- Email: [email protected]
The Pay TV market
survey
The Pay TV market The global television industry is growing and changing rapidly. As broadcasters work to protect their revenues and build their client bases, smart card technology is developing a role with many media organisations. Up until the end of the 1980s, the majority of television viewers received broadcast services via terrestrial television. Using this approach, funding for broadcasters typically came through income from corporate advertising or revenue received via national licenses. Since then, technology has developed, and new business models have been established. The biggest change has been the advance of Pay TV, which is delivered via a number of different platforms including: •
•
•
direct to home (DTH) satellite and cable systems. It is estimated by DTH insiders that there are 60 of these systems worldwide with 50 million subscribers; digital terrestrial TV, which represents a shift from the Pay TV model to a Free to Air model; emerging new platforms. Telecoms operators are entering the content business so that they can get a higher return on their networks. With these systems, it becomes possible to watch videos or listen to audio over a mobile network.
Convergence One of the buzzwords within the Pay TV market is convergence. The move from analogue to digital technology has enabled value added services such as interactive TV, home banking and e-commerce to be conducted via digitally based cable and satellite systems. Furthermore, traditional broadcast over cable and satellite channels is now converging with broadband Internet. As IP-TV takes off, viewing habits will be revolutionised, as Koos Ellis, senior software development engineer, Irdeto Access explains: “The Internet browser is a one-person device, whereas the TV is a device for more than one person, meaning that convergence to one single device is highly likely.”
Copyright protection The introduction of Pay TV has resulted in new challenges for broadcasters, who need to manage transactions and interactivity, while ensuring that only those subscribers who have paid for a service can gain access to it. This challenge is being addressed with Conditional Access Systems (CAS), which in addition to limiting access to paying subscribers, enable operators to scale and upgrade their system to match business growth and increase average revenue per user (ARPU).
Card Technology Today September 2003
In Europe, the use of smart cards in conditional access systems is the norm. As a result, “when the Pay TV industry does well, smart cards do well; but when Pay TV does badly, smart cards do badly,” according to Manfred Müller, head of strategic marketing, and director of investor and press relations – Europe, SCM Microsystems. Unlike other application markets where smart card companies may be closer to the card issuer, smart card manufacturers typically communicate with Conditional Access Vendors or Conditional Access suppliers, and provide their cards to these vendors who then incorporate them into their Conditional Access Systems. One source of revenue generation for some CAS vendors is the exchange or swapping of smart cards. This is conducted partly to remove the number of illegal cards circulating in the system. “There are lots of illegal cards out there, which come from Asia and then allow software to be downloaded from the Internet. These are called Fun Cards or Gold Waiver cards,” reports Müller. “Broadcasters can make these inoperable by upgrading the CA system or switching CA suppliers.” When broadcasters upgrade their CA system, they often receive a boost in subscriber numbers as those using pirated cards find that they are no longer operable.
CA approaches The European approach to conditional access is different from that adopted in America. “TV companies in Europe were the early adopters of smart cards for Pay TV,” says Perry Smith, vice president, security development, NDS TI. “Now, the technology is spreading around the world and we’re beginning to see the Asian With the growth and divergence of broadcasting platforms, international copyright protection has become a big issue, and several organisations are now involved in content protection. AEPOC (The European Association for Protecting against Piracy) comprises key players in the European digital television sector, and was founded to combat piracy in Europe. Members of AEPOC include BetaResearch, BskyB, Canal+, Canal+ Polska, Canal+ Technologies, Conax, Eutelsat, IrdetoAccess, Motorola, Nagravision, NDS, Nokia, NTV-Plus, Pace, Philips Digital Networks, Premiere, Rai, Sagem, SCM Microsystems, Showtime Arabia, Société Européenne des Satellites, Sogecable, Stream, Tele+, Thomson, TPS, United Pan-European Communications (UPC) and Viaccess (France Telecom).
