BSkyB / NDS : Further Innovation in the Pipeline
The OFT inquiry into the BSkyB purchase of Amstrad couldn’t be any further wide of the mark in finding the real competitive advantage that BSkyB has over all the other players in the UK TV market. One of the consistent advantages, but not the only advantage, is the innovation that NDS has developed for BSkyB.
Conditional Access is a pretty boring dinner party subject but absolutely core for payTV operations – NDS provides the technology that secures the BSkyB business model. ITV digital found out how expensive it was to make the wrong choice when its cards were cloned and being sold in pubs up and down the UK. A little known fact is that the Virgin Media Conditional Access has also been comprised and limited bootleg versions are available as we speak on the net. NDS has never been cracked and the technology has actually been successfully implemented in Scandinavia and Italy to stop mass pirating of satellite signals.
News Corp was one of seed financers of the businesses when encryption was even less fashionable than it is today. On the back of its start in Conditional Access, NDS has spread its technological wings into other vitally important parts of the BSkyB service.
An important feature of the Sky Sports service is the interactivity. The Red Button feature is designed with NDS technology and still to this day, seven years after launch is not available to Sky Sports subscribers on Virgin Media, a compelling reason for some people to choose satellite over cable TV for some.
Betting on the TV may not be everyone’s cup of tea, but some like it and SkyBet is becoming an useful profit contributor to BSkyB profits. The multiplatform technology underpinning the SkyBet service is from a company called Orbis who NDS acquired in 2000.
Games on the TV have always been part of the BSkyB service even in the analogue days and the key partner is a Danish company called Visionik who were acquired by, you guessed it, NDS in 2002. Visionik themselves in 2006 have since bought another Danish Games developer called ITE.
When interactiveTV was first launched one of supposed key benefits was extra income generated by personalized and interactive adverts. In the first generation these were a complete flop not only because of the early smaller audience size of payTV, but more importantly because of the extra costs of production were not deemed to be justified. Step forward NDS in 2003 with its RapiAd template technology which allegedly allows agencies to build ads from the desktop in under an hour. Quite a few ads these days on BkyB appear with a red button next to them with some sort of interactivity feature.
All of these applications were revenue enhancing to the BSkyB operation, but the next product was such a step forward that it has literally changed TV viewing in the UK forever and is more addictive to the average Couch Potatoe than the Crackberry is to the average City Trader. Yes, we are talking about Sky+ in the UK. I am sure there are hundreds of City Traders whose idea of weekend recreation time is fast forwarding through adverts in the middle of recorded programmes from the week with the left hand whilst simultaneously replying to overdue emails on the Crackberry with the right. Sky+ is an absolute phenomenon and has exceeded all commentators’ expectations and NDS technology underpins it.
Once the Sky+ boxes had been seeded onto the market another new groundbreaking service was launched. Push VOD services into a hidden eighty hours worth of space on the Sky+ v2+ boxes named Sky Anytime and again supported by NDS technology. Currently the content is limited to programmes that have been shown on the Satellite channels, but I don’t suspect it will be too long before Hollywood starts using Sky Anytime as a mechanism for distributing relatively new movies for rental. I can’t think of a cheaper distribution mechanism than using overnight spare satellite capacity to millions of homes.
Assuming a rental price of £4/movie with a 50:50 revenue share with the movies studios works out to be £1.70 revenue/movie share to Sky. Assuming an average 1% take-up per week for the Sky households of 8.5m works out to be £7.23m additional high margin turnover both to Sky and the Movie studios per annum with very little risk of pirating. Sky Anytime could be quite a nice profit centre for BSkyB in the future.
Of course the million dollar question is where the Sky/NDS partnership is heading next.
As with the hidden storage, I believe there is also a chance that a new service will spring to life with the less hidden USB port on the front of the Sky+ boxes. This is only a software download away from being really useful output device for copying content from the hard disk to a portable memory stick which can then be played on other types of devices (eg laptops). Of course, the security will be a concern, but for a company such as NDS with security embedded in its DNA it shouldn’t be too high a hurdle to overcome. I would expect in the future Sky+ boxes to have memory card reader/writers contained within them.
