Broadband Wales Observatory Case Study Report

red90

Key Broadband Benefits

Corporate videos can now be delivered through the Internet. Clients requesting streaming video have provided an extra revenue source. A remote office location is possible as video distribution and communication can by conducted over broadband. Video conferencing is replacing face to face meetings, which is important for international projects. Broadband has enabled the business to develop a national and international customer base.

Document Information
Investigator:
Name: email: Mandeep Kaler kalerms@ecommerce.ac.uk

Primary Unit of Analysis

Organisation: red90 Contact Name: Martin Phillips Job Title: Director & Head of Production Address Line 1: Address Line 2: Town/City: County: Post Code: red90 Production Office The Beeches Pontypool Torfaen NP4 8LG

Tel: 01495 757858 Fax: email: martin@red90.co.uk Web Site(s): www.red90.co.uk

Publication Date: October 2006 Publisher:

Broadband Wales Observatory eCommerce Innovation Centre (eCIC) Cardiff Business School Cardiff University Cardiff Business Technology Centre Senghenydd Road , Cardiff, CF24 4AY Wales, UK Tel: +44(0)2920 647028 Fax: +44(0)2920 647029 www.bbwo.org.uk and www.ecommerce.ac.uk The Broadband Wales Observatory is an integral project of the five-year, multi-million pound, Broadband Wales Programme www.wales.gov.uk/broadband.

Acknowledgements
The Broadband Wales Observatory would like to thank the Primary Unit of Analysis red90 for agreeing to participate in this Case Study. All 24 Case Study Reports may be downloaded from www.bbwo.org.uk/casestudies

Document Change Control

State Submitted Submitted Revision Version 0.1 0.2 0.3 Date 30th October 2006 30th October 2006 30th October 2006 31st October 2006 31st October 2006 31st October 2006 1st Nov 2006 Comments Submitted by Mandeep Reviewed by Beth Caines amendments and comments made Reviewed by James Waddell, minor amendments and returned for minor changes Reviewed by Nicola Hunt amendments and comments made Submitted by Mandeep Approved by James Waddell and Geraint Rowland. Submitted to eWales. Approved by eWales and red90.

Revision Submitted Final

0.4 0.5 0.6

Approved

1.0

Possible values for State are: Submitted, Revision, Final and Approved

Executive Summary
This case study demonstrates the significant impact of broadband on the corporate video production industry and focuses on a Welsh Small to Medium Enterprise (SME) called red90. In the past, most corporate video was distributed via VHS and to a lesser extent CDROM. This evolved into DVDs which could be displayed via a TV as well as a PC and also offered some interactivity. The uptake of DVD by consumers and businesses helped establish it over VHS and the emergence of fast speed Internet has provided another distribution method for corporate videos with more choice and control given to the users. red90 was set up in 2003 by Martin Phillips and Stuart Bradley who have worked in the screen industry for many years. By incorporating broadband into their production of videos, red90 have been able to streamline their working processes and introduce a new product line, videos for streaming across the Internet. By employing broadband to stream high quality video over the Internet, clients can show their video to anyone in the world without the cost of producing a batch of DVDs or the associated packaging and delivery costs. Many of red90s clients now ask for both DVDs and streamed video allowing customers to access it from their Web site. red90 have also cut down their production time by sending rough edits of videos over broadband to the client. In the past, a client would have to visit them in the edit suite to view and discuss the video or have a rough edit posted to them which could be time consuming. Now red90 can send video edits over the Internet to clients across the world avoiding the client having to travel to them or wait for the video edit to arrive in the post. Utilising video conferencing, Martin and Stuart can hold meetings with clients without having to leave their production office. This incorporation of broadband into the production process has reduced project time. With the need for a state of the art production office, Martin and Stuart decided to move from their old office located in Newport to Pontypool. This decision was heavily influenced by the increasing use of broadband to communicate and distribute work to clients, and fewer meetings with clients taking place at their offices. The use of email and teleconferencing has made setting up a studio in a more remote location with good broadband connectivity possible without damaging customer relationships. red90 have an international client base and broadband has helped speed up the process of client approval and therefore project completion, as well as expanding their client base beyond the UK and reducing the need to travel. Without broadband, our client base would be limited to British companies and our business could not function as efficiently as it currently does. Not only has broadband saved us time and money in terms of postage and travel, it has provided us with extra sales revenue for clients requiring Internet streamed videos along with DVDs Martin Phillips, Director and Head of Production, red90

