The death of triple play

How broadband, satellite and cable operators were blindsided by consumer tech companies.

Four years ago, every provider who had a coaxial, broadband or cable socket in people's homes started to see if they could provide services in addition to their core offerings to the extent that each grasped the opportunity to provide video-on-demand, telephony and Internet services.

However, the success of each type of player has been qualified. What went wrong? How did the providers miscalculate so significantly? The basic truth is that they all underestimated each other and how consumers would be able to see through their complex pricing structures and service agreements.

Screen Digest predicts that the total European movie download market will be worth €350m by 2012, up from €17m in 2007.

Video-on-demand has been available in homes for over 20 years and was first pioneered in the UK by satellite and cable TV providers. The business model was simple. Rather than go out to their local video rental store, customers would be able to choose from a simple screen menu which movies or sports events they would most like to watch.

Cable and satellite providers in the early 1990s had a significant advantage in that they were the only providers that were able to transmit on-demand content with their duopoly in being able to download video to consumers.

All that changed, however, with the introduction of broadband Internet services, which became available a decade ago. Ironically, the satellite and broadcast operators have been significant players in the development of broadband Internet services.

In particular, the regional cable companies - who were by now already offering telephony services using their cable infrastructure - started to offer broadband over cable without relying on the cable infrastructure of BT.

Other than cable there was no escaping BT at the turn of the millennium; even when customers thought they were buying broadband Internet from other ISPs, they were basically being resold wholesale BT broadband.

Local loop unbundling - the regulatory process of allowing multiple service providers to use connections from the telephone exchange's central office to the customer's premises - began in 2003 and allowed many service providers to supply broadband Internet services directly to consumers that were truly separate from BT.

iplayer and itunes

BSkyB, the News Corporation-backed satellite broadcaster, acquired ISP EasyNet in 2005 and soon became one of the biggest suppliers of broadband in the UK. This was part of the emerging media strategy known as 'triple play', which was based on the theory that consumers would prefer to receive telephony, broadband and content-on-demand services from a single supplier.

They would benefit from the simplicity of receiving a single bill for all three services. Additionally, it was assumed that supplying these three services together would work out cheaper than supplying them separately.

Unfortunately, this model is now being threatened by companies that are supplying content over the Internet.

By far the biggest threat has come from existing broadcasters allowing their content to be downloaded over the Internet. BBC director general Mark Thompson has hailed the iPlayer as being as significant as the start of colour TV. But the iPlayer is just one of several download services run by the UK broadcasters. Channel 4 runs the 4oD service and ITV has the Net Player.

Further competition in the UK has now emerged from Apple's iTunes store, which last year began downloads of movie sales and rentals. A new movie for rent typically cost consumers £3.99 and allows viewing for up to two days, with downloads 'to keep' costing about £18.99.

Other players that allow downloads to PCs include online video rental company Lovefilm and some of the film distribution companies themselves.

But most of these services principally allow downloads only to a computer - not the most relaxed way to watch. The uncomfortable transition from hard-drive to screen is where consumer technology has begun to thrive. For example, one way around this would be the installation of a digital media adaptor (DMA) - a home entertainment device designed to retrieve video files from the computer to another media server and then transmit them to a television set or home theatre system.

Apple TV

Apple - the darling of the consumer sector for the last decade - has made its move for the next decade in the shape of Apple TV. This gives users the ability to lift movies, TV shows, music and photos off the computer and onto a widescreen TV in the living room.

Apple TV was first launched in 2007, its small off-white box allowing content purchased from iTunes to a television via a PC or Mac. Initially, you could not rent movies or buy other content directly from the device.

However, an update to the hardware now means that a computer is no longer necessary. Now, you can preview and rent videos using Apple TV alone, and content is viewable within seconds, even while a video downloads.

The current library of movies is sparse, although Apple is busy cutting deals with all the major Hollywood studios. Most movies are available about 30 days after the initial DVD release.

To rent movies, users summon the Apple TV menu via their remote control. The left-hand screen is divided into Movies, TV Shows, Music, Podcasts, Photos, YouTube, BBC iPlayer and Settings. The right is a subdirectory that corresponds to the category you highlighted. Select 'movies', and you can browse by 'top movies', 'genres', 'all HD', 'search', 'trailers' and 'my movies'.

Rental options are displayed as movie posters, similar to the 'cover flow' view in iTunes. Users can click on one to view a plot summary, cast details, viewer ratings and more.

Xbox 360 Live Market

Elsewhere, since December 2007, Microsoft's Xbox 360's Live Market video store has offered rental of full-length movies.

"We were already offering HD games, HD music videos and the option to enjoy HD-DVD format films, now we are offering HD movies to download and rent. This is very exciting," says Robin Truchy, director of Xbox Live for Europe.

Since July last year, Sony has also used its Playstation as a means to sell content over the Internet.

"Consumers will have the ability to download full-length movies, television shows... with nearly 300 full-length movies and more than 1,200 TV episodes," the company said when the service went live last year.

Other significant players include Archos and Nintendo - who are also pursuing similar models.

UK broadcasters have had to sit up and take notice. Sky recently announced a deal with Microsoft to allow much of its content to be streamed for a subscription through the Xbox console. Additionally, the BBC's iPlayer is already available on a number of hardware platforms.

With hindsight, service providers underestimated the ability of consumer tech companies to move on their patch. And the competition is only going to get even more fierce as many TV manufacturers have announced their intention to also enable their products to download content direct from the Internet.

This has been shown by announcements at the beginning of this year. However, big the video-on-demand pie is, if there are too many players, no one is likely to make any real money.

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