Not Your Dad's Revenue Model

Not Your Dad's Revenue Model
September 2006

We have talked incessantly about the convergence that is certainly occurring in the network, but it is the end-users who are truly demanding convergent delivery of content, commerce, and rich communications services to their digital home devices. Engineers who design digital home electronics products are answering this need by using high-performance processors to stay ahead in providing innovative features that set their products apart from the competition. Plus, new service demands from customers mean that end products must be able to adapt to new content-delivery features quickly and easily, facilitating adaptation of revenue models in the delivery chain.

While service providers classically made their money from bandwidth and connectivity, these have simply become too commoditized for sustainable profitability. So, along with the explosive market growth in file-based content comes a shift from one-dimensional usage and service models to a far broader range of ways for service providers to make money — by monetizing content delivery.

quoteProtected by compute-intensive DRM schemes, licensed-content downloads (the purchase model) have, of course, already revolutionized the music industry (In-Stat reports that "downloaded music will outpace physical media bought online in 2007"). Subscription service models, on the other hand, offer digital content to consumers for a single monthly or yearly fee, providing a convenient way to watch movies, play games or listen to music. Digital content supported by advertising has also become increasingly popular with applications such as Internet radio, gaming services and video content delivery. And finally, users can simply pay rental fees to service providers on a pay-per-use basis. The only way end products can support this wide range of approaches to monetizing content is through flexible and dynamic software-based architectures that roll out next-generation services with the reliability, security, and interoperability that the market demands.

One ADI customer involved with facilitating content delivery is X-Digital Systems. The company's new integrated satellite broadcast-media receiver/decoder uses the processing power of 48 Blackfin processors to decode high-density MPEG streams so digital content providers can service apartment-dwelling subscribers without having to install individual satellite dishes. X-Digital, which chose Blackfin for price/performance and power conservation, used to sell a centralized satellite receiver that let carriers distribute content over terrestrial lines they did not own. New legislation in Japan, however, allowed line owners to charge carriers enormous sums for the use of the transmission lines. But the new decentralized X-Digital unit solves this problem and dramatically changes the cost model for the carriers. X-Digital says that pure economics was the main driver behind choosing Blackfin — the carriers are demanding a very low cost per decoded stream. And underscoring the importance of a strong third-party ecosystem, X-Digital partnered with Epigon Media Technologies for the development of a multi-channel MPEG2 decoder software for the receiver unit.

Service providers simply can not ignore the way digital home product capabilities directly affect their ability to monetize content delivery. Who could have known there would be such direct coupling between semiconductor companies and the service providers? The result is certainly going to be the continued adoption of flexible and evolvable software-based product architectures, because there is simply no other way for the content delivery chain to keep up with the demands of the customers and with the constant need to make some money along the way.