BVS2008: Players

There are many different actors that have distinct roles in the digital media value net. Since study’s purpose is to describe the finnish competitive marketplace only the players affecting the finnish media business will be in scope. Naturally as the entertainment and media industry is a truly global business also the dominant international players have to be taken into account in addition to the domestic companies. In following the players are divided into online video service provider’s competitors, complementors, suppliers and customers. 

Competitors 

Without doubt the most visible and in some sense also most influential companies in global online video business today are Google and Apple. Google has the up and running Adsense advertising program and in longer run also is likely to create a pay per view service based on Flash video DRM. Apple on the other hand has a hugely successful iTunes store on the web that interworks with company’s stylish media devices. In addition to these companies there are only Microsoft, Sony and Nokia that could conceivably catch-up with the two globally.

For the time being television in all its forms (C, T and S) has the best reach of all the competitors locally in Finland. Television platform operators include Canal Digital (T+S), Viasat (S), TeliaSonera (C+IP), PlusTV (T), Welho (C+IP), DNA (C+IP), Elisa (C+IP), Maxisat (C+IP) and Aina (C). Terrestrial networks are operated by the french-owned Digita. It seems Digita or its customers have not very actively pursued online services. Cable operators are much more likely to launch local video on demand offerings. Since all of the the cable networks are small (under 450k subscribers) some consolidation is likely or at least rights purchasing will have to be outsourced.

Public broadcaster YLE playes an important role in finnish media scene. The operations are funded by television licensing fees. The company has been very active pursuing online services and is following in BBC’s footsteps toward open digital libraries. If YLE is able to co-operate with commercial players and integrate their platform with devices in the living room they can have a tremendous effect on online video competition. These efforts will likely be hampered by non-existance of standards since it will be very hard for YLE to justify co-operating with a single player. 

There are two major commercial television broadcasters (Nelonen and MTV3) with nation-wide coverage. In addition international Canal+ and Viasat offer pay-tv services. The local channels have some in-house productions, but most are characterized by low-production values and/or imported formats. Finnish television channels rely heavily on low-risk american productions. Both Nelonen and MTV3 have ventured into web-tv space and can be considered strong competitors also in online services due to their option to use excess advertising time on their own channels for marketing. 

In addition to television broadcasters there is also active competition in the online video business. The swedish SFAnytime has been operating in most operators networks for some time now.  Another active contender is Film2home. The prominescence of swedish companies is due to historical factors and the fact that rights are often sold to whole of Scandinavia or the Nordic reagion including Baltic states. Both players will need to find new ways to reach the living room as it is seems that Windows MCE is not reaching wide enough audiences. 

New comers in the scene are catch-up television operators – Saunalahti’s SaunaVisio and Tvkaista. Operating in a gray area of the copyright law these players have the potential to surprise, if they can justify their cases in court of law. Diversifying to online storage of personal media and/or offering additional high-definition video-on-demand content would allow these players grow their revenues and bring more stability.

Movies can of course be watched in cinemas. Currently the finnish market has been dominated by FinnKino’s (Rautakirja group) multiplexes. There are also some movie festivals like HIFF that can attract sizeable audiences. Video rentals are a very important competitor to online video since the publishing windows at least partially overlap. In the capital region the active player is Makuuni, nationwide R-kioski (part of Rautakirja) has gotten a hold on the business. 

In addition to these direct competitors there are more indirect substitutors to online video services. Basically any kind of free-time (sports, hobbies, events) or time-passing (reading) activity is a potential threat. Within digital media gaming and short-length video clips have been growing most rapidly in the last few years. Time used on the computer and personal media in general has been challenging television and other forms of mass media.

Complementors

Since the field is full and the competition is fierce it will be a good idea to consider co-operating with some of the competing players or try to create a totally unique value-proposition by attracting partners from totally different industries. Potential complementors to video services can essentially found anywhere, but to lay a solid foundation for co-operation it will be essential to assure that the partner company or organization shares same customer-segment.

Initially for any service business the biggest challenge is publicity. Thus seeking cross-media promotions from the other distribution channels would be a sound strategy. Some were introduced in the competitor analysis, but hooking up with independent print or online publications could be more fruitful as the finnish media industry is quite consolidated to large conglomerates. Harnessing the power of social media would be a very wise choice and a potential wedge to slowly pry customers away from the big players’ offerings. Viral marketing using social networks is one way to grow the subscriber base, but the masses of closely knit communities can also create value by themselves.

Online video services have not really embraced social bookmarking yet, but StumbleUpon and Del.icio.us could offer significant advantage to a start-up. Recommendation features can be found in Film2home’s service, but as the number of customers is quite small and heterogenous it is unlikely benefit from network effects. Massive players in the online media retailing (like Apple) are the only ones likely to succeed with propriatory solution.  The challenge for a small operator with a custom end-device is making sure all the bookmarked material on partner’s database is viewable on the device.

Player device have often been distributed by the service operator. If a standard platform is used and there is a device certification process also independent import companies can bear the substantial burden of acquiring boxes for retail. Some operators have attempted to subventise the devices in order to grow deployed-base faster. Gaining sustainable penetration early on is very important in making a service profitable.

Suppliers

Video service provider obviously require content to sell. The established media aggregators have existing business relationships with the biggest sources of video entertainment ie. ten big Hollywood studios. There are other european, scandinavian and even finnish distributors that can be contracted in order to buy rights. However it is not likely that the prices that can be negotiated for low quantities will be attractive and the content is likely to be bundled with lot of items that are too old to be interesting anyhow.

Alternative sources content need to be considered. User-generated video services have been growing rapidly and crowd-sourcing for content could still be a viable strategy in some less exploited niche segments. Starting small content will need to be well targeted to chosen customer segments. One option is to produce the content independently. There are many local commercial production companies that can provide custom content. Documentary content such as amateur league sports could offer one avenue to success.

Where-ever the content has been purchased it has to be distributed somehow. Video servers can be bought or the service can be custom built for the job. As technology matures open source solutions offer a cost-effective means to implement services. Relying on free software has its risks and it would be wise to purchase the whole system from one provider that has tested against the target devices. So unless the aim is to create a new technology company in video server space partnership should be sought with Microsoft, Apple, Kasenna, Bitband, Seachange, Adobe, Floobs or some other specialist in the area.

Video services offered through fast broadband connections can be distributed either using unicast or multicast, but the common feature is the billing needs to be implemented somehow. Outsourcing billing operations to a specialized operator is one attractive strategy as the cost per transaction needs to be low and to make a profit the sales volume needs to be quite high. Partnering on such an important piece of customer management is not risk free and starting out with building a customer relationship system directly into the distribution platform should be considered. Nevertheless there are plenty of operators that could be used if the propriator deems the function out of their core competences. 

Telecommunications operators can in the future offer billing services, but also pay-tv operators such as Canal Digital, PlusTV or cable operators could handle the customer interface for a domestic service. In the global economy working with local operators will not suffice and thus working with a global micropayments operator such as PayPal would be a good idea. The problem is that the video needs to be heavily encrypted and user identification needs to rely on strong authentication solution such as smartcard. As open authentication systems are still in their infancy integration work with propriatory DRM system is likely to be cumbersome.

Customers

Video entertainment is ultimately consumed by people. Depending on the model the content can be paid by the consumers directly or by businesses paying for advertising. Segmentation ie. understanding who the content attracts has been very important part of the media business in both cases. Due to the fact that audiences have started diverging rapidly this is becoming harder to do day by day. Letting the customers decide and come to you is the only real alternative in this day and age. Selecting content should not about be a question of fulfilling some random market segments’ preferences, but rather understanding each piece’s value for individuals.




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