Over-The-Top (OTT) Insights

Nearly 60 percent of U.S. households with televisions pay a monthly fee to subscribe to an OTT service such as Netflix, HBO NOW or Amazon Prime Instant Video.

Over-The-Top (OTT) video services – the delivery of film and TV content without a traditional cable or satellite subscription is growing at a rapid pace.

In 2015, more than 180 million individuals – 7 in 10 U.S. Internet users – watched a video on an OTT platform.

By 2018, one in five American households will not subscribe to a traditional pay TV service.

These subscribers will instead choose OTT services.

In the next five years, OTT subscribers are projected to surpass 306 million, and revenues are expected to climb 50% to nearly $27 billion.

While OTT subscribers and OTT service revenue continues to grows, the ways to model and distribute OTT services are still in their infancy.

The models are changing everyday.

Our insights into Over-The-Top (OTT) are listed below in the form of articles.

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Hold the Chauffeur! Beverly Hills Pushing for Fleets of Self-Driving Cars

“Imagine an autonomous vehicle going down Rodeo Drive,” says Mayor John Mirisch, who has met with tech giants Google and Apple to drum up interest (and investment) to make his municipality the first to integrate self-driving cars into its mass-transit infrastructure.

In case you didn’t have enough screens in your life, Grayson Brulte wants you to add one more: your car. Specifically, if the co-chair of the city of Beverly Hills Mayor’s Autonomous Vehicle Task Force prevails, your self-driving car.

The city has met with such tech giants as Google and Apple to drum up interest (and investment) in an effort to become the first municipality to integrate self-driving cars into its mass-transit infrastructure. But beyond all the civic advantages, Brulte insists that Hollywood should get behind the initiative for self-serving reasons. “The industry is going through massive disrupting changes,” he says. “But no one is looking at autonomous vehicles.”

Recent studies underscore the upside. “The car is effectively the fourth screen for media content consumption,” declared a 2016 Morgan Stanley report. “In our view, this is what Silicon Valley will be targeting by leveraging the autonomous utility.” In that vein, a recent Ernst & Young report concluded that driverless cars could generate $20 billion in incremental growth through increased streaming revenue.

Beverly Hills seeks to be a home for these futurist visions, a place where, Brulte hopes, industry players will see how driverless cars can improve their lives — and their bottom line. “Hollywood execs take for granted that everyone wants to watch their content,” he says. “The studios should make sure their content is there. It has to be different from a phone, or a house — there has to be an experience for the car.”

Beverly Hills already is a top contender as a lab for driverless cars. The first rail stop of Metro’s Purple Line is set to debut in 2023, but the city could be on track to have its own fleet of autonomous cars or mini-buses well before then. In April, the City Council voted unanimously to create a program to develop self-driving cars as part of a public transportation plan that would use existing infrastructure and technology to help connect cars to the city’s informational grid.

“L.A. is faced with a public transportation system that is second-class,” says Beverly Hills Mayor John Mirisch, who hopes to have a fleet up and running in five to seven years. “We aim to shift that paradigm on its head.” Mirisch says the excellent roads, quality infrastructure and well-educated populace in Beverly Hills make it an ideal place for auto engineers, inventors and tech companies to make a big splash. The city is in talks with such car manufacturers as Google, Volvo and BMW as well as with cutting-edge companies like Local Motors, an Arizona firm that manufactures self-driving cars with 3D printers.

“Imagine an autonomous vehicle going down Rodeo Drive,” says Mirisch. “A lot of entertainment people who wanted to go into town wouldn’t have to worry about parking.”

THE FUTURE OF L.A. TRANSIT IS UNDERWAY

What will life be like here when you no longer can complain about traffic? Within a few decades, the Hyperloop, a high-speed rail and self-driving cars will alter how you travel — and how fast.

1. HYPERLOOP

From a proposed L.A. terminus in Santa Clarita, Elon Musk’s high-speed tube-transport system could reach San Francisco in less than an hour. Tests of the technology, which theoretically could top 700 mph, already are underway.

2. HIGH-SPEED RAIL

With construction underway (in the Central Valley), this project is slated to serve L.A. and San Francisco by 2029. The trains, which will travel up to 220 mph, would connect the two cities in two hours and 40 minutes.

3. SELF-DRIVING CARS

Beverly Hills is pursuing plans that would make it the nation’s first city to integrate autonomous vehicles into its public-transit system.

4. METRO EXPANSION

Overdue growth to existing rail might be less futuristic than 700 mph pneumatic tubes but arguably more transformational for most Angelenos. Highlights include a new line linking Culver City and the rest of the Westside to LAX (2019) and a Purple Line extension down Wilshire to La Cienega (2023) and — don’t hold your breath — Westwood (2035).

