The Pragmatic Innovator

As the CEO of a start-up company, I tell the story about our technology and products on a daily basis. We typically receive incredible feedback and response to our approach for video delivery optimization.

However, there is one question we are constantly asked regarding content pre-positioning: “How does the subscriber know what they want to watch?”

To answer that question, we point to the many examples of consumers making proactive decisions all the time on what content they want to consume.

Consider monthly magazine subscriptions via the US Postal service, Netflix movies by mail, eBooks delivered to a Kindle or iTunes Seasons Pass TV. All of these businesses are predicated on the consumer making a decision on what they want and subscribing to content of interest. Consumers are willing to pay for a subscription to what they want and have it delivered to them – especially when delivered in the highest possible HD quality with perfect playback every time.

We are also seeing evidence that consumers are migrating to video-based “apps,” customized applications to access the content they prefer. For example, consumers today might subscribe to CNN by purchasing and downloading the CNN app for $1.99. Likewise, a consumer may select ESPN for their sports news and information by purchasing and downloading the ESPN app.  When consumers buy and download apps they are specifying an choosing the content that they want and prefer. Pre-positioned content can transform that ESPN app into an ESPN Sports Center TV experience for Mobile – and generate a small monthly fee per customer.

These are decisions and preferences made by the consumer and align very well with pre-positioned content and revenue generation opportunities. We expect that this trend will continue in the future, especially as it pertains to viewing mobile video.  As subscribers become increasingly disgruntled with the quality of the video that is available to them, they will turn to more consistent alternatives, such as apps that utilize content pre-positioning techniques, for a consistent and high quality experience.

We believe mobile apps are more valuable to the consumer than a mobile browsing experience. Do you?

---

We’ve talked quite a bit about how streaming video places enormous strain on wireless networks, degrades network performance and creates a massive capital burden for operators.   This strain also affects the end-consumer as it results in a very poor and inconsistent playback experience.  Many operators are imposing data caps (check out this video from o2 talking about why they chose this route), but data caps alone will not ease the strain on networks.

The simple fact is that video is crippling our networks and the industry must explore new video distribution methodologies, as well as new consumer models that achieve superior service level characteristics.   We believe that new video distribution models must accomplish the following to be successful:

• Reduce operator CAPEX and OPEX. Operators have fronted the cost to build out the current network and the costs to maintain them.  Continuing to invest billions of dollars in network build out to facilitate other third party company revenue growth is simply not a long term viable business model   (see how much bandwidth Netflix is using without paying for the capacity)
• Creation of new revenue generating services. A more viable approach would be to create new services that generate revenue in a linear relationship with capacity consumption and provide wonderful video quality to consumers – something they will pay for.
• Improve quality of video for consumer. Operators must provide a substantially improved video playback experience.  The optimal playback experience should:
  • Never freeze and/or rebuffer;
  • Should leverage the high quality video components in today’s smartphone and tablet devices
  • Should utilize the ultra low cost of memory in wireless;
  • And allow consumers to enjoy their content without broadband connectivity.

It’s actually a rather basic proposition: operators simply need to provide a quality of experience that is worth paying for.  Innovative subscription-based applications allow consumers to subscribe to the content that they want, when they want it.  And that content is always available in flawless quality every single time. Everywhere. If operators can provide this type of high-quality service and experience, we think consumers would be willing to pay for it.  What do you think?

---

In my opinion, the end-user mobile video experience today leaves a lot to be desired. On any given day, I will visit an app for a leading cable news site on my iPhone.  Half of the time I wind up watching a video of decent quality, and half of the time, I get a video that freezes and buffers until I get frustrated and exit the app.  At best, the experience is mediocre.

Personally, I think this is unacceptable, and it looks like the majority of mobile video users today agree.  In fact, we expect that over time, consumers will migrate to those applications that provide better experience for their “video snacking” time and even premium video.

It is essential, therefore, for content owners to provide consumers with a better experience just to stay competitive.  One way to improve QoE and gain a strong competitive advantage is to enable apps with content pre-positioning technology.  Apps that utilize this exciting new technology eliminate consumer frustration by pre-positioning content into the end device memory using surplus capacity.  This allows content to be played back instantly, truly at any time (on an airplane, etc.) and with ultimate consistent quality.