market open. However, the US is still not actively using smart cards for Pay TV. This is because of the difficulty of adoption. The market is ruled by Motorola and Scientific Atlanta, which have traditionally built their security into the set top box.” In spite of this, signs are afoot that the US market is now changing, as Myra Moore, president of Digital Tech Consulting told CTT: “In the US, there are efforts to incorporate cable tuners and conditional access systems into digital televisions through the Point Of Deployment (POD) initiative. This marks a move away from the traditional approach of embedding the CAS into the set top box, and means that if people want to buy a TV and hook up to PAY TV without buying a set top box, they can do so.” The POD initiative was established by the CableLabs consortium – the research arm of the cable industry – and was a response to the need to address the problem of interoperability. POD fits well into the OpenCable Standard, which was drafted by CableLabs. The POD module – recently renamed CableCARD – is currently in front of the Federal Communication Commission (FCC) for approval. The question of interoperability has become more important since the US government passed the 1996 Telecommunications Act, which is set to allow consumers to purchase a digital set top box instead of having to lease one from cable operators in the future. “In the US, the regulations state that the security element for encrypting the signal is separate from the box or removable. But, there is no reference to a smart card in this approach. The reference is to the POD or CableCARD,” reports Jason Schouw, vice president & general manager, Americas, SCM Microsystems. Activities conducted under the AEPOC umbrella include: •
monitoring of pirating situations;
•
analysis of European legislation and international agreements concerning safeguards and the protection of conditional access services;
•
identification of weak points in existing regulations;
•
promotion of new laws to cope with an everchanging market.
Other groups that are now putting pressures on governments to police content theft include the World Intellectual Property Organisation (WIPO) and the Motion Picture Association (MPA).
International copyright
13
survey
Hot topic CAS and Digital Rights Management (DRM) are hot topics within the Pay TV industry, with many insiders debating the difference between the two terms. Some argue that both terms are the same in principle – covering the protection of movies, music, literature and software. Those who approach the debate from the broadcasting world tend to use the term ‘CAS’, whereas those who come from the Internet world tend to use ‘DRM’. Others argue that everything should be included under the umbrella of content protection. “DRM just says who has access…As content becomes all digital, and fears of privacy increase, DRM is a more sophisticated form of copy protection than in the past,” says one insider. Meanwhile, Jean-Marc Racine, executive vice president, Marketing, Canal Plus Technologies argues: “DRM provides end-to-end protection of content from the point when it goes out of the studio until it reaches the Pay TV subscriber on their Set Top Box. This process ensures security of access throughout the whole chain. Today, there are no true DRM systems that are deployed. CAS, meanwhile, protects the broadcast segment between the broadcast sector and the set top box.” “Typically, DRM products are downloaded and watched at a later time, whereas CAS products can be downloaded in real time, and viewed as they come over the network. DRM and CAS are now converging and this is resulting in converging viewing rights,” comments Martin Neville-Smith, applications manager, Amino.
Why smart cards? Clearly, two of the key issues for Pay TV broadcasters are security and revenue generation. Smart cards could play a part in both these areas. “What is interesting about the smart card is its flexibility and renewability,” reports Schouw. “If a box or security system is hacked or a protocol is changed, all the operator has to do is ship a new card as opposed to shipping a new box.” This flexibility is useful for new broadcasters, who may A number of laws and directives have been passed to protect the interests of the Pay TV industry. In May 2000, the European Parliament issued a directive against piracy in the EU. Also in 2000, the promulgation of the Copyright Amendment Bill to the Australian Copyright Act took place. This bill provides the legislative ability to deal with content thieves. And in the US, the 1998 Digital Millennium Copyright Act was created to help copyright holders protect their rights online. In Europe, Directive 98/84/EC on the legal protection of conditional access services aims to provide a minimum level of equivalent protection within the EU of electronic pay-services against piracy by prohibiting all commercial manufacturing, distribution and marketing activities related to pirate smart cards and other devices circumventing the access protection of pay-TV, radio and Internet services.
Legislation
14
just want to roll out basic services to consumers before thinking of additional functionality. Within the Home networking environment, the smart card also allows the viewing of different programmes in different parts of the home. Smart cards play a fundamental role in revenue protection for the whole home entertainment industry. As Davide Rossi, secretary general, Aepoc told CTT: “Smart cards are important for protecting the legitimate rights of programme makers, because without proper management of CAS, the whole business structure could collapse. In Italy during 2002, the CA System was completely hacked. As a result, the video and DVD rental business fell and sales of DVD boxes dropped, as many people opted for satellites and set top boxes instead. Without proper maintenance of CA systems and procedures, this could have a big impact on the whole market.” One approach to copy protection using smart cards is SmartRight – an end-to-end digital content protection system for home-networked consumer electronic devices, which can be combined with conditional access systems or digital rights management systems. This is a global system that can be deployed in any region of the world. According to the SmartRight web site: “It defines a common syntax for SmartRight content to ensure interoperability and defines a simple application programme interface (API) with current dominant CAS and DRM systems. SmartRight member companies include Canal + Technologies, Gemplus, Micronas, Nagravision, Pioneer, SchlumbergerSema, ST Microelectronics, SCM Microsystems and Thomson.