5. FLY TO MARS (SERIOUSLY!)

Elon Musk and his Hawthorne-based SpaceX plan to send well-funded private travelers to Mars by 2024 (arriving a year later).

As featured in the July 22, 2016 issue of The Hollywood Reporter

Apple Car and The Growth of the Services Business

An Autonomous Apple car combined with exclusive content and experiences will create Apple’s next great revenue growth opportunity: services.

As we move towards a future where autonomous vehicles will eventually replace cars with full-time drivers, the automotive, technology and entertainment worlds will soon merge to create the future of in-car entertainment.

When these worlds merge into a closed ecosystem, Apple will be one of the big winners as they will control the hardware, software and content. At this year’s Sundance Film Festival Apple quietly hosted private invitation-only events to meet with talent.

As Apple makes the rounds in Hollywood with a focus on developing original content for their yet to be announced OTT service they are quietly developing the future of content distribution right under our nose.

In a recent research report from the investment bank Morgan Stanley the firm stated: “The car is effectively the 4th screen for media content consumption after PCs, phones and TVs. In our view, this is what Silicon Valley will be targeting by leveraging the autonomous utility.”

In my view, Morgan Stanley is correct in their assumption and I believe that this is one of the next great revenue growth opportunities for Apple. In Apple’s 2015 annual report the company reported $19.9 billion in revenue from services (includes revenue from the iTunes Store®, App Store, Mac App Store, iBooks Store™ and Apple Music™ (collectively “Internet Services”), AppleCare, Apple Pay®, licensing and other services) which was a 10% increase in revenue from 2014 when services generated $18.1 billion in revenue.

When Apple officially introduces their electric autonomous car and a complementary section of the App Store solely designated for their in-autonomous car experience, service revenue will continue to grow year-over-year. In the Apple car section of the App Store Apple will be able to showcase and sell bespoke in-autonomous car experiences that were created exclusively for the Apple car.

Today Americans spend 75 billion hours a year driving which costs $507 billion annually in lost productivity according to Ravi Shanker, lead analyst covering the North American auto and related industries at Morgan Stanley.

With this lost productivity due to driving autonomous vehicles will create new opportunities for companies to introduce new services.

Instead of concentrating on the road and the surroundings, the former driver and passengers in an autonomous Apple car would be able to catch up on work or watch an exclusive Apple movie or TV show on the car’s screens while the car travels down the road.

To make this a reality Apple will need a secure private testing facility where they can test autonomous cars and new technology in secret.

With the introduction of the CA A.B. 1592 bill by Assembly Member Susan Bonilla (D CA-14) on January 6, 2016, Apple looks to have a deal in place to test their autonomous cars in secret at GoMentum Station in Concord, CA.

According to The Guardian Apple has had talks with GoMentum Station as early as 2015. Apple engineer Frank Fearon wrote in an email obtained by The Guardian: “We would … like to get an understanding of timing and availability for the space, and how we would need to coordinate around other parties who would be using [it].”

Assemblymember Bonilla who represents the district that GoMentum Station is located in, introduced CA A.B. 1592 as spot legislation earlier this year which coincidentally is almost a year after Apple first inquired about testing autonomous vehicles.

The CA A.B. 1592 “Autonomous Vehicles: Pilot Project” states:

Notwithstanding Section 38750, the Contra Costa Transportation Authority is authorized to conduct a pilot project for the testing of autonomous vehicles that do not have an operator and are not equipped with a steering wheel, a brake pedal, or an accelerator provided the following requirements are met:
(a) The testing shall be conducted only at a privately owned business park designated by the authority, inclusive of public roads within the designated business park, and at GoMentum Station located within the boundaries of the former Concord Naval Weapons Station.
(b) The autonomous vehicle shall operate at speeds of less than 35 miles per hour.
(c) A change in ownership of the property comprising the GoMentum Station shall not affect the authorization to conduct testing pursuant to this section.

The bill will allow for the testing of Level 4 autonomy. Level 4 autonomy is a fully-autonomous vehicle that does not have any option for human driving—no steering wheel or controls. Could Apple be following the lead of the Google with their self-driving car project by developing a fully autonomous car?

Furthermore, section C of the legislation would allow for a change of ownership without affecting bill. Could Apple be in negotiations to buy GoMentum Station to further their interest in autonomous vehicles?

In May 2015, Apple senior vice-president Jeff Williams called the car “the ultimate mobile device” and said that Apple was “exploring a lot of different markets … [in which] we think we can make a huge amount of difference”.

