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NewsGlobe: Today's News
IPTV 2007: Fastweb Wrestles With The VOD 'Long Tail'
Revenue-Sharing Deals With Content Owners Needed, Says Operator
by Ken Wieland
The ‘long tail’ has been a recurring theme at the IPTV World
Forum. Other than building the IPTV business model
exclusively on the most popular content, such as blockbuster
films and live sport channels, much debate has surrounded
the possibility of putting together successful business models
based on niche content, services, and applications that have
lower take-up the more niche they become – the so-
called ‘long tail’ when presented in diagram form.
From the video-on-demand (VoD) perspective, Fastweb (Italy’s second-largest fixed-line broadband provider) believes that there are a number of issues that still need to be
resolved if the long tail is to be an attractive business
proposition.
“Although around 40 per cent of our VoD revenue comes from
library content, the margins are very low,” Paoli Agostinelli,
head of media & TV at Fastweb, told the IPTV World Forum
delegates. “For the bottom 25 per cent of our films [that is,
the least requested], we even have negative margins.”
One of the key problems for Fastweb, explained Agostinelli,
are content providers who look for a guaranteed minimum
returns on titles (or collections of titles). So, if only a small
number of subscribers pay for that content then Fastweb is
out of pocket since it has had to pay the content provider a
higher sum to make that content available in the first place.
“If we can put revenue-sharing agreements in place [with the
content providers] for every VoD, then the business can
become attractive,” said Agostinelli.
But that in itself wouldn’t necessarily tame the long tail,
added Agostinelli. Marketing, encoding and storage costs
would also have to be taken into consideration. “We would
have to be careful that these costs didn’t affect plans for our
premium VoD services,” he said.
But he didn’t rule out far-reaching network design changes to
achieve greater efficiencies if the revenue-sharing
agreements could be struck. “At the moment we have a
distributed architecture with local servers,” he said, “but
maybe we would have to go for a more centralized
architecture with fewer servers.”
Agostinelli was also cautious about giving consumers too
much choice, as it could lead to less take-up of VoD through
creating indecision on what to buy.
To try and avoid falling into that trap, Fastweb has so far only
released 30 percent of its film library for consumption. And to
help customers make a VoD choice from the library, Fastweb
only promotes four titles a day (picked randomly from the
archive) from which they can choose.
Agostinelli said that Fastweb was working on a new graphical user interface (GUI) to make navigation of content
easier, as well as saying that it was in talks with Google to develop a
TV search engine, although Agostinelli did not expand on that.
The attention to the ‘long tail’ is part of Fastweb’s strategy to
extend its ‘walled garden’ approach with more content (but
not to take the walls down, as it is still intends to remain a
closed network).
Last September, Fastweb introduced a hybrid IPTV and Digital Terrestrial TV (DTT) set-top box, capable of receiving both
Analog TV and DTT, but giving them both the ‘IPTV
treatment’ (such as network personal video recorders/digital video recorders and catch-up TV).
This week Fastweb also announced the availability of the
entire content portfolio of Sky, with Sky committed to
promoting Fastweb’s services.
Fastweb has over one million broadband subscribers,
7000,000 of whom are TV-enabled. The average spend of
Fastweb’s video clients, on an annualized basis during 2006,
was €296 (US$389) more than the yearly Average Revenue Per User of those subscribing
only to telecom services.
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