Revenue generation As parts of the Pay TV industry reach saturation and pre-saturation phase, new Pay TV business models are being established to enable operators to maximise their ARPU. According to NDS, these business models include: •
subscription services: channels are packaged and sold in a number of different ways;
Earlier this year, the European Commission published a report saying that piracy must be stamped out to protect Europe’s competitiveness. “Piracy is far from a victimless crime: legitimate users end up paying higher prices, operators can go bankrupt and governments are deprived of tax revenue,” it said. The report assessed the implementation of the 1998 Directive on legal protection for electronic pay services, and urged member states to work together to fight piracy through training enforcement personnel, improved cooperation between industry and enforcement authorities and exchanging best practice and information. The report also identified the need for a clear European enforcement framework applicable to all kinds of piracy and counterfeiting and how to combat most effectively the distribution of keys and illicit devices via the Internet.
•
•
•
•
•
tiers: pricing tiers allow differential pricing to be applied for different groups of subscribers. Specific tiers can be targeted with special promotions; order-ahead pay-per-view (OPPV): subscribers can call their operator to buy one-time viewing events or groups of events. This can drive up sales by selling content with flexible pricing and incentives, such as rewarding subscribers for ordering early; impulse Pay-Per-View (IPPV): subscribers can purchase programmes from the Electronic Program Guide (EPG) using their remote control. Simplicity of use and availability of the latest movies and premium content drives up ARPU; near-video-on-demand (NVOD): Subscribers can buy PPV movies at staggered start times. This increases sales as it allows viewers to choose the time most convenient for them to view; token pay-per-view: subscribers can buy credit tokens for ordering movies. This gives the convenience of IPPV without the need for a return path.
In addition to subscriber-based Pay-per-view, it could also be possible to adopt ‘pay as you go’ models, similar to those of the telecoms industry. Such models allow broadcasters to target new market sectors where subscription services are not appropriate. This would allow Pay TV companies to generate incremental revenue without issuing subscriptions, and opens marketing opportunities for other nonsubscription based impulse purchases. This model appears to provide an opportunity to utilise EMV cards as a means of paying for TV services without the need for a separate Pay TV account to be set up. “The ability of an EMV card to authorise a transaction locally is a great enabler for Pay TV services as it removes the need for an infrastructure that supports online authorisation of transactions, which has traditionally been the most expensive, and technically difficult part of the process,” explains Brendan Thorpe, business development manager, CreditCall Communications. “The general view amongst the major players in the European Pay TV market place is that once one major player has implemented set-top boxes with Pay As You Go services that utilise credit or debit cards, the other companies will have to follow suit. “At the moment, all impulse decisions are paid for over the telephone. However, it is expected that within the next 6–9 months, trials using EMV cards could take place. One manufacturer of set top boxes has already gained EMV certification of its smart card reader – this is the best indicator that at least one Pay TV provider has already made the decision to develop and market pay-as-you-go Services.”
Card Technology Today September 2003
survey
Conditional Access – describes the method that ensures programme providers get paid for the services they supply to the user Conditional Access Module – a detachable conditional access interface Decoder – unit connected to the satellite receiver to unscramble pictures protected by encryption
OpenCable Standard – developed for the US and now adopted for use in Korea Pay-Per-Channel – a set price is paid per period for the viewer to receive all programmes of a specific channel Pay-Per-View (PPV) – Conditional Access service that enables the user to buy access to a particular programme
Digital Video Broadcast (DVB) standard – this is used in Europe and China
POD – Point Of Deployment
Impulse-Pay-Per-View – Conditional Access service which allows the consumer to make a last minute decision to purchase a specific programme
Video-On-Demand (VOD) – Multichannel system that enables a film to be broadcast immediately when requested by the viewer
STB – Set Top Box
A selection of terms used in the Pay TV market.