Despite the efficiency of broadcast networks and the capacity of broadband networks, I still believe that reusable physical media has a big role to play in future media distribution. It should be remembered that there is as much innovation going on in physical media as in any other means of distribution – the industry has moved on a lot from the write once unprotected CD’s that have created such anarchy in the music market.
One recent acquisition in Dec 2006 by NDS of Jungo Ltd, brings a lot of expertise in USB interfaces. However, the real reason for the acquisition is the Jungo expertise in producing out-of-box software platforms for home gateways. These gateways are the fundamental means for broadband customers to access the network and are becoming more and more complex over time – not only including the DSL modems, but also routing and firewall capabilities, wireless access points, remote management, storage and print facilities. NDS are pretty open in their belief that support for a hybrid set-top box and home gateway for both ip and broadcast video is the next evolution of their software set and Jungo gets them all the capabilities they require.
This hybrid solution NDS calls the Xspace architecture. It offers fantastic revenue opportunities not only in the long tail of content, but also in targeting ad-insertion and a decent quality return path rather than the current dial-up modem based solution that the current generation of set-top boxes uses.
It is interesting that last weeks acquisition of CastUp provides NDS the capability in the final missing piece of the jigsaw: a CDN. CastUp is not currently on the radar of most industry observers, but it is quite successful in distributing content around Israel, I don’t suppose it will be too long before a CastUp CDN for the UK is built tightly integrated with the BSkyB/Easynet internet backbone.
NDS although quoted on the NASDAQ is majority owned by News Corporation and reported great results for FY0707 last week with revenues of US$709m, Operating Income of
US$160m and Cash Balances of US$593m. Although quoted in the USA, NDS is actually based in West Drayton, Greater London just up the road from BSkyB’s HQ in Isleworth, Greater London. NDS has a lot of other customers worldwide apart from BSkyB and openly markets its software to all cable and satellite companies.
BSkyB derives a lot of its technological advantage through the symbiotic relationship with NDS and only a fool would bet against their view of a hybrid broadband and satellite future. Virgin Media, BT and the other broadband players are going to have their work cut out to keep up with the innovation already on the way.
Conditional Access is a pretty boring dinner party subject but absolutely core for payTV operations – NDS provides the technology that secures the BSkyB business model. ITV digital found out how expensive it was to make the wrong choice when its cards were cloned and being sold in pubs up and down the UK. A little known fact is that the Virgin Media Conditional Access has also been comprised and limited bootleg versions are available as we speak on the net. NDS has never been cracked and the technology has actually been successfully implemented in Scandinavia and Italy to stop mass pirating of satellite signals.
News Corp was one of seed financers of the businesses when encryption was even less fashionable than it is today. On the back of its start in Conditional Access, NDS has spread its technological wings into other vitally important parts of the BSkyB service.
An important feature of the Sky Sports service is the interactivity. The Red Button feature is designed with NDS technology and still to this day, seven years after launch is not available to Sky Sports subscribers on Virgin Media, a compelling reason for some people to choose satellite over cable TV for some.
Betting on the TV may not be everyone’s cup of tea, but some like it and SkyBet is becoming an useful profit contributor to BSkyB profits. The multiplatform technology underpinning the SkyBet service is from a company called Orbis who NDS acquired in 2000.
Games on the TV have always been part of the BSkyB service even in the analogue days and the key partner is a Danish company called Visionik who were acquired by, you guessed it, NDS in 2002. Visionik themselves in 2006 have since bought another Danish Games developer called ITE.
When interactiveTV was first launched one of supposed key benefits was extra income generated by personalized and interactive adverts. In the first generation these were a complete flop not only because of the early smaller audience size of payTV, but more importantly because of the extra costs of production were not deemed to be justified. Step forward NDS in 2003 with its RapiAd template technology which allegedly allows agencies to build ads from the desktop in under an hour. Quite a few ads these days on BkyB appear with a red button next to them with some sort of interactivity feature.
