Sunday, 12 February 2012

The Factors which Challenge the Emergence of a Viable Market in Internet Video


                 Despite the growth of viable businesses in the online video sphere, there remain significant threats to a long-term future for the provision of legal feature-length content. Chief among these threats is that of piracy, which existed before the establishment of legal alternatives and remains a consistent threat to legal business models. However, there are a number of other factors which threaten to undermine the establishment and development of online video. Some of these threats are intrinsic to the business of media distribution and are not directly related to the online sphere; although the nature of internet delivery may contribute to the shape these threats ultimately take. Such issues are primarily those of rights – whether the rights of film makers to be compensated for their efforts or the right of distributors to be rewarded for developing and bringing works to market. Other threats come from the nature of the internet itself – concerns over the stability and security of open networks and the expense and logistics of support which internet video companies must provide to end-users. There are also a number of factors which are intrinsic to local markets – matters of legislation which remind us that media distribution is dependent on a complex framework of national laws and regulations, regardless of the global nature of the internet itself. Thus, this section will include an examination of the impact that UK law has had on the development of the internet video market.

Piracy


                There can be little doubt that piracy is one of the greatest threats to the legal distribution of media content in general and this holds true for online businesses, perhaps to an even greater extent. The ease with which digital content can be replicated, without loss of quality, and the multitude of ways in which it can be transferred over the internet - practically without expense – is a major problem for the industry. For example, Netflix's planned expansion into the Spanish market is seen as a key test in a territory where piracy is rife:
... Spain could pose more of a challenge given the high levels of piracy and unemployment... Apple Inc.'s iTunes Store doesn't sell movies and TV shows in Spain. The Spanish roll-out is seen as a test of whether people used to watching movies at home for free will pay about 6 Euros a month for content of a higher quality and easier to find than on piracy websites.[1]

It's interesting at this point, however, to point out the way in which piracy – or, at least, the initial application of new technology – has a disruptive effect on existing modes of media distribution. This has been true of most home entertainment technologies. From the earliest home film projection formats, through audio formats like the cassette tape, to VHS and DVD, home formats have disrupted the distribution and revenue models of studios. Though each of these formats has proven to be enormous commercial opportunities for rights holders in the end, their introduction has been met, time and again, with suspicion and legal threats.
The case of VHS is illuminating in regards to the legislative approach studios have been undertaking in respect of online video. The Sony Corporation and its partners in the development of the Betamax home video format was the subject of a law suit issued by Universal and other Hollywood studios in 1981. The studios protested that the Betamax and other VCR machines allowed users to make unauthorised copies of copyrighted works from television broadcasts and, further, that Sony were marketing the device for this purpose. Though the lawsuit was eventually lost in 1984, by which time Universal had already released several of its titles on Betamax and VHS, this illustrates the nervousness with which studios perceived a technology which allowed individuals to control how and when they viewed video content[2]. Though VHS recorders and now PVRs have become ubiquitous, the idea of time-shifting was once seen as deeply threatening to an industry which wished to preserve the established theatrical and television release windows.
                In the same way, studios now look on with trepidation to a truly on-demand viewing experience in the online sphere, where users not only want to view any content whenever they want to, but wherever they want to view it – be it on multiple devices in the home or on the move. Many viewers have turned to peer-to-peer and other file distribution services to obtain copies of films which have been released in other territories, showing disregard not only to rights holders but – crucially – to the studio's cherished distribution patterns and release windows. The global nature of news media ensures that publicity for a major release spreads into other territories sometimes well-ahead of a traditional staggered release and creates a demand which is filled by forms of piracy which are often simple (ease of use) and reliable (no loss of quality).  Though the film industry continues to characterise film piracy as stemming from clandestine filming of theatrical screenings[3], a large proportion of files exchanged online are taken from DVD rips – often from screener copies sent for review by journalists. As such, they are almost perfect copies of the originals: most modest computers can use free software to remove DVD encryption and re-encode the resultant files to a format which is smaller and easier to transfer over the internet, whilst retaining the resolution and bit rate of the original[4]. It is no longer the case, as with analogue formats such as VHS that copies of video content must be of inferior quality to the original.
                In addition, the files which are ripped from DVD or other sources can be easily transferred to other devices, such that a viewer can choose to watch a film at home or on a portable player while travelling. Parents, for example, can easily transfer a child's DVD for playback on a portable games console to entertain them on long car journeys. The industry's attempts in the sphere of portability have, to date, proven to be embarrassingly inflexible and unappealing. At present, several studios have marketed DVD and bluray releases of feature films with “digital copies” on the same disc. Consumers can transfer these files to portable players. In reality, such files have proven to have DRM systems which place heavy limits on how consumers can digital copies. There have been restrictions on the amount of times the file can be transferred from disc, the types of devices allowed for transfer and the timescale within which transferred files must be watched. The same types of restrictive systems are in place for download services such as iTunes, for both film rentals and for outright purchase. Combined with outdated pricing models, consumers have had a right to ask why there should be any restrictions on what they do with digital files when they have paid the same price as for more portable and flexible formats such as DVD.

