Daily Media: A Closer Look

Here is my second review of the Daily Media set-top box, United Content Distributors' main product. You can choose between reading the story below, clicking here to view the Google Docs original, or mail me for a PDF version.

Keep reading, if you want to know why I personally think this box, traditionally regarded as an element belonging to the fixed-line telecom world, should perhaps appeal to ... mobile operators most of all!

(Full disclosure: I have no personal interest in this company or product.)


Daily Media: A Closer Look

Last week I paid a visit to the UCD headquarters in Wijk en Aalburg, a small town in rural Holland. UCD, United Content Distributors, is the company behind the Daily Media set-top box (view our complete coverage here). It was very enlightning, all the more because 'yet another box' is a hard sell, not least because of the difficulty of explaining how and what it is in the first place.
The current state of the economy is not really helpful right now, but I am impressed by the capabilities of this box, its ease of use and its revolutionary business model. So, here is follow-up review, expanding on my first one. I really hope it will grab some attention, because I am convinced it can be a great tool for both users and potential partners with a strategy reaching beyond today's turmoil.

Personally, I am most intrigued by the possibility of UCD teaming up with a mobile operator. No quad play mumbo jumbo, but a move away from commodity access services. Anyway, here are my findings from my conversations with executives of the company. Read on!

1. What is Daily Media?

The shortest way of describing the box is to say that it is a media center for place-shifting internet (broadband) content from the PC to the TV. But there is much more to it. It would be served better by putting it this way: On the input side, the box combines broadcast TV with broadband internet content. In the process, it adds interactivity, targeted personalized advertising (please, no in-program stuff), a payment system and several (non-core) add-ons. It is controlled by a 'multi-apparatus' remote control and menus on the TV screen. It doesn't have a hard disk, but all sorts of hardware can very easily be connected (there are many output slots), including your hifi.
As to the broadband content: this consists of standard video stuff (like YouTube), and also includes pay-per-view VOD content from multiple sources and a range of narrowcasting channels (such as Rabo TV provided by AAA-rated Rabobank). Importantly, the highly popular VOD content Uitzendinggemist (catch-up TV, comparable to BBC iPlayer or Hulu), provided by Netherlands Public Broadcasting, is freely accessible as well as access (pay-per-view) to live (incl. sports) events. Further, broadband TV channels make up a total of some 500 available channels.

You can think of it as an hourglass, with Daily Media sitting in the center (thanks for making this picture, Thomas!):

2. How to bring it to market?

How does one get a box like Daily Media into the homes of millions of consumers, i.e. the target of the Wijk en Aalburg-based company? Not an easy task. It appears that UCD has made a number of smart decisions in paving the way for successful mass distribution:

• The box is free to consumers.

• From a content point of view, it really adds 'happiness' to the consumer's life. More content, no more trips to the video rental store, being able to pay-per-program instead of paying yearly subscriptions, etc.

• It really is a plug & play tool and the menus are straightforward.

So far so good. I expect consumers will be quite happy to receive and utilize the Daily Media media center. However, that shifts the problem (i.e. the cost of the box) to any potential partner. Remember, UCD is the platform provider and others will have to carry the financial burden (the production cost for the box is approx. EUR 150).

I believe UCD has produced a great product that should enable many potential partners to find the budget for this strategic tool.

• It is a great marketing tool for partners, especially for companies who have subscribers and feel the need for a churn-reducing or loyalty-stimulating tool. Markets are opening up to competion, which makes the availability of Daily Media very convenient. Think about it: there are a lot of companies out there who have subscribers, members or even just loyal customers: (health) insurance companies, utility companies, video stores, pizza delivery chains, car drivers associations (such as ANWB in the Netherlands, AA in the UK, or ADAC in Germany), newspaper and magazine publishers. Or even gas stations, grocery stores and other retailers (who all have their own loyalty programs). In the Netherlands, public broadcasting companies can be added to the list because they actually have members.

• It allows existing video providers to enhance their product offering. UCD very carefully avoids becoming a competitor to your local cableco, satco, IPTV or DTT operator in case of retransmission (this story also contains an instructional video for hooking up your PC to your TV, but then of course you miss out on all the Daily Media fun).

• It allows new entrants to add video to their existing bundle of services. I haven't mentioned mobile operators so far, but think of the trouble they are going through in becoming a LLU operator and trying to enter the IPTV market (such as Orange UK). Forget about all that. Broadband and broadcast TV are commodities, right? So why not leave that up to the consumer and position yourself at the next higher level in the value chain: inside the box, where you will get the chance to access a whole range of new revenue streams.

