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Tue 30 Dec 2008 04:00 AM

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Turning the tide

Having been at the forefront of development in the video-on-demand (VOD) sector for more than a decade, SeaChange is now looking to snare new business in emerging markets. John Parnell caught up with SeaChange execs in Dubai to discuss how the Middle East fits into this strategy.

Having been at the forefront of development in the video-on-demand (VOD) sector for more than a decade, SeaChange is now looking to snare new business in emerging markets. John Parnell caught up with SeaChange execs in Dubai to discuss how the Middle East fits into this strategy.

Pay TV subscribers in developed markets such as Europe and the US are embracing VOD services at an unprecedented rate, which is forcing both broadcasters and advertisers to reconsider their approach to the market.

"If there was anyone left who had any doubt that TV is changing and that personal TV, VOD and other forms of personal TV are being adopted by mass markets, then those doubts should now be dispelled," says Simon McGrath, chief marketing officer, SeaChange.

We realise that growth in this industry is coming from markets outside the US... to expand, we need to be looking at the Middle East, south-east Europe, South America and Asia. - Simon McGrath, Chief marketing officer, SeaChange.

SeaChange has been heavily involved in UK operator Virgin Media's much-lauded VOD service, which is considered to be the first successful large scale deployment of its kind in the UK. Over the past 18 months the volume of VOD content accessed on the platform has quadrupled with the number of monthly VOD views rising from 10 million in January 2007, to a peak of 45 million in July 2008.

"We realise that growth in this industry is coming from markets outside the US. These clients along with Virgin Media are the company's bedrock in terms of meeting our projected numbers, but if we are going to become a growth stock and expand the company we need to be looking at the Middle East, south-east Europe, South America and Asia. Beyond 2009, we will also be looking to explore opportunities in Africa," says McGrath.

SeaChange recently completed an IPTV project with Turk Telekom in Turkey, which has prompted the company to look further afield in the region for new business.

"There is a lot of ambition, energy and a desire to implement new projects and we want to be part of that," he says. "We are now in talks with distributors in the region and are looking to recruit some permanent staff to service the area."

McGrath is also keen to highlight the differences between free to access, video library services such as YouTube and other P2P sites and the products that broadcasters can offer on a VOD platform.

"We are talking about high-quality personal TV, not on a website with grainy, poorly encoded content, but HD standard, captivating content that people are prepared to pay for, either through sensible subscription models or on a pay-per-item basis," says McGrath.

With pay TV subscriptions in the region currently languishing below sustainable levels, the pay-per-item service may be the more rational option for the Middle East market. McGrath disagrees.

"There will always be a blend of these two. If you want the most recent, top quality Hollywood content, that is going to be offered on a pay-per-view basis. Older library content would more likely be offered as a subscription VOD movie service not too dissimilar to a traditional pay TV movie service," he claims.

"New release movies would have to be offered on a pay-per-view basis as that is really the only platform for which we can acquire that type of content. For VOD, content subscription is the best way, either built in to the operator's packages or on an à la carte basis.

"I think that ad funded services only really come with scale, once you have that scale the advertisers start to get very interested. This would be dependent on the operators finding the scale," claims McGrath. "If you are looking pan-regional, then you would need to aggregate all of the eyeballs using all the different operators.

That means some collaboration via collective inventory handling and united campaign management from the advertisers across the region, which is not completely unreasonable. Going forward, perhaps not next year, advertising will play a more significant part in the revenue pie I suspect."One division of SeaChange, the On Demand Group (ODG), has a collaborative role of its own to play.

Primarily a content aggregator, ODG negotiates rights deals with film and television production giants including HBO, Paramount, Disney, MTV and Universal. It then sells bundles of content on a wholesale basis to smaller operators who may not be able to negotiate an economically viable deal with studios on their own.

"It is about bringing down the cost of content by scaling it across multiple players," explains McGrath. "What we want to do in the region is work with telcos, broadband data companies and cable operators from a technology, service and content standpoint. ODG is looking to acquire content for the GCC and put together aggregated VOD packages for all those looking to offer IPTV."

McGrath says that the fragmented nature of the Middle East telco industry makes the region particularly well-suited to the ODG proposition from both the content and technology point of view, saying that it allows the operators the chance to get the scale they need faster.

"Similarly on the technology side, we are working on a solution that can either be cookie cut or even sold wholesale from one operator to the next. So a larger operator can host all the equipment and can wholesale the technology platform to smaller operators reducing their costs in the process. That is part of the solution strategy we are working on with our partners Argela."

For now, SeaChange's work in the region is likely to include a partly ambassadorial role for the IPTV platform as a whole, with key investors in the telecoms industry still feeling their way in the mainstream media sector.

"One of the messages that we are trying to put across to telcos is that they don't need to go out and buy access to pre-existing linear movie channels in order to provide their customers with movie content.

The scheduling of this does not have to be like regular FTA programming where people have to stay in during the evening to watch their favourite show. With movies, the viewer will decide spontaneously that they want to watch a movie and they don't really care how the movie service is branded or what channel it is on," says McGrath.

"A VOD service is a much better way to approach this. It is tough to get the return on investment with IPTV and it can be really frightening for telcos to launch with the cost of the content, the STB hardware and the risks associated with putting on an expensive tech solution."

The company's scalable approach to both technology and content (through ODG) could appeal to smaller operators that have not yet weighed into the IPTV arena.

As the under-pinning technology improves the vendor community will play an important role in persuading these smaller telcos to make the investment and overcome their current anxiety.

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