Availability of Content Rights


                Of course, studios argue that such restrictions are necessary to protect rights of ownership and to ensure that filmmakers can be properly compensated for their work. It is argued that DRM is necessary to prevent the mass, unregulated exchange of film titles on digital formats, especially given the ease with which such activity can take place. Such arguments would seem to be self-evidently true, given the widespread piracy that is taking place and the success of some online video portals that operate using DRM. The example of Apple's iStore, which sells film and TV content for rental or outright purchase, is perhaps a telling one. Despite all content being protected with DRM which heavily restricts what the consumer can do with individual files, iTunes has around two-third of the total US market for VoD titles[5]. Other portals which provide access to film titles, such as Sony's Qriocity service and Acetrax's movie-on-demand portal for Samsung Smart Televisions are also proving commercially successful, whilst selling files with DRM restrictions.
                In the case of subscription services like Netflix, where video is streamed to viewers rather than transferring a complete physical file, nervousness over content rights has manifested itself in a reluctance to allow premium titles to be licensed. Major studios – such as those owned by the Sony Corporation – have tended to reserve recent Blockbuster hits for portals they own and manage rather than license them to Netflix. Rights holders have been concerned that the subscription model – where thousands of titles are available for the same price as two paid downloads – devalues titles and can impact other revenue streams, such as DVD and cable pay-per-view. As a result, much of the content available on Netflix has been viewed as “library” content – titles which tend to be older, less well-known and well-reviewed.
                In addition, as mentioned above, studios have attempted to implement the regional release patterns of theatrical and previous home viewing formats, when issuing content to online video portals. This leads to a situation where websites and services which operate internationally have to present different front-ends to users in each territory. Online video services also have been struggling against illegal downloads, where such territorial boundaries are only restricted by language and all titles are easily available on the date of initial release. Film studios remain content to preserve these restrictions while there is substantial revenue from physical formats such as DVD and bluray.

Ease-of-Use Issues


                Compared to previous home viewing formats, online video has a usability problem. With VHS and DVD all that is required is to insert the tape or disc, in most cases you won’t even have to press “Play” or change the channel on the television. In comparison, online video has necessarily been developed on the PC platform, which has several disadvantages as a platform for viewing feature-length entertainment:

  1. The PC is not a communal machine. PC stands for “personal” computer and despite the fall in cost of large monitors, computers tend to be used by individuals rather than groups. Home entertainment – especially feature film – tends to be viewed by couples and families.
  2. PCs also tend not to be located in the lounge or family room, where the majority of home video is watched. The rise of small laptops such as netbooks and tablet computers has meant that browsing from the sofa has become common, but such devices are even less communal than the standard PC.
  3. People – or at least certain demographic groups – are intimidated by PCs. Older people, or perhaps people in general who are less experienced with PC usage, find computers difficult to use[6]. Compared to inserting a DVD, the steps necessary to, for example, set up an iTunes account, pay for, download and watch a film are complicated and difficult to explain to someone who is not even familiar with how a mouse operates – or who has limited experience with the internet.

                Devices are emerging which have been developed to simplify the experience of accessing online video, utilising television-style remote controls and connections for televisions and home cinema amplifiers, but standards for such devices are still in the process of being defined and consumers are nervous of adopting formats which may lack support in future.

