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Insight: NSR Executive Briefing
Beyond The Platform Wars... Is Collectivism Coming To TV?

by Carlos Placido, NSR

To obtain a glimpse of the future of television beyond today’s push for technology pragmatism and cross-platform play, one must simply observe recent developments driven by some of the most respected players in the industry. Netflix’s expansion of their successful “collaboratively-recommended” mail-order DVD rental service into streaming distribution is a classic (and anticipated) case, as could be TiVo’s aggregation of online video and collaboratively-filtered menus. However, perhaps a more surprising example is CNN’s recent decision to rely on “collectivist” peer-to-peer (P2P) distribution technology for their live video streaming channel at CNN.com.

When seeing this in the context of other Internet-TV developments, the long-term picture for television can look scary, especially for traditional distribution players. Adobe intends to extend Flash video to the TV set and add P2P capability into their ubiquitous Flash video player. In fact, Adobe and Broadcom have just partnered to produce silicon chipsets to bring the Adobe Flash Platform to TV set top boxes (STBs) and other broadband-enabled TV devices to experience web TV on plasma screens, including HD streaming. Web video, collaborative-filtering, and P2P grid streaming entering the living room suggest that “crowdsourcing,” or, in other words, making use of collective actions for specific tasks, is coming to mainstream TV. Clearly, it is not yet panic time for traditional television, but it appears that the era of TV collectivism is upon us, whether we like this term to describe it, or not.

The End of the Platform Wars as We Know It
With TV digitization, PC-TV convergence, and growth in high definition (HD) screens and services, it is no secret that television is going through the single most profound transformation since the arrival of color TV in the 1970s. However, with Internet pressures building and consumers starting to take back their attention from traditional media, it could be argued that the impact of the mass-customization forces transforming television is rather on the league of the impact experienced in the 1950s — with the arrival of broadcast TV itself.

In order to retain and expand their user base and contain competition from over-the-top (OTT) offerings, distribution players are “crossing the technology border.” Cable MSOs, telcos, DTH operators, broadcasters, as well as wholesale distributors and aggregators, are all adopting pragmatic strategies across traditionally competitive platforms, leading us to believe that platform-bounded service competition is ending. Examples abound, but the following iconic cases can be highlighted:
  • U.S. broadcasters are placing their content online and plan free digital mobile TV offerings to regain eyeballs going to cable and the Internet.
  • Orange (Europe’s largest IPTV player) and Telefonica (world’s most international telco) both rely on satellite (DTH) for extended TV coverage.
  • Major U.S. MSOs, including Comcast and Cox, are exploring wireless alternatives and are united under “Project Canoe” to fence off Google from the lucrative national TV ad aggregation business.
  • EchoStar is launching a telco-friendly HITS platform, while also developing Sling-enabled HD-DVR and Tru2Play set top boxes for the cable industry.
  • Telmex is acquiring cable and WiMAX operations for the last mile in Latin America.
  • Content aggregator IPTV Americas is shifting focus from telco-centered IP services toward more fragmented cable operators, in partnership with SES New Skies
Technology pragmatism is clearly a stamp on today’s competitive environment. Thus, focus is given to developments in HDTV, mobile TV, cross-platform and quad-play convergence which are, most certainly, shaping the business in the short-to-medium term. However, movements taking place beneath the surface involving social-economic factors such as collaborative distribution, peer recommendations, and social advertising, are possibly driving the most profound long-term changes to the industry, as intelligence and bargaining power shifts toward the edge of the network.

Shifting Power Among Content, Distribution, and Consumer Attention
Television is moving away from a mass-market, “one-size-fits-all” era, defined by limited content, controlled distribution, and expanding consumer attention towards a future of mass personalization where content and distribution will be abundant. Also realize, conversely, consumer attention will be focused and will be charged a premium for such services. This is a long-term view; we are in the midst of such a transformation that’s impacting content, advertising and distribution. This transitional stage is characterized by power shifts where content has moved fast toward abundance, but broadcast-quality TV distribution continues having bottlenecks at various points (despite broadband growth). To these distribution bottlenecks, we can also add the fact that clearing rights for premium content distribution across various technologies is not simple, though certainly not an issue for the rise of user-generated content (UGC). However, the tipping point in power structure shifts is in the hands of consumers, whose attention has reached the limits of expandability and has now begun to retreat.

