The launch of Netflix and the subsequent announcement by BSkyB that it would roll out its own web-only subscription offering have thrown over-the-top services into the spotlight, especially in the UK. These services, along with so-called connected TVs from the likes of Samsung and Sony, and the forthcoming launch of YouView, could profoundly effect the way we consume video in the future. The impact is being felt across Europe, with regional and pan-regional players launching various forms of OTT.On the face of it, the various platforms offer similar services – movies and TV shows to connected devices – but business models, user experience and content deals vary widely. In some ways, OTT operators are fumbling around in the dark, hoping that their branding, content offerings and pricing models will win out. Some will fail, but for the winners, the prize could be substantial.The pay TV operatorIn light of the proliferation of OTT services in the UK, and in the case of Netflix and Lovefilm, backed by substantial marketing budgets, it is perhaps of little surprise that Sky is hitting back with an OTT service of its own. Whether it’s an offensive or defensive move is unclear, but the timing is notable.Sky has offered a form of OTT for some time, via its Sky Anytime online platform, which last year evolved into Sky Go, a service offering a number of premium channels and on-demand content on various devices including tablets, smart phones and games consoles. The difference, and perhaps game changing feature, of the yet-to-be-named platform is that it is being made available to people who don’t take a Sky subscription.“We’ve seen a rapid proliferation of internet connected devices and increasing demand from consumers to access video on multiple-screens, particularly through our own Sky Go service,” says Stephen van Rooyen, managing director of Sky’s sales and marketing group. “To build on our existing expertise and investments in delivering TV online and on mobile, we want to build out a new proposition which offers Sky content in new ways. The flexibility of internet delivery enables us to innovate in the way we package and price content, to appeal to those potential customers who may like the content that we offer, but who don’t currently subscribe to a pay TV service.”Sky’s announcement about the forthcoming OTT platform came as it revealed that the 2011 Christmas quarter was the first ever that it didn’t deliver the highest quarterly customer additions for the year – a sign that its subscription service is reaching saturation point. Sky will be hoping to use its new platform to mop up those customers taking free-to-air services who, while unprepared to commit to monthly payments for premium content, are prepared to pay for certain movies, TV shows and possible sports events.There is, of course, a risk for Sky that existing subscribers will churn in favour of a combination of free-to-air and occasional Sky OTT use, or that potential new subscribers will be swayed into choosing this option instead. But, according to Van Rooyen, the operator is placing an emphasis on offering as much choice to existing and potential customers as possible – a Sky customer taking any service is better than a non-customer. “By offering content in a more flexible and simple way, a distinct internet TV service enables us to offer more choice in how customers access Sky content,” says Van Rooyen. “Our new service will cater to those consumers who like what we offer but for one reason or another have decided to not to sign up to Sky for a satellite-based subscription.” By innovating in the way it packages its content, Sky is able to give those homes more choice over how they access pay TV, which will open up pay TV to even more UK homes, he says, pointing out that although more UK homes now take a pay TV service than don’t, there’s still significant headroom for growth, with 13 million homes relying only on free-to-air services. “As the content gap between pay TV and free TV continues to widen, we see internet TV as a complementary growth opportunity alongside satellite,” says Van Rooyen.While Sky will be competing with newer entrants to the market, it is confident that the brand recognition it has developed in the 20 years since launching, coupled with its strong content offering will bring success in the OTT space. While the platform will launch initially with movie content, it is likely to add TV series and sports. Van Rooyen says its experiences of innovating in platforms and services will also serve it well. “Sky’s success since launch has been founded on investment in content and innovation,” she says. “In practice this means making sure our customers enjoy access to high-quality, exclusive content first, supported by innovation that drives an even richer, more engaging experience. This is the same approach that we will take to our internet TV services, making sure that consumers understand the content and experience gaps between Sky and competitive services. Whether it’s having a better quality line-up of programmes or a better user experience, we’ll offer customers great value.”The CPE vendorOne of the new entrants to the UK’s OTT market is streaming device specialist Roku. The company launched in the US in 2008, offering access to then DVD rental company Netflix’s