The Tech Side of the Streaming Wars
Content is king, but infrastructure is the chariot that carries it
On Tuesday, Disney+ launched with great fanfare after months of high anticipation. One day later, Disney proudly announced that it had already amassed 10 million sign-ups. This is a very impressive achievement, even though it does include the millions of Verizon customers who got Disney+ for free and unpaid users on the 7-day free trial.
The House of Mouse kicked its entire marketing machine into full gear to ensure a successful launch for its flagship direct-to-consumer streaming service, and they’ve largely been largely successful — perhaps even a little too successful. Some early subscribers reported some technical issues in accessing the service, such as loading errors, log-in failures, and slow buffering. In response, Disney released a statement saying that “the consumer demand for Disney+ has exceeded our high expectations” and that they are working to resolve those issues.
While this incident is unlikely to dampen consumer interest in Disney+ and its premium content, it does put a minor dent in an otherwise spectacular product launch that ushers the global entertainment powerhouse into the streaming era. The technical issues are likely a result of exceedingly high demand at launch and therefore should not be much of a problem for Disney in the long run. However, they do serve to highlight an often-neglected side of the ongoing streaming wars — the cloud infrastructure on which companies are building their OTT services. Yes, content is always king, but user experience also matters a lot, especially in this post-peak-TV age where an abundant amount of content is just a few clicks away.
Disney Bought a Robust Streaming Infrastructure
Make no mistake, Disney has a fairly strong streaming infrastructure to build upon. In 2017, the company acquired the majority stakes of BAMTech, a spin-off of MLB Advanced Media (the digital media arm of Major League Baseball) that focuses on OTT streaming video solutions. And it still remains one of the best streaming tech solutions in business today. At the time, Disney was already using BAMTech’s technology to power its watchESPN service, which later evolved into ESPN+. Other BAMTech clients at the time included WWE and HBO, but both have left BAMTech in favor of building their own streaming solutions. By October 2018, it was reported that BAMTech had been internally renamed Disney Streaming Services. Today, it provides the infrastructure foundation for both ESPN+ and Disney+.
A quick sidenote: BAMTech’s streaming solutions are built on Amazon Web Services (AWS), whose servers also support other major streaming services such as Netflix, Hulu, and, of course, Amazon’s own Prime Video. Each streaming service then layers a proprietary system on top of that commodity infrastructure to optimize for the functionality of their respective services. So while many streaming services are using Amazon’s platform, the streaming experiences they deliver could be differing in quality and speed. Streaming quality is also affected by the performance of Content Delivery Networks (CDNs), which function as local traffic cops to direct requests for data between end users and servers in order to ensure a smooth streaming operation at scale. AWS also provides a CDN service called CloudFront, but not all streaming solutions built on AWS are also using it.
At the time, some industry analysts criticized Disney for overpaying for a tech solution that it could have built by itself. In retrospect, Disney was working with a rather tight development timeline to catch up with shifting consumer behavior, which made it an easy call to simply buy an industry-leading streaming solution rather than building one from scratch. After all, there is no guarantee that even if Disney had spent the time to build the streaming infrastructure itself, it would end up being as good as what BAMTech already provided off the shelf. Plus, this also keeps a proven infrastructure out of the hands of competitors.
One of BAMTech’s strengths lies in handling high-volume live video streaming, which was instrumental in ensuring a great user experience for ESPN+. Still, as this week has shown, even BAMTech’s strong cloud-streaming infrastructure couldn’t handle the massive influx of Disney+ subscribers perfectly. While this most likely won’t matter after the launch hype circle calms down, it does point to the technological challenges facing media companies as they rush into streaming in order to make a direct connection with their customers.
Traditionally, media companies were largely spared the worrying that typically comes with the technical side of content distribution, since the cable companies took care of that. Now they no longer have that luxury, as the quality of distribution — a big factor in determining the user experience — is placed in their own hands. By going directly to consumers, media companies will gain access to a lot of granular user data to inform their content decisions elsewhere, but this also comes with the extra cost of ensuring the quality of content distribution. And this may be something the tech companies moving into video streaming are more adept at delivering.
