Digital TV Summit Day Three...

The summit ended today with a market analysis on the opportunities for PayTV in Africa, covering most of aspects of the end-to-end value chain, from content procurement to delivery and consumption. I found today's session especially interesting and refreshing, a great complement to the book I am currently reading, The Business of Media Distribution: Monetizing Film, TV and Video Content in an Online World, providing an overview into what the business of PayTV actually entails. We learnt from past experiences of people who've worked in several countries in launching PayTV operations in-country, had an overview of a core component of the system (i.e. Content Management System), touched on Next-Generation platforms, and culminated in a demo on a low-cost (sub $100), but advanced Set-Top-Box, exploring the opportunities that await the African market.

My notes cover the following:

• Day 2: Case Study Namibia Spectrum Allocation
• Overview of Africa Markets
• Lessons from Past (failed) African Projects
• Content & Operational Considerations
• Overview of Media Asset Management Systems
• Next Generation Platforms
  
• Overview of Monitoring Systems
  

Day 2: Case Study Namibia Spectrum Allocation
by Stanley Shanapinda, CEO, Communications Regulatory Authority of Namibia (CRAN)

CRAN's philsophy "Regulate as littel as possible, but as much as it is necessary". Some background into the push to digital is coming from requirements for spectrum harmonisation from international (ITU) and regional (SADC), created the draft Namibian National Band Plan, channelling plans expected to complete end of April 2013. They are confident in meeting the switch off dates. CRAN is basically involved as the overseer of managing progress of the switchover, with NBC being the common carrier for distribution, but can NBC allowed to commercially negotiate carrier deals with private broadcasters. Competition is openly encouraged by CRAN, they've already granted one licence for DTV broadcast, i.e. Multichoice. Multichoice must fund the rollout entirely at their own expense, however, they are free to contract with other private broadcaster. CRAN promotes fair competition between public and private broadcasters. They view the market is small, and therefore must be open to fair competition, such that any company can apply for a broadcast licence. It is made clear however, that no company really owns the spectrum, they just pay for the right of use - leasing is not allowed.

NBC, it appears, is currently not regulated by CRAN, waiting for ministry approval. This becomes difficult for CRAN to check and enforce regulation guidelines on NBC, no matter how intent CRAN is on levelling the playing field.

Spectrum pricing is being revised to discourage walling, instead its aim is to promote efficient use of the spectrum, and not focused on maximising spectrum revenues. CRAN has strict controls on granting a licence and implements a "Use it or lose it" policy, window of six months. If they don't see any movement in six months, the licence is up for revocation. They also operate on a "first come, first serve" basis, with a renewal policy of every 12 months. There are currently no restrictions on the number of licences, depends on availability of spectrum. They try to be technology and service agnostic, for example - Multichoice's licence allows them use of spectrum for DTT and Mobile TV. Public broadcaster is free to expand into PayTV...

Main points around the rationale for regulatory considerations:

• Type Approvals (Is it carrier grade?)
• Quality of Service (QoS) Service Level Agreements (SLAs)
• Spectrum required
• Competition criteria
• Government ownership & participation
• Manage disputes
• Consumer Protection
• Universal Access
• Affordable pricing
• Broadcasting Charter / content
• Sharing of infrastructure

Overview of Africa Markets

by Merlin Naicker, Founder, Media Wizard Consulting
Merlin maintains the traditional concept of "Pay TV" is misleading - in the current markets, we must consider this as "Paid For" content, because content is not only being consumed by TV, other devices now involved. He drove the point that although the world is moving to digital, there is still the need for analog, using this analogy:

He also drove another point home by showing the trend of how music consumption has changed over the years from the old analog cassette days, to CD players and latest mp3 devices / ipod - but, they important point is that the music hasn't really changed in all these years, i.e. the content has remained the same, although the platform used for consumption has changed.

Merlin drew a nice analogy of the media landscape with that of the planetary universe or solar system. The sun, being the centre at which all planets revolve around, is really the Content. The main planet would be the TV, with its moons being all the peripheral devices connected to the TV (DVD player, STB, etc.). There are other planets in the solar system all revolving around the Sun, harnessing the energy - these would be your other devices like PC, Smartphone, Tablet, E-readers, etc. And what does universes have other than the sun or planets, it's the Aliens! Aliens in this case is Social Networks, seeing as the big disruption...

The African market is a complicated market. Cited some statistics that whilst there are 53 recognised states in the African Union or rest of the world, there are other states in operation that are not recognised, and if you add those to the equation, the African market really amounts to about 57 countries. So it's a complex market, with around 2100 languages, many different cultures and religious sensitivities. All these factors come into play when deciding to setup shop as DTV provider.

Current modes of TV in Africa include Terrestrial, Cable & Satellite. The market is seeing growth in all areas: DTH, Cable, MMDS, Mobile, IPTV & DTT. Africa also has some diverse regulatory requirements, not to mention political complexities. However, glaring gap is the lack of established infrastructure, covering capacity to support DTH (Satellites), Base Stations for DTT, Broadband penetration for IPTV, and lack of established Banking & Billing infrastructure.