Internet Network Stability


                Another factor which negatively impacts the viability of online video businesses is the stability of the delivery network. Video is delivered across the open network in the form of individual packets, which may in reality be sent across various routes and are subject to delays caused by other unrelated traffic. Technologies are in place to buffer and sort data packets when received by the displaying device[7], such that the viewer experiences a smooth, interrupt-free video and audio image, but the potential for disruption is present even on the highest speed network connections.
                In addition, as online video is an on-demand business it is susceptible to service interruptions which have can have a major negative effect on perception of the service. In traditional packaged media, failures in the supply chain can delay product being delivered, but once the consumers has received a disc she can watch it whenever she wishes to. Online video relies on 100% service availability to cater for demand which may occur at any time, day or night. Despite developments in network hardware and software, it is extremely rare for even mission critical web services in industries such as finance to achieve perfect availability. Due to the open nature of the internet, online business must be vigilant against malicious attack from viruses and other external intrusions from hackers and criminals. The complexity of systems required to correctly authenticate and serve potentially thousands of concurrent customer requests introduces risk which can be difficult to manage and can have extremely negative results when not handled correctly.
                The most high-profile example of network intrusion in the online video sphere occurred in April of 2011 when Sony's online gaming and media store the Playstation Network was the victim of a hacking operation which compromised the personal data of 77 million customers[8]. Due to the extremely serious legal position, Sony was forced to shut down the entire network and enter a lengthy period of analysis, redesign and rebuild of the network's security architecture. In the end, the system was not fully operational until early June, an outage of some 8 weeks:
Just think of what this means from a business perspective: nearly three months of zero revenues from the services, plus the cost of putting right the attacks with new security measures including automated software monitoring and configuration management to defend against new attacks ... the cost of a new customer appreciation programme designed to thank customers for their “patience and loyalty”... if this can happen to Sony, who can't it happen to?[9]

Sony compensated video gamers who had been unable to play online over this period with a promotion allowing downloads of a number of games for free.
                By contrast, subscribers to video services operating on the Playstation Network were not compensated by Sony – the corporation arguing that such services are run by external parties over which Sony has no control. The platforms which provide video services through Playstation Network include Netflix, Vudu, Hulu, NBA, Mubi and Lovefilm. Each of the services is available on other platforms (chiefly, on a PC through a web site), so companies correctly argued that outages on the Playstation Network did not equate to complete loss of service. However, subscribers who used the services on the Playstation 3 game console were clearly doing so to benefit from a better user experience than the PC could provide – namely, integration with a home entertainment system based in the family room. To lose access to such a service, particularly a paid subscription service, for two months was extremely damaging to the Sony's Playstation brand, the concept of subscription video services and the companies who provide them.
                For companies providing access to video over the internet, the number of potential links in the delivery chain between them and their customer presents a challenge, not just in providing stable video streams, but in supporting customers when things go wrong. Consider the following scenario:
 
Having paid to stream a feature from an online video provider, the viewer's film is paused after 20 mins and refuses to resume. The viewer is watching the film on a connected TV over his home broadband connection. The problem could be in one or more of the following areas:

  1. There is a problem with the viewer's TV. This could also be caused by a number of reasons from a failure in the processor which decodes the video, in the software which manages the network connection or in the network interface itself.
  2. There may be a loose connection between the TV and the router, or between the router and the broadband modem.
  3. If using wi-fi there may be a problem with the wireless network, such as interference from another signal.
  4. There may be a hardware or software fault in the viewer's broadband router or modem.
  5. There may be a service interruption in the viewer's boardband.
  6. There user may not have a sufficiently fast broadband connection to stream the video content.
  7. There may be a problem with the video provider's servers or network.

                Self-evidently, such complexity makes any problem difficult to diagnose. What makes this situation even worse is that, unlike provision of ondemand video content over a cable network, no single provider is responsible for point-to-point transfer of the data. The viewer may have paid for a film from Blinkbox, streamed over his PlusNet broadband connection, using a Netgear wireless router to a Playstation3 games console, which ultimately displays the content on a Samsung TV (which he may have purchased from John Lewis). Given such circumstances, even an individual with a level of technical understanding of the links involved may struggle to know how to identify which component is faulty and, ultimately, who to call for support.

