Business Models. CDN industry. Ads. Other (freemium, bundles) Pricing V

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Audra Reynolds
6 years ago
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1 Business Models Introduction to OCEAN requirements Joint EBU OCEAN Workshop on Internet Content Delivery EBU Headquarters, Geneva, 7 September

2 Business Models Online Video services Ads Paid VOD Other (freemium, bundles) CDN industry Market size and trends Pricing

3 Advertising i

Advertising Ad format Traditional in-page ad formats around the player Display (banner,

In-video ad (not for linear video) Pre/mid/post-roll/ /p Overlay Pricing: mainly CPM

sponsored suggested videos Number of ad spots per Hulu content Ad load Number, length

spot per ad unit Percentage of videos on the site that contain ads.

4 Advertising Ad format Traditional in-page ad formats around the player Display (banner, rich media) & sponsoring Sponsored links Traffic-based monetization (YouTube homepage) In-video ad (not for linear video) Pre/mid/post-roll/ /p Overlay Pricing: mainly CPM and, to a lesser extent, flat rate/sponsorships New formats in beta Promoted d videos : sponsored suggested videos Number of ad spots per Hulu content Ad load Number, length and placement of ad units per video; Vary based on the length of the content Usually one spot per ad unit Percentage of videos on the site that contain ads. Short-form content (clips, short series, cartoons) Traditionnal TV series (45 min) Movies Source: IAB France 3 5 7

5 Advertising Hulu and equivalent: high CPM Premium content t 100 % of videos are ad-supported Mainly in-video ads with high CPM Hulu and YouTube s video ad revenue profiles Hulu US audience March 2010 YouTube Estimated theoretical (i.e. before discount) per-video ad revenue: from Video viewed per month (billion) (60 WW) 90 to 230 USD. YouTube: few valuable content but huge audience Unique visitors per month (million) (300 WW) Video ad revenue Monetized video 100 % 15 %* Ad revenues 100 % 100 % In-video spots per video 3 to 7 1 Generates a huge amount of traffic: 500 M UV Paid revenues 0 % 0 % Used as a selling point with advertisers Homepage is key: CPM is about USD 5 and daily buys can range from USD 200K to 300K On other pages, CPM is under 1 USD Poor in-video ad volumes and revenues Only a small fraction of its catalogue can really be monetized Only one ad spot In-stream ad CPM rises but remains low Estimated average theoretical pervideo ad revenue: from 10 to 15 USD Video ad CPM USD USD Source: IDATE estimates based on comscore data * Only 7 % Worldwide. Hulu and YouTube s annual ad revenues ( million USD) YouTube WW YouTube US Hulu Source: IDATE estimates

6 Advertising Premium content is key to reach profitability Only high-value videos can be adsupported Premium justifies high CPM That is why YouTube has been setting a growing number of partnerships with added-value content owners Most used monetization strategies for online video in the US (data from a survey of Brightcove media customers (n=104)) In-stream ad 50% In-page ad 47% Sponsorship 37% Sources: Brightcove and tubemogul In-video ad : The most effective CPM and ad time: online vs. TV (US primetime shows) and valuable ad format to monetize video content Pre-roll is leading in-stream ad format Better monetization for video content: In-stream ad CPM is higher than p y display CPM Premium online video ads achieve higher performance than TV ads In terms of ad/brand/message recall, likeability 50 Hulu CPM (USD) 35 TV 4 Hulu Ads per hour 32 TV Source: BrightRoll

7 Advertising Issues at stake CPM limits: Getting too high because the number of inclusions is limited A need for new metrics : CPV, CPE Significantly fewer online ads than TV ads means lower total revenue per viewer hours Metrics advertisers would most like to base online video ad spend on (data from a survey of US executives and media buyers at leading ad agencies) CPV* 45% CPE** CPM Other 5% 16% * Cost Per Video View - ** Cost Per Engagement 34% Source: BrightRoll Viewers who click away from a second pre-roll ad before a short-form video starts playing (Analysis of a sample of 1.8 billion video streams during a 48-hour period) Large broadcasters 10,9% Overall 15,9% Top magazines and newspapers 24,9% Source: tubemogul