Put into context, which is really interesting, the whole continent of Africa can swallow the largest nations easily: USA, China & other countries can fit comfortably into African continent, 30.2 million square kilometres of landmass - with 1 billion population, two trillion dollars GDP, more than India but less than Brazil:

Perspective on Africa

He also presented an interesting heat map that shows where to do business - basically some countries are more geared up to support new DTV ventures, whilst others aren't that great. Nigeria has the most dollar millionaires per capita!

Touched on the competitive landscape in Africa:

• DTH: TopTV, HiTV, MyTV, NGB, Zuku, Viewsat, MTG, TV Cabo, Canalsat, Mulichoice, GTV (Liquidated in 2009, investment $200 million!) [Aside: Religious channels/content is big in Africa]
• DTT: GoTV, StarTimes (2.3 million customers across Africa), Zuku
• Online: PanaTV, MultiTV
• Mobile: Slow to start despite having a large base of mobile users: MTN, AirTel, Zain, Vodacom

Lessons from Past (failed) African Projects

by Charlene Fullard, Consultant, CLJ Consulting

Charlene shared her experiences with companies who ventured into Africa DTV market, but failed, some interesting lessons to be learnt there.

• HiTV (Nigeria). Operated a DTH platform from 2007-2011
• GTV (Most of Africa, excluding SA & Nigeria), DTH Satellite provider, 2007-2009
• This operator was backed by UK investors. Content was the compelling sell, having won rights to the EPL sports package. Once the EPL rights were lost, subscribers started to churn. Company still invested deep into content, but it became unsustainable. For the amount of money vested into content, they weren't growing the subscriber base. This, and lack of in-country awareness, led to the downfall of this operator.
• NGB - Next Generation Broadcasting, DTT, 2009-2012, operated in Ghana, Kenya & Uganda
• Was Swedish-owned, Viasat - wasn't managed well, lack of understanding of local diaspora

Hard lessons learnt:

• You must have an effective business plan, thought upfront when embarking into DTV, all costs planning must be done across the value chain
• Local/Africa team versus International Investors - you must get the balance right, its about relationships
• Correct balance between debt funding and equity funding - billing subscribers work differently in Africa
• You must have patient and strong investors, prepared to wither the storms
• Must understand local cultures, standard of living and income levels
• Must understand regulatory processes and timelines involved
• Must understand differences in legal, taxation, requirements when working in a multi-country environment
• Sport content versus other content. Sport is a great awareness creator, EPL was a fantastic opportunity for GTV
• Must have local and international content - this way subscriber retention is improved
• Companies must understand the high cost of set-up, it's an expensive affair
• Must understand the import costs, timelines and processes
• Must understand STB manufacturing timelines, logistics and import procedures
• Cost of setting up operational structures must be clear
• Ensure grounded operational and financial procedures. Keep operational costs lean and mean.
• Understand impact of poor planning & panic decisions. Panic decisions result in high costs. Inventory costs, Advertising & Marketing budgets must be planned
• Must have a well-chosen local management team. Complement the local team with seasoned professionals that understand the business
• Balance sales targets and STB ordering & delivery timelines
• Establish strong performance criteria for the entire team, based on all key areas including Sales V Retention V Call Centre
• Be acutely aware of competitors & ability to counter new players - be fast and agile

Content & Operational Considerations

by Merlin Naicker, Founder, Media Wizard Consulting
Merlin sees convergence not from a technology concept, but from a marketing view which is around convergence of the marketplace. The modern consumer displays the following characteristics:

• Higher income (devices cost money: smartphone, tablet, etc.)
• Connected (devices & social networks)
• Younger "digital natives" - average age is 35 & below (decreasing)
• "Glocal" - is concerned about what happens internationally and how it impacts locally
• Has money to spend - but is resistant to lock-ins (most young people prefer pay-as-you-go than contracts)
• Urban-based (close to infrastructure that enables the lifestyle)
• Techno savvy
• Multi-taskers (watch TV whilst playing on console or browsing the net)

If you are not talking to your customer on his platform, then you're not talking to him at all, no matter how loud you shout. Consumer will just switch off and go somewhere else...

Believes the consumer really doesn't know what he/she wants to watch, instead seeking out what's popular - this behaviour is seen online, the videos that have the most hits, most popular, what your friends recommend, etc.

UK & US households are the largest in terms of households consuming video per week, totalling 35 hours per week, compared to South Africa with 27 hours per week. Content still being driven by US market, 115 million TV households (17 million with one TV, 35.9 million homes with at least 4 TVs). All the studios are based in US, their local market is the largest, box office returns alone from local US market far exceeds takings from rest of the world. The split of consumers: Average viewer consumes 35hrs:34 mins per week, Kids (2-11 years) 25hrs:48 mins/week, Adults (65+ years) consume 48hrs:54 mins...

