14th November 2011
As SCH Consulting's Diya Soubra reports, while the telecoms industry is busy trying to figure out the correct business model for OTT video, CDN providers can quietly expand their business by capitalising on what they already are - ultra secure multimedia data banks.
I want my CDNDiya Soubra, SCH Consulting
At a connected home and cloud services conference this week, equipment suppliers and service providers gathered to discuss the issues facing the industry. The focus was on OTT video services and whether all cable and internet providers must also offer OTT TV or risk losing their customer base to new players.
The consensus was that OTT is here to stay and as I mentioned in previous articles, rich metadata and a good search engine are the key to a differentiated consumer experience. Everyone also agreed that for service providers, a new business model is required since the revenue from OTT video is very small compared to the core business and the cost does not justify the investment, especially after the failed IPTV experience. By comparison, a pure OTT video company will make reasonable margins to justify the business since the cost base is low.
One thing to keep in mind for video content is that service providers and pure OTT video operators have to constantly negotiate and renegotiate copyright payments with the studios who are now unwilling to do blanket agreements, choosing to proceed on a per case basis taking into account geography and broadband distribution technology among other factors.
Service providers are a classic example of the innovator's dilemma. Their core business is very successful and profitable with the quadruple play offering, and they choose to put their effort in the hunt for the killer application to become the fifth play instead of doing any disruptive innovation. Meanwhile pure play OTT video players are coming into the market and taking the business away by riding the multi-screen wave and the mobile connected lifestyle.
So far there were no surprises but I claim that a certain fact went unnoticed by all. The current winners are the CDN operators. If we are able to break down the revenue per video transaction between the OTT player, the content owner, and the CDN provider then most likely the CDN provider is taking the largest share when the lifetime usage of the content is taken into consideration.
A real use case will illustrate the point. A consumer buys a HD movie that is stored for him in the cloud by his OTT video provider. Every time the user watches that movie, the OTT video provider margins drop. There is a cost associated with CDN traffic.
Each download or streaming session increases the revenue of the CDN provider but not that of the OTT player. The user pays only once to buy the movie.
The best business to be in, until the service providers wake up and jump in, is the CDN provider business. No copyrights to negotiate or broadband networks to expand and upgrade.
Hollywood does not allow content out the door unless the total path to the end user is 100% secure. So If we view CDN providers as a group of trusted secure multimedia data banks, then we can see that Business for a CDN provider can be expanded if they also offer those secure data banking services to end users.
A CDN could for example store home automation and security information, energy monitoring information, personal content, health data, and life style information.
Today there are many cloud services that store video from home security cameras and other cloud services that store energy monitoring and climate control information. Each of those services develop their own information storage infrastructure but suffer from the lack of a secure reputation that the CDNs already have, and are totally disjoint as services. There are other companies offering backend cloud services where the customer defines the data structure to be stored as a backend service but they also lack a security reputation.
A CDN can easily extend its secure data storage and delivery service to all the above services and more to allow a mash up with very high security.
Continuing the bank analogy, today, a consumer opens a bank account and decides to allow various companies to credit and debit that cash bank account to pay for services and goods. In the same way, a consumer can open a secure data account with a CDN and then can allow various companies to store and access data for various aspects of his life.
A specific futuristic example will help explain the operation. My home security camera stores the video stream at the CDN, my energy control stores energy consumption readings under the same CDN account, an application that is monitoring energy consumption of my home detects a peak, it then inspects the video to see if any door or window has been left open before sending me an alert SMS. Currently, people do this manually since the services are on different systems from different providers. Another application / service may detect that the kids are home by checking the location data of their mobile phones that is also stored in the data bank at which point it resets the heating control to a comfortable level.
A service that has access to my calendar detects that we are away on vacation so it shuts off the heating system. Another is checking the video stream to make sure the dog is not doing crazy stuff in the house.
This is my data in my secure data bank which I give permission to some services to create and /or access. The technology to do all this exists today, the missing part is the secure data bank for personal user data accounts.
A CDN can capitalise on its reputation as a secure data storage and delivery operator, to open the door for many exciting applications by offering structured data services for the storage of personal user generated data, including multimedia.
Diya Soubra is the managing partner for SCH Consulting, product marketing and technology consultants for companies looking to place their business in the clouds. For more information please visit: http://www.schconsulting.eu
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