Whether or not the card placed in the EMV reader to pay for impulse purchases will be a regular credit card, or one provided by the broadcaster is open to debate. “It is being suggested that a large card scheme may have signed an agreement to provide a multiapplication EMV card to the Pay TV market,” reports Thorpe. “At the moment the limiting factor is the deployment of EMV cards in Europe; once these cards are in widespread use there will be no reason why Pay TV services utilising a credit or debit card can not become a reality. The technology to enable it from the TV provider’s perspective is already there. The opportunity presented by multi-application cards where you could have a payment application and an electronic purse containing your PayTV top up account is enormous.”
Market change? Although smart cards could be included in the Pay TV systems of many of the world’s broadcasters, many people within the smart card industry report that this is still a very slow market, with very little happening. According to one insider, this is because the market is in a steady state, and growth is not assured. The number of subscribers is not growing as quickly as expected and churn is still high. However, it is possible that the Pay TV industry has now turned a corner. As one Conditional Access Supplier told CTT: “In the last 6-8 months, the Pay TV market seems to have picked up, with lots of new contracts. This statement certainly seems to be born out by BskyB’s financial results, which were announced
in August. For the first time in five years the company reported an annual pre-tax profit. The company said that its improved performance reflected continued strong growth in subscriber numbers, with a further 133,000 viewers signing up between April and June this year. The increase brought the total subscriber base to 6.8 million. Meanwhile, the churn rate of BskyB’s subscription-only sport and movie channels fell to 9.4% from 10.4% a year ago. In other parts of the world, the satellite industry is also reported to be strong. “Areas of growth that are now emerging are in regions where satellite was banned or not economically viable,” says Ellis. “In particular, Korea has one million subscribers, and China and India have a regulated satellite system.” However, for all companies to be viable, economies of scale have to be realised. “This is a problem in Eastern Europe where it is sometimes difficult to get satellite TV up and running because of language differences,” reports Ellis. The digital cable television industry is considered sluggish in the US and Western Europe, and has not received the uptake of subscribers that many people predicted. On the other hand, cable use is high in China, India and Korea, where it is heavily promoted by national governments. In addition to broadcasters’ developments, the Conditional Access market is going through a period of consolidation. At the beginning of August, the Kudelski group announced an agreement to acquire MediaGuard, the Conditional Access business of Thomson’s Canal Plus Technologies. This announcement
means that the European CA market is now dominated by two players: NDS and Kudelski.
Smart card future? There is little doubt that smart cards will continue to be used to secure access to Pay TV services for a large number of consumers in the future. The need to control access to content will continue to be there – and the smart card could provide that link. However, it is expected that the smart card industry will continue to have limited influence or power over the Pay TV market. This is because the suppliers of Conditional Access Systems drive the main security initiatives and smart card providers merely fulfil order requirements. Some groups predict that sales volumes of cards related to Pay TV will grow substantially in the next few years. According to the RESET Roadmap published by Eurosmart, these increases will be due to “the new interactive and Internet television market”. Such markets will require cards with more memory and greater functionality. Cards will also have to be replaced every three to five years to prevent piracy. As the diversity of output devices on the market increases, some industry insiders believe that there will be a change in the form factor of the card used in this market. There will also be occasions – even in regions where smart cards are widely deployed – when smart cards will not be chosen. Some hotels often do not want to use smart cards as they can be lost or stolen. “In such circumstances, the smart card may be held as a virtual smart card elsewhere on the network, rather than on the Set Top Box,” comments Neville-Smith at Amino. While the main Pay TV business will continue to be characterised by subscriber-based services directly to home (DTH), there will be a growing interest in IP-TV as well as the incremental market of pay-as-you-go. “If the smart card industry can prove that additional applications are useful to consumers, without creating additional hurdles, then it should have a future in the Pay TV market – especially if it is used as part of a multi-application solution,” says Richard Straub, ceo, MediaCrypt.
