Next-Gen TV: It's All About the Engagement

For IPTV operators looking for the next wave of revenue generation, advertising, the rise of mobility and multiscreen are the bywords. And all of those things go back to one central idea: bolstering customer engagement.

The IPTV provider with the savviest strategy for engaging the consumer in the way they would like to be engaged will find themselves with the greatest differentiation point vis-a-vis other pay-TV operators. This means embracing hybrid strategies, leveraging TV Everywhere and multiscreen and doing more interesting things with content discovery and middleware.

There is no doubt that the IPTV market is growing and will continue to present a big opportunity for IPTV subscriptions globally increased 38 percent between 2009 and 2010, reaching 46.2 million, according to Pyramid Research. The firm expects that number to reach 131.6 million by year-end 2015, a CAGR of 23 percent. Growth is being driven by the introduction of IPTV in emerging markets and the extension of existing IPTV coverage in developed markets to secondary and tertiary cities. The further buildout of FTTH networks, sometimes as part of national broadband plans, is also underlying this growth. From a penetration perspective, IPTV penetration will rise from 0.7 percent of global population in 2010 to 1.8 percent in 2015.

Video uptake on connected devices is also part of the story for pay-TV operators looking for new opportunities. According to the Cisco Visual Networking Index, there are one million Internet video minutes streaming across the Internet every second, the equivalent of 28 million DVDs streamed in an hour.

"We now have larger screens, better compute power and better broadband speed," said Doug Webster, director of marketing for service providers at Cisco Systems Inc. "No question future IP traffic growth is around rich media content; video is the driver."

For IPTV providers, this thirst for mobile and multiscreen video will only accelerate. Cisco predicts that there will be 3 billion broadband users by 2015, vs. 1.9 billion this year, many of them accessing the Web via mobile device. Mobile traffic will increase 26-fold. Mobile video accounts for 35 percent of mobile traffic, and mobile data is 8 percent of total global IP traffic. By 2015, 66 percent of mobile data traffic will be video.

"It's a fantastic opportunity for providers — these numbers are really indicative that there’s a great amount of demand for their respective video offers," said Webster. "It will come down to how they work their specific business models."

Increasingly, that means implementing advanced advertising techniques. "If the person isn’t going to get charged more for access outside the house, how does the content owner make money?" said Gerry Kaufhold, analyst at In-Stat. "It will have to ride on advanced advertising."

For instance, addressable ads (dynamic ad insertion) focused on where the subscriber is or what time of day, and since those ads are targeted at different locations and times of day the content owner can sell the spots at a premium. Also, telescoping ads and interactivity is a rising growth area.

Connected devices are also creating opportunities for advertisers to catch consumer eyeballs while they are actively searching for content or information.  New In-Stat research estimates that the value of this ad-supported content discovery will reach $2.4 billion by 2015.

“When consumers are navigating for content, advertising is not seen as an interruption. In fact, it might help consumers find what they’re looking for," said Kaufhold. “With the rise of mobile Internet services, the proliferation of smartphones, and the growth of tablet devices, a lot of content discovery engines will work on a mobile device, to find content that ultimately gets delivered to a TV screen. Advertisers will be attracted to content discovery services, which we see as an emerging growth market segment."

Kaufhold estimates that the annual value of ad-supported content discovery on directly connected TV sets will grow to nearly $ 442 million in North America by 2015. By 2015, expect that almost 170 million Web-enabled devices in Europe will be connected. By the end of 2011, there will be about 30 million Web-enabled TV households in Asia/Pacific.

Monetizing the new IPTV experience is the issue of the day.

And the bottom line? Nothing matters if you're not able to get the consumer to interact with your service in new ways. Offering more and more premium tiers can only go so far. IPTV as a technology offers the opportunity to craft much more of "lean-in" experience – and the opportunity to be much more than just another living room service.

Happy viewing.

Don’t miss this month's digital issue, as vision2mobile takes a look at new emerging trends in IPTV and opportunities for operators, including smart ways to leverage over-the-top (OTT) content, the evolution of the set-top box, content discovery and a look at new user interfaces in our extensive product gallery. A Q&A with Infonetics' Teresa Mastrangelo sets the stage for us, and a look at what new entrants are doing on the Web video front and a look at adaptive testing for IPTV to be prepared for advanced functionality round things out.