Since service providers own the access network, they can deliver the personalized video content consumers want at the quality levels they demand. That’s why, with the right investment and partnerships, service providers should remain the preferred distributor of video entertainment in the forseeable future.
THE RISING DEMAND FOR VIDEO CONTENT BANDWIDTH
Any forecast of tech/business trends toward 2020 must start with the exponential growth in computing power we’re now experiencing thanks to Moore’s Law. This growth translates to an accelerating pace of change across all industries as the cost of processing power decreases.
For the video ecosystem this means a boom in both the quality of produced content as well as the sources of content. Video calling is now a routine activity. According to an Alcatel-Lucent U.S. consumer survey, 59% of smart phone users under 35 make at least one video call per month and 37% do so at least once per week.
User generated content that used to be dominated by “cat playing the piano” videos on YouTube is morphing into brand produced content such as Alcatel-Lucent’s “New Guy at the Office” series and lifestyle episodes and events developed by brands such as Red Bull and Marriott.
In addition, the adoption rate of 4k Ultra-HD is starting to gain critical mass. It is now easier to find a new 4k compatible TV, and 8k compatible TV sets have been available for a few years. Some content is already available in 4k and more is being produced as the cost of 4k cameras is decreasing rapidly, with some priced to be attractive to consumers.
The confluence of increasing content sources and the increased resolution of produced content creates exponential growth in the bandwidth required to deliver the content demanded by the consumer. Bell Labs predicts an increase in global bandwidth consumption from ~1.0 Zb/year in 2015 to 4.3 Zb/year by 2020 with video content being the lion’s share of the data transferred (Figure 1).
TV IS NOT DEAD
Consumers want any content delivered to any device at any time. The question is how a service provider gets from the video service they provide today -- be it none or be it a full linear TV package -- to that end state.
There are many variables affecting what the service provider’s network is currently designed to deliver. But market trends show that most providers are positioned to take advantage of the new, personalized nature of content demanded by the consumer.
A Google search on the phrase “TV is dead” returns almost 500 million results. However, innovations in the video market are not happening “to” the TV, they are happening “around” the TV. The television set is the primary device choice for watching video across all genres of content (sports, news, documentaries, reality TV, comedies, dramas, and movies – Figure 2).
The only area where the TV is not preferred is short form content, where the computer is the preferred device. The general rule is “the smaller the screen, the shorter the content”.
SERVICE PROVIDERS POSITIONED TO LEVERAGE OTT OPPORTUNITIES
Smart/connected TVs make it possible for the television to receive content via a streaming service -- just like their digitally designed device cousins. But there are some realities about OTT video that contradict the media-generated perception of streaming services as a threat to service provider delivered services.
1. OTT streaming services revenues are markedly lower than those from linear video service providers on a global basis
- Advertising does provide a little lift to the OTT economics because so many of the OTT services are free, ad supported platforms. But these revenues are still dwarfed by advertising on linear TV.
- OTT services revenues enjoy high growth rates, but they are starting at a low base. By 2020, the OTT subscription and advertising revenue streams will still only be ¼ that of traditional linear services. This is due to the reluctance of the content rights owners to cannibalize their revenue sources for an unproven substitute. They experiment with capturing revenue from cord-nevers and cord-cutters, but do not offer price points for their OTT services that would drive consumers away from the content distributors/consumer aggregators.
2. The network matters – significantly
- In fact, consumers with high-bandwidth connections will abandon streaming content more quickly than those with slower connections if the content does not quickly load or the video quality is poor.
- Some OTT service providers have partnered with access network owners to ensure a sufficient customer experience. Others have relied on “best available” service with some notably poor results, particularly with extremely popular live events such as sporting league championships.
It’s imperative to provide the content the consumers want, when they want it, regardless of the source. There is a trend toward more time-shifted viewing of content that has been delivered via linear services. And subscriber video on demand service is one of the few features in a linear TV package that is seeing significant growth.
To reduce the cost of delivery of this content, a cloud-based DVR solution makes a lot of sense for many service providers. It’s almost table stakes to have a content delivery network to push popular content close to the edge of the network where the content will be consumed.
Going forward, some content will be delivered as part of a linear package and other content will be streamed in an on demand fashion. Some linear programming will be consumed live -- particularly sports, award shows and reality TV -- and some will be time shifted to better fit into the viewer’s schedule.
Operators can use local and consumer contextual data to provide discovery and delivery options for their customers and provide individually curated ads based upon the manner in which the content is being consumed and other consumer data where permitted. Overall, we believe the service provider’s position in video content delivery will remain extremely strong.
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