Market survey contacts Company AEPOC Amino Canal Plus Technologies Conax CreditCall Communications DTC Reports Irdeto Access MediaCrypt AG Nagravision NDS Oberthur Orga SCM Microsystems SCM Microsystems GmbH
Name Davide Rossi Martin Neville-Smith Jean-Marc Racine — Brendan Thorpe Myra Moore Madelon Kaspers Richard Straub — Margot Field Joseph Hoppe Michael Scharrenberg Jason Schouw Manfred Müller
Card Technology Today September 2003
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Email [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] — [email protected] [email protected] [email protected]
15
The Pay TV market The global television industry is growing and changing rapidly. As broadcasters work to protect their revenues and build their client bases, smart card technology is developing a role with many media organisations. Up until the end of the 1980s, the majority of television viewers received broadcast services via terrestrial television. Using this approach, funding for broadcasters typically came through income from corporate advertising or revenue received via national licenses. Since then, technology has developed, and new business models have been established. The biggest change has been the advance of Pay TV, which is delivered via a number of different platforms including: •
•
•
direct to home (DTH) satellite and cable systems. It is estimated by DTH insiders that there are 60 of these systems worldwide with 50 million subscribers; digital terrestrial TV, which represents a shift from the Pay TV model to a Free to Air model; emerging new platforms. Telecoms operators are entering the content business so that they can get a higher return on their networks. With these systems, it becomes possible to watch videos or listen to audio over a mobile network.
Convergence One of the buzzwords within the Pay TV market is convergence. The move from analogue to digital technology has enabled value added services such as interactive TV, home banking and e-commerce to be conducted via digitally based cable and satellite systems. Furthermore, traditional broadcast over cable and satellite channels is now converging with broadband Internet. As IP-TV takes off, viewing habits will be revolutionised, as Koos Ellis, senior software development engineer, Irdeto Access explains: “The Internet browser is a one-person device, whereas the TV is a device for more than one person, meaning that convergence to one single device is highly likely.”
Copyright protection The introduction of Pay TV has resulted in new challenges for broadcasters, who need to manage transactions and interactivity, while ensuring that only those subscribers who have paid for a service can gain access to it. This challenge is being addressed with Conditional Access Systems (CAS), which in addition to limiting access to paying subscribers, enable operators to scale and upgrade their system to match business growth and increase average revenue per user (ARPU).
Card Technology Today September 2003
In Europe, the use of smart cards in conditional access systems is the norm. As a result, “when the Pay TV industry does well, smart cards do well; but when Pay TV does badly, smart cards do badly,” according to Manfred Müller, head of strategic marketing, and director of investor and press relations – Europe, SCM Microsystems. Unlike other application markets where smart card companies may be closer to the card issuer, smart card manufacturers typically communicate with Conditional Access Vendors or Conditional Access suppliers, and provide their cards to these vendors who then incorporate them into their Conditional Access Systems. One source of revenue generation for some CAS vendors is the exchange or swapping of smart cards. This is conducted partly to remove the number of illegal cards circulating in the system. “There are lots of illegal cards out there, which come from Asia and then allow software to be downloaded from the Internet. These are called Fun Cards or Gold Waiver cards,” reports Müller. “Broadcasters can make these inoperable by upgrading the CA system or switching CA suppliers.” When broadcasters upgrade their CA system, they often receive a boost in subscriber numbers as those using pirated cards find that they are no longer operable.
CA approaches The European approach to conditional access is different from that adopted in America. “TV companies in Europe were the early adopters of smart cards for Pay TV,” says Perry Smith, vice president, security development, NDS TI. “Now, the technology is spreading around the world and we’re beginning to see the Asian With the growth and divergence of broadcasting platforms, international copyright protection has become a big issue, and several organisations are now involved in content protection. AEPOC (The European Association for Protecting against Piracy) comprises key players in the European digital television sector, and was founded to combat piracy in Europe. Members of AEPOC include BetaResearch, BskyB, Canal+, Canal+ Polska, Canal+ Technologies, Conax, Eutelsat, IrdetoAccess, Motorola, Nagravision, NDS, Nokia, NTV-Plus, Pace, Philips Digital Networks, Premiere, Rai, Sagem, SCM Microsystems, Showtime Arabia, Société Européenne des Satellites, Sogecable, Stream, Tele+, Thomson, TPS, United Pan-European Communications (UPC) and Viaccess (France Telecom).