Touched on the classic content windows and how that's changing in light of new offerings. Traditional flow of Theatre > DVD > Hotel > PayTV > FTA being disrupted by VOD, introduced two PayTV windows: Theatre > DVD | VOD > PayTV1 > PayTV2 > FTA.  And more recently with Mobile, Apps, IPTV, DTT all posing disruptions to content windows are now competing with the first PayTV window.

An operator can acquire content from different means: Commissioning or producing own, through channel providers, Library Catalogues and Output deals. Selling content involves one of three options: Flat Fee or Minimum Guarantee (MG), Cost per Subscriber (number of active subscribers X flat rate) & Advertising. Advertising revenues come from the 30 second slot depending on air time, for example: A 30 second slot on Carte Blanche costs R70k, compared to R237k if aired when Isidingo is showing.

Studios typically implement volume-based deals, the volume mix is determined by the studio, no picking and choosing allowed. Payment is made upfront and the currency is always US dollars. VOD takes a long time to gain returns, VOD is more a feature to retain existing subscribers. Generally for VOD content, there is a 70/30 split with Studio/Operator: 70% goes to Studio, 30% for Operator - if you consider all the costs associated with VOD on the Operator-side, it becomes clear that to reach profitability and ROI will take a long time, so VOD is basically part of the Operator's subscriber retention plan.

Operators implement various ways of generating revenue: Subscription, VOD, Pay-Per-View, Advertising, Electronic sell through, Supplementary experiences, Alternate platforms. Interesting that Multichoice attempted a Pay-Per-View service a few years back, prior to their PVR - it didn't work so well and was canned...

Merlin went into the various stages to consider for operational readiness of platforms, going through the value chain:

When creating content, you need to understand the aspects of Market, Format, HD/SD, Aspect Ration, Consumption device: TV/Web/Mobile.

Content aggregation takes into account: File Formats (Studios send out hugh mezzazine files), Reception (how will content be received & stored), DRM (what rights management system is content provider using, this is driven by the supplier, operators must conform)

• Value Chain
• Create Content > Aggregate > Distribute (DRM, Devices) > Manage (CRM, Billing, Reporting)
• Business Priorities & Channel Management Systems
• Rights Management > Acquisitions > Programming > Traffic > Schedulers
• Workflow
• Search > Browse > Media Logistics > Content Management > Audit Trail
• Operations
• Production > Library > Ingest / Transcode > QC > Post Production > Graphics > Archive > Transmit > VOD
• File Flow
• Media Management > Transfer Management > Transcoding > Rewrapping
• Infrastructure & Content
• Servers > Storage > Routers > Graphics > Modulator > Monitoring > Viewing
• Platform Diagram: Check out the system from Evertz

In a nutshell: Studios providing content to Operators have stringent policies and systems in place for protecting their content all the way from creation to distribution to Operator. The Operator has to conform to Studio requirements for managing the content downstream, respect the various requirements and be prepared to undergo audits by Studios. Operators have to implement all the necessary infrastructure to manage this content, and therefore should not underestimate the enormity & complexity of the operational aspects to content creation, distribution, protection and management - which is why it's recommended that Operators invest in a strong Asset Management System. 

Overview of Media Asset Management Systems

by Jacques Braydenbach, Systems Integrator, Haremba Technologies

This was basically a walk through of the elements that make up a Content Management System (CMS). A CMS is recommended for Operators to efficiently manage all aspects of content management as described above. This is depicted below, you can learn more about it from the product website (Evertz Mediator platform):

Next Generation Platforms

by Merlin Naicker, Founder, Media Wizard Consulting

Final part of the Africa Market wrap-up ended by touching on the next generation platforms, using the following video clip that sums it up nicely:

He drove the point home that Operators shouldn't be complacent - it's just a matter of time that Africa is enabled with the infrastructure that will enable the next generation user experience. We should start tinkering now with the technologies, work through the issues, gain experience and fix the mistakes, so when the time the technology hits mainstream, we will have been prepared. This is further motivated by the following graphic illustrating Africa's plans for under sea cabling:

List of players in the NextGen space:

• Apple/Samsung
• Netflix
• VOD:TV - Only VOD licence in SA, apparently was ready to launch Nov '12 but gone quiet
• Wabona - Online PPV video streaming service for local African content only, operates out of Cape Town
• Tuluntula - Funded by Technology Innovations Agency. Low bandwidth infrastructure, targeting tablets and mobile phones. Already have an app available on Android
• MobileTV - DMB platform, applied for licence. Using on transmitter networks
• Zuku - DTT & DTH
• MultiTV
• PanaTV
• www.izognmovies.com
• www.iroktv.com
• PRTV - Planet Radio Television - worth watching, available in Africa

Overview of Monitoring Systems

by Leon van den Berg, COO, Hambisana

Leon presented an overview of Command Centre (IPTV) Monitoring Tools that his company develops and is already adding value to the likes of Multichoice. For more details refer to the website. He also presented a demo of a low-cost DTT STB, running DigiSoft.tv Iris Middleware, with Internet Connectivity, HTML5 User Interface & Other Apps. Hambisana recently entered a partnership with Digisoft.tv to provide support services & introduce the technology into African market.