online service. It has since done numerous deals with content owners and has sold around 2.5 million devices.In the UK, Roku customers are not tied into a subscription; they need to buy one of the two available streaming devices – the XS at £99 (?118), which can be connected via Ethernet as well as WiFi and can display 1080p video, and the LT at £49, which displays 720p video.Rather than acquiring its own content like other OTT platforms, Roku acts as a host for any provider that meets its basic quality threshold to offer their own streaming services. While the company offers its own billing platform, once content owners have got carriage on Roku they can deliver and manage their own services, as is the case with Netflix.Roku expects its products to reach mass-market status in the UK, but, says Clive Hudson, Roku’s vice-president and general manager, it doesn’t intend to initiate a high profile marketing campaign until it has a wider range of content partners on board. “We’ll look to add more services and other film services as well. We will wait untill we have more content providers on board before we push out to other potential users,” he says. “Movies are what people are attracted to – and then in the UK you can add some of the catch-up services. We have seen a lot of interest in the Netflix launch.”While the UK version delivers fewer channels than Roku does in the US, it currently has deals in place with around 40 partners, including Netflix, Sony-backed Crackle and the BBC’s iPlayer catch-up service. Additional content comes from Euronews, CNBC, Yupp TV and Bollywood movies.According to Hudson, Roku aims to deliver a user experience that is simple to use. “You don’t need to be geeky to use it,” he says.Looking to expand the range of devices Roku can by used on, the company plans to introduce the USB streaming stick that it launched recently in the US in the UK market. The device can convert TVs that are compatible with the MHL standard into connected TVs, offering the same functionality as the set-top boxes. In the US, this product is bundled with branded TVs sold by the BestBuy retail chain.“People invest a lot of money in smart TVs but the actual screens have a five-year lifespan while the smart hub might have a much shorter replacement cycle,” says Hudson. The use of the stick can help future-proof the TV, he says.For now, Roku is not planning any further launches in Europe. “We will look at other markets but that’s not high on the agenda right now,” says Hudson. “Getting the UK right is the thing that’s important.”The pure OTT playerSweden-based Voddler launched in 2010 as an ad-funded streaming service. In the intervening two years, it has added a premium option enabling customers to skip the ads, launched transactional VOD, expanded onto smartphones and, most recently, began offering titles to download.The service is available in Sweden, Norway, Denmark and Finland, where it has a cumulative total of over one million registered users, and in Spain. It offers content from 35 film studios, including five of the Hollywood majors, and numerous broadcasters.Scandinavia isn’t short of OTT services. Last year saw the launch of free and pay TV broadcaster Modern Times Group’s Viaplay service offering premium live sports coverage, thousands of blockbuster movies, TV series and catch-up services on various connected devices. But according to Anders Sjöman, Voddler’s vice-president of communications, Voddler is competing on technology and pricing models.“As with all good tech stories, it started with three guys in a basement,” he says, explaining how the platform was invented almost by accident as its founders were attempting to develop more efficient means of distributing large files over the internet. Today, Voddler uses a mix of content delivery networks and peer-to-peer technology to deliver very high-quality video in a cost-efficient manner. The network, called Voddler Net, is a decentralised distributed streaming system with centralised control. Voddler developed and patented the network itself. It has taken elements from the ability of CDN networks to control content within the network, and from peer-to-peer networks where content is pushed as far out into the network as possible. “Pure peer-to-peer is chaos,” says Sjöman. “Anyone can put content into the network, and once it’s there you have no control over it. The difference with Voddler Net is that only we can publish content. We retain complete control over it and can decide how long it stays on the network.” New Voddler customers must download an app before they can begin using the service and agree to having some content stored on their hard drives. When another Voddler user streams a movie or TV show, rather than streaming from the company’s video servers, it comes from other Voddler users who have already seen it and still have some of it stored on their hard drive.