Our annual big-picture look at the numbers that tell where the online
video market is today and where it's headed in the next year.
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Just 4 or 5 years ago, streaming services were being labelled as supplementary to pay TV, an inexpensive add-on that would offer viewers alternative content. The reality now is that over-the-top (OTT) is on a decidedly upward trajectory while its competition is not.
With Disney+ and Apple's services both on the horizon to
launch in 2019, the storm facing PSBs and pay TV providers will
intensify. Just 4 or 5 years ago, streaming services were being labelled as supplementary to pay TV, an inexpensive add-on that would offer viewers alternative content. The reality now is that over-the-top (OTT) is on a decidedly upward trajectory while its competition is not.
TV viewing has been steadily sliding across Europe, a trend which UK
media regulator Ofcom identifies as not a blip but a "structural
decline" in the 2018 version of its annual Communications Market Report.
People across the UK watched an average of 88 minutes of non-broadcast
content on their TV each day, with 16–34-year-olds viewing 2 hours, 37 minutes
of on-demand—including 59 minutes of YouTube, on PCs, phones, and
tablets—according to Ofcom's annual report on how communications services are
changing in the UK.
These patterns are repeated everywhere. Conviva's State of the Streaming
Industry report for Q3 2018 shows that streaming TV consumption globally has more
than doubled in a year.
While European internet users are less likely to watch video on a smart
TV or smartphone than their US counterparts, according to research from Ampere
Analysis, overall, viewers continue to prefer mobile devices for consuming short-form
content and connected TVs for consuming long-form programming.
More significantly, a growing segment of TV viewers has also started to
associate OTT with both high-quality on-demand content and start-over
functions.
"The increasing capabilities of mobile devices to deliver video
content mean consumers now expect a compelling and consistent experience from
their traditional TV service provider across devices, blurring the lines
between traditional linear TV and online video," finds the latest PayTV
Innovation Forum report from Nagra and MTM.
"The demand for quality is pushing connected TVs to the top in
terms of device share, commanding more than 50% of total viewing hours at the
expense of PCs that have lost 7% while mobile remains relatively flat,” Conviva
CEO Bill Demas notes in a press release announcing the
"State of the Streaming TV Industry" report.
The report enforces the understanding that viewer engagement is directly
related to the content's streaming quality, with rebuffering a key
factor.
"It's clear that viewers are less tolerant of a poor experience, as
13% of U.S. and 16% of global viewer attempts result in an exit before the
video starts," Demas warns. "Providers must increasingly focus on the
streaming TV experience to match viewers' rising standards."
Conviva did chart "significant overall improvements" in
streaming quality, with video start failures down 33% year on year (YoY), as
were buffering rates (down 41%); meanwhile, it found picture quality (bitrate)
had increased by a quarter.
No TV for Generation Edge
We know Millennials are fleeing traditional TV but Nielsen figures from
November showed post-Millennials ("Generation Edge") abandoning TV in
even bigger numbers, which eroded to 18% over the past year, according to
Ooyala principal analyst Jim O’Neill.
Ofcom also reports the steepest fall in TV viewing among children and
young adults. Children's viewing fell by 15% in 2017 to an average of 1 hour,
24 minutes, while 16–24s' viewing fell by 12% to an average of 1 hour, 40
minutes. This means that over-54s, who make up just 28% of the UK population,
accounted for 51% of broadcast TV viewing in 2017.
Alarmingly for broadcasters, "[O]lder viewers are starting to catch
that wave, because streaming content to connected devices and to mobile phones
continues to grow cross-generationally," says O'Neill.
Content War
Programming is the primary weapon to attract and retain audiences—but it
costs.
"Cost—more than anything else—is going to be the determinant in who
thrives in the new OTT environment," O'Neill predicts. "Content
distributors who can't maximise ROI or who can't afford a continuous stream of
new content are going to simply disappear."
Ofcom's "Communications Market Report" has found that drama is
still capable of attracting 8 million-plus viewers in the UK, but many smaller
shows have dropped below 5 million. Outside of live sports (decreasingly
available on free-to-air channels), "TV shows with mass appeal are now
increasingly difficult to generate" it states.
That said, October 2018 saw a record-high 334 million requests for
BBC iPlayer, bolstered by high-ranking drama like Killing Eve and
the start of the 37th run of Dr Who.
Current market pressures are increasing the cost of content at a time
when original content is in demand. Even Netflix could be trapped in a cycle of
its own making.
Ampere Analysis says cost of acquiring subscribers to Netflix in the U.S.
has shot up from $60 to $100, according to Advanced Television, as the
streamer's content budget nudged $13 billion in 2018.