• It allows content providers to establish a more or less direct relationship with consumers. This is possibly the most eye-popping characteristic of the box. The value chain is collapsed considerably and the payment system (a virtual wallet) allows consumers to directly access your content.

3. How is Daily Media different from other boxes?

The one feature that distinguishes Daily Media from competitors such as Sony, Apple, Sezmi, My Broadband TV and others is its business model: the box is free to consumers and UCD will only take a cut from the content it adds. It's a platform for sharing with all sorts of partners. It offers a payment system (through co-branded Visa-card provider LaSer Financial Services, which also brings potential partners to the table, most notably several 'tier 1' retailers in the Netherlands). Further, it uses a multi-server model; certain content is streamed from UCD's own datacenter, and most of the “partnered content” is streamed from their own servers.

4. What's new?

Several things were added to the Daily Media story, since my first review. In this sense, it reminds me of Sling Media and its Sling Box, which maintained a good level of innovation after the first product launch (see this story: "We need more companies like Sling Media.").

• Preferred available bandwidth for a proper viewing experience is 1.5 Mb/s (previously 540 kb/s).

• They built in a DTT tuner (just like I suggested, making the box a good fit for KPN's Digitenne offering, whose growth is leveling off (see results October 22) and could use another stimulus).

• Several pilots have started (at OZB, the Rotterdam munifiber network; at Kabel Krimpen, a small MSO; and at a Van der Valk branch, a nationwide hotel group).

• UCD has signed an agreement with LaSer (see above) to distribute multiple thousands of boxes, starting in the coming months. A similar agreement was reached with Holland’s largest video rental chain ERG to distribute (sell) Daily Media via their nationwide network of video stores (such as Videoland and Moviemax)

5. What's next?

Of course, lots of developments are in the “cooker” over in Wijk en Aalburg:

• Premium (pay-per-view and subscription) broadband channels. I understand that UCD is aiming for very generous revenue sharing deals in this area.

• A search engine, in combination with an EPG, for personalized media recommendations, built into the TV menus for an easier way of finding channels.

• A virtual DVR, storing content on web-based servers, since the box has no hard disk (that rings a Cablevision bell).

• Video calling.

• Expanding the offering of games (including premium games).

• Several add-ons, including a 'butler service' (already available on the internet: Eileen.nl) and Daily Care (which aims to be a 'switchboard', connecting all players in the national healthcare market).

• Real-time energy metering through an on-screen display. Consumers can keep direct track of the actual level of energy consumption, at any given moment. Wouldn't that be a neat tool for your utility company, as they intend to make us consumers more and more energy conscious?

6. And more?

Daily Media is an intriguing product. I can see several other applications.

• Hardware v. software. Daily Media is a hardware platform, but I can't see why it couldn't be a software platform. Such a transition could simplify the 'Invasion of the Living Room', even more than including a DTT tuner (see above). After all, bundling the platform into an existing set-top box would allow Daily Media to sail into the living room on the back of an existing cableco/boxco relationship. ActiveVideo Networks, seems to be just that, and forged a deal with Time Warner Cable to enter Hawaii.

• Femtocell. If UCD succeeds in partnering with a mobile operator, the next step I would expect is the inclusion of a femtocell in the hardware. Femtocells offload traffic to the subscriber's broadband connection. Why not do some more piggybacking on the provider of the dumb pipe?

Telco TV: in search of a strategy

Here are some follow-ups to my previous posts. Telco TV is the one common theme.

1. The P2P/net neutrality/broadband incentive problem
A valued reader and analyst at a major research firm pointed me to a solution out of it.

To put it in my own words:
Why not sell a portion of your bandwidth and reserve the rest for your own services? This way, you may sell e.g. 10 Mb/s (best effort) for 30 EUR/mo, and keep the rest for your own www and IPTV services.
I'm not exactly sure where the rub could be. To me it is interesting to see how telcos can learn from cablecos (as I pointed out before), because this is exactly what cablecos are doing: they sell BB, but keep most of the available spectrum for their own broadcast offering.

2. Blog roll
Here are some interesting recent posts out of the Fibre Ring:

Stephen Davies: white papers.
Rudolf van der Berg: on streaming video.
Stefano Quintarelli: on separation.
Kai Seim: on PAN, LAN and WAN (cool graph).

