Earlier today in Paris, our customer Numericable announced that its customers will soon have available the world’s first true high-definition (HD) 3D video-on-demand service- based on the Cisco Content Delivery System (CDS) platform. It is a visionary and exciting development, and we are delighted that Cisco and Cisco CDS are playing an important role in its advancement.
3D content went through nothing short of an explosion on the big screen in 2009, culminating with the phenomenal success of “Avatar,” with the final box-office results clearly making it the world’s highest grossing movie of all time.
But, 3D films have been around for a long time. Unfortunately, there were several significant hurdles to overcome in order to create and show 3D images.
One problem has been the high-priced hardware and complex production processes that were required for content creation. Another was the costly installation of the systems required to display a stereoscopic 3D images on a cinema screen. Moreover, the apparent lack of a standard format for all segments of the diverse entertainment business also inhibited market development.
The retail video rental business and the pay-TV service provider pay-per-view model have a common connection -- they’re both heavily dependent upon new movie releases. Here in the U.S. market, that strategy is now being questioned -- as the two largest video rental retailers struggle to remain solvent, and as cable companies unite with media companies in an attempt to revive their VoD services.
In contrast, Netflix key performance indicators continue to outperform expectations. They have recently reported that their 2010 first quarter revenue rose by 25 percent, and gross margins by 10 percent -- as total subscribers increased by 35 percent year over year. Netflix total number of subscribers (13,967,000) is just behind two major U.S. MSO’s total video subscribers (even though this is not an apples to apples comparison).
Netflix offers a monthly subscription-based service. Access to the Internet is an integral part of their offering, since customers must go to a Web site to select from a library of 100,000+ DVDs, which are then delivered via first-class mail. Subscribers can also watch movies and episodes of TV shows (currently over 17,000 titles) streamed online as often as they want.
A significant difference of the Netflix service is how it is designed -- by intent -- to proactively encourage subscribers to choose from the “full catalog” of quality video content instead of just new releases. Netflix focuses on good vs. poor content instead of new vs. old.
Currently, approximately 90% of rentals from video retail stores and pay-TV pay-per-view are new releases, while Netflix new releases rentals are just about 30%. Let’s not forget that rights to new content are often more expensive than catalog content. Netflix has been very successful in promoting its full catalog, and it is thanks to its sophisticated recommendation engine.
Like most, my thoughts today, this 40th anniversary of Earth Day, turn to the state of the planet and our environment. We in the Information and Communication Technology (ICT) industry share a responsibility to not only develop products in environmentally responsible ways, but also to innovate and create solutions that will enable other industries to do the same.
Service Providers also hold a unique position when it comes to environmental sustainability. SPs can impact the environment twice -- by operating their own businesses and networks in a Green fashion, and by providing the ICT services that will enable other enterprises to minimize their greenhouse gas emissions. Products such as the Cisco ASR 9000 and CRS-3, which were designed and built with efficiency in mind, serve to reduce the energy used within the network. And services such as WebEx, TelePresence, and other communications and collaboration technologies work to reduce travel, reduce costs, and improve productivity and efficiency.
The International Telecommunications Union (ITU) recognizes the impact the ICT industry can have on the environment and has been a leader in fostering the development and deployment of energy-efficient next-generation networks. Its 2008 report on “NGNs and Energy Efficiency” put the industry on notice by stating that “Global migration to Next-Generation Networks (NGNs) could bring about a substantial reduction in power consumption and thereby reduce the telecommunication sector’s contribution to global warming.”
The theme at this year’s CTIA conference was Mobile Life. As I walked the floor of the exhibition hall, it became apparent that mobile enablement is permeating many of our day-to-day experiences.
Whereas the mobile industry has focused on device innovation over the past two years, a shift toward application innovation has now taken hold. Device innovation remains strong, but manufacturers and carriers now realize the degree to which applications can drive users to adopt mobile data and rapidly increase their usage.
Nearly every carrier and handset manufacturer is talking about creating application stores and fostering application ecosystems. There is also a growing realization that linking or federating such applications stores could lead to increased value creation for all the participants. Machine-to-machine (M2M) is also gaining momentum, and CXOs of carriers are talking about connecting “billions of devices.”
From vendors, and service and content providers, we see sustained waves of news. From Cisco is our recent CRS-3 router announcement -- a super-sized router, optimized for video services. And you will be hearing us talk more about our Content Delivery System (or Cisco CDS) -- our platform for personalized video services delivery -- and how it now integrates critical technologies like dynamic service routing with proximity.
Why is video delivery getting so much attention? Because video isn’t easy. It has very strict requirements, from creation to playback. Add to that the meteoric growth of video content that is taking place, and the new ways people are interacting with video, such as watching content at more places, and on more screens. We can understand why delivering video services effectively is becoming ever more complex.
So we now find service providers constantly searching for new ways to distribute content efficiently. A key way to make that happen is by combining network intelligence with business-based rules. For example, it makes sense to have the closest content server assigned to provide content to a subscriber- but only if the connection is reliable, the cost of connectivity reasonable, and the server isn’t over-subscribed. Otherwise, a server farther way might be a better option for the most efficient delivery, and for the highest quality of experience to the customer.