Its content strategy is being angled toward local origination. From new
commissioning hubs in London, Madrid, and Paris, it will raise the number of
European titles it produces by a third to 221 projects. Amazon and YouTube are adopting similar strategies.
"In addition to giving audiences the local, original content they
crave online, those assets will go a long way toward satisfying pending laws
from the European Commission requiring 30% of streaming services' libraries to
be sourced from Europe," observes O'Neill. Prowess in locally produced
content is also the argument made for the survival of public service
broadcasters (PSBs). In a public address in March, BBC director general Tony
Hall warned that the success of digital streamers threatened to undermine
British values unless there was some sort of "breathtaking, seismic
change."
Yet, as Ofcom reports, UK PSBs combined spend on TV content remained
flat in 2017 at £7.5bn, with spend on original local programming within that
total dropping to £2.5 billion.
PSBs Plot Digital Fightback
All of these factors coalesced into a growing clamour for a consolidated
UK public service broadcaster SVOD service. Such a "British Netflix"
would showcase the best of British programming to compete with the global
growth of FAANG. By the end of 2018, Ampere forecast Netflix
would reach 9.78 million UK subs, while Ofcom pegged Amazon's subscriber number
as close to 5 million.
A revived venture (prevented by competition authorities from forming a
decade ago as Project Kangaroo) was in discussion at ITV, BBC, Channel 4, and
Channel 5 all year and would seem to be waved through by Ofcom should a
proposal be agreed.
Sharon White, Ofcom's CEO, reiterated her stance at several points in
2018. "As the national broadcaster, we'd expect the BBC to take the lead
on forming such partnerships," she said in November. "And for our part, Ofcom has to be
a forwardlooking regulator that supports the future success of UK TV, firmly
rooted in the online world."
The idea is that a single digital platform would unite the content
available on each of the PSB's individual on-demand services (iPlayer, ITV Hub,
All 4, My5) and make it easier for viewers to access content across a range of
devices.
The BBC has partnered with ITV on the joint U.S. streaming service
BritBox, while a new free Freeview mobile app for live and on-demand streaming
from the PSBs, launched in January, shows that collaborative deals can be
done.
Aside from being a paid-for service, the new PSB SVOD would probably
have a single login and have its content pooled. Brand protection may be a
sticking point for BBC and ITV.
The move, finally announced in February as a UK version of BritBox,
would be similar to partnerships in France (between Rai, ZDF, and France
Television) to enter a co-production pact and pool funds and in Germany, where
Discovery has linked with ProSiebenSat.1 to build a paid-for programming
hub.
Defending its position, Sky's chief executive of UK and Ireland, Stephen
van Rooyen, warns in The Guardian that any such plans could still fall
foul of the competition regulator since PSBs still command nearly
three-quarters of viewing share.
Should a PSB SVOD not go ahead soon, ITV has prepped its own plans to
launch its own domestic streaming business, which it reportedly thinks will net
more than £200m ($254m) a year, according to Broadcast.
Media Giants Position for DTC
The battle for Sky between Comcast and Fox was the year's biggest
M&A this side of the pond, one in which Comcast emerged victorious after
parting with £30.6 billion ($40 billion) and Rupert Murdoch was ousted from
British TV (if not all media) for the first time in 30 years.
According to Ampere Analysis, the deal is predicated on a strategy in
which streaming services and direct to consumer (DTC) offers take priority and
major content creators increasingly keep their own content for their own
services.
Indeed, if the combined Comcast/NBCUniversal and Sky decided to pull all
owned content from Amazon and Netflix in the UK and push it to Now TV, Sky's
streaming service would grow by around 20% in volume, boosting its competitive
position in the UK market.
"As Comcast owns NBCUniversal (which also owns Dreamworks
Animation), Comcast could decide to follow in Disney's footsteps and shift its
content away from Netflix and Amazon in Sky markets and place it on its
newly-acquired streaming services in the UK, Ireland, Germany, Austria and
Italy," Ampere has observed.
Comcast and Sky have already partnered to offer
NBCUniversal's reality TV streaming service, hayu, on Now TV devices in the UK.
Despite placing its bets on a traditional satellite pay TV platform, Comcast is
likely to also be looking to expand its streaming footprint internationally
using Now TV and its sister entities.
The number of publishers launching OTT services has grown
too. From Condé Nast to Vice, there has been a growth in brands which once
would have focused solely on text but are now launching separate video
platforms with hours of new original content. 2019 could see an acceleration of
this trend.
"An increasing number of publishers will create
platforms which attract consumers already using VOD products," says Tom
Williams, CEO at Ostmodern. "This will mean that some publishers will take
away much of their audiovisual content from social media platforms."