3. Video
There seems to be coming some urgency to the telco TV market.

KPN is raising the price of DTT (in this Opinion piece on Telecompaper.nl it is revealed that probably 1 in 10 of KPN's TV subs is on IPTV, the rest on DTT; 50-60k IPTV subs is far above what I personally had in mind), while HanseNet (the Telecom Italia subsidiary in Germany) is making basic IPTV free of charge (marketing talk of course: for 30 EUR/mo you now get a triple play, which used to be 40).

4. Poll
I intend to do a poll on structural separation.

The one problem I have is this: I have some trouble getting into the heart and mind of an incumbent. Who is willing to play devil's advocate and tell me why structural separation is such a "bad thing"? You can take the above link to Stefano's blog as a starting point.

KPN to intensify cableco assault

OPTA, the Dutch NRA, has released preliminary regulatory changes for the Dutch telephony, broadband and leased line markets for the period 2009-2011. A consultation period will run from July 29 to September 8 2008. Definitive new regulation is set to be written into law before the end of this year.

1. Main findings (more detail below, under 4):

• End to fixed telephony retail price regulation for consumers. KPN can step up its competitive efforts against cable.
• Services-based competiotion on FTTC (WBA, since SDF access is not viable) and infrastructure-based competition on FTTH (ODF access). It looks like we will have a regulatory patchwork in geographical terms. MDF locations serving no less than 50% of the population will remain open. (I'm not sure if the 50% is new to the market.)
  
• Service-based competition on cable networks, but no access for KPN. I doubt if this will catch on among cash-strapped altnets or new entrants.
  
• Fixed termination will move to symmetry next year. Will KPN's charges go up or altnets' charges go down? Probably the latter, in which case the long-term benchmark for mobile termination goes down as well.
  

KPN was quick to cry victory and point out that this will help it better compete against cable (basically a two-player market: UPC, owned by Liberty Global, and Ziggo, owned by Warburg Pincus and Cinven). Let's put this into a perspective.

2. Telco/cableco convergence
Telcos and cablecos are converging in the sense that their product portfolios are starting to look like mirror images. Independent ISPs are struggling and selling out, so now incumbent telcos are increasingly taking aim at cablecos.

Let's first see how cablecos and telcos are moving toward each other:

• Both offering triple play, even though IPTV remains a complex product. On the other hand, cable lacks a mobile offering (other than cheap resale) of its own.
  
• Cablecos (and satcos) moving into the LLU market. Sky of course, now even looking at FTTC. Numericable is a wholesale LLU customer of Completel. Versatel is looking at AKF (but the Zon/Sonaecom merger is not going to happen).
• Several cablecos are considering FTTH (Cox, Wow, Videotron, Compton).
• CableLabs, the US cable association, is trying to turn Tru2way (middleware) into an interactive TV platform for both cable and telco networks.
  

3. Telco strategies against cable
Next, let's see what telcos are doing to kill the cable guy:

• In the US, AT&T, Verizon and Qwest have set up Movearoo.com. Customers moving to an area served by a different Bell are helped to remain telco customers, instead of defecting to cable.
• In the Netherlands, KPN hasn't exactly made much of secret of how much its Digitenne (DTT) product earns them: zip, or rather a negative sum (see it as a SAC). Digitenne has just one mission: pull away as many cable customers as possible.
• Thanks to OPTA, KPN can now follow competitors into targeted price reductions for fixed telephony. We can expect a price war that will erode KPN's margins further, but it will serve their priority #1: expand market share.
  

4. Main points from the new rules
Here are some more details.

• Fixed telephony consumer market: end to retail regulation (both minimum and maximum tariffs). OPTA says competition is sound, due to CPS, WLR (which will be extended to the business market) and cable telephony. However, after 2011 it expects it will be able to abolish regulation of the wholesale services (CPS and WLR) as well.
  
• Business markets: increased wholesale regulation to stimulate competition, after which the retail market may be deregulated.
  
• NGN, NGAN: KPN is moving away from MDF access to both SDF access (for FTTC networks) and ODF access (for FTTH networks) as regulated wholesale products. OPTA has decided not to demand WBA (wholesale broadband access) wherever ODF access is available, since it wants to stimulate infrastructure-based competition as much as possible. At the same time OPTA acknowledges that SDF access is not a viable platform for competition, and therefore it will demand WBA offerings in FTTC markets. In both cases, KPN will be granted a decent return, based on the EDC system (embedded direct cost), which by the way is contested by competitors. Fortunately, OPTA appears to be aware of the necessity of a long-term view (longer than the traditional 3-year regulatory review period) and regulatory certainty for FTTH investors.
  
