Net Insight

Net Insight signs their first live OTT agreement

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Yesterday Net Insight (NETI-B.ST) signed their first live OTT agreement, only two weeks after the new technology was announced. The agreement is signed with Tata Communications, the official connectivity provider of Formula 1. Alpha Researcher considers Tata Communications as one of the best possible reference agreements available for this kind of new technology.

Opportunities arise with Net Insight’s new live OTT technology

Two weeks ago Net Insight announced their new live OTT technology. The presentation can be watched on YouTube. In brief their new technology enables truly live over-the-top content, which means content that is fully synchronized across all platforms. Today’s technology does not allow full synchronization between normal tv distribution content and OTT content. This bottle neck currently limits for example tablet users’ experience of “live” over-the-top content, such as live hockey games and Formula 1 races. In other words the current technology which consists of buffering and caching has limited for example tablet users to interact on what they are watching, since “live” OTT content has been out of synchronization and thus around 20 seconds behind the normal tv distribution content. Therefore the true live feeling has been limited and it has sometimes spoiled events happening before the user has watched them. Net Insight’s live OTT solution solves these problems.

According to the company the technology has been under development for around two years, and no competition has so far been observed on the market. We argue that the lack of current competition could give them a significant window to gain traction and to become clear market leader before any eventual competitor develops a similar technology.

Possible business opportunities that arise with this kind of unique technology are not hard to identify. An overall increased user experience is probably the first enhancement factor that will be targeted and utilized by market participants, such as content delivery networks (Tata Communications) and their sub-customers. Alpha Researcher argues that providers of live sports content and other live content, where this new technology could significantly improve interactivity with OTT viewers, will be the first adopters. We also believe that the decision process amongst potential customers within this segment could pick up significant speed going forward. The reason behind this belief is that online marketing monetization on OTT content can be taken to the next level through this technology.

Furthermore we argue that Net Insight’s framework agreement with Tata Communications is one of the best possible reference agreements that they can sign in this early stage. Tata Communication is as previously mentioned the official connectivity provider of Formula 1 content. Participants within the Formula 1 industry is with their high level of capital expenditures well-known for being early adopters of technology that enhances service quality and thus also the user experience. Tata Communications has already tested the technology on Singapore’s Formula 1 track, and there was no delay between the live broadcast and the content displayed on their application.

In our view Tata’s quality check and early adoption sends distinct signals to all market participants within the Formula 1 segment, but also to ones in other sports segments like the National Football League, National Hockey League and Major League Baseball. We believe that market participants within those sports are likely to be the next ones to sign agreements with Net Insight, along with those providing Premier League content. Observe that this however solely represents our qualified speculation.

Another segment, where the demand for a high level of social interactivity is even more pronounced, is the growing e-sport market with participants like ESL and Twitch. The first one is owned by Modern Times Group (MTG) and the second one by Amazon. E-sport fans value the possibility to interact even more than fans of traditional sports, due the strong online community feeling that exist amongst them. Combined with currently extensive capital injections in the industry we argue that Net Insight’s offering could be topical for it in the short- to mid-term.

Other business opportunities and target groups that might arise in the future are for example the online gambling industry. With Net Insight’s technology online gambling operators will be able to introduce fully synchronized live betting services and live content on mobile devices. An entry into this market might however take a while since the back-end technology has to be developed and then approved by regulatory authorities. The kind of revenue model that will be used for delivering this type of service to the gambling industry is difficult to speculate on today, but we do not exclude a software as a service model (SaaS model) which is based on transaction- or user volumes. The best case scenario for Net Insight would however be if some kind of revenue sharing model were to be used.

The revenue model that will be used within the Tata framework agreement is also difficult to speculate on. But we expect that some kind SaaS model will be implemented. For example a monthly subscription fee that is paid by Tata’s customers that decide to use Net Insight’s technology. The fee could in our view be based on the amount of unique end-users that are using the service.

Alpha Researcher is excited given all the opportunities that arise with this new technology. Not only by the opportunities that arise from the new service itself, but also by the overall upselling opportunities. It is however too early to draw any concrete revenue assumptions on this service and on upselling opportunities. More information regarding the revenue model is required before we can do that. And perhaps more importantly we need information that tells us when the company intends to start sell the new service.

Disclosure and disclaimer

Net Insight is a part of Alpha Researcher’s portfolio and is also included as one of our Alpha Picks. The analyst owns shares in the company.

Alpha Researcher does not take any responsibility for investments made in Net Insight. The analysis or article written above and all the conclusions that are made within it are solely Alpha Researcher’s opinions and expectations. It should absolutely not be seen as any investment advice. We highly encourage investors to make their own analysis and/or contacting investment professionals before buying any shares in Net Insight.

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