Jaw Jaw, Not War, War

The decision this week by BT to charge for otherwise free BBC content on its IPTV service highlights the sharp contrast between business models for delivering content. Content owners increasingly cut out (or not even consider) the distributor and adopt the Over-The-Top (OTT) web route to their customers, riding the internet infrastructure for free. Verizon, Comcast and MTV also came out this week hitting at the ‘free’ model of content distribution by companies who don’t have to pay for transport cost.

At the Advertising 2.0 conference in the US last week, Terry Denson, Verizon's vice president of programming and marketing for FiOS TV, said that the industry is evolving "two competing programs, two competing ad models, two competing consumption models that are going to collide on the same screen."

In the UK, the BBC’s web-based TV replay  service called iPlayer has become increasingly popular but has been  causing major issues for ISP’s as traffic generated has lept to almost 10% of UK internet traffic within 6 months of its launch. It is causing other internet traffic to suffer and ISP’s are having to invest in more capacity but without any increased revenue.  In return, BT claims the charging for the replay capability on its IPTV service is reasonable given that it offers a much higher high quality service than the basic web service offered by the BBC. All of that revenue goes to BT, none of it back to the BBC - in other words this is a charge for superior carriage, not for content.

This increasing stand-off does not bode well for industries that actually need each other and need to work together. Either  web based players naively regard the net as a birthright and aim to just keep pumping content across it as long as someone else (the ISP) pays for the infrastructure, or maybe they are just taking a first mover approach to ensure that they don’t get their position threatened by communications companies. As Carolyn Everson, executive vice president at MTV said, "They've got it for free -- we're training them to get it free”.  Given free content available on the net, will IPTV service providers be able to persuade many people to pay for something that is available free elsewhere, even if it is better quality?

There is an underlying reality here: both sides of this debate are symbiotic and need each other to survive. Content distributors need good quality distribution which involves significant capital investment and distribution companies need useful content to drive new revenues. If the infrastructure companies are cut out of the revenue stream, they are unlikely to dip their hand in their pockets and pay for upgrade of networks to deliver very high speed services – to the detriment of digital content distributors.

Squaring this circle brings another value chain layer into the frame – the advertiser. The advertiser can provide the money to pay for both the infrastructure and the content, provide that there is a business model that makes sense – to the advertiser that means access to eyeballs and the better targeted and profiled they are the more they will pay. Just ask Google.

But what keeps going missing in all of these debates is that all of these players are dependent on each other. Advertising can’t work without a delivery mechanism and content: content needs someone to pay and users are reluctant; communications companies need to move on from just basic voice and messaging services. Guys, you all need each other but to make it work there needs to be a fair and equitable sharing of risks, costs and revenues.

Trying to leverage benefit from the other or invading each other’s turf may be a part of daily business in open economies – so an economist might say:” let the market decide”. But to me the whole digital content sector might stall because of the clumsy baby steps that the parties are making. There is a lot of new revenue in here for everyone if only people would get round a table and look at how to make it work – not technically but in sustainable business terms.

The TM Forum’s role has always been to help business work more efficiently and effectively. We stand ready to help foster this debate, so everyone can make money.