• Broadcasting: UPC and Ziggo will have to open their networks to services-based competition, because Digitenne, IPTV and Sat-TV haven't been able to really change the cable market (in terms of market shares or prices). Third parties will be able to take over the customer relationship (but they will have to take care of the related broadcasting rights for analogue TV themselves). This is aimed at third-parties; should KPN be granted a license to resell cable TV, then it could be incentivised to delay investments in IPTV and All-IP. In other words, KPN will not be a cable reseller (just as cablocos are not allowed to be KPN resellers).
  
• All-IP: KPN is planning the closure of many MDF locations. There is an MoU with the biggest unbundlers (Tele2/Versatel, T-Mobile/Orange, BBned/TI). MDF locations covering 50% of the population will remain open for existing LLU offerings. No detailed migration deals have been signed however for the other locations. Therefore, LLU and WBA regualtion will remain in place.
• Fixed termination: OPTA will end the asymmetry (KPN charges are lower than competitors') at the start of 2009.
  

Daily Media allows new players into the IPTV market

When you ask "can it it do x?", the answer will either be "yes" or "no, but it could - easily".
That's one way to describe the new Daily Media box.

Last week, two of United Content Distributors' executives came to my home for a private demo of their newest box. And I have to say I was impressed. Hennie Meijndert is their CEO and behind much of the technology. John Goedegebuure is taking care of PR, now that the Daily Media product is ready for commercial launch.

Basically, the box provides place-shifting in that it allows for a full-blown TV experience of internet-based content. In that respect it resembles both Apple TV, Microsoft and Sony products, as well as TiVo, Akimbo (the original box) and Orb. But it offers a whole lot more, especially to distribution partners. Typically, these could be operators (CATV, DTT, telcos, munifiber) as well as 'service providers' in the widest possible sense (ranging from insurance companies to the post office) - as long as they have some form of customer relationship because UCD doesn't plan to become a service providers itself. Partners will be able to share in (targeted) ad revenues, VoD fees and other fees. And more.

Openness, partnering and revenue sharing are at the heart of the company and it's business model. In that respect, it has telco 2.0 written all over itself. It offers traditional and web 2.0 based video content, enhanced with highly targeted ads.

The specs (also, check out this .ppt that I made available as a Google Presentation):

• United Content Distributors has been working on the Daily Media box for 4 years, with 16 employees (developers and sales). CEO is Hennie Meijndert.
• Funding is private so far, coming from the shareholders: the CEO and his partner.
• Daily Media is a box for connecting a range of input sources (currently >500 channels through web feeds, beside CATV channels) to the TV. Also, all media content available in the home can be converged into the platform. As the box is portable, it can even mimic Sling-like capabilities.
• Video is streamed at 540 kb/s.
• Manufacturing cost: EUR 150 (excluding several relatively cheap add-ons, such as a PLC adaptor, cables, web-cam, microphone, possibly a DTT-tuner, etc.).
• Proprietary are the hardware specifications and the OS running on the box (albeit based on Windows CE). Further, two programs are server-based (for updates and the UI).
• Upon receipt the customer receives a EUR 240 credit at LaSer Nederland/VISA for buying content (VoD) and services. After registration it is raised to EUR 1,000.
• The company does not aim to be a service provider and instead relies on third party distributors. Their role is to subsidise the box and subsequently share in the revenues.
• The business model is centered on revenue sharing with both upstream (content providers, advertisers) and downstream (operators) partners. Sources of income are fees (VoD, t-commerce and other servies) and advertising (skyscrapers and video on the menu pages; commercialised slides during buffering; inserts; etc.).

Here are the benefits to each party in the ecosystem:

For consumers:

• A wide range of content, including web feeds of traditional TV channels, with a heavy focus on long-tail content (e.g. a Brazilian soccer channel).
• Access to the internet, so no walled garden.
• Movies (VoD, running quite well on an astonishing 540 kb/s, or 800 kb/s for somewhat better quality), with a single-click payment system (through the LaSer Nederland/VISA deal), connected to a maximum EUR 1,000 credit against which payments are debited – nice for impulse buying.
• VoIP (an SIP-based home grown solution) for box-to-box communication.
• Services including a 'red button' on screen for t-commerce and potentially domotica.
• Uploading personal content (audio, photo, video), with a free of charge 2 GB of personal storage.
• Plug-and-play installation with a single remote control, a wireless keyboard for web surfing, a webcam and a headset and PLC-based plugs that allow you to hook up anywhere in your home.

