M+E Daily
M&E Journal: EST as a Growth Strategy for MVPDs
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By Anupam Gupta, Executive Vice President Cloud Services, Vubiquity
Electronic sell-through (EST) crossed the Rubicon last year when the purchase of digital movies and shows reached close to $1.6 billion in revenue, which was a 30 percent growth spike over the previous year, according to DEG: The Digital Entertainment Group.
As further proof of the shift by consumers towards buying digital entertainment to store in their own private lockers, 2014’s increase was the largest year-over-year jump in EST sales, according to Rentrak Corp.’s Digital Download Essentials. While transactional video on demand (VOD) is currently a bigger piece of the revenue pie, new platforms and revenue models are now entering the digital landscape.
For EST, thanks to the combination of earlier release windows by content owners, continued growth of connected devices, and the ‘digital mom’ now seeing the value of digital ownership for kids’ content, spending is growing.
Leading studios and film distributors have long realized EST’s revenue potential and the value it offers by shortening the early release windows while also making more digital video available. Consumers are purchasing digital versions of popular shows and movies at an increasing rate and top EST sellers such as iTunes, Amazon, VUDU, Comcast and Verizon are prime examples of consumers building their own digital video lockers or libraries. The end result is more purchasing and downloading of content for viewing across a wide range of devices both in and out of consumers’ homes.
The growth of digital ownership has been spurred along by the increased availability of digital content and the size of the libraries available.
As of December 2013, 94 percent of the most popular and award-winning films were legally available for streaming or downloading in the U.S. through online services, according to study “Film and TV Title Availability in the Digital Age” by KPMG.
The report also found that 85 percent of the most popular and critically acclaimed television titles were available in the U.S. through online video services. In particular last year, blockbuster hits such as Frozen, The Hunger Games: Catching Fire and The Lego Movie were among the top-ranked movies for digital streaming and purchases, according to Rentrak. Today, Comcast and Verizon are the two MVPDs offering EST. Comcast, which introduced EST two years ago as part of its Xfinity On Demand Digital Store, has recently publicly acknowledged the success of its EST efforts.
In a recent blog post, Matt Strauss, Executive VP and General Manager, Video Services for Comcast Cable, said its subscribers have embraced building their own movie and TV collections since 46 percent of the customers who own a movie or TV show on Xfinity own more than one and, on average, own at least two movies and/or four TV episodes. Since its debut, Comcast has built up its formidable EST library through agreements with Warner Bros., Paramount Pictures, Sony Pictures, and MGM among others.
EST represents a burgeoning revenue opportunity for multichannel video programming distributors (MVPDs) as well as content providers, but implementation requires investment in infrastructure, including building out networks, providing storage and developing digital storefronts. This can be overwhelming to all but the largest service providers.
To solve this, as well as to take advantage of the monetization opportunities, MVPDs are looking at alternative ways to launch their own EST services in order to deliver digital video content for purchase to both set-top boxes and other IP-connected devices in homes and on the go. Content-as-a-Service (CaaS) solves the challenges of building and deploying an EST service across all levels.
In the same vein as Software-as-a-Service offerings, Content-as-a-Service companies charge their customers monthly subscriptions for their services. The CaaS video content is managed and hosted in a company’s cloud, providing economies of scale with the costs distributed across multiple service providers via a multi-tenant ecosystem, which in turn reduces the cost.
CaaS platforms feature a modular approach that allows MVPDs to take advantage of pay-as-you-go or pay-as-you-grow services.
In addition, CaaS-based services eliminate the need for MVPDs to construct, test, maintain and scale the services themselves, all of which in turn lowers operational support labor and costs.
With customers continuing to clamor for more video content anywhere, anytime and on any device, the CaaS solution not only enables new revenue streams from EST purchases, but also serves as a strong deterrent to keep those subscribers from churning away to competing services from over-the-top (OTT) providers.
Along with speeding up time to market for new revenue generating multiplatform services, CaaS also increases distribution efficiencies. On the encoding side, an end-to-end CaaS platform eliminates the need for costly in-home gateways that re-encode video content prior to distributing shows and movies to iOS and Android tablets and phones, gaming consoles and smart TVs.
Metadata authoring and management are key for multiplatform usage rights that are in turn crucial to digital curation of video content. CaaS metadata can be used to keep track of the maximum number of simultaneous streams, maximum number of registered users and approved devices within users’ homes, which provides peace of mind to the content owners that their video is being paid for and used by the correct customers.
By using metadata authoring and management, CaaS ecosystems also eliminate the complexities inherent in garnering licensing agreements including complex in-home and out-of-home rights with studios and other video content owners. Instead of continually negotiating those rights, MVPDs can tap into a deep library of pre-licensed content from a CaaS provider.
Additionally, the end-to-end CaaS platform provides royalty measurements for the content owners as well as user metrics and billing for the service providers.
On the digital rights management (DRM) front, CaaS offerings can keep track of the evolving DRM keys that are in play to ensure broad device coverage. The CaaS platform also includes adaptive bit rate (ABR) preparation that insures the best multiplatform experience for end users based on the available bandwidth.
By utilizing the cloud, CaaS can offer burstable capacity to scale as well as the flexibility to evolve the services without getting caught in a legacy environment.
Through economies of scale, the cloud reduces storage costs for the various tenants while also reducing the software and hardware CAPEX maintenance and licenses.
In addition to reducing the complexities surrounding sourcing, ABR preparation, metadata management and cloud storage, CaaS provides end users with their own digital video lockers for the content they’ve purchased. Through EST, each member of a household can store and manage their online video purchases from an MVPD’s digital storefront.
In order to further promote transactional purchases, last year Comcast, among other digital service providers, added a preorder feature to its digital stores. Other methods for promoting digital video purchases include offering bonus features that aren’t available elsewhere and gift giving, which could, for example, entail bundling 20 family movies together at a discounted price during a holiday season.
In the face of the proliferation of devices, content rights issues and increasingly complex delivery architectures, a third-party CaaS platform leverages a shared environment in order to deliver a cost effective, consumer-grade service that can be quickly launched, managed and monetized.
CaaS is a win/win for MVPDs and their customers.
