Partnering is the way forward

We have been working in the business of digital licensing for video and audio catalogue now for some years and whilst the barriers to entry for content are now dropping, the expectations on businesses wishing to exploit materials over IP are still a little on the high side. It is those expectations that can seriously stop an industry and new revenue stream before it even starts. Our experience is that the terms range enormously in terms of guarantees with some meaning we would require 250k subscribers on day one just for the owner’s catalogue to break even. The maths don’t add up and there needs to be a reality check somewhere.

The cost for bandwidth for distributing digitally is not insignificant. If each user takes somewhere in the region of 50 hours of content a month, on demand, this equates to 400 terabytes of data travelling over the network for a couple of hundred thousand users, every month. The investment for businesses in this kind of distribution channel is pretty large and just like any other business has to provide a return. The time has maybe arrived where the content owners and digital distributors collaborate and work out how, between us, we can make best use of new network technology and distribute content on-demand at a much lower cost per unit than DVD or even broadcast.

Whatever you want to call it IPTV, VoD, SVoD, streaming, download etc the fact remains that in the future this IS going to be the way in which we supplement our viewing either Satellite or DTT, and it is in everyone’s interest to make sure that we bear the following in mind:

1. No one is going to get rich quick, this is a longer term play

2. Physical and traditional channels will die away. It may be a slow death, but it will happen

3. Consumers are becoming more tech savvy and understand the benefits

4. Work in partnership to create something, this is not a land grab

5. Hardware in support of IP is appearing

With regards to the last point, we work with the CE manufacturers and next year will be the year that hybrid devices with hard drives DTT and IP capability will be on the market. There is a huge opportunity here, the industry should be working together to help make it a reality not fighting for the largest percentage of what is still a small pot.

Comments

[Paul Houghton (Assurance Partner, Grant Thornton)]

I read your item with interest.

One of the big issues is whether power fall to be with the innovative distributors (like you gyuys at BIBC), or whether it will remain with the content owners.

Certainly some of the major content owners are scared of the partnership model. Fearing their profits heading out of the front door, they keep their delivery channels in-house, as illustrated by NBC pulling away from iTunes. However, where the right balance can be struck to ensure it's win-win for the distributors and the providers... then the pot can be shared out to the benefit of both... and over a short period of time we all know this pot is going to be huge.