We believe that pre-positioning technology, which is utilized by Opanga’s NetRover solution, can complement subscriber data usage limits and pricing plans that are becoming the norm today (see previous post).  For example, content pre-positioning can enable operators to offer new innovative revenue growth applications that are “outside of the cap,” and, when done properly, can maximize the efficiency of the operators’ networks by leveraging underutilized capacity.  This is in addition to providing consumers with a far superior playback experience on their device.  Consider, for example, the following possible use cases:

• Premium content distribution such as catch-up TV, Seasons Pass TV and “mobile DVR” functionality.
• New release VOD movie content delivered to smartphones that coincide with DVD and Blu-Ray release windows.
• Up-to-date news applications, where subscribers can open an app and watch all of the latest local or national news videos – without a broadband connection
• Personal file sharing, where subscribers can share sharing pictures and media with other devices or family members

What other use cases can you imagine with business use cases?  What is your favorite video-based app?

---

AT&T and Verizon are doing it. And it is only a matter of time before all wireless operators are imposing some type of usage-based mobile data pricing, or data caps. The iPhone, surge of Android devices and now tablets are demanding an unprecedented amount of wireless bandwidth largely due to video-based apps. And bandwidth is something that operators have a limited amount of.

So data caps are here to stay (even with 4G, we believe) because operators simply cannot keep up with the growing demand of video, which uses a tremendous amount of capacity. Read more about how much capacity streaming video requires.

It has been argued that data caps are good for the operator (less network congestion so they can add more subscribers without building new base stations as quickly) and good for some subscribers as well (especially light users).

But how do you know how much data you use?

We did the math on AT&T’s pricing plan and we determined on average subscribers pay about 5¢ per MB. This is fairly meaningless unless you know how much data you can get per MB.

Streaming Video Clips

Costs for streaming YouTube videos to a smartphone based on watching 15 minutes of video each day, which is what the average person spends on YouTube. YouTube uses approximately 2MB/min to stream a video to a smartphone

Plan	Minutes per day	Usage Price
200MB – base price $15	15	You can watch about 45 mins of YouTube videos over 2.5 days before overage ($15 for another 200MB)
2GB – base price $25	15	If you watch about 15 minutes of YouTube videos per day, you will use almost half of your 2GB allocation over the course of your billing period.

Streaming Full Length Movies

Costs for downloading the movie Avatar to various devices using AT&T’s Data Connect Plan. Figures are calculated based on information taken from AT&T’s website.

Plan	Resolution	File Size	Usage Price
200 MB	iPod (480×270)	596 MB	Can’t deliver 1 without overage
200 MB	720p (1280×720)	3992 MB	Can’t deliver 1 without overage
5GB	iPod (480×270)	596 MB	$7
5GB	720p (1280×720)	3992 MB	$48

No doubt subscribers will now have to think twice before viewing that 2 minute YouTube video, not to mention longer-form content that is proving popular on these devices. I’d argue that this is not good for content owners or over-the-top type of video service providers.

We believe operators are faced with two primary options:
1) Forget about allowing subscribers to stream video over 3G

2) Find alternative ways for subscribers to get their video fix

If you’ve read this blog before, you know that Opanga has developed solutions based on a concept called content pre-positioning. Operators can pre-position content into end devices by using surplus capacity found in their networks throughout a 24-hour period.

We believe that pre-positioning technology can complement subscriber data usage limits and pricing plans. Content pre-positioning can enable operators to offer new innovative revenue growth applications that are “outside the cap.”

Stay tuned for some business use cases that will benefit operators and media companies.

Are you surprised at how much a movie would cost on your smartphone? Would you pay it?

---

By Dave Gibbons

We recently returned from CTIA Enterprise & Applications in San Francisco.  Based on the meetings and foot traffic, it is abundantly clear that there is a tremendous amount of interest in the concept of content pre-positioning.  Over the next two weeks, we will explore the opportunities presented by content pre-positioning; how it can be incorporated into a successful business model and why it has the potential to alter consumer behavior.

See our interview on bnetTV and what Light Reading has to say about the potential of content pre-positioning.

As always, we encourage you to weigh in with your thoughts and comments.  And if you have a question about content pre-positioning that remains unanswered at the end of the series, please feel free to drop us a line.  We’re very excited about this new concept and the possibilities it presents and we would welcome the opportunity to share our vision with you!

---