For content providers:

• Yet another platform to sell your wares.
• Daily Media picks up free web feeds, but adds pay-TV channels to make the offering more compelling.
• Also, it has a VoD agreement in place with which it has a very narrow distribution window (sometimes movies can be seen just days after they become available for rental).
• New revenue streams from interactivity (purchases through a single click on the red button on enhanced programs) and highly targeted ads (IP addresses and subscriber data can be combined, so CPMs in theory must be relatively high).

For operator partners:

• The solution to your quest for content, with the added benefit of raking in advertising euros, VoD and other fees, and solidifying your customer relationship.

For other distribution partners:

• Same as for operator partners, and add to that the option of having your brand and access to your services on the personalised home page of each individual user. This adds a line of communication to your subscribers. Providing 'hot news' may even alleviate your help desk (in case the partner is a health insurer, e.g.).

Obviously, there are a number of obstacles for UCD and its Daily Media box:

• Picture quality. At a 540 kb/s bit rate, the offering is quite astounding. However, the audience will adopt HD and get used to much more over the coming years. It remains to be seen if Daily media can keep up in this arms race.
• Dependence on web feeds implies that the server of any content provider may crash. Obviously, this is an area in flux. The service is dependent on third parties and you can only hope/assume that capacity is added, and deals with CDN operators such as Akamai and Limelight are scored.
• Funding. Four years and 16 employees implies considerable investments have been made by the current shareholders. Going to the next stage can be achieved through organic growth, but can also be expedited if the company were to attract additional funding. I have been shown some very interesting innovative financing methods.
• Yet another box. STBs and the boxes of even a company like Apple have a hard time making it to the living room. Sure, UCD adds interesting deals for partners, as well as a wide range of content and services, but still ... What helps is that the Daily Media remote can also be used to control the already existing audio/video hardware in the living room, so "one box in and 2,3 or 4 remote controls out".
• Focus. Perhaps the box can do a little too much to make it sellable?
• Exclusivity. Any distribution deal may alienate other potential partners in a specific geographical market. The same would apply if the company would sell itself to KPN, to its erstwhile Siamese twin TNT or to a large retail banking group - to name a few thinkable options.

To round off, here is what I particularly like:

• The box promises to be truly plug & play and converges several other boxes and remote controls.
• Low cost for consumers and operator partners. This is basically the result of distribution partners and advertisers coming on board, taking a big chunk of the cost.
• There are no regional boundaries. Daily Media could be sold anywhere, provided they have a distribution partner.
• New operators such as Reggefiber or bbned/Alice (both involved in FTTH in the Netherlands) could team with UCD to extend their content offering. This would raise their chance of winning against entrenched cable operators.
• KPN could forgo the development of its ill-fated IPTV offering and simply quit that game altogether. Instead, a Daily Media box with DTT tuner could allow KPN to offer basic TV and some pay-TV of Digitenne (at the highest available quality), enhanced with all the Daily Media stuff (which has a somewhat lower picture quality). In fact, an alternative could be to accept CATV channels to enter the box too (outside the network or commercial reach of Digitenne). KPN could look at that as a form of traffic off-loading – comparable to what femtocells do for mobile-only operators (in-home traffic off-loaded to the subscriber’s broadband connection). Another possibility may be to deploy Daily Media in a closed setting, to improve its performance (in terms of picture quality and stability).
• CATV operators could integrate their STB in the Daily Media box (or vice versa). A single box and a single remote control would be great for consumers.

Expanding the network business up & down

An MSO (Vigcom in Krimpen, NL) and an FTTH operator (OBR in Rotterdam NL) are starting a field trial of UCD's 'Daily Media' set-top box. The box will bring together both the video feed and internet-based video (comparable to AT&T's 2Wire box).

This way, the network operator, which already has upstream deals for its video feed, can expand this side by adding internet-based video. The latter will not directly bring in revenues, but indirectly (i.e. advertising): the box will be sold through retail partners, who will have their brand exclusively put forward on the user interface.

At the same time, downstream partners (UCD and any retailers) are added.

For UCD (United Content Distributors) itself, there are "28 different potential revenue models for the service, which include revenue-sharing of video-on-demand offerings or video subscription services."

Comments:

• The above terminology I used is a reference to STL's 'two-sided business model', that they are making waves with.
• Maybe the box could also bring together a DTT signal, such as KPN's Digitenne service, and internet-based video.
• I wish I could count to 28.