Network Infrastructure


                Poor availability of high-speed broadband in the UK is likely to hamper the development of online video. The minimum recommended download speed for a streaming service is usually 1-2Mbps[10]. However, viewers who are restricted to speeds at this level are likely to encounter pauses as network levels fluctuate and the player software tries to buffer incoming packets. There are a number of server and client-side technologies which attempt to work around problems with low-speed connections, but the reality is that uninterrupted display of video content requires a minimum level of regular traffic across the network. In addition, as content is increasingly displayed on large television screens in the lounge or family room, viewers are seeking an experience which is equivalent with HD formats on bluray disc, broadcast, cable and satellite platforms. The minumum recommended download speed for streaming HD video is between 8-10Mbps, which is currently only available to 14% of UK households[11]. For households with slow broadband speeds a better option would be to use one the services which provides files for download, rather than streaming – such as iPlayer desktop or iTunes. However, with download solutions the opportunity to capitalise on impulse viewing decisions is lost. Despite the popularity of services such as BBC's iPlayer, the vision of an online video ecosystem to compete with broadcast television and ondemand services via cable is not currently feasible in the UK.

Legislation


                Also important to the feasibility of online video and other media services has been the question of “net neutrality” and the legislation which national governments have enacted to protect or compromise this notion. Essentially, “net neutrality” is the idea that ISPs and other organisations that enable internet traffic should treat all traffic in the same way, regardless of origin, destination or content. This is an important concept in relation to online video due to the large amount of traffic generated by online video businesses. In the US, it has recently been measured that Netflix takes up some 22% of internet traffic, despite only have 25 million subscribers[12] and – therefore a relatively small percentage of the total US internet-enabled households. ISPs are concerned that viewers of online video are consuming a disproportionate amount of traffic as other users, while paying the same for their internet service package. Similarly, as companies like Netflix use the open internet to transfer video content, they are using greater bandwidth than other services with less traffic-intensive websites and services.
                To combat this seeming inequality of usage and – they argue – to preserve internet bandwidth for the wider use base, some ISPs have introduced caps for individual users on certain packages. So, for example, subscribers to plusnet's 20Mb monthly service are capped to 60 GB of traffic (downloads + uploads) per month[13]. If users go over their monthly allowance, they are charged at a premium rate for the extra traffic they incur. So far, these kinds of caps on home internet use have been relatively uncontroversial. This is likely to be so because for a number of reasons:

  1. Consumption of online video is a relatively new phenomenon, with many users either not downloading or streaming at all, or in a fairly limited way.
  2. Popular online video sites, such as Youtube, carry a majority of short-form, low-bit rate content, which consumes low amounts of data.
  3. Video has – and continues to be – viewed primarily on personal computers, laptops and mobile devices with small screens, which doesn't incentivise viewers to seek out higher resolution, more bandwidth-hungry video content.

All three of these contributory factors are changing as online video business matures. To take each in turn:

  1. Online video consumption has been increasing at a very steep rate in recent years, across a number of devices. The maturity of platforms such as Netflix and BBC iPlayer – and the range of attractive content they offer – is driving viewing figures ever higher.
  2. Now that people are using catch up services, the expectation of similar – i.e. Broadcast – quality is becoming the minimum acceptable standard for online viewing experience. Similarly, viewers of feature film online have an expectation of DVD quality bitrates and resolution. Some services have begun to carry HD quality video.
  3. The spread of online video services to a number of devices which connect to televisions, from games consoles to bluray players – and the emergence of so-called “smart” TV has led to an increase in online video viewed on large screens in the family room. Low-bit rate video looks terrible on these kinds of monitors and, therefore, screen sizes are a direct driver for increased video quality.