Could Mr. Williams be forecasting the future of Apple? While we are uncertain at this time, I am certain that autonomous vehicles will create a plethora of opportunities for forward-thinking individuals and companies.

Only time will tell whether or not Apple ultimately decides to produce a fully autonomous car complete with bespoke in-car entertainment experiences exclusive to Apple.

Without having to concentrate on the road at all times we will be able to enjoy a variety of exclusive content and experiences.

An autonomous Apple car combined with exclusive content and experiences will create Apple’s next great revenue growth opportunity: services.

Apple Car and The Growth of the Services Business is an article written by Brulte & Company Co-Founder Grayson Brulte.

Florida Prepares for Autonomous Vehicles

OTT video-streaming providers will now have the opportunity to partner with autonomous vehicle fleet owner and operators to develop bespoke in-autonomous vehicle video experiences based on the location of the vehicle.

Governor Rick Scott of Florida openly embraced the future and signaled to the world that Florida is open to new innovative ideas when he signed HB 7027 (2016) on April 4, 2016.

HB 7027 will allow the testing of autonomous vehicles on public roads by any person holding a valid driver license, without the need to be designated by an autonomous vehicle manufacturer for testing purposes, and without any testing. The physical presence of an operator is no longer required.

This ground-breaking bill will allow automobile manufacturers and on-demand transportation companies to fully test autonomous vehicles at various levels of autonomy in a variety of circumstances.

By amending 316.303, F.S. to authorize active display of moving television broadcast or pre-recorded video entertainment content visible from the driver’s seat while the vehicle is in motion if the vehicle is equipped with autonomous technology and operated in autonomous mode HB 7027 will create new opportunities for OTT video-streaming providers.

OTT video-streaming providers will now have the opportunity to partner with autonomous vehicle fleet owner and operators to develop bespoke in-autonomous vehicle video experiences based on the location of the vehicle.

For example, tourists arriving at Orlando International Airport (39,583,000 passengers annually) could soon very well be shuttled to their hotels and resorts in autonomous vehicles that are streaming location based video about their vacation.

This streaming content could be highly personalized depending on which theme park the family was visiting, the resort where they are lodging, or the age of the children.

For guests visiting Walt Disney World, the autonomous vehicle experience could get highly personalized by using a MagicBand combined with the data Disney has on each and every one of their guests.

I could imagine a scenario where a parent unlocks the autonomous vehicle with their MagicBand, the kids hop in and the daughter is greeted with a personalized welcome message from Minnie Mouse while the son is greeted with a personalized welcome message from Mickey Mouse.

The parents would then sit back and relax while the kids interacted with Mickey and Minnie as the vehicle drives itself to Walt Disney World.

This is the future of autonomous transportation at hotels, resorts and destinations around the world.

Florida Prepares for Autonomous Vehicles is an article written by Brulte & Company Co-Founder Grayson Brulte.

Turning Up the Volume on Over-the-Top Content

As more people cut the cord on cable, over-the-top service providers see opportunity in services like Uber.

While the number of traditional cable subscribers continues to decline, over-the-top (OTT) video services – the delivery of film and TV content without a traditional cable or satellite subscription – are headed in the opposite direction.

And now, with the help of Uber, OTT is about to get even bigger.

Nearly 60 percent of U.S. households with televisions pay a monthly fee to subscribe to an OTT service such as Netflix or Amazon Prime Instant Video.

In 2015 alone, more than 180 million individuals – seven in 10 U.S. Internet users – watched a video on an OTT video platform.

In the next five years, OTT subscribers are projected to surpass 306 million, and revenues are expected to climb 50 percent to nearly $27 billion.

It’s a different picture for pay TV. Based on data from The Convergence Consulting Group, the number of U.S. households paying for TV peaked in 2012.

There were 97.6 million U.S. households with TV subscriptions in 2012. But that number declined by about 150,000 in 2013 and dropped another 260,000 in 2014.

The trend is expected to continue.

OTT’s growing popularity is in part a reaction to consumers continuing to ramp up expectations that take advantage of innovative technologies, including the use of electronic devices to pay for goods and services.

Now, by allowing third-party developers to build on its platform, the mobile ride-hail company Uber is paving the way for the next evolution in OTT video distribution.

The Next Step in Video Evolution

First television manufacturers partnered with Netflix to offer video streaming in their DVD and Blu-ray players.

Television producers then joined forces with video-streaming services by creating app stores on their TVs.

The next inevitable step for OTT is partnering with automobile manufacturers and transportation companies like Uber to offer streaming on screens inside a vehicle.

This trend will create new subscribers for OTT video-streaming providers, many of whom will be younger customers looking to enjoy content on their own devices without the expense and hassle of a cable subscription.