8 Pay VOD

9 Pay-VoD For pay-vod market: still small but growing fast For pay-vod mostly used for rentals DVD rental market is progressively disappearing But the development of open Web-based VoD is limited TV set is the key device for pay- VoD in the countries where IPTV/digital cable is strong Managed network-based VoD platforms are serious competitors for open Web- based VoD services For Internet users, open Web is still synonymous of free entertainment services Piracy creates a huge loss of earnings for premium VoD services Annual VoD revenues (million EUR) Evolution 08 / 09 US nd % UK* nd % France % * Feature films only Sources: Blockbuster, ScreenDigest et CNC Breakdown of annual VoD sales in the US and France, 2008 Sources: ScreenDigest and CNC-Harris Interactive

10 Pay-VoD Pricing and revenue depend on: Intrinsic content value New releases vs. back catalogue content Short-form content vs. long-form content HD (later 3D) Marketing modalities Retail vs. rental Pay per video vs. S-VoD (unlimited access in exchange for a monthly subscription fee) Streaming vs. temporary or permanent download (download offer users the ability to transfer the content onto devices) New release pricing on VoD services In EUR Rental Retail HD itunes France TF1 Vision Blockbuster Amazon US Universciné Source: IDATE according to VoD operators

11 Other Business models

12 Other Business Models «Technical» Freemium Paying for guaranteed traffic, less limitation, better QoS, no ads, etc Eg : Megavideo, Justin.tv, Typical pricing level 10 USD/month Generally suscribed by 5 to 10% of users (for most advanced services) Service can still be used for free otherwise but with limitations (especially in time) Generally with ads «Content» Freemium YouTube video rental store opened in April in the US Failure of its first experiment with the Sundance Film Festival Hulu Plus (subscription) Dailymotion is preparing a premium movie catalogue Freemium: a mixed business-model that capitalizes on the popularity of free services Bundles Free usage on Web in the case of subscription Eg : Netflix (DVD), Epix (cable), Canal+ A la demande (TV), etc

13 Content t delivery

Online content distribution techniques The content distribution

unicast: by peering or transit And alternative methods like CDN

CDN sub-techniques Caching: storing popular content close to

steers traffic to the best available server Traffic allocation:

Three pricing i models The CDN pricing model is generally based

However, the bandwidth pricing model is still used (95th

14 Online content distribution techniques The content distribution could be achieved by multiple techniques : Interconnection unicast: by peering or transit And alternative methods like CDN method P2P: user to user or a combination of these (hybrid CDN) CDN sub-techniques Caching: storing popular content close to users Switching: directing traffic to a virtual router that steers traffic to the best available server Traffic allocation: directing traffic to a server that is underutilised or nearby. Three pricing i models The CDN pricing model is generally based on GB delivered (volume). However, the bandwidth pricing model is still used (95th percentile) Some players use a tariff model based on number of pages viewed Revenue sharing in the future?? CDN principles Source: IDATE &01net

15 CDN Pricing Typical pricing Based on commitments Very dependent of contract size Current price wars CDN costs per GB in USD for a commitment in TB 0,5 0,45 0,4 0,35 0,3 0,25 0,2 Netflix paying as low as 015 0, cent per GB of video 0,1 0,05 (limited period of time) Mostly non-public tariffs Source: StreamingMedia High Low

16 Online content distribution techniques V Market sizing and forecasts The CDN market represented Worldwide CDN market size (in million USD) around $1.6 billion worldwide in It should reach $3.5 billion by 2012 a 28 percent compound annual growth rate Still not enough 2000 CDN market growth < traffic growth CDN market growth still limited for an emerging market Price competition Economics of main players Operating margins for CDN players are pretty good, but below those of other telecomlike activities. Net margins are more limited and dropping with the current competition on price Source: IDATE

17 Open questions Can a free only video Website be viable? Under what conditions? What about live video, for which the flow can not be modified (and therefore less ad opportunities)? What are the metrics expected by advertisers? Is for pay-vod bound to remain a small part of the online video market? Will it come mostly from bundles with other services? What evolution with Internet TV as it requires more bandwidth with both main business models? Is freemium a real alternative solution or just a complement? Can users pay directly for QoS? Will CDN (and equivalent technologies) cost will continue to reduce? What should be the target price, esp with potential mega contracts? New schemes for payment?

LECTURE # 11B ELECTRONIC COMMERCE

LECTURE # 11B ELECTRONIC COMMERCE DIGITAL GOODS The Internet digital marketplace has greatly expanded sales of digital goods. Digital goods are goods that can be delivered over a digital network. Music