Since the arrival of broadcast TV, consumer attention to the medium has historically expanded. In the U.S., TV viewership is at all time highs. Additionally, TV networks have consistently increased the amount of ad time, costs mainly born by the consumer side of the two-sided TV network economic ecosystem. In a sense, the opportunity cost of the time spent watching ads has been low. This has begun to change with the Internet generation, devoting more time online and valuing their time higher. Although 18-34-year-olds, the segment most targeted by advertisers, continue watching TV, they increasingly tend to rely on the Internet for entertainment and often multitask between TV and PC to watch what they want.

Additionally, consumers are bypassing the local service provider’s “closed” services encouraged by the Internet’s network externalities. Classic examples are Skype and Vonage in telephony and Hulu or Netflix in web video. Provided the net neutrality and non-discriminatory principles of the Internet prevail, telecom and entertainment services will continue to move away from platform-bound, locally-constrained service silos towards utility-like connectivity and distributed resources, where speed, processing and storage become ubiquitous, like electricity, enabling — on demand — a host of new application blends and virtual services.

What becomes clear with these developments is that the various access technologies, from broadcast to unicast, are challenged to properly handle the complete spectrum of content with complex trade-offs among variables such as popularity, picture quality, ad value, premium content value, etc. With expanding choice, enabled by new ways to produce, contribute, and distribute media, consumers are, as never before, in the driver’s seat of this transformation directed towards serving their generic and specific digital lifestyles.

However, the amount of content produced by professionals and consumers each day is overwhelming, and far outpaces the physical ability of any closed-network service provider to distribute and the users’ ability to index through it without collective cooperation.

Crowdsourcing + Collectivism
TV “crowdsourcing,” the concept of taking a task such as distribution or content indexing traditionally performed by the service provider, and outsourcing it to an undefined, generally large group of people or community in the form of an “open call,” appears to be gaining momentum in the new form of grid streaming. As power shifts toward consumers and social nets at the edge of the network, enhancing TV distribution evolves toward tapping into these edge resources by letting such resources “sort it out.”

The arrival of P2P distribution to live video and adopted by such major players as CNN is of significant importance, as it implies the entertainment sector has come to realize P2P could find its usefulness outside the darkness of P2P file sharing and piracy. In fact, it is believed that CNN now delivers at least 30 percent of its CNN.com live video traffic via P2P distribution (the remaining coming from video servers), reaching 25 million users. P2P grid streaming was behind the webcasting of Obama’s presidential inauguration ceremony and has possibly labeled CNN.com as the world’s largest live streaming case. Peer-to-peer distribution for CNN relies on a plug-in from a company called Octoshape, which is also reportedly working with European broadcasters.

TV news is a fertile ground for P2P distribution as piracy issues are low. Any piece of news is, after all, history as soon as it sees the light of broadcast. However, leaving aside security and privacy concerns, the democratizing power of P2P grid streaming is enormous. In theory, as technology improves, live content could reach millions of people by sending out the stream only once from a single video server (or desktop computer), effectively “crowdsourcing” distribution to the net, which will take care of the job of doing this in the most efficient manner. In a sense, P2P grid streaming can be thought of as extending the Akamai model all the way to the edge of the network, but saving content owners (or aggregators such as YouTube) thousands of dollars in distribution costs and potentially putting both large and small video contributors on equal distribution economic footing.

It is quite interesting that for a company such as CNN, born in the cradle of capitalism, adopting “collectivist” P2P puts it in touch with a term that touches the nerves of many conservatives. In political terms, collectivism is immediately associated with labels such as “socialism,” “communism” or “fascism”. However, collectivism is a term largely linked to technology since the arrival of the Internet. Peer-to-peer distribution is, by definition, a collectivist technology, and even the network neutrality through the U.S. legislation for the Internet is, considered by many, a “collectivist” principle because BitTorrent, among many, can free ride on Comcast’s last-mile bandwidth. Also, many of the success stories of the Internet rely on the collective wisdom of the crowd, including, most notably Wikipedia content and Google search engine, which, despite neither being authoritative nor precise at the micro level, do provide great efficiencies and accuracy at the macro level.

