So far, monetization of long-form video distribution has been the purview of over-the-top players like Netflix, Hulu and Amazon, and there, with the aggressive strategies of Google, Microsoft and myriad others in play, the money curve is sure to keep climbing. Hulu, for example, after registering a 60 percent jump to $420 million in revenues in 2011 logged an even bigger spike at 65 percent in 2012 with a reported $695 million in advertising and subscription sales.
So far, as Tom Morrod, director for consumer and media technology at research firm IHS notes, all the money flowing to providers from online video consumption is a drop in the bucket compared to traditional TV. In Europe, for example, the online video take adds up to about one percent of the overall media revenue pie, counting print, movie box office and everything else, compared to the 54 percent share represented by pay TV subscriptions.
“There’s very little money being generated right now from the multiscreen world, but there’s a lot of money going to the TV set,” Morrod says. But how long can things remain this far out of balance in light of other trends cited by Morrod and other researchers?
Among developed countries worldwide the average number of TVs per household has been at two or above since 2005, according to IHS findings, while the number of PCs per household has steadily increased to a total of two per household as of 2012. Meanwhile, the number of other devices capable of delivering video from the Internet, including smartphones, game consoles, connected set-tops and tablets, has gradually escalated to where, by the end of 2011, the total of such devices in all households in all developed nations matched the number of PCs, Morrod says.
“Within another few years we’re going to have more of all those different connected device types added together than the sum of TVs and PCs added together,” Morrod says.” What this is really showing is a huge fragmentation of device types consumers can use to watch content.”
Just how rapidly that fragmentation is impacting consumption habits in the U.S. can be seen in research performed by Leichtman Group, which found that the proportion of U.S. adults who viewed Web video on their TV sets at least once a week had gone from five percent in 2010 to 13 percent in 2012, while the percentage who viewed full TV shows online weekly on all types of devices had gone from six percent to 16 percent over the same timeframe. In a similar vein, Parks Associates last year found that the percentage of smart TV owners who watch online TV shows daily was at 32 percent.
For MVPDs (multichannel video program distributors) the push into multiscreen service delivery has been a defensive mechanism aimed at making sure pay TV services are available to serve this growing propensity to view TV and movies on connected devices. Certainly the program providers, too, have participated in agreements to make their content available to authenticated MVPD subscribers with the same goals in mind.
But, as the subscription model proves to have legs amid growing ad revenues in the OTT domain, the content owners are also looking at ways to generate more revenue through online offerings independent of MVPD affiliations. In fact, Hulu, with a reported three million plus subscribers to its premium offering through Hulu Plus, is threatened by its own success as partners in the venture, including Disney, NBC Universal and Fox, push to free themselves from exclusive licenses in order to make the same high-value content available through other outlets as well.
The flexibility to exploit content distribution opportunities wherever they can be found requires a change in how content is handled at the sources, not only lowering the costs of delivering secure streams to every type of device but minimizing dependence on third parties to execute on the ever more complex technical requirements. As previously reported, over the past year TV programmers have been beefing up and streamlining OTT operations with an eye toward funneling existing and newly developed channels of programming into whatever distribution conduits make business sense, whether directly to consumers over the Internet, through Web aggregators like Hulu or in conjunction with MVPDs’ TV Everywhere initiatives.
With sufficient flexibility to put together niche channels with compelling appeal to certain audiences from their deep reservoirs of content in whatever mixes are suited to their contractual obligations, programming suppliers would have an opportunity to create far more varied programming options than they can within the restrictive multichannel TV environment as well as to maximize exposure of established programs across multiple outlets to whatever extent their deals with MVPDs allow. Now, with such content workflow management capabilities made possible by advances in the technology platforms that support on-the-fly aggregation, transcoding and device-specific secured streaming of new and archived programming in whatever combinations they choose, programmers are preparing to execute on these possibilities.
One sign of what’s in store comes from white label online video publisher thePlatform, which has responded to programmers’ demands for such flexibility with a suite of new “smart workflow” features to simplify video preparation and publishing across multiple formats and devices. Now, says Marty Roberts, senior vice president of sales and marketing at thePlatform,
distributors running their workflows through thePlatform’s mpx publishing system will have click-and-execute access to suppliers such as Elemental and Harmonic for next-generation transcoding, Aspera for fast-file transfer and Akamai for its latest HTTP ingest technology on the recently launched Sola Media Solutions portfolio.
“Multiscreen video publishing has never been more complex, and coordinating the workflow is the key to success,” Roberts says. “When you look at the proliferation of devices with different aspect ratios, file formats for delivery and security protocols you see an explosion in the number of files you have to manage for each title. You may need 20 to 25 different files including caption files, different language versions, thumbnails to manage and set up for consumer to have great experiences, etc.”
Nothing is more important to content owners’ ability to activate new business opportunities than the gains achieved with transcoding and streaming systems. “When we looked at this space a couple of years ago we thought transcoding was moving to a commoditized software play without a lot of differentiation,” Roberts says. Now, with the challenges posed by device proliferation, “to their credit these vendors have stepped up and provided some of the most innovative advancements to meet these needs.
