OTT Business Models in the Industry, Zattoo Internet TV Conditions of Access Regulation to Promote the ICT Sector Nick Brambring, CEO Cartagena, September 2012 This document is confidential and is intended solely for use by its original recipient for informational purposes. Neither the document nor any of the information contained in this document may be reproduced or disclosed to other persons without the prior written approval of Zattoo.
Agenda
Over-the-top-TV and and Business Model Success Factors Market environment Regulations and Impact
2
Every internet-enabled device with a screen can be a TV.
PC, Laptop, Mac
Tablet PCs Smartphones Connected TV sets
3
Vision „Internet TV Everywhere“ is part of Zattoo‘s day-to-day operations.
• 30 FTE, growing by ~5 FTE per year • Presence in Zurich, Germany, US
• ~ 200 TV channels • ~500 advertising campaigns in 2011
Our Values*: We want to win as a team and with fun. We are in for the long run.
Our Strategy*: Offer attractive content for free, monetize via advertisements and premium offer
• PC & Mac • iOS, Android & WP7 • Smart TV‘s Our Vision: Internet TV is Everywhere
Our Mission*: Be the No. 1 Internet TV Platform
• 10M registered users • 1M active monthly users • Active in 6 countries
4 *Abbreviated
When Zattoo was founded in 2006, experts didnt believe in Live Internet TV.
Product Development Backend
Streaming
User Acquisition Free/Pay
Frontend
Rights
Video Streaming takes too much bandwidth
Marketing
CRM
Payment Process
Ads/ Sales
Online users are not interested in Live TV
You will not be able to acquire Live TV Rights
Premium Content cannot be monetized by ads
5
An empty road has advantages.
Users want
…on their TV set (lean-back)
…on other devices (via internet)
Linear TV (popular content)
VOD (additional offering)
Incumbants
Online Services
6
An OTT model allows rapid innovations and new offerings for users. Registered Zattoo users (million)
1.0 1.5 0.5 0.3
2006 CH: First Live Web TV
2.1
2.8
3.5 3.9
5.4 5.7 4.5 4.8 5.1
7.4 7.8 7.2 6.4 6.7
8.6
9.3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 GER: First Live Web TV
DK: First Live Web TV ES: First Live Web TV
UK: First Live Web TV F: First Live Web TV
CH: First Live TV Player integrated on internet news portals
CH: First ad financed Live TV offer for smartphones
CH: First Live TV Player integrated into partner iPhone Apps
ES: First Live TV offer for iPhone/iPad
CH: First “Recording in the cloud“ service (Recall) First international OTT Pay TV offer (Zattoo+)
First free Live TV service for Android, iOS, WP7 First OTT Live TV for Smart TVs plus HD!
7
Developing OTT TV has constantly posed new challenges. „Emotional Curve“
2006 No legal framework for Internet TV outside CH
2007
2008
Bilateral Contracts with TV stations and Collecting Societies
Upcoming market crisis, lack of new investment
Poor advertising sales via partners
Insourcing sales as core competence
Strong decrease of streaming cost
Moving away from P2P technology
Content cost too high in ES, DK, F
Switching to pure pay model
2009
2010
Decreasing team, re-negotiating contracts, focus on core markets
Stagnating business outside CH and GER
Repeated streaming problems Growing number of new devices
Upcoming Parterships with competition in CH publishers
2011
Increasing team, partly outsourcing
Ending exclusive contract with CDN
OTT TV demands expertise along value chain and constant improvement.
Product Development Backend
• Stable system to handle big loads • Interface (API) for cooperations
Streaming
User Acquisition Free/Pay
Frontend
• Team of designers & developers • 6 years of internet TV experience
• Network of providers • Prepare for Euro Cup 2012!
Rights
Marketing
• Efficient promo via users & press • Reanimate noncore countries!
• Strong relation to right owners • Know how and partners across EU
CRM
Payment Process
Ads/ Sales
• Multi product & country system • All relevant payment options
• 10M individual accounts • Get better in upselling!
• 100s of advertisers • Technology for multi devices • Get better CRM!