market open. However, the US is still not actively using smart cards for Pay TV. This is because of the difficulty of adoption. The market is ruled by Motorola and Scientific Atlanta, which have traditionally built their security into the set top box.” In spite of this, signs are afoot that the US market is now changing, as Myra Moore, president of Digital Tech Consulting told CTT: “In the US, there are efforts to incorporate cable tuners and conditional access systems into digital televisions through the Point Of Deployment (POD) initiative. This marks a move away from the traditional approach of embedding the CAS into the set top box, and means that if people want to buy a TV and hook up to PAY TV without buying a set top box, they can do so.” The POD initiative was established by the CableLabs consortium – the research arm of the cable industry – and was a response to the need to address the problem of interoperability. POD fits well into the OpenCable Standard, which was drafted by CableLabs. The POD module – recently renamed CableCARD – is currently in front of the Federal Communication Commission (FCC) for approval. The question of interoperability has become more important since the US government passed the 1996 Telecommunications Act, which is set to allow consumers to purchase a digital set top box instead of having to lease one from cable operators in the future. “In the US, the regulations state that the security element for encrypting the signal is separate from the box or removable. But, there is no reference to a smart card in this approach. The reference is to the POD or CableCARD,” reports Jason Schouw, vice president & general manager, Americas, SCM Microsystems. Activities conducted under the AEPOC umbrella include: •
monitoring of pirating situations;
•
analysis of European legislation and international agreements concerning safeguards and the protection of conditional access services;
•
identification of weak points in existing regulations;
•
promotion of new laws to cope with an everchanging market.
Other groups that are now putting pressures on governments to police content theft include the World Intellectual Property Organisation (WIPO) and the Motion Picture Association (MPA).
International copyright
13
survey
Hot topic CAS and Digital Rights Management (DRM) are hot topics within the Pay TV industry, with many insiders debating the difference between the two terms. Some argue that both terms are the same in principle – covering the protection of movies, music, literature and software. Those who approach the debate from the broadcasting world tend to use the term ‘CAS’, whereas those who come from the Internet world tend to use ‘DRM’. Others argue that everything should be included under the umbrella of content protection. “DRM just says who has access…As content becomes all digital, and fears of privacy increase, DRM is a more sophisticated form of copy protection than in the past,” says one insider. Meanwhile, Jean-Marc Racine, executive vice president, Marketing, Canal Plus Technologies argues: “DRM provides end-to-end protection of content from the point when it goes out of the studio until it reaches the Pay TV subscriber on their Set Top Box. This process ensures security of access throughout the whole chain. Today, there are no true DRM systems that are deployed. CAS, meanwhile, protects the broadcast segment between the broadcast sector and the set top box.” “Typically, DRM products are downloaded and watched at a later time, whereas CAS products can be downloaded in real time, and viewed as they come over the network. DRM and CAS are now converging and this is resulting in converging viewing rights,” comments Martin Neville-Smith, applications manager, Amino.
Why smart cards? Clearly, two of the key issues for Pay TV broadcasters are security and revenue generation. Smart cards could play a part in both these areas. “What is interesting about the smart card is its flexibility and renewability,” reports Schouw. “If a box or security system is hacked or a protocol is changed, all the operator has to do is ship a new card as opposed to shipping a new box.” This flexibility is useful for new broadcasters, who may A number of laws and directives have been passed to protect the interests of the Pay TV industry. In May 2000, the European Parliament issued a directive against piracy in the EU. Also in 2000, the promulgation of the Copyright Amendment Bill to the Australian Copyright Act took place. This bill provides the legislative ability to deal with content thieves. And in the US, the 1998 Digital Millennium Copyright Act was created to help copyright holders protect their rights online. In Europe, Directive 98/84/EC on the legal protection of conditional access services aims to provide a minimum level of equivalent protection within the EU of electronic pay-services against piracy by prohibiting all commercial manufacturing, distribution and marketing activities related to pirate smart cards and other devices circumventing the access protection of pay-TV, radio and Internet services.
Legislation
14
just want to roll out basic services to consumers before thinking of additional functionality. Within the Home networking environment, the smart card also allows the viewing of different programmes in different parts of the home. Smart cards play a fundamental role in revenue protection for the whole home entertainment industry. As Davide Rossi, secretary general, Aepoc told CTT: “Smart cards are important for protecting the legitimate rights of programme makers, because without proper management of CAS, the whole business structure could collapse. In Italy during 2002, the CA System was completely hacked. As a result, the video and DVD rental business fell and sales of DVD boxes dropped, as many people opted for satellites and set top boxes instead. Without proper maintenance of CA systems and procedures, this could have a big impact on the whole market.” One approach to copy protection using smart cards is SmartRight – an end-to-end digital content protection system for home-networked consumer electronic devices, which can be combined with conditional access systems or digital rights management systems. This is a global system that can be deployed in any region of the world. According to the SmartRight web site: “It defines a common syntax for SmartRight content to ensure interoperability and defines a simple application programme interface (API) with current dominant CAS and DRM systems. SmartRight member companies include Canal + Technologies, Gemplus, Micronas, Nagravision, Pioneer, SchlumbergerSema, ST Microelectronics, SCM Microsystems and Thomson.