OTT video streaming providers know that the average American spends 46 minutes per day in a car.

As OTT video streaming services evolve and driverless cars and new group transportation models come to market, OTT video streaming providers will create customized video streaming experiences based on the location of the automobile and the subscriber.

These in-car OTT experiences could also be based on location, interests or destination.

For example, when someone gets into a driverless car and programs the automobile to drive to the baseball game, the in-car entertainment system could suggest baseball highlights from the previous night’s game.

The growth of OTT will provide automakers the opportunity to develop compelling in-car interactive experiences, which will help car manufacturers differentiate their vehicles in a highly competitive market.

Big Winners

The big winners in this evolution are consumers, who get what they want, when they want and how they want it.

OTT video-streaming service providers will create custom experiences based on each user’s unique location at any given time, increasing their brand’s value.

Transportation companies and automobile manufacturers can offer unique customized experiences through partnerships.

Regulatory bodies overseeing the autonomous car industry are the big hurdles to making this vision a reality.

OTT providers, car manufacturers and technology companies will need to work with the U.S. Department of Transportation to develop consistent policy that puts passenger safety first, while allowing OTT video providers to create innovative, in-car entertainment experiences.

Meanwhile, the race is on to embrace the future of the in-car, OTT video-streaming experience.

Turning Up the Volume on Over-the-Top Content is an article written by Brulte & Company Co-Founder Grayson Brulte that was originally published on UPS Longitudes.

Disincentivizing Online Piracy Through Innovation

You don’t have to read all the headlines about the online attacks on Sony Pictures Entertainment to understand the growing problem of piracy confronting the TV and movie industry.

While it may never be possible to stamp out illegal downloads, some studies suggest that making shows and movies easier for viewers to access and watch whenever and wherever they want without friction can act as an incentive to watch legal content.

Today, there are more than 100 legitimate online services in the U.S. alone. But to truly disincentivize piracy, content and rights owners should partner with broadband service providers, mobile network operators and smartphone manufacturers to develop a frictionless authentication system that is unique to each and every device that is owned by a customer.

For a next-generation authentication system to work and be widely adopted, it would have to be a seamless experience that is easy to set up and manage as consumers add on new services, such as HBO’s recently announced stand-alone streaming service.

For the authentication experience to be truly frictionless, it would have to be an industry standard that is driven by the wants and needs of the paying consumer — not by the content owners’ desire to create end-to-end encrypted system, such as the Prima Cinema. This high-end system, retailing at $35,000 with each movie rental costing $500, enables consumers to watch movies at home while they’re still playing in theaters.

While Prima Cinema creates value for a few, the system will not see mainstream adoption due to the current pricing structure and hardware requirements. And as consumer habits continue to evolve and change, the authentication system will have to change as well, hopefully in a way that is not noticeable to the consumer.

As the big shift to mobile continues, an authentication system will have to seamlessly work its way into the background in a way that is not visible to the consumer. A recent report from Google points out that in a typical day, 98 percent of 18- to 34-year-olds use their smartphones to watch video content. The report also notes that of all the time spent watching videos on YouTube, 40 percent is on smartphones.

The shift to mobile will also benefit content owners, as a next-generation authentication system could bind a device to a subscriber’s account by authenticating the device prior to shipping.

In the future, when consumers order their next smartphone, they will be prompted to enter their login credentials for their various streaming services. By encouraging a consumer to pre-load their credentials, streaming service providers would be able to bind the device to the user’s account without the current hassle and friction of authenticating a device.

With a pre-authenticated device, subscribers would be able to access exclusive content from Wi-Fi hotspots around the world based on their geolocation. This would create new marketing opportunities for content owners, while at the same time creating value for subscribers.

“Marrying content with who and where is a home run for consumers and content owners, as it creates value by adding context to what is being served for both parties,” says Mike Perrone, CEO of SocialSign.in, a startup focused on developing a marketing layer on top of Wi-Fi networks: Consumers would be able to watch unique geo-targeted content based upon their location.

As we embark on the next chapter of authentication systems, it is important for content and rights owners to think like a consumer and focus on unique geo-location content that creates value for subscribers.

“Everyone has a vested interest in making authentication simple,” notes Marty Roberts, Co-CEO of thePlatform, a video publishing company and an independent subsidiary of Comcast.

When the friction of authentication is eliminated and consumers can experience and enjoy new content from various locations and devices without restrictions, piracy will become disincentivized.

Disincentivizing Online Piracy Through Innovation is an article written by Brulte & Company Co-Founder Grayson Brulte that was originally published on General Electric Reports.