of niche language content to distribute internationally.

Shemaroo also understand that digital distribution means the market is global. They are purchasing rights to international films and repackaging for the local market. Be it Kurasawa or a B-movie you never heard of there are niche markets in India who are unable to get hold of the content they are after. Again distribution is niche, through online or ‘clubs’ where customers get regular catalogues sent out to them. They are also looking to develop projects as co-producers where they own some of the IP in international film and TV productions. All in all a very interesting business model.

From the website intformitv, an excellent report on the annual IPTV World Forum in London.

We’ve been looking at the developments in Video on Demand (VOD) with interest, and I’m developing a picture of the emerging environment for online VOD and IPTV.

The Free To Air broadcast “channel” is a solution to a specific problem of bandwidth and technology: there is only so much spectrum, and because the content is synchronous (must be delivered to all users at the same time), governments divide up the spectrum into discrete parts, and lease the parts to broadcast channels. (They’re like property developers of the airwaves).

The channels then look at the other 3 or 30 channels who have spectrum allocations and say “Hmm, how can I develop a programming strategy that brings a viable number of consumers to watch the channel, so I can sell the advertising space and make some money?” Viewers have low loyalty to channels (except for substitutable products like News), but nevertheless the channel needs to have enough of a brand presence to sit in the viewer’s mind as an option worth looking at in the TV guide. Outside of the big ticket items, channels will try and bring together a certain sequence of programming designed to keep a particular kind of viewer in front of the box. Therefore, “comedy night”, or “sports”. At the end of the day, however, I want to watch Desperate Housewives, and not “TV2″ or “Channel 7″.

In the digital / on-demand environment, this changes and the viewer has a vastly increased range of viewing inventory available. Why do I have to wait for the channel to get around to showing Ferris Bueller’s Day Off again? I don’t, it’s the long tail. In this model, what I am looking for as a viewer is not a channel, but a platform which will give me the largest range of available content that I want to view, for the right price. SkyTV and Foxtel are platforms. YouTube, Google, and MySpace all platforms.

As a platform provider, the game is different than running a channel. Platforms are natural monopolies, the best platform is the one with the largest amount of content that is easy to access for a good price. Mental barriers to switching platforms (and in the case of Digital TV, technological barriers such as the set top box) are high. If a Video on Demand subscription service provides 80% of what I need, I am unlikely to switch to a new service that has 90% of what I need, unless there is a really compelling driver such as unique content that I am desperate for.

For customer acquisition in the online environment, where there are multiple platforms, the drivers are user experience and content selection. This is why Apple/iTunes is so successful, because their user experience is far ahead of any of the Windows Media solutions, even though some of those providers have more diverse content. We’ll talk more about that another day.

The critical thing is that channels are in a tough position because there are really two roles in the on-demand content ecology - the rights owner, who makes the content and licenses it; and the platform, who is the user’s interface to that content. Channels are not quite in either of these modes - usually they have been retailers for content rather than commissioners; and they don’t know how to create compelling user experiences for accessing a complete range of content.

Of course, ways of discovering new content are always needed, but we know from the music industry that people are decreasingly looking to radio, physical stores and other mass distribution tools to discover music, they will find it in social networks based around a particular genre or content offering. The brand promise of the networks and the labels (”we are the best way for you to find the music you like”) is dissolving because it is no longer true. For example, Robert and I both like hip-hop, he hears on a message board or a MySpace link about a hot new MC, downloads an MP3 or sees the video on YouTube, then decides to buy it if he likes it. That is just a much more influential recommendation mechanism than a giant brand campaign with billboards and grammys.

Where is this going? Well I believe the channels have to clarify their roles. They get more into the content game, owning the content rights for their properties and taking a more active role in selling that content through various distribution platforms, instead of just their own. Or, if they’re brave, they get into the platform game, and try and either partner with or displace the YouTubes and iTunes of the world, but creating a new platform is harder than you think.

Basically, that’s why I’m skeptical about the on-demand offerings from BBC, Channel 4, TVNZ, etc. iTunes is a proven model. Even though the range of content is not yet what it could be, there is enough compelling, big-ticket content to make sales. The value proposition is “Lost and 24 on your iPod.” The channels’ offering is “hard-to-use low quality versions of we’re not quite sure how much content we’ll be able to get rights to put online”.

From the article:

Arjang Zadeh of Accenture had an important message for current and prospective service providers. He pointed out that television services are low margin compared to broadband. Delivering video services is not a simple technical or operational proposition. “Despite industry hype, this is not top of the mind for consumers,” he warned. “The biggest shift in the market is not satellite or cable to IPTV,” he said “but broadcast TV to web-based TV on the PC”.

The high-value users who will pay for content by and large have already got satellite or cable. Given that BSkyB offer a broadband version of Sky for their subscribers, will they migrate to any of the new online-only players which have less content? I can’t see it happening. And will there be users who have not yet bothered to get cable or satellite who will find the VOD via Internet compelling? I don’t see that either.

This post is already too long and I’ve barely scratched the surface of the issues. More another time.

Welcome to Suma Blog!

At Suma we spend a lot of time keeping up with developments on the internet, mailing links to each other, and trying to contextualise what’s going on in terms of the big picture. So we thought, why not keep a blog where our clients and associates can also benefit?

So here it is - it’s less a weblog of what we’re doing, more where our heads are at. I’ll probably also use this space to draft my ideas for articles relevant to our work - I prefer my blogs with longer posts, more irregularly. We’ll see what Robert’s style is.

If you have suggested topics you’d like to see us cover just drop us an email.  Now on with the blogging!