“It means we can have a much higher bitrate, enabling us to deliver a better image than other services. We also save on delivery and storage costs,” Sjöman points out. “If a movie is well spread across the network, we might only have 3% of it being streamed from our servers, the rest comes from our users. It’s a perfect match of supply and demand – the more people watch a movie, the better the quality. On other platforms it would mean having to buy a new server.”Sjöman believes Voddler is also benefitting from the mix of pricing models it offers to customers, including TVOD and AVOD: “We are the only European-based video provider that is both your video store and your TV channel.” He says that about 60% of Voddler video views are for free content and 40% are for transactional content, although the revenue split is more evenly balanced. “There are fewer views with TVOD but a higher mark up. We’ll keep building both sides of the business,” he says. In terms of the free content, which comes with four to five minutes of pre-roll ads, Sjöman points out that the costs involved in using a third-party CDN to stream the ads rather than using its own network would cancel out the revenues generated from the ads.Voddler is actively seeking to expand outside Scandinavia. Most recently it launched in Spain, a decision that was made for business and practical reasons. From a technology point of view, it makes sense to distribute Voddler Net networks around Europe so they can be scaled more efficiently. “We wanted to launch in a large market but also in one that is far away from Sweden so we could install a network as far away as possible,” says Sjöman.There was also a business decision based, surprisingly, on the fact that Spain is one of the most prolific countries for illegal video file sharing, the idea being that there was a large potential market of customers who wanted to watch online services. “They are huge on piracy [in Spain] and that actually tells us that people have moved online to get their content. We believe that if you can find the right business model, the right pricing level and offer the right content, you can compete with pirates,” says Sjöman, adding that the country is not ruling out a launch in any European country. “It’s a question of timing because every time you go into a new market you have to renegotiate rights. But we are confident we can enter any market with a different proposition based on our technology and our quality.”The UGC serviceFor all the talk of OTT services transforming the TV landscape, some of the most successful and well-known internet services have made their name by offering video content for a number of years. Take Dailymotion, the second largest online video site globally with around 120 million monthly unique visitors. Founded in 2005, around the same time as YouTube, the video-sharing platform was instantly popular in its home market of France, before it started an international expansion programme.While sites including Dailymotion and YouTube are often associated with videos of people falling over, cute babies and grainy concert footage, they are starting to use their reach to deliver premium content. In the case of Dailymotion, the majority of content available on the site is user generated, which is offered for free but supported by ads with revenue shared between Dailymotion and whoever uploaded the video. However, Daniel Adams, Dailymotion’s head of international content says that as the site has developed, it has increasingly struck deals with premium content owners. “We have about five or six million premium content videos on the sight, working with broadcasters including Bloomberg, BBC World News and Euronews, for example. As well as news, music and sport do well,” he says.Taking things further, Dailymotion has begun to experiment with a pay model and has recently soft launched a TVOD service in France.Last year French telco and pay TV operator Orange acquired 49% of Dailymotion with the option to buy the remainder of the business in 2013. Orange has already offered some premium content on the platform, including the live streaming of a Coldplay concert that Orange had acquired the rights to. Adams believes more Orange content will be made available on the platform. “For Orange, Dailymotion can be used as an OTT offering to complement their other services and to perhaps distribute some of their premium content. It gives them huge scale straight away. There are all sorts of opportunities going forward,” he says.When it comes to striking pay deals with content owners, one thing clearly in Dailymotion’s favour is its scale. “We offer reach and we offer eyeballs,” says Adams. “If you are a movie studio or music promoter you need to find ways to access large enough audiences to make distribution on the internet worthwhile. We can offer that scale.”Unlike YouTube, Dailymotion’s service is heavily editorialised, rather than being focused on search. The company has teams of editorial staff in each of its markets that deliver a curated service to users. “The benefit is that we can drive our audience to content that we think they’ll like,” says Adams. It also means the company can push high-value content and strike deals with content owners. Ultimately, Adams believes that if an online platform offers relevant content in a welcoming environment and an attractive price, there is an opportunity to persuade them to pay for it. “It is appropriate for most of our content to be distributed as part of an ad-funded model but there is also a place for higher end content, including feature films.” As the OTT land-grab gathers pace, Graham Pomphrey gets the lowdown from various operators offering very different propositions.