The definition of collectivism as to when “an individual is not an end to himself but only a tool to serve the ends of the group,” advocates collective control over production and distribution, which is exactly what is happening with the growth in UGC, open-source initiatives, social networking and P2P, turning traditional thinking upsidedown as virtual groups take over. Truth be told, however, even in technology there is a constant struggle between individualistic and collectivist behavior, with the latter prevailing only when giving the right incentives to individuals. While it is in the collective interest for all to upload/upstream to others (so everyone receives the file/stream quickly), it is also in the individual interest to save bandwidth by only receiving and hence free-riding on others. This leads to what some call “individualistic collectivism.” Paradoxically, as demonstrated by the use of collaborative filtering in user menus, “collectivist” technology can help treat large audiences as individuals.

In some cases, collectivist behavior results from the fact that such behavior does not bear a perceivable cost to the individual. Prime examples are Netflix subscribers that, by renting DVDs, provide additional data to be input into their collaborative-filtering “organism, used by Netflix to recommend DVDs to subscribers, or Tivo users that, while they time-shift programming and swap channels, are providing data to be used by Tivo in its StopWatch ad survey platform.

In other cases, collectivist behavior comes from the fact that users do not perceive the resources that they are putting to service the network (such as hard-drive storage, upstream network capacity, and CPU cycles) interfere with their “individualist” resources. Or, if they do, such disadvantages are outweighed by the advantages brought by the network, such as the ability to watch content that would otherwise be only available for a subscription fee in cable or satellite TV — such as CNN TV news.

Adobe P2P and Flash Video Reach The Living Room
Not surprisingly, Adobe is also working toward adding P2P video streaming capability to its ubiquitous Flash player, installed on 99 percent of Internet-enabled desktops worldwide. Its Flash video version 10 has P2P features built-in, but Adobe also intends to become prevalent in the living room. Today, some TiVo DVRs have the ability to display YouTube, Amazon-on-Demand, Netflix, and CinemaNow web video content on the TV set. Adobe is working with Broadcom (a large chipset manufacturer) to make generic Flash video decoding available in other TV consumer devices such as set top boxes for seamless PC-TV addressability, which will possibly accelerate the transition to HD web-based video on televisions. Although P2P capability in these TV chipsets has not been announced, such development is a possibility.

Even outside telecom, P2P technology appears to be the focus of attention. Scientists argue that the current global economic crisis, when seen through the glasses of global warming and power dependency on oil, has reached an inflection point set to foster the development of smarter, green-friendly, high-tech electricity grids, where, interestingly enough, the answer to macro-level efficiency could come from imitating Internet P2P networks.

The Network IS The Platform
Every company is adapting to this transitional phase in telecommunications and entertainment and pragmatically adopting means to enhance, or protect, their business, seeking to strengthen gatekeeping, by (among other things) expanding distribution capabilities. This, however increasingly pushes players for openness.

While it is not panic time for traditional television, as the exact picture of how television will look like in 10-years is not entirely clear, there is no question that television, just like all other basic consumer services including voice and data, is being driven by changing consumers’ behavior and technology developments that foster intelligence toward the edge of the network, including collective actions such as collaborative-filtering and peer-to-peer distribution.

The platform wars are ending. Tthe mantra now is how to gain, retain, and monetize empowered consumers for as long as possible, even if doing so exposes vulnerabilities. During current transitional times, there will clearly be a mix of approaches that present opportunities and threats to the collective resources and wisdom of the network, which is where answers will ultimately be cemented into place. In this platform-agnostic world, collectivism has arrived, or in other words — the network IS the platform.

About the author
Carlos Placido has more than 12 years of progressive experience in the areas of consulting, program management, research and engineering in telecommunications and entertainment. Mr. Placido has carried out independent business development, technology assessment and management activities, including market research studies for NSR, assessment of regional business potential for vendors and project management at Telefonica. Until 2004, he led a development team at Intelsat in Washington, D.C. where he was responsible for identifying and validating emerging video and data technologies for their potential applicability to new and existing services. Mr. Placido’s development efforts at Intelsat included advanced video networks, IP television, satellite multicasting and broadband, having made significant contributions including spearheading satellite IPTV, improving Internet throughput enhancement and pioneering high-speed satellite LAN-to-LAN. Mr. Placido is currently based in Buenos Aires, Argentina. He holds an engineering degree from the University of Buenos Aires and an MBA from the University of Maryland, Smith School of Business. He is fluent in Spanish and English.