Voice Takes Control
All of this puts intense focus on discoverability, a focus that risks
burying broadcasters all together. Ofcom will advise the UK government this
year on how PSB prominence might be legislated to ringfence content. Today,
PSBs get the top channel slots on a TV EPG (electronic programme guide).
But even that may be redundant if, as many believe, voice search will
soon be the dominant TV interface. Mark Harrison, managing director of the
Digital Production Partnership (DPP), told the Changing the Picture conference
in November that voice search will be the single most disruptive and important
thing to happen to video in a decade. "There will be a ‘Voice EPG' and the
question is, when we say ‘Play me some news, play me some comedy': What news?
What comedy? Who will decide on this? The one who has the most money? And what
will happen to niche content?"
Virtual voice apps are being integrated into new TV displays and set-top
boxes. Any pay TV operator choosing Android gets Google Assistant bundled in.
It was estimated that smart speakers would be in more than 100 million homes
worldwide by the end of 2018, while Amazon claims 20,000 different devices can
be connected to Amazon Alexa alone.
"TV is the most important space for us," Fabrice Rousseau,
Amazon's GM for Alexa Skills EU, informed the IBC2018 conference. "Voice
is going to change the user experience by making it a simpler and richer way to
access content."
But that's what worries broadcasters. In the same panel session, Channel
4's chief consumer and strategy officer Sarah Rose argued that content
providers had to "actively defend" themselves over a service they had
little control over.
She urged broadcasters to work together to standardise voice interfaces
(their metadata) "so that the consumer isn't going to be confused"
and also urged Amazon to share data on Alexa interactions with consumers around
content.
Rousseau insisted that there were no plans to prioritise Amazon Prime
over that of other content providers—yet.
There are likely to be battles ahead around rights and which assistant
can serve what content to which device.
Sports Streaming Becomes Business as
Usual
Another indication of the growth in streaming is the impressive increase
in peak concurrent plays. Peak concurrency in Q2 2018 was up by 45% YoY,
spiking to 5.3 million concurrent plays during the winner-take all 7th game of
the NBA Western Conference Finals and then 7.9 million during the FIFA World
Cup, as charted by Conviva. In the UK alone, a record 3.3
million requests were made to stream England's dramatic penalties win against
Colombia via ITV Hub, according to The Guardian.
These spikes demonstrate that sports are driving "appointment
TV" in the streaming space even while they are broadcast to TV. More than
24 million people in the UK also watched England v Colombia, making this match
one of the most-watched events in recent UK TV history, as reported by The
Guardian.
While live simulcast is becoming a valued part of the fan experience,
these events can also create massive demands on the video delivery ecosystem,
which faltered at times in 2018.
Combating Latency
The rollout of Formula 1 streaming service F1 TV got off to a stuttering
start in May when live playback issues resulted in some viewers being unable to
watch the race.
Australian telco Optus had to hand its rights to the FIFA World Cup over
to free-to-air broadcaster SBS in July after subscribers reported being unable
to watch games.
However, Nick Moreno, director of strategy at communications
infrastructure company Arqiva, reminds us that these incidents are outliers.
"Though clearly serious for the rights holders involved, these are
noteworthy events only because they are now relatively rare," he told me
in a December Broadcast interview. "Multiple millions of
streams are delivered every day without hitch, but this doesn't make
headlines."
Latency has long been an OTT bugbear, but one that BBC R&D may have
cracked. In a prototype for which it won an award at IBC, Chris Poole, lead
research engineer for BBC R&D, explained that it could eliminate delay by either reducing
the duration of each segment of video file sent over the network, or by
creating the segments progressively as a series of chunks that can be passed
through the chain immediately as they become available.
Esports finally burst into mainstream consciousness last year. Official
affiliation with the Winter Olympics in February is paving the way for the
sport's full integration. The $25m prize pool at The International Dota 2
tournament is indicative of the entertainment's rapid rise.
"2019, we will see more organisers experimenting with enhanced
interactivity, such as allowing viewers to vote collectively on a player's next
move in a game, through the use of polls that appear on the screen during the
live feed," predicts Ostmodern's Williams. "Viewers in eSports will
not just watch game broadcasts but will actively participate in them,
potentially affecting the outcome of a contest."
Rights to premium sports continue to be fiercely fought for. The most
eagerly anticipated auction in the UK was for the English Premier League (EPL),
the second-most lucrative sports franchise in the world behind the NFL.
Incumbent domestic rights-holders BT Sport and Sky regained the bulk of live TV
coverage, paying a combined £4.464 billion ($6.43 billion), which is less than
the £5.14 billion ($7.1 billion) for the previous tranche.