“With packaging and encryption all bundled in,” he adds, “they’re able to process content faster than real time. A couple years ago we didn’t think these capabilities were possible.” thePlatform has integrated the Elemental and Harmonic systems to work seamlessly with customers’ workflows on the mpx platform, and it’s looking at support for other transcoding suppliers on mpx as well, including Digital Rapids, Envivio, RGB and Telestream.
Another major requirement underlying ambitious business plans of content suppliers is the ability to instantly access, transfer and ingest files across multiple locations in a dynamically changing distribution environment. In essence, Roberts says, the new paradigm in content distribution is to instantly “grab files from storage and transform them to meet the requirements of all downstream outlets and set them up for delivery to those outlets.”
“We move a lot of files around the network, from customer storage to theplatform for transcoding, sometimes from our servers to content delivery networks, syndication partners, etc.,” he explains. “Our customers can now use Aspera to move content into thePlatform, and we’ve talked with a number of CDN suppliers about using Aspera to move content to ingest on their systems. Their technology does it in a secure and reliable way that’s much faster than FTP or other traditional protocols.”
The new requirements introduce new challenges that must be addressed through the smart workflow system as well, Roberts notes. “You start to run into some interesting situations,” he says. “For example, what happens if the eighth file set up for a particular title has an error and the other nine are fine? Is the system smart enough to recode just one without starting all over again with all ten?”
Or, to cite another nuance, content owners need to be able to manage all these different files for each title in the context of what the business arrangements are with each downstream distributor. “Maybe all the content going to our website gets a higher priority than what you publish to YouTube, so you have to be smarter about setting up and prioritizing your modes of distribution within the workflow,” he says.
Streamlining metadata management is another major requirement. “You used to have to go back and re-transcode your metafiles to, say, set them up for the Xbox,” Roberts notes. “Now we can analyze the files we have and package them up for streaming with the metafiles to the Xbox without going through those added steps. We’re really reducing the amount of work that has to be done when we look at the capabilities of these new transcoding engines.”
Another technological advance with the potential to further buttress the monetization opportunities for online distributors is the soon-to-be adopted next-generation video compression standard, H.265, also known as HEVC (High Efficiency Video Coding). With the anticipated ratification of the latest draft from the ISO’s MPEG committee H.265 will quickly enter the commercial mainstream, bringing with it a near doubling of compression ratios in comparison to H.264 AVC (Advanced Video Coding).
This is a landmark moment for online video distribution, especially for mobile, where the confluence of increasing bandwidth on LTE and reduction in bit rates on H.265 has explosive potential, notes Keith Wymbs, vice president of marketing at Elemental. “You’re able to get a very high quality experience at a very low video bit rate to any device of your choice over a wider variety of access networks, whether you’re at a Starbucks, on public transportation or roaming throughout your home,” Wymbs says. “That creates a type of ubiquity that a consumer is able to take advantage of regardless of the stream they’re on.”
Another transformative factor driving new business opportunities for online distributors is the cloud. Elemental, for example, is offering cloud-based support with its core technology to lower customers’ costs, Wymbs notes. “We think cloud over time will become the next kind of technology evolution that really changes things and makes things even more flexible for the premium content providers that are delivering multiscreen offerings,” he says.
Cloud-based support, of course, has always characterized thePlatform’s model. Now, Roberts notes, customers can use the new workflow system to more easily leverage multiple cloud tie-ins such as might come into play if a customer is relying on Elemental’s cloud for transcoding and thePlatform’s for all the publishing components. And customers with their own security and transcoding infrastructure can exploit the functionalities brought into play by thePlatform’s smart workflow on mpx.
“Some customers who don’t have their own transcoding farm take advantage of our cloud transcoding,” Roberts says. “Others who want to manage their security requirements behind their own firewalls have invested in their own transcoding solutions.
“Our remote media processor – RMP –sits remotely at the customer’s location and calls back into mpx for instructions what to do,” he continues. “mpx says take this file and pass it to Elemental and when that processing is done move it out to Akamai. We can work in a world where the vast majority of processing is operating in our cloud but can also work with customers in a hybrid fashion.”
The options will continue to expand as customers seek to bring in new vendor partners, Roberts adds. “We’ll continue to invest in those integrations as our customers require them,” he says.
“Because everyone is using standard Web protocols and open documented APIs these integrations have gone really, really well. We’re able to build new plugins in two to three weeks, including load and stress testing.”
The cloud is a big part of Akamai’s strategy with its new Sola Media Solutions platform. “Bringing seamless television experiences across devices is a great market opportunity that requires content providers to tackle major challenges including platform fragmentation, monetization, buffering between content and ads, and understanding who is watching the content,” say Jeremy Helfand, vice president of monetization at Adobe. Leveraging the cloud greatly mitigates the costs, he adds.
The vendor’s offerings include cloud-based transcoding for on-demand content and stream packaging that’s designed to adapt a single file or live stream on-the-fly for delivery to multiple viewing devices, Helfand explains. With support for multiple levels of content protection the architecture is designed to match content protection levels and monetization strategies to specific content and target audiences, he says.
What all this adds up to is a transformation in the monetization opportunities associated with OTT distribution of premium content. Technology advances that enable quality-of-experience suitable for TV-caliber advertising and subscription services in combination with cost-effective means of achieving ubiquitous access are freeing all players to create business models that maximize returns across all outlets.