Case Context
In the last 5 years, the uptake of broadband amongst both home users and businesses has seen major changes in the film industry. DVD is still popular but online video streaming has also become significant. Fast upload and download speeds have made video media more accessible to home users which has led to companies adopting on-line video as promotional material as well as home users uploading their own videos on user generated community sites such as YouTube (www.youtube.com).

Developments in Technology
The production and format of film has changed significantly in recent years. In the past, video was shot on analogue Betacam and edited on a U-Matic machine which required a lot of time to index time points. Mastering would have been done via a reel to reel tape which could be accidentally erased if it came into contact with magnetic fields. The film was distributed on U-Matic, Betamax or more likely VHS which would need to be couriered to its destination. Modern filming, editing and distribution have made the old process almost unrecognisable to modern film producers. Digital Video (DV) cameras which are available at affordable prices from high street electrical stores can be used to record at a shoot, edited on a computer and burned onto a DVD without any loss of quality. Using the Internet the video can be uploaded and streamed from a Web site or a rough edit could be sent securely to a customer for their approval. In theory, all of this can be done within a few hours of the video first being shot depending on how much editing and extras (such as graphics) are required. A significant change to the Internet community has been with the uptake of Flash software. Instead of having to encode videos into different formats such as Real Player or Windows Media Player, users download a flash plug-in which automatically installs into a browser. This means only having to produce one type of video which will work across several different platforms including Windows and Apple Operating Systems. Its estimated that Flash is used on 97%1 of computers with many computers having the software preinstalled. Other players such as Windows Media Player, Apple QuickTime and RealPlayer are available for free download on-line and are still in significant use.

User Generated Content

With the success of MP3 Players and mobile phones, the video industry is trying to break into mobile TV. Orange, Three, O2, T-Mobile and Virgin have launched streaming video services of negligible quality2 . Broadcasters are now working on short films of around 5 to 15 minutes with the idea that commuters will download and watch them while they travel to and from work. Three have a service called See Me TV and O2 have a service called LookAtMe which encourages the public to create videos for which they receive payment if the video is viewed. Affordable cameras and video software has not just led to services such as LookAtMe or See Me TV, it has also led to a rise in community sharing Web sites such as YouTube (www.youtube.com), Google Video (http://video.google.co.uk/) and Yahoo Video (http://uk.search.yahoo.com/video?&p=).

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The public can edit their own videos and upload them to the Web sites for others to view. There are currently issues over the Google owned Web site, YouTube which may have problems with copyright infringement and recently showed how corporate video can be stolen. A recent incident involved Microsoft who commissioned a staff only video featuring Ricky Gervais, which ended up on YouTube.3 It is also easy to find film clips which have been illegally uploaded across the site. Sites such as YouTube can also be seen to encourage social change. Some Americans have turned away from TV News coverage on the Iraq war and have been watching personal videos uploaded by American troops on sites such as YouTube, MySpace (http://www.myspace.com/) and Ogrish.com (www.ogrish.com).4