Revenue generation As parts of the Pay TV industry reach saturation and pre-saturation phase, new Pay TV business models are being established to enable operators to maximise their ARPU. According to NDS, these business models include: •
subscription services: channels are packaged and sold in a number of different ways;
Earlier this year, the European Commission published a report saying that piracy must be stamped out to protect Europe’s competitiveness. “Piracy is far from a victimless crime: legitimate users end up paying higher prices, operators can go bankrupt and governments are deprived of tax revenue,” it said. The report assessed the implementation of the 1998 Directive on legal protection for electronic pay services, and urged member states to work together to fight piracy through training enforcement personnel, improved cooperation between industry and enforcement authorities and exchanging best practice and information. The report also identified the need for a clear European enforcement framework applicable to all kinds of piracy and counterfeiting and how to combat most effectively the distribution of keys and illicit devices via the Internet.
•
•
•
•
•
tiers: pricing tiers allow differential pricing to be applied for different groups of subscribers. Specific tiers can be targeted with special promotions; order-ahead pay-per-view (OPPV): subscribers can call their operator to buy one-time viewing events or groups of events. This can drive up sales by selling content with flexible pricing and incentives, such as rewarding subscribers for ordering early; impulse Pay-Per-View (IPPV): subscribers can purchase programmes from the Electronic Program Guide (EPG) using their remote control. Simplicity of use and availability of the latest movies and premium content drives up ARPU; near-video-on-demand (NVOD): Subscribers can buy PPV movies at staggered start times. This increases sales as it allows viewers to choose the time most convenient for them to view; token pay-per-view: subscribers can buy credit tokens for ordering movies. This gives the convenience of IPPV without the need for a return path.
In addition to subscriber-based Pay-per-view, it could also be possible to adopt ‘pay as you go’ models, similar to those of the telecoms industry. Such models allow broadcasters to target new market sectors where subscription services are not appropriate. This would allow Pay TV companies to generate incremental revenue without issuing subscriptions, and opens marketing opportunities for other nonsubscription based impulse purchases. This model appears to provide an opportunity to utilise EMV cards as a means of paying for TV services without the need for a separate Pay TV account to be set up. “The ability of an EMV card to authorise a transaction locally is a great enabler for Pay TV services as it removes the need for an infrastructure that supports online authorisation of transactions, which has traditionally been the most expensive, and technically difficult part of the process,” explains Brendan Thorpe, business development manager, CreditCall Communications. “The general view amongst the major players in the European Pay TV market place is that once one major player has implemented set-top boxes with Pay As You Go services that utilise credit or debit cards, the other companies will have to follow suit. “At the moment, all impulse decisions are paid for over the telephone. However, it is expected that within the next 6–9 months, trials using EMV cards could take place. One manufacturer of set top boxes has already gained EMV certification of its smart card reader – this is the best indicator that at least one Pay TV provider has already made the decision to develop and market pay-as-you-go Services.”
Card Technology Today September 2003
survey
Conditional Access – describes the method that ensures programme providers get paid for the services they supply to the user Conditional Access Module – a detachable conditional access interface Decoder – unit connected to the satellite receiver to unscramble pictures protected by encryption
OpenCable Standard – developed for the US and now adopted for use in Korea Pay-Per-Channel – a set price is paid per period for the viewer to receive all programmes of a specific channel Pay-Per-View (PPV) – Conditional Access service that enables the user to buy access to a particular programme
Digital Video Broadcast (DVB) standard – this is used in Europe and China
POD – Point Of Deployment
Impulse-Pay-Per-View – Conditional Access service which allows the consumer to make a last minute decision to purchase a specific programme
Video-On-Demand (VOD) – Multichannel system that enables a film to be broadcast immediately when requested by the viewer
STB – Set Top Box
A selection of terms used in the Pay TV market.
