OTT At a Tipping Point, Poised for Rapid Growth
By Ted Coons
Obstacles remain — from licensing windows to network capacities for large-scale live events — but it’s hard not to imagine a day in the not-too-distant future where OTT viewers are measured in the billions.
When Netflix launched its streaming product in 2007, few people appreciated the potential of over-the-top video. With significant unresolved technical issues and daunting content licensing challenges to overcome, many in the industry simply dismissed streaming video as too hard.
But Netflix — and a handful of rivals — have clearly silenced the doubters. A recent survey by Pew Research Center found as many as 24% of American adults do not have cable or satellite TV, with about two-thirds of those non-subscribers citing over-the-top content from services such as Netflix, Amazon, and Hulu as the reason. Meanwhile, some of the biggest names in broadcast and cable TV are jumping on the OTT bandwagon, including CBS, HBO, and Showtime. The cord-cutting movement has reached a tipping point, and it’s not hard to imagine a day, not too far off, when OTT video streaming will be measured in the billions of viewers. But the path forward will not be linear; industry players still face some challenges they will have to overcome to make streaming ubiquitous.
Key Content is Unavailable, but Not for Long
Live sports and the most popular scripted TV shows generally aren’t available on streaming services today. But this will change within a few years. Major league sports rights have been sold forward; the NFL, for example, has sold almost all broadcast rights, save for a couple of games a year, to the major networks through the 2022 season. As streaming audiences continue to scale, OTT providers could well afford the billions of dollars it will take to compete for broadcast rights when they next come up for sale. And even if a streaming platform doesn’t win, the networks themselves are developing online video players to live stream content. Market dynamics are also changing the economics for scripted TV shows like The Big Bang Theory and Modern Family. Tumbling DVD sales and a decline in the value of syndicated shows suggests prices of scripted TV shows will come down in the next several years, providing streaming platforms the opportunity to own this content at more reasonable prices per subscriber.
Available Content Remains Fragmented Across Platforms
Viewers don’t want to have to search for content; they want it to be easy to find and all in one place. Streaming services from Google, Amazon, Apple, and Roku have done a pretty good job at aggregating content. Add a great recommendation engine, like Netflix’s, on top and it is a game changer compared to linear TV. That said, finding the streaming content you want to watch is a bit of a wild goose chase at this point. Viewers today have to jump among platforms, each with its own user interface and menus, as well as business models, including AVOD (ad-driven), SVOD (subscription), or TVOD (transactional). YouTube and Netflix have done a good job of aggregating content, building reliable recommendation engines, and making content easy to access, but in the broader context of video content, each service is extremely limited. Apple clearly believes simple content discovery is crucial to the success of streaming video too; it was reported in early August that they are working on a TV guide to discover and access content seamlessly across apps from several programmers.
Bandwidth Remains an Obstacle
While advances in computing and availability of broadband have made streamed content more available than ever, technology continues to be one of the biggest hurdles to reaching billions of OTT subscribers. Live streaming taxes networks in ways that VOD does not. While popular VOD content can be cached at nodes around the world, streaming live events like Sunday Night Football require content to be concurrently delivered from an event to a smartphone or streaming TV platform across networks with only a modest amount of latency. Bob Bowman, CEO of Major League Baseball Advanced Media, believes the current max capacity of networks in the U.S. is 10 million concurrent streams (for a one-off event, not the weekly NCIS episode) and it would require all the capacity of every content delivery network (CDN) to make that possible. By comparison, the average number of viewers for Sunday Night Football in 2015 was 22.5 million, indicating that we have some work to do before live streaming of sports and other popular live content can replace linear distribution. The challenges are more pronounced in the developing world, where roughly 4.2 billion people, some 57% of the world’s population, don’t even have regular internet access. The good news is that investments in wired and wireless networks will allow global Internet traffic to grow to more than 60,000 Gbps in 2020, a 30-fold increase from 2007, the year the iPhone launched.
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Originally published at www.streamingmedia.com on August 26, 2016.