Background
red90 is a limited company set up in 2003 by Martin Philips and Stuart Bradley. The business produces corporate videos for a variety of organisations including Barclays Bank, Pfizer, The National Lottery, Tesco, Mencap and the NHS to name but a few. They currently have a turnover of 150,000 and a good example of red90s streaming video work can be seen on one of their Welsh clients Web sites www.it3.com or on the red90 Web site www.red90.co.uk. They use the latest digital cameras and edit suites to provide videos which can be distributed by DVD, CDROM, the Internet or VHS. Videos can be short promotional films to much longer staff training films. There is no average length for the video with short films lasting around 30 seconds to longer productions taking over an hour. Corporate video production has changed considerably in the last 5 years and red90 have embraced Information Communication Technology which has helped facilitate the majority of communication as well as foster long distance relationships. Martin and Stuart have worked together several times in the past and when working for a production company, they found themselves moving away from video production and into more design and video associated services. They both decided that this was not what they wanted to do and decided to go into business together and concentrate on video production. The business originally rented offices in Newport but in April 2006 they moved to a purpose built production office in Pontypool. The office boasts state of the art recording and editing suites and is based in a remote location as clients rarely visit the studios and most of their communication is electronic or over the phone. No other staff are employed. red90 has an impressive portfolio of clients including small businesses, charities, local authorities and multi national companies. Around 10% of their clients are from overseas, 25% are based in Wales with the other 65% based in the rest of Britain. It is estimated that 30 to 40% of their corporate videos are viewed globally. Martin and Stuarts work has gained recognition having won numerous awards and accolades over their time in the industry including the APV Best Promotional Film Award 2001, Screening of Showreel at Tokyo Film Festival 2002 and NTL Annual Awards Best TV Ad 2002. Martin and Stuart take on around 20 to 30 projects a year although this can vary depending on the size of each project. It is estimated that 60% of their clients are located over 100 miles from their Pontypool office which makes face to face meetings difficult.

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Martin started work as a cameraman with a personal interest in technology. When technology started to move into the production world, he took an interest and became skilled enough to work as a trainer to other companies across Britain for some time. His video production CV boasts big names such as the BBC and NTL. He is now the Head of Production and works with more of the technical aspects of editing work as well continuing his camera work. Stuart has been in radio, theatre, national television and corporate video for almost 30 years. He is best known for presenting programmes such as Playschool, Playdays and Caterpillar Trail for the BBC. He now works as a writer, director and presenter as well as setting up a shoot, controlling the creative look of the filming and controlling the film set.

Pre Broadband
red90 have had an Internet connection since they have been in business and acquired a broadband connection in April 2005 . However, its speed and use amongst clients has changed considerably, impacting on the companys business model. In the past, video cassettes were the only method of distributing corporate videos. When Martin and Stuart started their careers in video production, the only issue was whether the tape should be betamax or VHS. When VHS emerged as the standard this no longer became a problem. When PCs became more established in the 90s, CD-ROMs which allowed interactivity were more dominant with a sizable segment of the market still using VHS. CD-ROMs allowed users to have some control over content such as interactive tests, selecting which order to watch videos and linking to Web sites. The problem with CD-ROMs is that they needed to be accessed via a computer, which required certain processor and graphics card specifications. PCs were also less likely to be connected to big TVs for use in a training room or at a stall in an event. This is why VHS was still in use. When red90 was established in 2003, DVDs had emerged as the dominant distribution method as they had advantages such as being less bulky and therefore cheaper to send. They could be encoded as region 0 which means that they could be used around the world unlike PAL VHS. DVD players were also quickly adopted by the consumer market and became standard on PCs. Having a DVD player connected to a TV in a training room or on a stall at an event was possible without the use of a PC. Typically, a client in New York would have to wait three days before receiving the DVD/VHS. They would then view and discuss the edit before contacting red90 with their suggestions. Its estimated that from sending a DVD/VHS to the client, to getting the client to respond with their view and suggestions would take around 7 working days.

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Post Broadband
Reliability of Broadband Connection
At their Newport office, the majority of communication was still conducted by email and phone conversations with clients visiting the old production studio in Newport to view rough edits of their videos. Face to face meetings were a prominent method of contact however this was difficult with international clients. In April 2004, red90 had their first broadband connection at their Newport office, 512Kbps ADSL. Although was an improvement over dial-up it still wasnt reliable enough. If international clients wanted to view a rough edit to ensure the video was on track and to make some suggestions, Martin still had to send a copy to them by mail as the broadband connection was slow and unreliable. Some clients received videos over the Internet but sometimes the upload would fail, and again Martin would have to post it. We worked with any companies who wanted our services but had no work with overseas clients. When we had a 512Kbps connection, we found ourselves with projects from overseas clients. We tried to send videos over the Internet to them but this sometimes caused problems such as failed uploads and we ended up posting a DVD to the client.