The Great Streaming Quality of Apple TV+
Two weeks ago, Apple also made its official entry into the streaming market with the launch of Apple TV+. According to sources reported by Variety, it has drawn millions of users who are spending, on average, more than an hour watching its content available at launch. None of that really matters to Apple at the end of the day, however, as long as there are people watching. After all, as we explained in our recent write-up, Apple TV+ is an ecosystem play that uses content as a lead generator for Apple’s TV Channels and its suite of services.
While Apple TV+ obviously lacks a robust back catalog of content compared to other streaming services, and its slate of original series received pretty mediocre reviews at launch (although the audience scores on Rotten Tomatoes suggest viewers like them a lot better), the service nevertheless had one praise-worthy highlight: the quality of its video content. According to FlatpanelsHD, Apple TV+ offers 4K streaming that beats what all other major streaming services offer, even eclipsing most iTunes movies in terms of bit rates. In fact, the bit rates that Apple TV+ delivers are about 1.5–2x the video bitrate of a typical HD Blu-ray disc and around half that of the typical UHD Blu-ray disc.
While it is true that Apple TV+ probably had to deal with a lot less concurrent traffic than Disney+ did on Tuesday, it is nevertheless a major feat to pull off a streaming service for millions of global users with video quality that surpasses Blu-ray. Apple does not disclose which cloud service provider it uses for Apple TV+, but given that it uses all three major web service providers (Amazon, Microsoft, and Google) for its existing iCloud services and Apple Music, and the fact that it has built its own CDN system after moving away from indepedent leader Akamai, it is safe to assume that it is Apple’s proprietary streaming solutions that make all the differences. Netflix has been pushing for 4K streaming for a few years now, and now Apple is setting a new bar for high-quality video streaming.
Netflix’s Infrastructure Advantage Remains Strong
Speaking of Netflix, the global OTT leader holds one of the strongest streaming infrastructures in-market today. Built upon the industry-leading cloud computing services of AWS, Netflix’s streaming infrastructure also includes a proprietary CDN system called Netflix OpenConnect, which was started in 2011 after third-party CDN suppliers struggled to support the increasing web traffic Netflix generates as it grows. According to data reported by Variety, Netflix was responsible for 12.6% of the total downstream traffic across the entire internet during the first half of 2019. At evening peak hours, Netflix accounts for as high as 40% of all downstream Internet traffic in North America.
By operating its own CDN system, Netflix not only gained more control over the delivery quality and user experience, but it also got to tailor the CDNs to fit its own needs and adapt them to each local market. Through OpenConnect, Netflix partners with Internet Service Providers (ISPs) around the world so that they can store and deliver content inside local ISP data centers, which isolates the Netflix service from the wider internet and reduces the demand on network capacity. In addition, Netflix’s algorithms also help distribute its content throughout its CDNs based on regional popularity to ensure maximal efficiency and minimize buffering.
All this upfront investment and efforts in engaging with local ISPs created a best-in-class streaming infrastructure to help Netflix to deliver the best user experience to its subscribers worldwide. Plus, they create a huge moat for Netflix to defend itself against the new entrants by ensuring that millions of people can click play on the new season of Stranger Things and start watching without delay.
People often debate whether Netflix is a media company or a technology company, but in the streaming age, perhaps that delineation no longer matters. Today, a good media company will also need to be a good tech company, at least on the content delivery and UI design front. Netflix, for instance, has built its own special interface for interactive content such as Black Mirror Bandersnatch and tested unique features that allow users to skip the political jokes or speed up the playback. This new development no doubt offers the tech companies a sliver of advantage against the media companies, but as Disney has shown, a media company can also build a streaming infrastructure that holds its own.
When the time comes for HBO Max and NBC’s Peacock to make their debuts next spring, it will be interesting to see whether AT&T and Comcast can translate their expertise in delivering content over Pay TV into building a robust streaming infrastructure. While HBO already has gained plenty of experience on this matter from HBO Now, Comcast stands untested in OTT streaming outside of Xfinity Flex, which is only available through Comcast’s own network. And given that Peacock will be reportedly free-to-access with ads, it could attract a lot of casual viewers on launch day flocking to check it out. Whatever streaming solutions that Comcast comes up with, it had better be good enough to withstand that door-busting traffic, lest it annoys those uncommitted viewers and loses their wandering eyes.
