On one of my info-gathering missions last week, I got hold of Mark Sebastyn who runs product marketing for Motorola On Demand Solutions. Knowing that he’s spent serious time talking to service providers about VOD, I wanted his perspective on the business behind the technology.
I’ve included the full Q&A after the jump, but here are some of Mark’s top-level points:
- “Real-time” VOD services (like Program Restart and on-demand ad insertion) are putting greater demand on legacy VOD servers and creating new cost considerations.
- Total VOD costs can’t be measured solely in equipment purchases. (I wrote about this briefly once before.) A disk-based system with 150,000 video streams, for example, costs approximately $550,000 annually for power alone.
- The rate of future VOD growth will depend on several factors, including user interface.
Keep reading for the full Q&A, including specific facts and figures.
How should operators be evaluating VOD solutions?
I think all service providers should look at 2 key metrics when evaluating VOD solutions. First, the ability to support new “real-time” services such as Time-shifted TV, Program Restart (such as Time Warner’s Start Over service), network-based DVR (nDVR) and on-demand ad insertion is critical. Most VOD servers can support movies on demand, but when it comes to ingesting and streaming 250 live TV channels simultaneously, most legacy VOD servers will struggle to handle the load.
The second metric is Total Cost of Ownership (TCO). Legacy disk-based systems take up a lot of space and resources, which is one of the reasons we developed a very compact solid-state platform. Cable operators with existing VOD systems in place today are already feeling the pain. Some operators have racks and racks of VOD servers deployed. When you have that much headend real estate tied up for VOD servers, cost becomes a big issue. Not just the real estate cost, but also power, cooling and software upgrade costs become significant. For example, a system with 150,000 streams would cost approximately $550,000 annually for power alone. If we add in cooling, real estate and software upgrade costs, the annual total can approach $1 million. Larger systems also require additional capex investment for HVAC and UPS equipment. A 30 ton cooling unit can cost up to $100,000 installed and 30kVA UPS with battery backup can cost $75,000 installed.
You propose a solid-state (DRAM-based) solution over a disk-based solution. Are there any other cost advantages to consider with DRAM?
Yes, disk-based solutions are by nature less reliable because they have moving parts. If you think about it, which part of your PC has the highest failure rate? The hard drive right? Now, string together hundreds of these hard drives and make them spin for 24 hrs a day, 7 days a week, 365 days a year. Do you think they will last very long? What does this high failure rate mean to service providers? It means that large operators need to constantly change out disk drives. This also adds cost to the disk-based solution. More importantly, when disks fail it also adds subscriber frustration because they can’t order a video—which in turn leads to churn and lost revenue.
Cable operators are loving video on-demand. What kind of growth curve do you predict for VOD?
A growth curve is difficult to predict, but I can say that the curve will be impacted by how rapidly real-time services like Program Restart are deployed by other cable operators. I also think the user interface is critical. With the explosion of available on-demand content, it’s become difficult to navigate through it and find what you’re looking for. Solving this will propel usage. I also think the growth will depend on how fast large-scale IPTV rollouts occur. Competition is the one driver that accelerates everything and we have lots of competition in the market today. On-demand ad insertion will also be a key factor in the VOD growth curve. There are a lot of advertising dollars to be made in the on-demand space and these new solutions for targeted advertising offer consumer product companies the ability to pinpoint their marketing.