High Speed Broadband Enables Business Relocation

The only thing keeping red90 back from distributing more of their videos over the Internet was their clients ability to access it. The Newport office was deemed to be insufficient for their needs as they needed a dark environment for video editing and a quiet office for recording voiceovers. With the direction of the industry moving towards the Internet, Martin and Stuart agreed that they needed a studio environment with high speed Internet access. Stuart owned a plot of land next to his house in Pontypool which could be used to build a studio. Furthermore BT could install a 2Mbps broadband connection which would be a vast improvement on their 512Kbps Internet connection. As they were moving to a remote location the ability to get a good speed broadband connection for distanced communication was paramount. The Newport office was expensive and did not allow us the privacy needed for professional video production. The Pontypool area was just what we needed and once we knew we could get a higher speed Internet connection we decided that this is where we should be. This location was ideal, as it was in a quiet area suitable for a studio with fast speed Internet access. With the help of a bank loan, the new office was built with state of the art editing suites. Most of the specialist technology and soundproofing had been in place when they arrived, with minor things such as carpeting and painting required. Martin decided upon the best package which BT provided at the time which was 2Mbps and a BT engineer turned up and connected them to the local exchange. The money used to pay for the rent of the old offices is now used to pay off the associated costs of the building and equipment which will work out better in the long term.

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Clients were requesting the use of the Internet to send draft videos, so the 2Mbps connection was ideal. We now market broadband Internet distribution as a fast way of completing a project to overseas and British customers The red90 Web site (www.red90.co.uk) has been established since February 2003. The site is simple to navigate and has been praised by customers as it is easy to use. The site is in a brochure format and contains information on red90, contact information and a sample of streaming videos at various speeds. The only advertising red90 currently undertake is in the Yellow Pages, www.Yell.co.uk and their Web site. Most work is from word of mouth and the Web site gets a lot of traffic bringing in around 25% of all queries. The hosting company provides software to help track visitors and red90 ask their clients how they found them. Currently no Search Engine Optimisation (SEO) or other marketing takes place as red90 is never short of work. The site is updated by Martin and costs very little to maintain.

Change, Impact and Benefits of Broadband

Reduced Costs and Extra Revenue
Broadband has enabled the Internet delivery of corporate videos but the uptake of Flash video has also been a significant development. If a client has asked red90 for a corporate video on DVD and a streamed video, very little work is required to convert the video format for Internet delivery. Clients now have draft edits of their videos distributed via broadband as it is quicker than the old method of posting DVDs. The benefit is that postage, packaging and courier costs are less with the monthly average of around 200 spent on postage, packaging and couriers. With Internet distribution, postage has been reduced to around 20 per month. Its not uncommon for clients who require a corporate video to ask for a batch of DVDs and streamed Internet video to be used in a combined strategy. The DVDs may be used at a fair or product launch to display in the background reinforced with a video streamed from the clients server via their Web site as part of an Internet campaign. red90 are not involved with hosting clients videos, however by offering the extra video streaming service, they receive an average of 2,000 in extra revenue a month. The extra service of providing a streamed video only requires some extra work to convert it into Flash and add a player. The work is worth it as this adds around 24,000 to our yearly turnover. There is still a significant demand for DVDs with some clients asking for as little as 10 DVDs with their corporate video. Small orders of less than 50 DVDs are created in the Pontypool production office. However, anything greater than 50 is sent to a duplication house. red90s main suppliers are located in Somerset and provide DVDs, DVD cases and a duplication house for mass DVD production. An example of a large order can be seen with a client who currently orders five thousand DVDs a month. A technical rental company is also used if specialist equipment is required for a shoot. Clients tend to use DVDs to send as part of a promotional pack or to play in the background at a promotional event. They then use streamed video from their web sites as part of an Internet promotional campaign

