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The Future of Digital Content Distribution

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					The Future of Digital Content
Distribution
…enabling the controlled distribution of digital content


                                        Stan Moyer
                                        Executive Director

                                        Applied Research
                                        Telcordia Technologies, Inc.
                                        One Telcordia Drive 1A-361
                                        Piscataway, NJ 08854
                                        Voice: +1 732 699 2966
                                        Fax: +1 732 336 7014

                                        E-mail:
                                        stanm@research.telcordia.com
                      An SAIC Company
   Talk Outline

Background data
The problem with current
content distribution
offerings
The Digital Content
Mediator solution
Alternative business
models
Summary




                           CCNC Future of Content Panel 2
                  Current State…
                                                         Share of Time Spent
        In October, 2004, content became                 Online in the U.S.**
        the leading U.S. online activity         Oct. 2003
                                                                 3.0%          16.5%
        Network operators would like to          35.3%
        monetize both illegal and legal
        digital content traffic
                                                                                   45.2%
                                                              Commerce
        Amount of (legal and illegal) digital                 Communications
                                                              Content
        content traffic is expected to                        Search
                                                Oct. 2004
        increase much more — includes                           4.2%          15.8%
        music, movies, games, ringtones,
                                                40.2%
        photos/image, software, …*
                                                                                    39.8%
                                                             Commerce
                                                             Communications
                                                             Content
*Multiple sources                                            Search
**Source: Nielsen/NetRatings                      CCNC Future of Content Panel 3
                    Online Music Market Data
                   Music download market:
                    US online music market expected to grow 148% to $556M
                    and 70% to $945M in 2004 and 2005*
                    EMI predicts 39% CAGR in digital download market and
                    32% net growth in consumption from online music**
                    Digital download music market expected to be $2B by
                    2008***
                    $359.1M worldwide market in 2003 expected to be $14.7B
                    by 2009†                       U.S. Online Music Market


                                                              $4,000.0                                                       $3,528
                                                              $3,500.0
                                                              $3,000.0                                              $2,538
                                                              $2,500.0
                                                   millions




                                                              $2,000.0                                     $1,826
                                                              $1,500.0                            $1,314
                                                                                          $945
                                                              $1,000.0            $556
                                                               $500.0     $224
*PiperJaffray, Sept. 1, 2004
**Bear Stearns, July 19, 2004                             $-
                                                                         2003    2004    2005     2006     2007     2008     2009
***London Financial Times, Nov. 20, 2004 (also Forrester)
†WinterGreen Research, May 2004
                                                                                                 CCNC Future of Content Panel 4
                  Music Downloads Usage

                                    Households with a member downloading music
                                7
                                6
                                5
                     Millions




                                4
                                3
                                                                                         P2P
                                2
                                                                                         Legal
                                1
                                0
                                     Oct
                                     Nov
                                     Dec




                                     Apr



                                      Jul
                                     Aug
                                     Sep




                                     Feb




                                     Jun
                                     Jan

                                     Mar

                                     May

Source: NPD Group, Inc., Oct. 13, 2004                              CCNC Future of Content Panel 5
                    Peer-to-Peer “Market” Information
        Peer-to-peer traffic
          –   single largest consumer of data on ISP
              networks — varies from 55% in Europe to
              over 80% in Asia
          –   continuing to increase — contrary to some
              reports
          –   consists of mostly “illegal” content downloads
              — one study shows six times as many peer-
              to-peer music downloaders vs. legal music
              downloaders
        At any given instant, 7M people are using P2P
        networks in the U.S.
        “iTunes 100m downloads is paltry compared to
        1 billion files available through file-sharing-
        networks”*
          –   P2P executives argued that the music
              industry needs to embrace P2P networks and
              monetize them*


                                                           Source: http://www.cachelogic.com/research/index.php
*Bear Stearns, July 19, 2004                                         CCNC Future of Content Panel 6
The problem with current content Distribution Offerings…
                  Today’s Limitations

                                                                      Customer
                                                                      Customer
                                                            content

                                                                        99¢
                                               Content
                                               Content
                Content
                Content
                                              Distributor
                                              Distributor
                Rights
                 Rights            65¢
                Holders
                Holders                                               Operating Cost: 35¢
                                                                       Operating Cost: 35¢
                                         0¢          content          Profit: nil
                                                                       Profit: nil

                       0¢

                              P2P User
                              P2P User               content          P2P User
                                                                      P2P User


