Adaptability to New Biz Models Is Shaping MVPD Tech Choices
Charter Finds Cisco to Be a Willing Partner in Best-of-Breed Strategy
By Fred Dawson
January 30, 2015 – This is a strategically dicey moment for MVPD decision makers when the technology solutions they’re looking for to maintain their competitive edge under current content licensing models must also position them to react as new models come into play in the months ahead.
It’s a tough challenge, says Charter Communications CEO Tom Rutledge. “The hardest thing to do in business is to manage creative destruction,” he says. “It takes guts.”
Charter, in a sweeping act of creative destruction that taps solutions from Cisco Systems, ActiveVideo, Zodiac Interactive and other suppliers, has come up with a strategy which Rutledge believes will serve current needs while putting the MSO in a place to introduce new service models at minimum cost and disruption to current operations. By becoming “more focused on security and intelligence in the network,” Rutledge is pursuing a strategy that has now become the blueprint for all MVPDs.
Of course, adopting “future-proof” strategies that envision eventual migration to all-IP operations has long been a guiding principal in the cable industry. But the difference now is the imminence of changes in the pay TV business model doesn’t leave room for solving immediate service challenges with solutions that don’t address the bigger picture.
Nothing has driven this point home more emphatically than DISH Network’s Sling TV, the $20-per-month OTT service offering a live broadcast lineup of 12 networks, including ESPN, ESPN2, TNT, TBS, Food Network, HGTV, Travel Channel, Adult Swim, Cartoon Network, Disney Channel, ABC Family and CNN, along with VOD options and a short-form video package from Maker Studios, the online provider recently acquired by Disney. While no one yet knows how far these and other programmers are willing to go in fashioning other new package options in the OTT subscription market, it’s clear many more shoes will be dropping in the months ahead.
“Cord nevers and haters are driving this trend,” says Eric Reed, vice president for entertainment and tech policy at Verizon. “At the end of the day we have to address this or go out of business. We see a lot more a la carte options coming to fruition. Programmers are starting to show a little more flexibility.”
And for good reason, notes Campbell Foster, director of product marketing for video solutions at Adobe. “Programmers want to reach certain demographics no matter whether they’re watching online or on a pay TV channel,” Foster says. “The wall between OTT and TV is coming down.”
What it comes down to is the risk of losing advertising revenues by not reaching the growing legions of non-pay-TV subscribers is beginning to outweigh the risks of breaking up the pay TV bundle. How fast things change is likely to hinge on how fast programmers and advertisers, with the help of the vendor community, can put in place a viable analytics, measurement and pricing infrastructure that will move cross-platform advertising into the mainstream.
“We’re going to see more skinny packages like Sling TV,” Foster says. “But there has to be a tradeoff that’s at least revenue neutral with the move away from the old model. There have to be new monetization models.”
As previously reported (see, for example, November issue, p. 8), there is a massive industry-wide effort underway to build the foundation for these new models, especially when it comes to establishing key measurement parameters suited to the different device environments of pay TV, fixed broadband and mobile. There’s growing concurrence on how to combine data points from all these environments into measures of reach and frequency that can support a cross-platform ad campaign strategy, notes Scott Brown, senior vice president for technology, engineering and strategic relations at Nielsen.
“If it can’t be measured, it can’t be sold,” Brown says. “Over the past couple of years we’ve made a lot of progress with new digital measures that allow us to look across platforms and the different usage patterns.”
All of which creates an opportunity for MVPDs to take a proactive role in driving and participating in experimentations with new business models. “The reason we created this product [Sling TV] is we knew a lot of our customers want pared-down options they can access over broadband,” says Jason Henderson, senior product manager for iTV at DISH Network. “You can beat your head against the wall or react. We believe this service will be a complementary and additive benefit to us.”
Many other MVPDs are thinking along the same lines, as evidenced by Cisco’s efforts to keep pace with the changing dynamics. MVPDs’ demand for a cloud-based platform with sufficient flexibility to support multiple approaches to navigating the transition period between legacy pay TV and next-gen operations has triggered “big changes” in Cisco’s Videoscape strategy, says Cisco chairman and CEO John Chambers.
“We’ve restructured the team overseeing this,” Chambers says. “We’ve moved to a horizontal approach rather than segmenting everything on Videoscape, which gives our customers great flexibility in their approaches.”
This flexibility includes the ability to combine elements of Videoscape with various third-party solutions, even when those solutions might be competitive with options offered by Cisco. For example, in choosing to partner with Cisco, Charter opted for the ActiveVideo CloudTV platform as a way to give subscribers access to Charter’s new next-generation UI, the Spectrum Guide, on legacy set-tops as well as the MSO’s new Worldbox set-top.
“With the support provided by ActiveVideo, Charter is able to solve the legacy set-top box problem,” Chambers says. “Close partnerships with customers and other suppliers have allowed us to focus on network intelligence and creating a horizontal platform that works for everybody.”
Critical components of Charter’s new strategy also include the DCAS (Downloadable Conditional Access System) and seamless DRM solutions Cisco is providing to support the Worldbox strategy. Along with eliminating the costs of equipping every set-top with cable card-based security, DCAS provides Charter the flexibility to work with multiple suppliers of DCAS-capable set-tops, deploy the box in different CA environments, implement new advances in CA and quickly set new security policies in conjunction with new types of service options. At the same time, the Cisco DRM solution allows Charter to manage security on IP devices connected to its premium services over broadband.
Worldbox is a cloud-supported thin-client device with built-in DOCSIS 3.0 modem and dual IP/QAM capabilities that will facilitate delivery of new applications and service packages as well as eventual migration to all-IP distribution. The Worldbox will include HD-only and HD-DVR models with up to 16 turners and comes equipped with H.265 decoding capabilities to facilitate introduction of 4K UHD and other bandwidth-saving service strategies. By virtue of its reliance on intelligence in the cloud, Charter will have the option to move to cloud DVR if and when it makes sense to do so.
“Worldbox opens up the box universe for us,” Rutledge says, noting the company is hoping to engage other suppliers in addition to Cisco in manufacture of the set-tops. “It’s a high-capacity but less expensive box that allows us to use the cloud to benefit from Moore’s Law rather than continually moving to new generations of devices.”
But, of course, like other MVPDs, Charter has to gauge its pace of strategic evolution to the practical realities of an embedded set-top base that can’t be torn out and replaced overnight. “We don’t want to force out older boxes,” Rutledge says, which is why it’s so important to be able to deliver a next-generation navigation experience to every set-top, including some that have been in the field for as long as 11 years. “Using ActiveVideo allows us to ubiquitously deploy this guide,” he says.
The ActiveVideo CloudTV platform uses compute power in the datacenter to stitch together each UI page representation in response to users’ navigational commands. The encoded page is delivered over Charter’s VOD distribution system in an MPEG channel stream to the user’s set-top at the same speed the user would experience were the UI stored in the set-top.
The Spectrum Guide, which Charter built utilizing development tools supplied by Zodiac, supports an all-new user experience for customers who appreciate all the functionalities of a next-generation guide while remaining in the comfort zone of users who prefer the traditional EPG grid. The guide is “completely customizable” to allow configurations suited to specific locations and to personalization of each streamed page for each user, Rutledge notes.
Charter’s product development team has configured the guide with a default mode that features a grid-style presentation of channel choices as the dominant feature on the screen. At the same time, users are given a set of options in the left hand column that trigger completely different navigational experiences, including search and discovery, dynamic presentations of viewing options and affiliated metadata and much else. “The key point is smart networks make dumb screens smart,” Rutledge says.