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Increased use of Video Conferencing, VoIP and Email for an International Customer Base
Very rarely do clients visit a studio and most communication takes place via email, phone/VoIP or video conferencing. An example of this can be seen with a recent American client. They contacted red90 via phone concerning a corporate video production in Italy. Using the phone, video conferencing and email, they agreed a contract without having to leave the production office. So far, video conferencing has helped with communication, and when in use, other applications needing to access the Internet are suspended to avoid any bandwidth problems. The client sent photos and videos of the filming location in Italy via email so Stuart and Martin could see what was required for the set without having to travel there before the shoot. The first time Martin and Stuart met the client was at the shoot in Italy. At this point the client had committed to red90 and had paid 25% of the agreed cost for travelling and equipment expenses. After the shoot was completed, the client paid another 25% of the cost with Martin and Stuart returning to the production office to edit the material. A rough copy was uploaded to a secure Apple production Web site where the client could access it with a password supplied by Martin. The size of the video file depends on what the client has asked for and can range from 1 MB to 50 MB. The client and Martin discussed the draft of the video through Apple IChat teleconference software. The software allows a video conference between 4 users and requires a compatible Web cam and a broadband connection. The video was edited to the clients requirements and completed in budget and on time with the outstanding 50% being paid on completion. Our American client is a good example of how broadband was used instead of us having to travel to America or the clients having to travel to Wales for any meetings. Nearly all communication was through the phone or broadband using email and teleconferencing. It also shows that being located in Wales was not a problem in winning the contract for an American company wanting to shoot a video in Italy.

Reduction in Project Time

The graph in Figure 1 below shows the time saving over the period of a year on projects by distributing videos over the Internet compared to the old method of posting DVDs. On average, posting a DVD would take 3 working days to reach its destination, with another 4 working days before the DVD was watched by the client and contacted red90 with their comments and suggestions for improvement. With distribution of the videos over the Internet, clients contact red90 with their suggestions and opinions within 2 working days. With 10% of their 25 to 30 yearly projects coming from overseas, broadband distribution saves them 15 working days of project time over a year compared to posting a DVD.

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Figure 1: Broadband Distribution Time Saving 25 20 Days 15 10 5 Internet 0 1 2 Overseas Projects 3 Post

Around 60% of our clients are based over 100 miles away. We try to encourage them to use the Internet to speed up the project no matter where they are located as its best for the client and for us.

Internet Connection Metrics Summary

Service Description Before Broadband After Broadband ADSL Wireless LAN 512Kbps 2Mbps Number of Internet Connections: 2 Date of Connection: 01 Feb 2003 2 01 Apr 2005 01 Apr 2006 Service Provider: BT Total cost per month for Internet connection(s): Number of users/employees 2 using Internet connection(s): 14.99 2 BT 30.00 14.01 Soon rising to 8Mbps Change or Comments

Type of Internet Connection (Dial- Dial Up up, ISDN, ADSL, Cable, Satellite, Wireless, Leased Line): Bandwidth Mbps or Kbps 56Kbps

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Home Working Metrics Summary

Whereas research and communication with clients is possible from a private residence, specialist equipment located in the production studios is too expensive and cannot be replicated without significant cost, and therefore journeys to the office are dependent on deadlines and the nature of work. Monthly Metrics Home Working Employees Total Home Working: 0 Before Broadband After Broadband 4+ Change or Comments Now able to access data from home quickly. Depends on the type of work if it can be done from home. 4 days

Total Office Working Days: 22 days over a 31 day month Total Commute Time: 12.83 hours Total Commute Distance (miles): 40

18 days over a 31 day month 10.5 hours 40

2.33 hours 160 miles over a month period

TOTAL COMMUTE (HMRC: 25pence per mile)

220.00

180.00

40.00

Financial Metrics Summary

The requirement to send VHS and DVDs has been greatly reduced as a video can be uploaded to a third party secure site such as Apple or made available from the red90 server. In the past even minor changes to a video would need to be re-sent before the client would confirm that the video is complete. Having to produce videos for clients which can be streamed has added extra revenue but does not require much extra work. If the video has already been produced for a DVD, it can be easily converted into a Flash format for Internet delivery.

