P2P-TV - A looming media revolution?

> Opinion Paper P2P-TV – a looming media revolution? 2008 / 09 www.detecon.com P2P-TV – a looming media revolution? Table of Contents 1 Executive Summary ............................................................................................ 3 2 P2P turns the distribution paradigm upside down ............................................... 4 2.1 Video traffic dominates – on-demand replaces linear programs ................. 5 2.2 Hybrid P2P networks are the solutions of choice ........................................ 6 2.3 P2P-TV has reached commercial status ..................................................... 6 3 Liberating captured value in the broadcasting sector.......................................... 9 3.1 Trend comparison of network costs ............................................................ 9 3.2 Breaking-up the traditional TV business model......................................... 10 4 Telco opportunity: efficiency gains and new revenues...................................... 11 4.1 Comparative cost advantages vary by type of content.............................. 11 4.2 No one-size-fits-all recipes ........................................................................ 12 4.3 P2P is here to stay .................................................................................... 14 5 Recommended strategy for telcos: embrace P2P-TV ....................................... 15 6 Conclusion & Recommendations ...................................................................... 17 7 The Authors....................................................................................................... 18 8 The Company.................................................................................................... 19 Opinion Paper 2 Detecon International GmbH P2P-TV – a looming media revolution? 1 Executive Summary Internet video traffic is exploding. It is expected to amount to almost 10 billion terabits per month in 2010, starting from less than 1 billion in 2006. The impact on traditional networks and network engineering will be highly significant as network operators have to master the enormous traffic load while keeping their costs under control and finding alternative revenue opportunities to offset these costs. The problem is aggravated by the fact that an increasing share of video and TV content will be consumed on demand. Traditional broadcast and even IP-based multicast distribution, only recently deployed by telco operators to deliver IPTV, don’t scale well for non-linear content. New technology concepts will be required to tackle the issue of increasing traffic load on IP networks of the future. Decentralized peer-to-peer (P2P) TV networks that scale with increasing number of users represent a promising solution to the problem. Not surprisingly, a considerable number of players have adopted P2P-technology to stream TV and video content in a cost effective way. Among the best known P2P-TV services is Joost, a start-up company backed by the founders of the ground-breaking voice-over-IP service Skype. These providers have been extremely bullish in pushing the benefits of P2P-TV technology, claiming massive cost savings and revolutionary experiences for users. However, the real underlying benefits for traditional network operators and traditional media providers have remained largely unproven and not clearly understood. This paper attempts to highlight the possible areas of opportunity for operators, both in driving new revenues and in managing network costs. P2P-TV will potentially disrupt existing market dynamics, as it offers a viable alternative to traditional broadcast business models. From the perspective of the P2P-TV provider, lower distribution and network deployment costs translate into less need for returns, usually generated in the form of ad revenues. As a consequence, long-tail content that would otherwise not have passed the threshold to generate a critical mass of viewers demanded by advertisers can now be distributed. In other words: P2P-TV has the potential to grow a new market for content that was previously undeveloped due to profitability issues. Telco operators need to understand how P2P-TV affects their business. As and when the quality of P2P-TV improves the risks that IPTV will be substituted (if only partially) increases. On the other hand, telcos can use P2P-technology to differentiate their IPTV offering (e.g. by extending the content portfolio) and expand its reach (e.g. by making a best-effort IPTV service available over a P2P-client based PC solution). The launch of a separately branded P2P-TV service could also be an option. But the biggest opportunity for telcos is to use P2P networks as a means to improve the cost effectiveness of content distribution. Given the tremendous impacts that are looming for operators, any technology which provides a longer term solution for their network evolution must be very critically, and imminently, considered. Opinion Paper 3 Detecon International GmbH P2P-TV – a looming media revolution? 2 P2P turns the distribution paradigm upside down P2P-TV is the name for peer-to-peer software applications designed to transmit and redistribute video streams of live or archived content from one user to others over the Internet. Such networks rely primarily on the computing power and bandwidth of the participants in the network rather than concentrating it in a relatively low number of centralized servers. That way, the broadcasting paradigm is being reversed into a user- centric scenario that takes advantage of resources available at the edges of the Internet (e.g. storage, processing power). P2P-TV could be considered as an equivalent to television because it represents an alternative means to distribute traditional, linear broadcast content. However, P2P-TV can also be considered as much more. Because it is based on the internet protocol and has evolved from the PC environment, it is by character much more similar to an internet application than to a conventional television program watched on the TV. Definition of Terms P2P-TV IPTV Web-TV Type of delivery Distributed, decentralized Multicast; client server Client server architecture network network / server = client architecture (centralized) (centralized) Type of content Streaming Streaming Streaming and download delivery User experience Linear and non-linear Linear Mainly non linear Primary rendering PC TV-set PC device Type of content Professionally and user Typically professionally Mainly user generated source generated content generated content Typical business Free offerings (e.g. ad Subscription (e.g. bundled Free offerings, pay per view, model financed) with DSL access and VoIP) payable premium services Providers Niche providers, internet Social networking sites, TV Network operators (exemplary) firms broadcasters, start-ups Figure 1: Characterization of different types of Internet-based TV Opinion Paper 4 Detecon International GmbH P2P-TV – a looming media revolution? 2.1 Video traffic dominates – on-demand replaces linear programs P2P-technology has originally become known to a broader public through (mostly) illegal music file sharing applications (e.g. BitTorrent). However, for the distribution of streaming video content (e.g. content that is not downloaded but transmitted for viewing only, like traditional TV broadcast), the technology has different and even further reaching implications. First of all, the sheer dominance of video content over the Internet underlines its relevance. Therefore, solutions are required that allow delivery of content in an efficient and effective way. Here P2P-TV will play a major role. Secondly, the linearity of typical general interest content broadcast to a large audience is gradually being replaced by on-demand content that addresses niche segments besides the mass market. By nature, content not relevant for the mass market does not scale when delivered via a broadcast medium. The characteristics of P2P-TV much better fit these arising distribution requirements. Traffic & demand patterns Million terabits / month 11.000 100% 10.000 90% Internet, data & 9.000 voice traffic 80% Linear formats 8.