video on demand seminar - presentation

global media intelligencewww.screendigest.com

Digital Platform Digital Platform Feasibility StudyFeasibility Study

Screen Digest/Magic LanternScreen Digest/Magic Lantern


Key objectivesKey objectives

• Increasing access • Maximising public value• Providing a credible model for commercialisation


Who have we consulted?Who have we consulted?

Extensive interviews with: • Rights holders• Platform operators


Broadband is growing fast and represents a new Broadband is growing fast and represents a new avenue for content distribution in the UK – ~20m avenue for content distribution in the UK – ~20m broadband subscribers by 2010broadband subscribers by 2010

UK Broadband Households

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UK broadbandhouseholdsLog. (UK broadbandhouseholds)

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Broadband penetration vs Pay TV penetration Broadband penetration vs Pay TV penetration 2010 – broadband will have more ‘eyeballs’ in 2010 – broadband will have more ‘eyeballs’ in some territoriessome territories

Broadband v. Pay TV Penetration

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UK consumers spent £1.1bn on movies over pay-UK consumers spent £1.1bn on movies over pay-TV, PPV and VoD in 2005 - forecast to pass TV, PPV and VoD in 2005 - forecast to pass £1.9bn by 2010£1.9bn by 2010

Consumer Spending on Movies

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Internet VoD Walled Garden VoD PPV/NVoD Pay TV

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Demand for UK independent and Demand for UK independent and specialised filmsspecialised films

• Online DVD rental platforms as ‘proxy’ for assessing demand on a new digital platform

• Results encouraging– The expanded cyber ‘shelf space’ expands distribution compared to

traditional offline outlets– Demand is spread more evenly (less concentrated) and there is

some evidence these films perform relatively better in the online space


Exploitation of rights via on-demand Exploitation of rights via on-demand platforms: current trendsplatforms: current trends

• There is a hierarchy among platforms in the on-demand space with Sky at the top

• Even a Sky deal does not generate huge revenues in the on-demand window for content owners

• Deals in the pay TV and free TV window are far more important to content owners - making on-demand a lower priority

• Some UK distributors have PPV/VoD deals in place with existing TV-based platforms. But this is very limited and at the mercy of the platform operators’ ‘cherry picking’

• Most rights in the PPV window have not been exploited – ranging from 60%-100% of a distributor’s library


Exploitation of rights via on-demand Exploitation of rights via on-demand platforms: current trendsplatforms: current trends

• Many pay-TV and broadcast deals (where in place) tend to have an unwritten exclusivity against PPV/VoD exploitation that would have adversely affected price paid

• In TV windows there are now more buyers than ever before and sub-licensing deals are being put into place by buyers

• There is limited experimentation by UK distributors on Internet delivery platforms

• Not all titles are being (or have ever been) exploited on DVD• The declining retail price of DVD is making it a business with

tight margins for independents


There is a major ambiguity where Internet There is a major ambiguity where Internet rights are concernedrights are concerned

• Until 2005 most UK independent film licensing deals have been silent on Internet rights

• UK distributors interviewed do not explicitly hold Internet rights on a significant portion of titles signed before 2005

• In terms of unlocking library content for Internet distribution, there would have to be reopening of contracts with producers that may incur significant additional cost

• Sales agents are starting to realise value of Internet rights, as are some UK distributors, and as such are minded to ‘stockpile’ to hedge their bets on future successful services appearing

• BSkyB is trying to tie up Internet and SVoD rights in pay-TV window on newer studio deals, but some deals continuing on old terms

• There is a potential role for an on-demand aggregator of Internet rights direct from producers within the Internet space


Rights issues: summary of findingsRights issues: summary of findings

• Distributors/rights holders at the mercy of limited range of buyers

• Buyers frequently purchasing only limited range of more ‘commercial’ titles

• UK and ‘specialised’ films not maximising their commercial potential by exploiting all windows

• A ‘distribution gap’ exists where titles are not available at all to the public (or only for a very limited period of time in select regions)

• Confusion as to Internet/on-demand rights ownership is a significant barrier to development of specialised services in the market

• Rights holders confused and/or ignorant regarding potential of Internet and DRM solutions


Rights issues: summary of findingsRights issues: summary of findings

• Subscription VoD (SVoD) rights tied up with pay TV window• Broadcasters (pay and free) increasingly unhappy about on-

demand/Internet rights being carved out – issue of (implicit) bundled rights

• Tested concept of a ‘public service window’ (PSW) – potentially free to the user

• PSW could be defined in terms of time or terms of use/category of user or platform (or some combination thereof)

• PSW could potentially come after first full-cycle of commercial exploitation – i.e. after free TV window (typically 7 years-plus after theatrical release)

• No single rights holder interviewed would prima facie support concept of a Public Service Window (PSW)

• All rights holders would expect fee up-front for licensing content to PSW


Platform issues: summary of findingsPlatform issues: summary of findings

• The NVoD market remains limited by ‘shelf space’ and is not currently serving demand for specialised and independent film

• VoD operators see diversity of content and breadth of choice as a USP for the technology and their services

• But there is still a hierarchy in the VoD space: early VoD content deals are still being driven by blockbuster movies and the type of content that worked in the nVoD space.