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Monthly Apportionment Financial Measure Operational Overhead Costs Mailing Sales Revenue Streaming Video Direct Costs 0.00 TOTAL IMPACT ON PROFIT 0.00 0.00 2,180.00 0.00 2,000.00 2,000.00 200.00 20.00 180.00 Before Broadband After Broadband Impact on Profit

Internet Applications Summary

SUMMARY CHANGE IN USE OF INTERNET APPLICATIONS DESCRIPTION of Application Email Yes BEFORE Broadband AFTER Broadband Emails can be sent including pictures, video etc Skype used as a regular method of communication with their computer support company and with clients who have embraced this technology. Yes Increase Increase The music library used for videos is now totally on-line with access to over 100,000 audio files.

VoIP No

Video Conferencing No Web Browsing Yes Web based Research Yes Music downloads No

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Email was always used but has now evolved to carry large picture and/or video files. Large file uploads and downloads have also evolved with software being upgraded via the Internet. VoIP has mainly been utilised on a day to day basis as it is cheap for phoning landlines and free for phoning VoIP users on other computers. However, Martin only uses it for clients he has already established a relationship with or have requested to use this method for communication as it can sometimes suffer in quality. This is unacceptable compared to using a fixed phone line as it doesnt convey a good impression when talking to potential or new clients. Video conferencing has proven very useful when speaking to international clients where the opportunity of face to face meetings is constrained. The aforementioned American client is a good example of this. Web based research can include various subjects such as researching a client for an upcoming contract, keeping an eye on developments and using specialist forums to get past technical problems of software and hardware. As a technical engineer can cost up to 400 a day, it is in Martins interest to try and solve problems himself through using the forums. The music catalogue which is used for videos is available on-line, is regularly updated and instantly accessible giving access to a large range of tracks. Over 100,000 audio tracks are available with the average track being 5MB in size. In the past, music would have been delivered on hundreds of CDs which took time to organise and listen to. 2Mbps is an acceptable speed for red90s current work and they have been informed by BT that they will be upgraded to 8Mbps around June 2007.

Conclusions
It is clear that the screen industry has changed in the digital age, from hardware to software and product distribution. The uptake of broadband amongst both home users and businesses has seen major changes in the film industry. DVD is still popular but on-line video streaming has also become significant. Fast upload and download speeds has made video media more accessible to home users which has led to companies adopting video as promotional material as well as home users uploading their own videos on community sites. Although broadband is estimated to rise to 75% of all Internet connected households by the end of 20065, the UK is still seen as falling behind its European counterparts. Faster speeds are required to help make video more accessible to UK consumers as well as foster user generated content sites. For red90, broadband has affected them in two ways. It has changed their working practices as well as providing another income stream for clients requesting streamed videos. The utilisation of broadband to stream high quality video over the Internet allows clients to show their video to anyone in the world without the cost of producing a batch of copies or the associated postage and packaging costs. red90 has also benefited as they can send a rough edit of the video over broadband to the client. In the past, the client would either have to visit the edit suite to view and discuss the video or have a rough edit posted to them. Broadband has helped establish an international client base as well as speed up the process of client approval and therefore project completion.
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As well as being dependent on broadband for communication with clients and distribution of videos, broadband has made possible the relocation of a business to a rural area without disrupting client relationships. During our careers, we have seen new technology change the corporate video industry and broadband is a significant change. It has allowed us to reach clients who in the past would have only looked in their local area for video production services. It has also brought in extra money as most clients want streamed corporate video on their sites and on DVDs. Martin Phillips, Director and Head of Production, red90

References
1

Online Video & Corporate Websites by Scott Stephens, June 2006 www.pixelbridge.com/articles/index.php?p=129
2

Will mobile TV make moving viewing? by Ian Youngs September 2006 http://news.bbc.co.uk/1/hi/entertainment/5389114.stm
3

Microsoft unhappy at Gervais leak, August 2006 http://news.bbc.co.uk/1/hi/entertainment/5298376.stm

4

4 Pentagon keeps eye on war videos, by Richard Allen Greene, July 2006 http://news.bbc.co.uk/1/hi/technology/5226254.stm
5

Point Topic, Broadband Consumer Survey 2006 (accessible via the BBC Web site) http://news.bbc.co.uk/1/hi/technology/6041446.stm

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