V I D E O • A G E MA Y 2 0 1 2 28 (Continued from Cover) Wi-Fi Onboard to pay extra for. VideoAge embarked on a trip to find out what’s happening out there in the costly skies, considering that one aspect of the travel experience that has actually improved almost across the board is in-flight entertainment (IFE). First of all, drop-down or ceiling mounted mainscreens have largely become remnants of the past, as seat-back videos proliferate. Now, we’re onto the next big thing: iPads. Qantas recently rolled out a trial for their low-cost airline, JetStar, in which they rented out iPad 2s. Michael Reilly, COO of Australiabased Stellar, a content service provider that acts as “a classic middleman” between the content owners and the airlines, was involved in the deal, which he said was a bit difficult in terms of getting approval from the studios and from Apple (which is used to relying on iTunes for selling content). Yet, Reilly expects more low-cost airlines will follow suit. In fact, Scoot, a new low-cost carrier owned by Singapore Airlines, already has a similar initiative in the works. “There’s an interesting trend in which low-cost airlines are embracing the new technology. It could be a source of revenue for them,” Reilly said. “When done correctly, without the overhead of large systems, IFE can be a revenue center rather than a cost center,” Reilly added. The Qantas service relies on a central server on-board to stream content to specially configured iPads (as of now, all on-board content is pre-stored and streams from a server on the aircraft). “But the jury’s still out on whether people are willing to pay money to rent iPads on long-haul flights,” he added. It’s even less likely that those in premium classes would be willing to shell out cash for a tablet. But the biggest question on the minds of those in the in-flight entertainment business revolves around on-board Web connectivity — in other words, whether travelers will soon be able to stream Internet content directly onto their own tablets and devices as they fly around the world. Most experts agree that it’ll be a while before that technology becomes available in any widespread way, and passengers will be able to stream series from Netflix or Hulu; but it is something people are beginning to imagine. “We’re going to start seeing in-flight connectivity onboard after years of talking about it. The in-f light connectivity business is littered with dead bodies, but in recent years, there has been an understanding that passengers want to be connected. If you talk to any major airline today, they’ve either established a plan or are in talks to,” said Mary Kirby, editor-in-chief of the Airline Passenger Experience Association (APEX)’s Airline Passenger Experience magazine. “The big question mark is how much bandwidth they will have. At the moment, they simply don’t have enough for the whole cabin to stream,” said Kirby. “It’ll be appropriate to have this conversation in the next decade, but with airlines, changes come slowly… they can be in the pipeline for years.” Of course, the studios and other content providers are hoping that eventual connectivity translates into more cash. “On short-haul flights where no other IFE is offered, this could create a new incremental revenue stream for the studios that own and license the content,” said Ed Harris, director of Non-Theatrical Sales at California-based CBS Studios International. As things stand now, the airlines are expected to provide very high quality content, and in many cases, TV series are in high-demand. “The airlines will always buy the latest movies, but there are only so many that are made available, so the natural choice is television,” said Leigh Mantle, chair of APEX TV, the IFE Market Conference that recently concluded in Brighton, England. “You’re seeing boxed sets of shows like 24 or Mad Men, and you can buy the whole library on board.” “Airlines are very competitive, and entertainment — especially in the Far East and Middle East — is a big deal. If you’re competing with say, Virgin Atlantic, you have to have multiple channels so as not to encourage people to switch airlines,” Mantle said. As a result, the annual APEX TV Market Conference has seen increased attendance from independents. “It’s become easier for smaller companies to get their content on aircrafts. It started about 12 years ago with seatback screens. Some aircrafts are flying with 150 Hollywood movies and 1,000 video shorts,” Mantle explained. The change to seatback screens has also allowed distributors to license different kinds of content to the airlines. “It wasn’t long ago when most TV exhibiting in-flight was of the familyfriendly, half-hour sitcom variety due to mainscreen exhibition being the [IFE] offered by an airline. Once in-seat systems were developed and installed on many airlines, there was more of a demand for more edgy, premium content such as Dexter and Californication,” said CBSSI’s Harris. With changes in store, and airlines offering more content than ever before, can they actually make some money off IFE? “Yes, but it won’t be the airlines’ saving grace,” Kirby said. Some airlines have found the best way to make money on IFE is to unbundle programming, offer some content for free and sell premium movies (a model JetBlue follows). One large hurdle for IFE is that the systems are expensive to install. According to Boeing, IFE is the second most costly item on the modern jet, aside from the airframe (the most expensive, in case you’re wondering, are the engines). The IFE system on a 777 can include more than 2,500 parts and can weigh between 2,000 pounds (900 Kgs) and 4,000 pounds (1,800 Kgs), according to Boeing literature. But for many carriers the goal is less about making money off of IFE, and more about “differentiating your product,” said Kirby. “There are carriers that have unbundled content that want to make money off of it, or at least cover the costs. Increasingly, though, it’s become the cost of doing business.” For companies like Reilly’s Stellar, the ever-evolving technologies associated with IFE can mean big business, since his company does a lot of the technical work required to package content for the airlines. “One of the reasons we exist is because the airlines don’t have the knowledge — or the resources — to do it internally. The airlines are being told to do more with less.” This means that, ironically, as the airlines suffer financially, these intermediaries see growth. While we know the intermediaries are making money, and that the airlines can potentially make a small amount of money from IFE, what about the studios and indies? “For the Hollywood studios, it’s a fraction of what they make other places…maybe two to three percent of their overall business. But as they’re increasingly feeling the pinch of fewer theatrical sales, it’s not something they’re willing to turn their backs on,” Reilly said. He added that the studios tend to be very hands-on during a transaction, “because of concerns about piracy.” Distributors are charging less money for content now that most IFE comes in the form of seat-back entertainment. The varying fees depend on a number of factors, including the type of system installed on the aircraft, the number of exhibitions during any given license period (which is typically one-to-two months) as well as other factors such as volume commitment. This can result in costs ranging from $5-$70 per flight or a flat fee. But the studios contend that the business is still very important. “Airlines enjoy an early window to exhibit Hollywood films two to three months after theatrical release in the U.S., so a quality film with broad appeal will often provide a strong revenue stream for a studio.WithTV, it is important to maximize the revenue potential for each program. We are very well situated with hits from yesterday and today to do that,” concluded CBSSI’s Harris. Ed Harris, CBS Studios International Mary Kirby, editor-in-chief of APEX’s Airline Passenger Experience magazine Michael Reilly of Stellar The biggest question on the minds of those in the in-flight entertainment business revolves around on-board Web connectivity.
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