• A UK theatrical release remains the standard to judge the value of content

• UK VoD operators (cable, IPTV and Internet) are all open to bringing specialised content on to their services


Platform issues: summary of findingsPlatform issues: summary of findings

• Platforms are geared up for content management, play-out, scheduling and promotion within the VoD space. These services are offered to content owners as part of the distribution package

• Platform owners are generally open to the creation of themed streams within the EPG, branded content or a full-blown branded on-demand channel

• Operators generally flexible regarding branding and marketing and willing to explore a range of options

• Prior exposure in other TV windows is an issue for operators and impacts the value they put on content deals

• A degree of exclusivity is also considered important and impacts value and willingness to work with particular content providers

• Several operators are open to the idea of an on-demand channel that could be exploited across multiple platforms


Strategic options for the UKFC to considerStrategic options for the UKFC to consider

• Rights issues• Distribution

Nb – different options are not mutually exclusive


Strategic options - rights issuesStrategic options - rights issues

Levels of intervention:1. Clarify rights2. Ease friction in the market3. Intervention in the market


Level 1: clarifying rightsLevel 1: clarifying rights

• ‘Rights portal’ – online B2B database of rights information for rights holders to advertise availability of their rights

• Rights audit • Rights database made public (B2C public search/EPG for

specialised and UK indie films on-line)• Education initiative for rights holders

May be an important policy function as there is a significant ambiguity as to who holds what – it would make it easier for third party operators to source and access specialised rights

Any rights audit or rights database is likely to be a significant undertaking and require the agreed participation of distributors/rights holders


Level 2: easing friction in the marketLevel 2: easing friction in the market

• Facilitate broker role on behalf of rights holders (e.g. online marketplace or agent role to aggregate larger deals)

• Facilitate a royalty collection function for rights holders making content available on multiple platforms (e.g. adding tracking/collection function to rights database) will facilitate a potentially chaotic process of collecting royalties given the

haphazard nature of where rights are located as well as potential for numerous services accessing rights

not everybody will want their collection centralised or even use a brokerage facility (so may have to be an optional service)


Level 3: intervention in the marketLevel 3: intervention in the market

• Aggregation of content through pre-sale or post-purchase of on-demand rights (possibly on future revenue share basis or even without money changing hands):1. by territory 2. by distribution platform3. for public service usage (quality, time window, user type) pre-sale will provide a safety net for films that may not get an on-demand

distribution deal as well as add value to the UK film sector direct acquisition is the only approach that will guarantee distribution to

titles and provide a bargaining chip against existing platforms post-purchase may bring UKFC into conflict with existing buyers and

potentially draw fire from commercial sector (unless post-purchase is provided as conditional on no other buyer being found in the market first)


Strategic options: distributionStrategic options: distribution• Promote standards and an interoperability framework (esp.

DRM) and encourage dialogue across the value chain Current status of standards within digital space is a political minefield Possibly limited impact for effort required- Major policy issue requiring a coherent strategy

• Facilitate mastering (encoding), tagging and storage of content - with option for integration with the Digital Screen Network and rights database – May be unnecessary step if partnering with larger distribution partners– Raises standards and interoperability issues

• Enable marketing support (“digital P&A”) for on-demand distribution– Not enough to make the content available; need to let people know it is

there– Could encompass ‘digital print’ and marketing support


Strategic options: distributionStrategic options: distribution

• Partnership with limited number/one distribution partner with access to a platform– Exclusivity may encourage greater promotion/support Limited reach will not maximise exposure

• Partner with a range of distribution players based on shared standards for delivery and a content quota – who will determine content and what will platforms get in return? Commercial partners may be wary of open/shared standards

• Set up a ‘white label’ B2B publishing platform supporting content which is “sold” on to distribution/marketing partners may require an on-going marketing commitment Platforms will want to ‘cherry-pick’ the more commercial content Would lose branding benefits of ‘channel’ option Would minimise perception of competing with existing services Potential for broad distribution with minimum upfront cost



• Set up and manage an independent film platform on the open Internet, including public facing portal(s) – Costs relative to broadcast channel are low (likely to utilise P2P download

model – possibly with streaming ‘showcase’ channel)– Content could be easily fed to other broadband distribution platforms and re-

purposed for future devices this is not multi-platform per se and may not fulfil ‘widest reach’ agenda Reach of the platform will be dependant on availability of broadband at

minimum speed - raises potential equality of access issues Would potentially compete with (or be perceived to compete with)

commercial platforms – and consequently reduce value of other deals



• Make available a branded cross-platform ‘channel’ of on-demand UK/specialised film content for distribution on maximum number of platforms (TV and Internet)– Could include a linear ‘showcase’ channel as well as on-demand channel– Potentially most effective option in terms of public access objective – and

‘making an economic difference’ objective Commercial partners may have a different agenda to UKFC and different

agendas to each other May be perceived as publicly funded competitive threat– Would allow UKFC to draw on expertise and marketing power of partners– Best opportunity to build brand values and awareness of content– Potential challenge of presenting ‘free’ public service window content

alongside paid-for content– Operation of the ‘channel’ could be offered for franchise in manner

comparable to DSN (any/all of operations could be outsourced/franchised)


Questions?Questions?

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