Digital Media Buzz > Exclusive Content No More: IPTV Free Market Opens Floodgates

Exclusive Content No More: IPTV Free Market Opens Floodgates

By John Greaves

Exclusivity in IPTV was once standard industry practice. Device manufacturers could differentiate themselves from their competition a la the Xbox 360 deal with Netflix and people who purchased a device were potential customers for content producers. “Content companies traditionally made money by controlling distribution,” says Rob Green, senior vice president of business development for Imagine Communications, which serves the traditional HDTV and SDTV digital broadcast markets as well as emerging areas such as VOD, Internet Video and IPTV. “In the past you had to sit in front of the TV, you had to buy newspapers to get news. Companies tried to continue this model because it’s very profitable.”

However, the free market abhors exclusivity. FierceIPTV recently reported that French Telecom’s Orange has been given the thumbs down because of its anti-competition approach to on-demand content. It’s debatable how that affects the U.S. market but indicators show companies are copying Netflix’s decision to court both Microsoft and Sony.

This isn’t necessarily bad for the consumer or for business. Boxee, which is currently the only open source platform of its kind, has been very successful with the open model and according to Andrew Kippen, vice president of marketing, feels no pressure to revert to the traditional approach. “You’re able to get much more content to your users and much more quickly. Certainly we do have agreements with providers like Netflix, Pandora and Major League Baseball to access their content on Boxee, but what we’re able to do is bring in content from smaller independent sites [that] also have great content,” Kippen says.

Although Boxee has chosen complete openness, Green says the immediate future will feature either short-term exclusive agreements or what he calls licensing agreements.

“You have WiMax, cable boxes, modems, IPTV, DSL - so many of these network types and they all need content. Content companies have started to do far less exclusive agreements and far more licensing agreements for different devices. If you do see exclusivity it’s usually a short-term agreement almost from a promotional standpoint,” Green says.

These short-term agreements and licensing agreements can lead to intricate relationships among the industry players. For example, Amazon is the exclusive supplier of the Moxi HD DVR. Amazon also provides its video-on-demand service to Yahoo-equipped TVs made by various manufacturers. Yahoo, meanwhile, has also announced it will make BrightCove available on Yahoo-connected TVs, which compete with Roku and Boxee. Amazon the retailer competes with Wal-Mart, which is buying Vudu — a similar business to Boxee (but is more of a video rental entity).

Insiders say this is simply the free market operating the way it should in response to market pressure. “People are trying to cram functionality into devices without increasing cost. I’m a big believer that we’re going to end up in the space where everyone will have access to the same content,” says Keith Kocho, president and founder of ExtendMedia, which provides services that enable content providers and distributors to create, deliver, manage and monetize online content offerings over many devices. “I think when you turn your device on there should be any number of icons,” Kocho says.

Kippen agrees. “The goal for us is to be the OS that runs your living room whether we’re on a TV, set top box, or game console; we want to work with all those manufacturers. We want you to be able to buy a Sony TV and have Boxee installed on it,” he says.

According to Kocho, the trend is toward a market where price and value to the consumer will be how companies set themselves apart. “How you present a search engine and user interface to enable the user to find what they want, bundling content and what you have to offer from a price point and how it can be delivered to other devices you have will be critical to help users differentiate between your service and others,” Kocho says.

Providers will likely differ on how to accomplish this due to cost and the need to protect their intellectual property. “Most of these projects are proprietary so what Google and Yahoo are doing is different than what Boxee is doing,” Kocho adds.

Industry experts predict the two hotly contested areas will be consumer living rooms and mobile devices with monetization at the heart of what providers offer and how.

“I suspect that’s what’s going to happen is all of these guys want to aggregate the user experience in the living room and they will want to bill for it. They’ll want to upgrade the customer from what is a free service where they don’t have much participation in advertising revenue to a premium content,” Kocho says.

An early example of this is Boxee’s new payment platform that will enable users to purchase content online. Kippen says Boxee plans to pay for this by collecting a percentage of the payment for content. This is in addition to its planned offering that will attempt to link social networks with television viewership. “We’re building a new feature so you can pull information from social networks in to Boxee. You will be able to come home and see what your friends are doing on your TV,” he says.

Despite the furor over streaming content, Kocho cautions that no one should write off traditional providers. “I think the main thing from a strategy point is I don’t think anyone is going to wake up tomorrow and cancel their cable subscription, there’s a whole lot of technical reasons that won’t happen, but we’ll see companies like Boxee and Netflix start to erode that,” Kocho says.

Green agrees. “I think consumers want the content they want, how they want, where they want it. What system that delivers that [content] I don’t think they care - whether it’s streamed or pre packaged in devices. The trend is that there will be more avenues, more devices and more opportunities to get content,” he says.