                As each of these – and other factors – drives the move to high-bit rate video ISPs have moved to protect their networks from saturation. In addition to maximum monthly data caps, they have also introduced “throttling” measures, with some heavy data users finding data transfer reduced at peak-usage times (usually in the early evening). This has proven more controversial than maximum data caps, with subscribers complaining that they do not regularly receive advertised download speeds at times convenient for them. Subscribers and groups which represent consumers have also consistently argued that some ISPs are using these issues to mask profiteering – as ISPs continue to push subscribers to more expensive, less-curtailed data packages.
                In much the same as viewers have been charged for increased data usage, ISPs and CDNs (Content Delivery Networks) have been seeking to charge online video companies whose traffic uses large amounts of bandwidth on their networks[14]. Though this may be seen as a simple case of economics – companies should pay for using a greater percentage of internet traffic, in much the same way as road haulage companies pay extra taxes for the impact they make on motorways – in reality the issue is more complicated. Firstly, it is argued, that ISPs are already recouping greater revenue from subscribers. When traffic increases, subscribers graduate to more expensive data packages, so ISPs benefit financially from services which drive traffic on the network. Secondly, many providers of internet services have vested interest in the delivery of video. Many internet service providers – such as Comcast in the US or Virgin and Sky in the UK – provide broadcast television and on demand video services. In doing so, they run the risk of a conflict of interest when it comes to Over-the-Top video services, many of whom are striving to provide a service which competes with traditional media outlets. As such, groups representing online video companies have joined forces with advocates of open internet access to argue that all internet service providers should treat traffic in an impartial manner – neither throttling traffic from high-usage companies such as Netflix, or being allowed to charge extra to carry the traffic to subscribers.
                This lobbying has proven successful in the US. The picture is different in the UK, where the government introduced legislation in 2010 which allows BT, the dominant telecommunications company and provider of ADSL broadband to homes, to manage traffic in a way which throttles high-bandwidth services where such traffic is deemed to have a negative impact on delivery of other data[15]. The government's argument has been that allowing ISPs to potentially charge to route certain types of high-bandwidth data will ensure the network is not overwhelmed and will give ISPs extra revenue to continue with improvements in the UK networks reach and capacity. While it is indisputable that the UK desperately needs improvement in internet infrastructure, this is a controversial way to fund improvements and has resulted in a number of high-profile figures criticising the government's policies in this area. It remains to be seen how the legislation will impact the development of online video businesses in the UK and whether companies such as Lovefilm and the BBC will be charged extra by ISPs to carry traffic to subscribers. 


[1]    "Netflix heads for Europe", IP Television International, Vol. 7 No. 3, p. 6
[2]    Ulin, p. 165
[3]    "Anti-piracy ad promotes cinemas", BBC News, 21 June 2005. http://news.bbc.co.uk/1/hi/entertainment/4114416.stm . These series of ads showed pirate copies as fuzzy camcorder recordings of threatrical screenings, complete with people standing up in front of the camera "because there's always someone who needs to go to the loo". In reality, most digital piracy orginates from DVD and is of good quality.
[4]    Such software includes DVD shrink and DVD decrypter.
[5]    "iTunes stays on top of growing internet movie business", Richard Lawler, engadget, 9 Feb 2011. http://www.engadget.com/2011/02/09/itunes-stays-on-top-of-growing-internet-movie-business-in-2010/
[6]    This remains the case, despite considerable research and changes in web-site design to combat such issues. See http://www.d.umn.edu/itss/training/online/webdesign/usability.html#senior
[7]    Adaptive bitrate streaming is used to manage fluctuations in network speed. "The next big thing in video", Liz Gannes, gigaom, 10 June 2009. http://pro.gigaom.com/2009/06/how-to-deliver-as-much-video-as-users-can-take/
[8]    See Appendix A for the author's personal experience of service loss during this outage.
[9]    "Cloud busting video content", Joe o'Halloran in IBE, September/October 2011, p. 6
[10]  Interview with Edd Uzzell. The BBC iPlayer help site also used to recommend these speeds. This advice has recently been replaced with a tool which can measure a user's bandwidth automatically and recommend whether this is fast enough for iPlayer use. http://www.bbc.co.uk/iplayer/diagnostics
[12]  "Netflix grand 20% of peak time US traffic", Don Reisinger, CNET, 22 Oct 2010. http://news.cnet.com/8301-13506_3-20020434-17.html
[15]  "BT accused of iplayer throttling", BBC News, 1 June 2009. http://news.bbc.co.uk/1/hi/technology/8077839.stm

1 comment:

  1. Thanks for sharing this useful info.keep updating same way.

    Cheers,
    Ramesh Roy
    Online Marketing Solutions

    ReplyDelete