9
Confidential
Broad network of partners shows belief in OTT. Examples Zattoo Live TV Service included in third party apps
Co-Branding of Zattoo‘s iPhone App in Germany
Marketing cooperations
... Zattoo Live TV Player embedded on newsportals
Third party apps built on Zattoo backend
Objectives: - Create brand awareness - Gain reach on platform
... Websites link to live streams on zattoo.com
Integration of Zattoo Live TV on a Smart TV
... ... 10
Sometimes it feels like „Internet TV is Everywhere“ already. Conferences / Panels around Internet TV (Examples)
Over-The-Top distribution of linear and non-linear video content became one of THE topics in the broader TV industry
11
Switzerland has most competitive OTT TV landscape in Europe.
Competition in Switzerland
Internet TV in Switzerland ~ 1.5 million unique users / month With 600’000 – 800‘000 on Zattoo Usage ~ 10 hours / user / month Mainly on top of general TV consumption Revenues ~ 1 CHF / free user / month Mainly with pre-roll advertising Popular content for fair prices „OTT tarriffs“prevent discrimination
12
Development of OTT TV market depends on regulatory support.
What percentage of Population uses OTT TV?
20% 3% Germany
0% Spain
0% France
50%
50%
40%
Switzerland
Germany
Spain
France
yes
yes
no
no
Switzerland How many TV Channels are avaiLable for OTT TV (in % markekt share)?
Do content tarriffs Allow free offer?
100%
13
Usage measurement for OTT much easier and more precise.
SF1 Usage Zattoo vs. Offical Measurment 0,4 %
X%
0, 6%
Zattoo Share of total Usage
14
OTT Usage is mainly „on top“ of traditional TV.
Internet-TV complements traditional TV
Studies of TV stations back „on top“ usage
Zattoo-User 40% 35%
36% 33% 30%
30% 25% 20% 15%
12%
10% 5% 0% I use Zattoo when TV is in different room I use Zattoo, when TV is occupied I use Zattoo outside home I dont have a TV
15
If OTT TV is not offered legally,users will find illegal alternatives.
Succcess of illegal sites in Germany
Characteristics of illegal sites
No clearance of rights No revenue share of TV stations No agreed rules for how to present content, advertisings.. No geo-restriction depending on country (and IP address)
In Switzerland, illegal sites and apps do not play any role 16
Traditionally, value chain has been clearly seperated.
Traditional TV value chain Content production e.g. Studios
Content aggregation e.g. TV stations
Content distribution e.g. cable, sat
Devices e.g. TV manufact.
Advertisers
17
Today, borders between different industry players are torn down. TV stations Studios
Produce and aggregate content
Online program guides Social TV Apps Recommendation Engines
VOD platforms
Live vs. VOD Cable vs. Satellit vs. Internet
Present content
Make content accessable
Websites, Social Sites
Smart TV‘s , iOS, Android, Google TV, Apple TV
Search engines Devices TV devices Smartphones
Tablets (hybride) STB Game Consoles
‌ and nearly everybody is fighting for access to users and advertisers
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THANK YOU
19
Incumbants (cable providers, telcos) can‘t do Free, new entrants can‘t scale > Competition Product Development Backend
Incumbent (entry barrier)
New entrant (entry barrier)
Streaming
User Acquisition Free/Pay Rights
Frontend
• Cheap delivery relies on „overthe-top“ (vs. own infrastructure)
Marketing
CRM
Payment Process
• „Fremium“ needs Free promotion (vs. dependence on subscriptions)
• Flexibity required to adopt new internet devices • Investment to maintain scalable ingest & recording (vs. quick fix)
• Know how needed to acquire rights across countries (vs. one country)
• Multi-deviceapproach requires comprehensive CRM
Ads/ Sales
• Focus needed for ad-optimized product (vs. ads as side product of company with focus on subscriptions)
• Expensive to build own sales team (vs. dependence on 3rd party sales with low margins)
• Expensive to have multi-front-ends (vs. one device) 20
Note: CH shows difficulties of competitors; none has rights for >1 country, none covers all devices, most don‘t have successful ad sales
Despite growing competition, Zattoo grew significantly in 2011.
Growing number of users # active registered users in M 0.6
2011 Jan
+70%
Growing ad inventory to sell # video ads which can be sold in M
1.0 16 2012 Jan
Consistently high usage Usage per user & month in minutes (Europe)
2011 Jan
Youtube
2012 Jan
# Active subscriptions at month end
33
Zattoo
21
Growing number of subscriptions
500 80
+30%
2011 Jan
+45%
48
2012 Jan
21