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IPTV or Online Video?
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April 22, 2008

IPTV or Online Video?

By Gary Kim, Contributing Editor

Nothing better illustrates the challenges service providers face than the ways consumers are using video these days. At a high level, linear video on the cable TV or satellite model is the foundation telcos hope to leverage for more-advanced features provided by IPTV systems.

At the same time, about 40 percent of surveyed consumers watch online video, 29 percent watch video on demand, and 27 percent watch digital video recorder programming, according to a recent Yankee Group (News - Alert) survey, illustrating the various ways that users are viewing content and moving toward a more on-demand lifestyle, says Tara Howard, Yankee Group analyst.
So the issue is whether telcos are investing in a service (linear multi-channel video) that is not the wave of the future. It’s a serious question.
“What do people want?” asks Chris Douglass, IBM (News - Alert) solutions executive. “They want personalization, enhanced usage experience and control.” And they may want those features not just on TV screens, but on their mobile and PC screens as well.
“The notion of scheduled TV is being taken over by personalized viewing,” says Dan Lieberman, Redback Networks (News - Alert) video architect. 
“Broadcasting is obsolete, except for live sports or exceptional news events,” says Brough Turner (News - Alert), NMS Communications’ CTO. “Once a user has enough bandwidth, and peer-to-peer streaming or a store-and-forward method is available, why do you broadcast?”
That mans “triple play” offers will be drastically redefined over the long term, he argues. To be specific, he predicts service provider video entertainment revenues will vaporize once gigabit pipes are available.
“What are your assets, if you are a service provider who wants to survive the shift?” he asks. Turner thinks identity, location, authorization, and billing are assets a service provider can leverage.
At the end of the day, though, there are practical reasons why telcos are committing serious effort to becoming players in the classic multi-channel video game. To some extent (pardon the analogy) it’s the reason Willie Sutton reputedly said he robbed banks “because that’s where the money is.”
There’s some debate about whether Sutton actually said that. There’s no debate about the fact that although the multi-channel video business will face future challenges, it is a business that offers huge amounts of gross revenue for the foreseeable future.
Multi-channel video is a business “walled garden” with a clear path to revenue. Online video does not necessarily offer that sort of value to a service provider.
Nor is “linear” video necessarily a scheduled experience. The DVR itself breaks the “linear” character of multi-channel video by giving users more control. So do DVDs.
To be sure, under the right circumstances, downloaded or streamed forms of video can be quite convenient. For most users, though, it is not yet all that convenient for full-length movies, compared to other alternatives, as useful as it is for short form content.
Anecdotally, watching my children, I still don’t see much evidence that download behavior has made real inroads into their video viewing behavior. That isn’t true of their voice communications, texting, or audio habits, all of which are recognizably what you would expect from Gen X and Millennial users.
On the other hand, I wouldn’t characterize much of what they do when the TV is on as “watching.” It’s just on.
That isn’t to dismiss online video growth at all. But to the extent that service providers are looking for big sources of revenue, multi-channel video is a better bet now than online video is.
Online video is going to grow. It just isn’t clear how much actual revenue it will generate for service providers. And that’s why IPTV (News - Alert) is a reasonable bet, even as online video continues to grow.
Gary Kim is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.
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