Whether or not the card placed in the EMV reader to pay for impulse purchases will be a regular credit card, or one provided by the broadcaster is open to debate. “It is being suggested that a large card scheme may have signed an agreement to provide a multiapplication EMV card to the Pay TV market,” reports Thorpe. “At the moment the limiting factor is the deployment of EMV cards in Europe; once these cards are in widespread use there will be no reason why Pay TV services utilising a credit or debit card can not become a reality. The technology to enable it from the TV provider’s perspective is already there. The opportunity presented by multi-application cards where you could have a payment application and an electronic purse containing your PayTV top up account is enormous.”
Market change? Although smart cards could be included in the Pay TV systems of many of the world’s broadcasters, many people within the smart card industry report that this is still a very slow market, with very little happening. According to one insider, this is because the market is in a steady state, and growth is not assured. The number of subscribers is not growing as quickly as expected and churn is still high. However, it is possible that the Pay TV industry has now turned a corner. As one Conditional Access Supplier told CTT: “In the last 6-8 months, the Pay TV market seems to have picked up, with lots of new contracts. This statement certainly seems to be born out by BskyB’s financial results, which were announced
in August. For the first time in five years the company reported an annual pre-tax profit. The company said that its improved performance reflected continued strong growth in subscriber numbers, with a further 133,000 viewers signing up between April and June this year. The increase brought the total subscriber base to 6.8 million. Meanwhile, the churn rate of BskyB’s subscription-only sport and movie channels fell to 9.4% from 10.4% a year ago. In other parts of the world, the satellite industry is also reported to be strong. “Areas of growth that are now emerging are in regions where satellite was banned or not economically viable,” says Ellis. “In particular, Korea has one million subscribers, and China and India have a regulated satellite system.” However, for all companies to be viable, economies of scale have to be realised. “This is a problem in Eastern Europe where it is sometimes difficult to get satellite TV up and running because of language differences,” reports Ellis. The digital cable television industry is considered sluggish in the US and Western Europe, and has not received the uptake of subscribers that many people predicted. On the other hand, cable use is high in China, India and Korea, where it is heavily promoted by national governments. In addition to broadcasters’ developments, the Conditional Access market is going through a period of consolidation. At the beginning of August, the Kudelski group announced an agreement to acquire MediaGuard, the Conditional Access business of Thomson’s Canal Plus Technologies. This announcement
means that the European CA market is now dominated by two players: NDS and Kudelski.
Smart card future? There is little doubt that smart cards will continue to be used to secure access to Pay TV services for a large number of consumers in the future. The need to control access to content will continue to be there – and the smart card could provide that link. However, it is expected that the smart card industry will continue to have limited influence or power over the Pay TV market. This is because the suppliers of Conditional Access Systems drive the main security initiatives and smart card providers merely fulfil order requirements. Some groups predict that sales volumes of cards related to Pay TV will grow substantially in the next few years. According to the RESET Roadmap published by Eurosmart, these increases will be due to “the new interactive and Internet television market”. Such markets will require cards with more memory and greater functionality. Cards will also have to be replaced every three to five years to prevent piracy. As the diversity of output devices on the market increases, some industry insiders believe that there will be a change in the form factor of the card used in this market. There will also be occasions – even in regions where smart cards are widely deployed – when smart cards will not be chosen. Some hotels often do not want to use smart cards as they can be lost or stolen. “In such circumstances, the smart card may be held as a virtual smart card elsewhere on the network, rather than on the Set Top Box,” comments Neville-Smith at Amino. While the main Pay TV business will continue to be characterised by subscriber-based services directly to home (DTH), there will be a growing interest in IP-TV as well as the incremental market of pay-as-you-go. “If the smart card industry can prove that additional applications are useful to consumers, without creating additional hurdles, then it should have a future in the Pay TV market – especially if it is used as part of a multi-application solution,” says Richard Straub, ceo, MediaCrypt.
Market survey contacts Company AEPOC Amino Canal Plus Technologies Conax CreditCall Communications DTC Reports Irdeto Access MediaCrypt AG Nagravision NDS Oberthur Orga SCM Microsystems SCM Microsystems GmbH
Name Davide Rossi Martin Neville-Smith Jean-Marc Racine — Brendan Thorpe Myra Moore Madelon Kaspers Richard Straub — Margot Field Joseph Hoppe Michael Scharrenberg Jason Schouw Manfred Müller
Card Technology Today September 2003
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