Hoping to address the thorny problems facing TV and media players trying to deliver more content to more devices, Verizon has launched a new unit, Verizon Digital Media Services, that is planning to offer a complete set of services and infrastructure for multiplatform delivery of content that would essentially allow companies to outsource the digital delivery of their content.
The effort, which Verizon executives are calling a "digital distribution utility," much like the water or electrical utilities that handle those valuable services, would ultimately allow broadcasters, content owners, multichannel distributors, over the top providers and other media companies to outsource every aspect of multiplatform delivery.
"What we are building is world's first digital distribution utility," explains David Rips, president of Verizon Digital Media Services, a newly formed business unit, within Verizon's Global Wholesale division, who is spearheading the effort. "It will be a centralized fully automated fully managed end to end solution that manages high resolution content all the way to consumer on any network on any device."
The idea raises questions about whether major broadcasters or multichannel providers will want to allow a major company like Verizon to establish itself at the center of their multiplatform efforts, which are likely to be an important part of their future.
But interest in outsourcing many of these processes to the telco seems high. Over 15 companies have signed up as charter subscribers to test the services and while Hearst Corporation and the Associated Press are the only two that are allowing their names to be used, Rips says they are working with some of the largest media companies in the U.S.
"We have four of the five largest broadcasters," Rips says. "We have a major movie studio. We have two of largest magazine publishers. We've have one of largest online portals. There are a lot of them and they are big companies. The response has exceeded our expectations by a lot."
Much of this interest reflects some of the well-known problems of multiplatform delivery. While growing consumer interest in receiving more content on more devices is pushing major media companies to respond, it remains extremely difficult to satisfy that demand in a cost effective manner.
App developers must currently develop versions for at least seven major operators systems to deliver content to smartphones and many of these apps have to be adapted for different carriers or consumer brands. With over 80 tablets announced at CES the problem is only likely to get worse over the next year.
"We understand that the cost complexity and capacity to do digital distribution is beyond what most people can afford," Rips argues. "Because of the complexity, their costs right now are usually higher than their revenue and the economics don't work."
Beyond that, he notes that "they can't deliver high quality media because the infrastructure of the internet won't allow them to."
Here, content providers and distributors run up against the difficulties of moving from a broadcast model of sending one broadcast feed to many people to a unicast model where the same content is sent individually many times to many people.
For example, if a broadcaster tries to send a show that is watched by 1.5 million on their broadcast channel over the web or mobile networks, "you would have 1.5 million asynchronous streams, which are not running at the same time. So you've gone from the old world of broadcast where there is no data crossing any IP network to the unicast world where have 9.6 petabytes of data moving across that network. And here you are just talking about one show on one day that reaches a small audience of 1.5 million people representing, less than half a percent to of consumption of media in this country at any time. That is a problem" that companies are not equipped to solve.
Centralizing that effort would both help content providers and distributors cut the costs of formatting the content to different devices and would allow ads to be centrally inserted, Rips argues. This would help overcome the difficulty of formatting different campaigns for different devices, a problem that has slowed the deployment of targeted advertising for VOD and mobile.
Verizon is also planning to pitch the idea to cable operators, which have their own networks that they've been revamping to supply more content on more devices as part of their TV Everywhere efforts.
Here too, Rips contends that their centralized digital distribution utility would offer a number of advantages. In particular, it would help MSOs expend their services and offer TV Everywhere products outside the footprint of their own cable operation.
The development of the service represents a significant investment on top of the billions that the telco has spent upgrading its fiber backbone.
The new VDMS effort involves three major parts that Verizon executives are calling: 1) the media transformation factory, which automates the creation of various content formats; 2) the media distribution fabric, which provides high quality delivery from the central facility to edge nodes; 3) the unicast delivery framework, which enables the simultaneous distribution of millions of individualized, on-demand content streams to any customer, on any device, on any network.
Verizon has built two major data centers for the first part of the service, which is currently being tested by its charter subscribers, for a July release. The other two pieces are currently being developed and are expected to go live in 2012.
"This idea came as a result as a result of the pain in the market and the recognition that there is probably no way to meet that pain with existing technologies," Rips notes. "There is a need for a new approach, something really big and new, which is what we are doing."