All of these applications were revenue enhancing to the BSkyB operation, but the next product was such a step forward that it has literally changed TV viewing in the UK forever and is more addictive to the average Couch Potatoe than the Crackberry is to the average City Trader. Yes, we are talking about Sky+ in the UK. I am sure there are hundreds of City Traders whose idea of weekend recreation time is fast forwarding through adverts in the middle of recorded programmes from the week with the left hand whilst simultaneously replying to overdue emails on the Crackberry with the right. Sky+ is an absolute phenomenon and has exceeded all commentators’ expectations and NDS technology underpins it.
Once the Sky+ boxes had been seeded onto the market another new groundbreaking service was launched. Push VOD services into a hidden eighty hours worth of space on the Sky+ v2+ boxes named Sky Anytime and again supported by NDS technology. Currently the content is limited to programmes that have been shown on the Satellite channels, but I don’t suspect it will be too long before Hollywood starts using Sky Anytime as a mechanism for distributing relatively new movies for rental. I can’t think of a cheaper distribution mechanism than using overnight spare satellite capacity to millions of homes.
Assuming a rental price of £4/movie with a 50:50 revenue share with the movies studios works out to be £1.70 revenue/movie share to Sky. Assuming an average 1% take-up per week for the Sky households of 8.5m works out to be £7.23m additional high margin turnover both to Sky and the Movie studios per annum with very little risk of pirating. Sky Anytime could be quite a nice profit centre for BSkyB in the future.
Of course the million dollar question is where the Sky/NDS partnership is heading next.
As with the hidden storage, I believe there is also a chance that a new service will spring to life with the less hidden USB port on the front of the Sky+ boxes. This is only a software download away from being really useful output device for copying content from the hard disk to a portable memory stick which can then be played on other types of devices (eg laptops). Of course, the security will be a concern, but for a company such as NDS with security embedded in its DNA it shouldn’t be too high a hurdle to overcome. I would expect in the future Sky+ boxes to have memory card reader/writers contained within them.
Despite the efficiency of broadcast networks and the capacity of broadband networks, I still believe that reusable physical media has a big role to play in future media distribution. It should be remembered that there is as much innovation going on in physical media as in any other means of distribution – the industry has moved on a lot from the write once unprotected CD’s that have created such anarchy in the music market.
One recent acquisition in Dec 2006 by NDS of Jungo Ltd, brings a lot of expertise in USB interfaces. However, the real reason for the acquisition is the Jungo expertise in producing out-of-box software platforms for home gateways. These gateways are the fundamental means for broadband customers to access the network and are becoming more and more complex over time – not only including the DSL modems, but also routing and firewall capabilities, wireless access points, remote management, storage and print facilities. NDS are pretty open in their belief that support for a hybrid set-top box and home gateway for both ip and broadcast video is the next evolution of their software set and Jungo gets them all the capabilities they require.
This hybrid solution NDS calls the Xspace architecture. It offers fantastic revenue opportunities not only in the long tail of content, but also in targeting ad-insertion and a decent quality return path rather than the current dial-up modem based solution that the current generation of set-top boxes uses.
It is interesting that last weeks acquisition of CastUp provides NDS the capability in the final missing piece of the jigsaw: a CDN. CastUp is not currently on the radar of most industry observers, but it is quite successful in distributing content around Israel, I don’t suppose it will be too long before a CastUp CDN for the UK is built tightly integrated with the BSkyB/Easynet internet backbone.
NDS although quoted on the NASDAQ is majority owned by News Corporation and reported great results for FY0707 last week with revenues of US$709m, Operating Income of
US$160m and Cash Balances of US$593m. Although quoted in the USA, NDS is actually based in West Drayton, Greater London just up the road from BSkyB’s HQ in Isleworth, Greater London. NDS has a lot of other customers worldwide apart from BSkyB and openly markets its software to all cable and satellite companies.
BSkyB derives a lot of its technological advantage through the symbiotic relationship with NDS and only a fool would bet against their view of a hybrid broadband and satellite future. Virgin Media, BT and the other broadband players are going to have their work cut out to keep up with the innovation already on the way.
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