          • Content distributors not making (much, if any) money
          • Network operators not receiving revenue from digital content distribution
            over their network
          • Content rights holders and distributors receive no income from peer-to-
            peer file sharing
Source: NY Times, Dec. 2003                                            CCNC Future of Content Panel 8
                DCM Overview and Summary
                Enables network operators and service providers to enter
                the content distribution business without having to host large
                volumes of content or provide large amounts of access
                bandwidth
                  –   “Mediates” the exchange of digital content between two
                      parties
                  –   Does not get involved in the actual content transfer or any
                      DRM steps
Content Acquisition Steps:
 Content Acquisition Steps:
1. User searches for and
 1. User searches for and
   locates content                  Digital or   Peer                              Content
    locates content
2. DCM authenticates user          Content              Source Info                 Info
 2. DCM authenticates user
   and verifies authenticity of
    and verifies authenticity of
   content source
    content source                                                                   Authorize/Bill
3. DCM provides encryption         Content                               DCM                           Billing/
 3. DCM provides encryption
   key for content source                                Verify                                       Payment
    key for content source         Transfer
4. User downloads content
 4. User downloads content
5. DCM verifies downloaded
 5. DCM verifies downloaded
   content is authentic, bills                          Authenticate
    content is authentic, bills                                                         DRM Server
   user, and provides
    user, and provides
                                        User                              Store-
   decryption key                                GUI                                     (optional)
    decryption key                                        Browse/Find      front
6. User decrypts and accesses
 6. User decrypts and accesses                            Content
   downloaded content
    downloaded content
                                                                        CCNC Future of Content Panel 9
DCM Overview — Key Attributes
Balances the rights of the content owner with the demands
of the consumer — e.g., enables a legal peer-to-peer
content sharing network that is attractive to all stakeholders
Open and flexible architecture that simultaneously supports
different:
 –   Payment models (e.g,. Prepay, postpay, micropay, 3rd party
     pay) as a modular, back-end option
 –   DRM schemes
 –   End devices and applications
 –   Content transfer networks
Ability to prove condition of the content element
Provides the ability to offer incentives for onward forwarding
of content
System is “select” — i.e. people not in the system can not
receive the same benefits as those who are in the system
 –   Encourages people to “stay in the system”


                                         CCNC Future of Content Panel 10
          Digital Content Mediator Solution
          Centralized Distribution Model

                                                                        content
                Customer                 content                  Customer
                                                                  Customer
                Customer
                                            verifies
                             88¢
                  Content
                  Content                 DCM
                                          DCM
                  Rights
                   Rights
                  Holders
                  Holders   65¢                             3¢
                                                                 Operator
                                                                 Operator
                                                content
Operating Cost: 15¢
 Operating Cost: 15¢               Network Operator
Profit: 5¢
 Profit: 5¢                                                             Operating Cost: 1.5¢
                                                                         Operating Cost: 1.5¢
                                    w/DCM solution
                                                                        Profit: 1.5¢
                                                                         Profit: 1.5¢



  • Enables network operators to offer digital content services
  • Reduces operating costs for content distributors

                                                          CCNC Future of Content Panel 11
       Digital Content Mediator Solution
       Peer-to-Peer Distribution Model
                                                                  Operating Cost: 2¢
                                                                   Operating Cost: 2¢
                                                                  Profit: 5¢
                                                                   Profit: 5¢




             Content
                        65¢
             Content                    DCM
                                        DCM
             Rights
              Rights
             Holders
             Holders
                                                           3¢
                              10¢     Ntwk. Op.
                                      Ntwk. Op.                 Operator
                                                                Operator
                                          verifies
                                                     85¢
                                                                     Operating Cost: 1.5¢
                                                                      Operating Cost: 1.5¢
                       P2P User       content        P2P User        Profit: 1.5¢
                                                                      Profit: 1.5¢
                       P2P User                      P2P User


• Enables revenue generation from P2P transactions
  (for network operators, rights holders, and distributors)

                                                       CCNC Future of Content Panel 12
DCM Value Proposition
Content Distributors
 –   Won’t have to anticipate demand for titles, manage massive
     server farms, or pay for them and their associated bandwidth
 –   Can use choice of any DRM scheme or none, as believe
     customers will accept them
Rights holders —additional revenues
 –   Will get paid (and have tracking reports) for peer-to-peer content
     transfers
 –   Can get paid for niche or back catalog material distributed over
     P2P that is not profitable in other distribution channels
Consumers/Users
 –   Downloaders — cheaper content and better quality
        P2P content that is known to be authentic
        Potential benefits: restoration of collections if hard drives fail
        Greater variety at lower cost than the I-tunes model can provide
 –   Uploaders — incentive to stay “in the system”
        Converts a legally risky activity into a potentially profitable business
Network Operators — new revenue stream
 –   Participate in content distribution, not just transport
 –   Ability to offer a service beyond their physical footprint
 –   Analogous to PSTN 800 and 900-type services
                                                          CCNC Future of Content Panel 13
Alternative Business Models…
Subscription Business Model
Many in the digital music industry are advocating a
subscription model for online music (as opposed to the pay-
per-download approach)
 –   E.g., User pays $15-20/month for unlimited downloads
 –   User value proposition is compelling — e.g., it would cost
     ~$10k to fill an iPod with music with pay-per-download, but
     would only cost $15-20/month with a subscription model
 –   User does not “own” the music anymore — i.e., when they
     stop paying the subscription, they “lose” the music
 –   Microsoft’s Janus DRM that supports portable subscriptions
     should increase the popularity of the subscription model
It’s likely that multiple business models will exist and will
need to be supported


                                          CCNC Future of Content Panel 15
Summary

The digital content wave is just beginning
Now is the time to create and deploy the
necessary technological solutions
We need to re-evaluate what’s been done to date
— e.g.,
 – Do we need DRM
 – What business models need to be supported

All stakeholders in the value chain need to be
flexible during this evolution




                                  CCNC Future of Content Panel 16

				
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posted:12/13/2011
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