Date 13. April 2011
Interviewee Marius Haugen, Head of Web and Development, Get
Type Phone interview
Get is currently one of the two largest cable-TV players in the Norwegian market. Additionally they are among the leading Internet service providers. We contacted Marius Haugen – Head of Web and Development – for an interview in order to gain some insight into the view of a cable distributor.
Today’s situation and current business models
Get as a company is very aware of the changes in the industry with regards to what will be the competitive factors going forward. Haugen explained that «it’s not among our goals to be a supplier of infrastruc- ture – cables are just a means to an end – it is the con- tent and the way in which it is presented which will
become points of differentiation». Further he claimed that «cables will become a commodity, nobody will care if it is Get that provides the connection, but people will care if it is Get that provides the user experience».
Complications in the industry
As several industry players are developing their own OTT solutions, regardless of their position in the existing supply chain for TV-programming, Get sees that they are about to face a changing competi- tive environment where their current suppliers are directly targeting the end consumer. Get is currently positioned to offer an end-to-end connection for their customers, enabling them to guarantee QoS. Haugen
52 admitted that this is a defensive position, where they utilize their strong power in transmitting services to the end consumer as long as they own and control the underlying infrastructure. This is something that Get will continue to do as long as it’s possible, but he recognizes that this is a fight that cannot be fought for long. As a distributor Get must win on equal terms «competing on broadband connectivity on a price vs.
speed basis, and competing on entertainment by supe- rior content and experience».
On-demand offerings require distributors to renegotiate existing licensing contracts with content providers. Get declined to comment on their current standing with respect to obtaining distribution rights for an OTT-platform. But Haugen sees that diverging interests among content providers is a complicating factor for being able to offer a complete OTT-service. As some players such as NRK are pursuing their own platforms they might not be as willing to let others redistribute that offering. This is an issue that is gov- erned on a case-by-case basis and foreign players such as Discovery are much more willing to facilitate new distribution solutions.
While many infrastructure owners in the market are crying out in media about how the infrastructure will become a limiting factor for services provided, Haugen believes that «our current infrastructure will be adequate for some time, particularly given our recent upgrade to the EuroDOCSIS 3.0 technology. I foresee that other players in our market, particularly those whom offers are based on less promising stan- dards – such as ADSL – will be more severely impacted than we will», but emphasizes that this is not his area of expertise.
A suggested solution to the infrastructure and network capacity issues, according to some players, is for the content provider to start paying part of the distribution cost for having their content delivered to consumer. Get shares the view that this would be beneficial and that it is a natural development in light of increasing network traffic, but Haugen is not sure that this is entirely feasible. Other distributors have
also suggested that a model where capping consumers’ Internet traffic at a certain limit of used capacity is the way to go. Haugen does not agree: «I don’t believe that this is necessary, we have enough capacity today. Given that the demand does not explode I do not see the need to do this». Haugen continued by arguing that this would ruin the broadband offering, and that Get views broadband as a commodity and not a service differentiation point. «If you start messing about with [the broadband offering] too much, you will only spoil things for yourself», he said.
The future situation and related business models
With the introduction of OTT in the TV-mar- ket – which leads to less focus on owning the infrastruc- ture that connects the customer to a network – Haugen believes that competition will be on differentiation with regards to presentation of content. «I believe that the way in which a distributor can differentiate oneself is in the way the services are offered. The content itself will more or less become un-differentiated across the different players, while the way in which it is presented and the user experience of how the service is delivered will be an important factor in how the competitive environment will evolve» Haugen said.
Get aims to deliver a complete and integrated service across all content types and all delivery plat- forms. The goal is to present the content in a good and easy way wherever the consumer is. They will communicate with the consumer on an emotional level, and Haugen said that one factor Get wants to compete on is to «make your everyday easier». When it comes to expanding their footprint outside their own infrastructure Haugen see a trade-off between opening their own network to all service providers and keep- ing it closed. «The defensive bonus by not doing so is the option to deny other players access» Haugen commented. If all the networks are to be agnostic of service provider it will be a national matter. Haugen believes that this is what we are moving towards, but short-term Get will stay within their footprint, while continuing to work on liberating their services from
infrastructure as much as possible as time passes. Catch-up TV is according to Haugen one of the services that we definitely will see more of in the future, and is something Get also is working on. Cur- rently there is still a lot of work that needs to be done around rights management to roll this out full-scale; technologically all the parts are in place. «Given that all the big players [content providers] are onboard this is a very relevant service». Haugen believes that in the future the customer will not differentiate between the current PVR solution and an Internet-centered service for achieving catch-up TV.
The increase in on-demand services available to the consumer opens up the opportunity for new rev- enue models for distributors. Haugen believes micro- payments are the way to go. «With micro-payments one can scale infrastructure based on revenue, making it much easier». The drawback of subscription solu- tions is that the distributor won’t get paid for pro- viding access to additional content. While Haugen agreed that the Spotify model that we are seeing in the music industry is beneficial to the consumer, he doesn’t believe that one can make it cheap enough if the consumers are to gain access to a large content library. «And by large I mean everything you see on TV!» he said.
The development in the industry the next five years
When it comes to the development in the industry Haugen said that «I believe that all the services will converge, and that we will not be differentiating between TV, Internet and the accompanying services in a couple of years. I believe there will be one plat- form, allowing you access to all the services on your TV. The need for having a platform like the iPad for one objective and a laptop for another objective will become obsolete». The belief is that the services avail- able on one platform today will soon be available on all platforms.
While some content providers are developing their own OTT-solutions and universes, Haugen’s point of view is that the consumer wishes to access all
the different services from a centralized entry point; «I don’t believe the consumer wants to go to NRK to
access their content and then to TV 2 to find their content». He believes that it’s a convenience aspect for the consumer to be able to go to one place to find everything and to find it in a way that is appealing to that person. Haugen also agrees with others in the industry on that the border between linear TV and on-demand services will be totally erased.
On the topic of important strategic decisions for distributors in the coming years, Haugen said that «what is central is the break-down of how we approach our product, that we stop thinking of content as some- thing that is streamed». Content should be viewed as something that is available on-demand. Haugen also believes that the terms distributor and channel will somewhat disappear, and that «this is something that must be reflected in the business model». He contin- ued by saying that more and more this industry will be centered on the consumer, and that this will be a healthy development. His view is that the channels, or content providers, will to some degree consolidate to become a procurement function that negotiates with content producers and makes the content available for distribution through other agents who are the last link to the consumer.
On the development of infrastructure and the possibility of neutral networks Haugen commented that he believes that the existing model will prevail for some time still, basically because the networks are pro- tected. Neutral STBs and connected devices will not be prevalent «until we have fully neutral networks, but will most certainly become contenders in such a sce- nario. I believe we are going to get there [quite possibly fueled by legislative changes], and we need to position ourselves for this already now».
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