An increasing number of broadcasters are looking to distribute their content via the internet to increase their audience share and create new revenue streams. John Parnell looks at some of the legal, commercial and technological challenges associated with establishing online TV services.
Online TV (as opposed to IPTV) is moving rapidly into the mainstream with major broadcast networks and associated content providers looking to make their content available to as many people as possible. The simplest way to do this is to offer it for free.
To date, many of these content providers have launched services using a wide variety of business models and access approaches.
"Bandwidth is becoming a commodity and when you look at the size of some of the data files being transferred, it’s clear the ‘free’ or even fixed-cost billing strategies are no longer sustainable."
The past twelve months has seen a number of significant players establish services including the BBC and News Corp/NBC Universal, the latter of which combined to launch Hulu, which boasts content agreements with MGM, Warner Brothers and Sony Pictures Television.
Content is offered to US internet users to stream for free with the platform using a fully ad supported model.
Speaking in April, NBCU president Jeff Zucker revealed that Hulu has sold its entire advertising inventory despite only having come out of an 18-month beta period on March 12 this year.
"Based on early projections, we were indeed sold out of ad inventory. Fortunately, traffic numbers have exceeded our early expectations and we are well-positioned to bring on new advertisers. We've already added new blue-chip advertisers since launch including Proctor & Gamble, Bank of America and Nissan, among others," claims Hulu corporate communications spokesperson Christina Lee.
While online TV offers the same level of control over targeted advertising as is possible with IPTV, there can still be a degree of focus with advertisers able to tie their brand with a specific genre, keyword search or even an individual programme.
Lee says that Hulu is currently working on the development of location-based targeting and other techniques.
The format of the advertising on Hulu is particularly interesting. Viewers are given more control over the length and format of the adverts they watch.
"A user can choose to view either a long-form movie trailer at the beginning of the programming, or watch a series of short-form commercials during the content. If they choose the trailer, the content is viewed without ad interruptions, though they will see periodic overlays.
Otherwise, they'll see commercials during breaks throughout," says Lee. "Hulu is one part in the big picture of how individuals are beginning to consume content on their own terms," she adds.
Another degree of freedom is afforded to viewers with brands or manufacturers giving viewers the option of which advert they watch.
"This is great for advertisers with several products in a line. For instance, a car manufacturer promoting its range of sports cars, SUVs and sedans can let the viewer choose to watch the ad they are most interested in. The user gets some choice and control and it's a good feedback opportunity for advertisers," says Lee.
The wide variety of content provided on Hulu, though great for viewers, also highlights the inherent problem a service like Hulu presents to the operators - digital rights management (DRM).
So far content rights have been cleared for the US. Extending the service on a global scale represents a significantly greater challenge.
"We are working with our content partners to make Hulu's content line-up available worldwide. This requires the clearing of rights for each show or film, in each specific geographic territory - that is going to take some time," says Lee.
Hulu says that while it is pleased that many of its content providers are already working to make their content available over the internet, it is impossible to speculate on either a timeline or potential locations for the next phase of its roll-out.
These challenges do not impact content providers who look to distribute their own programming rather than aggregate from several different rights holders.
UK national broadcaster the BBC has launched a range of initiatives to make its own content available online.
Programmes can be purchased via Apple's iTunes store with a half hour programme costing around US$3.75 (commercial UK broadcasters ITV and Channel 4 have since signed similar agreements).
The BBC was also the first major broadcaster to put content on MySpaceTV, albeit in clip format. The BBC also has various dedicated entertainment channels on YouTube showing short format clips and special programming.
These include a BBC World channel, showing ad-funded clips to viewers outside the UK only.
The flagship online format for the BBC in the UK is the corporation's proprietary iPlayer. Content is made available for one week after regular broadcast via a P2P Kontiki network which employs user's bandwidth to share programming with others.
Breaking the trend of on-demand and short format content is Zattoo TV.
The Swiss and US-backed operation offers linear format TV 'as broadcast', live on the internet with no on-demand or catch up services.
The service currently streams 150 channels of content in eight European countries via a P2P streaming network, rather than a P2P download network which can be bandwidth intensive.
Five second adverts appear between channel changes and Zattoo claims to have already paid more than $3 million in royalties across its eight territories so far.
The service logs a user's IP address and on that basis permits them to stream the channels available in their region with a warning that a TV license may be required to view the content legally.
The service has attracted considerable controversy in the UK, where public broadcasters have found themselves powerless to halt the rebroadcast of their content.
While the legality of the service is said to be under the microscope, Zattoo TV execs argue they are only re-broadcasting free-to-air programming unaltered and with adverts intact, effectively negating existing copyright laws.
It is quite possible that the source of UK broadcasters ITV, C4 and the BBC's disapproval is rooted in Zattoo coming to market ahead of the trio's planned collaborative online player, Project Kangaroo.
Aside from the issues regarding DRM for broadcasters and content providers alike, a third-party is also affected by the influx of video content being viewed online.
The BBC iPlayer is now reportedly responsible for between three and five percent of all internet usage in the UK, with 42 million programmes viewed in the first three months following the launch of the service.
Globally, the number of users accessing video via the web is set to reach one billion by 2013, according to recent findings by ABI Research.
"The rapid expansion in availability of broadband video creates opportunities across a number of market sectors," says ABI senior analyst Cesar Bachelet.
"A wide variety of actors aim to gain a share of this fast-growing market: not only content owners such as the BBC and NBC Universal, and internet portals such as AOL and Yahoo!, but also a range of new entrants including user-generated content sites such as YouTube and Dailymotion, broadband video sites such as CinemaNow and Lovefilm, and Internet TV providers such as Apple and Zattoo."
It is not only these services that are expanding. The number of people with access to them is also increasing as broadband penetration increases in emerging markets.
The consequence of this growth is the emergence of a new headline worthy commodity, bandwidth. The massive increase in traffic on the UK networks following the launch of the BBC iPlayer has led to content providers, network carriers and ISPs arguing over who should foot the bill.
"The core traffic on the UK network has increased 60 percent at certain times of the day, which is a massive amount. Whilst it is a problem, it's a good problem to have in the telecommunications industry generally," says Mark Wardle VP innovation programmes with BT.
"It's what we call over-the-top TV. It's not quality controlled. The content provider offers it free of charge and they don't want to pay for the delivery of that content, the user is paying their set fee per month to the ISP and they don't expect to have to pay more. So who is going to pay for it? This issue is the source of much industry debate at the moment."
In the Middle East, comparatively low broadband penetration means that the likely uptake of online TV services will be lower. The effect on connection speeds for broadband users could be similar given the region's comparative lack of bandwidth.
However, as more high-speed internet connections and media rich services become available in the region, Middle East users could find themselves in the same situation as those in Europe and the US.
"There is still a debate to be had about who pays and perhaps more importantly how people pay for all this extra usage. At the moment the ISPs pay per gigabyte for P2P content. I think a more usage based billing system is likely to appear in the future," predicts Wardle.
"It's not equitable to have someone who shops online twice a week paying the same for access as somebody who is downloading video content all week. Bandwidth is becoming a commodity and when you look at the size of some of the data files being transferred, it's clear the 'free' or even fixed-cost billing strategies are no longer sustainable."