It’s the first IP&TV News interview of 2014, and it’s a real zinger. Dr. Yves Caseau is currently Bouygues Telecom’s Executive Vice-President in charge of New Products and Innovation, where his key responsibility is to design and to build “triple play” products (gateways and set top boxes). He is the author of books on information systems, lean management and enterprise organization, and in this interview breaks down the current connected entertainment ecosystem with a thoroughness and insight not easy to come by. In the course of the discussion we touch on things like Chromecast, 4K and what home entertainment could look like five years down the line…
IP&TV News: Greetings Yves! You’re speaking at TV Connect 2014 about the OTT, Smart TVs and STBs. How do you see the dynamic between these changing in the coming years?
Dr. Yves Caseau: The industry has been wondering for many years about the possible extinction of the STB, which would be substituted by “Smart TV”. The first round of this game has been lost by smart TVs, who have failed to produce an open & standard software ecosystem. Hence the app stores have remained fragmented, without critical masses of either value or usage. At the same time, tablets have done the exact opposite: to produce an open software ecosystem with two standards, iOS and Android, and to foster massive usage. We have started to hear about the tablet becoming the control point of the future, in collaboration with a connected-but-dumb TV. The second round is the emergence of both the dongle, such as Chromecast, and small Android OTT boxes, which is happening now. This will quite likely cause a chain reaction in the world of smart TVs. It will also challenge the world of STBs very soon, but the added complexity of content protection for IPTV means that the threat will take longer to materialize. Smart TV will have to adopt the open SW ecosystems of the dongle, both the Appstores and the casting protocols such as Dial, AirPlay, etc., or they will become not-so-smart-TVs. A key long term question is the “integration of the dongle into the TV” versus a TV with a small attachment (dongle, plug-in, plug). Another related question is whether the smartphone will displace the remote control. I believe that, although diversity is the most likely answer if we look at the all-in-one-PC versus component PC question, there is still room for a more traditional usage of the TV with a simple remote, and not enough battery life to make the smartphone an indispensable device for every minute at home. The most pregnant argument in favor of separating the “control” and the “view” functions is the different lifecycles of screens and processors, so diversity in this context may mean that some advanced functions and apps are better positioned on the tablet while simpler functions will continue to be performed by a smart-and-open TV.
What are your expectations for Chromecast? How big an impact do you think it could eventually have?
I think that Chromecast is a great tactical move, which will enjoy a transitional success. Chromecast is the typical example of the second step of the war that I just mentioned. The absence of open-ness and standardization of both SmartTVs and STBs has opened an avenue for casting dongles. Simplicity and low cost should assure a resounding success in 2014. However, we are still talking about a fairly limited experience, which means that the dongle is an addition to the existing home installation, not a substitution. My opinion is that Chromecast will have a big impact because it will “move the lines” and force the world of smart TVs and STBs to follow the lead towards both open OS and better integration with smartphones and tablets. On-demand OTT applications require a large and homogeneous market, it is clear that Google and Android have made a significant move to become the open standard in front of Apple’s world.
How do you think the rise of 4K is going to change the wider ecosystem?
I am a believer in the long term success of UHD when I see the pleasure in the eyes of the consumers who are shown a great piece of 4K content, but it will take a long time. A key question that is being settled is whether we need “high spec” versus “low spec” 4K to deliver an impressive experience on a “regular” 50-inch screen. There seems to be a consensus about “high spec”, that is, 60 frames per second and 10 bits color per pixel, which requires HDMI 2.0 and really high bandwidth, even with H265 encoding. This makes UHD TV a great value proposition for premium access networks such as fiber or advanced cable. UHD is also a differentiation opportunity for premium paid content. However, getting the “high spec” version ready from end-to-end will take time, and the added constraints means that this is a slow evolution, more than a revolution, and not a game changer.
There’s a great deal of interest concerning whether OTT can be effectively monetised. Will advertising revenue be sufficient?
Advertising revenue is not large enough today. We need both payment (subscriptions, Netflix-like) and improved online advertising to make the OTT business model successful on its own. It works today already, but as a “parasite” of a larger paid-content-creation ecosystem – I don’t mean this as a derogatory comment but more like a biology observation that the small OTT ecosystem would not exist without a larger pay-TV ecosystem. I think that the payment stream of revenue will grow, since OTT is the natural model (both from an innovation & diversity perspective) for the long trail of available content. As far as advertising is concerned, the ratio between on-demand individual viewing and mass-market viewing (TV) advertising is still quite high (4 to 5 is the usually quoted value, but I am not an expert). A massive move towards non-linear viewing would reduce significantly the amount of high quality available entertainment content. To escape from this deadlock, we need new forms of on-demand advertising (as Rishad Tobaccowalla has explained for many years), as well as targeted advertising using big data. However, those promises have been around for a long time, and progress is very slow. We will get there, but I do not see OTT as an independent (self-sufficient) business before many years, especially in Europe where the critical masses are smaller (content-production is a fixed cost business).
In the US pay-TV has just registered its “worst ever year”. Granted that there are market-specific reasons for this, does pay-TV in general have to approach the future with a different business model/philosophy – does it need to be revitalised?
Pay-TV as we know it will go down, slowly but surely and new forms of premium content consumption will rise. As a consequence, it is easy to forecast a price war, which always occurs when new entrants try to grab market share. Revitalization is both necessary and on its way, with multiscreen and on-demand access to the same pay-TV contents. Regular pay-TV revenue will go down, but large players are well positioned to become leaders in the field of OTT premium content. They will push 4K/UHD as differentiation factor in the coming years. However, the decline must be slow until a new way is found to generate revenue for premium content (cf. previous question) since DVD / BluRay is showing a sharp decline as well.
Finally, if you had to guess, what do you think home entertainment will look like in five years?
It’s hard to answer such a broad question with just a few lines. This being said, I tend to separate three components in the TV/home video entertainment experience.
First, there is the TV screen as a social experience, and I believe sociology and anthropology when they tell us that TV will keep its role as a social/family hub. These are the contents that we want both to watch together and to talk about later. Most of it is live content (sports, shows, news events, etc.) which will remain the heart of live TV. Series also play an important part in our social lives – thus, even though a significant fraction of the audience is shifting to new viewing modes, there is still a place for series in live TV.
Second, there the premium content experience, the content that we desire, which is on our “top of mind” (movies, TV series). As said earlier, pay-TV will be challenged by new forms of non-linear and OTT distribution. Still there is no reason to think that this appetite for high quality entertainment will go down. The main issue here is piracy, but it seems like the TV/movie industry has the means to sustain its business model.
Last, there is the “easy viewing experience”, when we turn on the TV to pass the time. This is where the shift to new forms of content and viewing, thanks to Internet and OTT, is likely to be massive. Instead of watching low-cost rediffusion of old contents on linear channels, the combination of Web (e.g. YouTube) and personal content (online media collections are growing) will offer a more exciting alternative. The sharp decline of storage costs, the availability of cloud storage will significantly change our usage. This has already happened with the sharp increase of catch-up TV (which also shows that TV channels may adapt to this change).
Dr. Yves Caseau will be appearing at TV Connect 2014, 18-20th March. For booking and more info go here.