More attention was on whether a digital player would be enticed by the
EPL's smaller package of livestreamed games. Amazon eventually made the move by
purchasing a 3-year, 20-match-per-season set of games for Prime (following its
scoop of exclusive UK rights to the ATP tennis tour and US Open tennis
tournament).
While this looks like more of a tester for the future, the biggest mover
in sports streaming was Perform Group, the UK-based self-proclaimed Netflix of
sport, which rebranded in 2018 as Perform Content, and DAZN, with the latter
being its consumer-facing division.
DAZN Goes for Broke
Already with a presence in Germany, Austria, Switzerland, and Japan, it
launched in Italy and the US last year. In Italy, it paid nearly €600m for
three seasons, or 114 matches a year, of football league Serie A.
Ampere Analysis is sceptical. "DAZN has an addressable market of 7m
Italian households. It needs to sign at least 25% of these homes in order to
break even on the rights costs," it notes adding that DAZN's monthly price
of €9.99 means DAZN's break-even point, "while high, is not
unachievable".
It maintains, "DAZN's local success will be a key test of whether
subscription OTT players are really ready to disturb incumbent pay TV providers
in the big-ticket sports rights arena."
It landed in the U.S. in September with an eyewatering $1 billion for
exclusive U.S. rights to broadcast Matchroom Boxing's 16 US and 16 UK staged
fight nights per year which, at current exchange rates, means around $118m per
year—a bigger budget for promotion than HBO and Showtime put together.
Matchroom's boss Eddie Hearn told The Independent, "I could have done this with less
money—probably half the money—but to make it as powerful as we can, this figure
enables us to do it. This will end up eradicating, in my opinion, the
pay-per-view model here in America. It's so expensive, it's ridiculous—$99 for
a pay-per-view".
"Paying over the odds for a niche sport in an already saturated US
market, in terms of content distributors, is an enormous gamble; especially at
a time when viewing figures for boxing and sports overall is declining,"
is the view of MIDiA Research.
MIDiA points out that Disney-owned ESPN+ offers a much more diverse
sports portfolio, which could impact DAZN's value proposition on entering the
market. But DAZN is nothing if not ambitious and aggressive, plotting to make
inroads with major sports leagues, including the NFL and MLB when rights become
available in 2021–2022.
At the other end of the scale, for second- and third-tier sports, remote
production for signal contribution purposes over the internet is gaining
ground. SRT, the open-source protocol developed by Haivision goes some way
toward ironing out the glitches in sending video over the public internet, a
point recognised with the award of a technical Emmy.
Codec Wars
Arguably the efforts to promote an alternative video streaming codec to
HEVC were generated as much by frustration over HEVC patent holders' refusal to
budge on either cost or transparency of licence payments than any bounding
improvements in rival technologies. Nonetheless, most observers concede that
the foot dragging by HEVC stakeholders has irreversibly opened up the market for
new contenders.
Chief among these is AV1, backed by the Alliance for Open Media (AoM).
Others include Divideon's xvc, which attempts to find a middle ground between
AV1 and HEVC, and PERSEUS from V-Nova, which works by enhancing existing HEVC
encoders and so wouldn't necessitate a rip and replace. V-Nova is promoting
this at MPEG with a view to getting it standardised. Samsung, which is not a
member of AoM, is pursuing its own HEVC successor through MPEG.
The sanest observers on this topic point out that HEVC is still a very
efficient codec and that it will take any rival at least 2 years to either
reach critical mass of market development and/or standardisation to make any
real impact. By that time, MPEG intends to come riding to the rescue with
Versatile Video Coding (VVC), designed to generate a 40% efficiency over HEVC
for applications in omni-directional immersive media.
The desire to improve VVC's commercial prospects by reassuring potential
users that the mistakes of HEVC will not be repeated led to the formation of
the Media Coding Industry Forum (MC-IF), which includes HEVC Advance.
5G Drives Mobile Gaming and Extended Reality
Cisco's latest Visual Networking Indeix predicts that by 2022, 60% of the
global population will be internet users, more than 28 billion devices and
connections will be online, and video will make up 82% of all IP traffic. This
volume is being driven by 5G, which will go commercial in 2019.
Qualcomm's 5G-ready Snapdragon 855 chip is already being incorporated
into flagship Android smartphones like the Samsung S10. The system-on-a-chip is
primed for 2Gbps speed using a 4G modem, but higher in 5G mode and using the
802.11ay-based protocol, it will take Wi-Fi speeds up to unprecedented
10Gbps.
Intel and Ovum predict that
user demand for video data alone will grow from a monthly average of 11.7GB per
5G subscriber in 2019 to 84.4GB in 2028, at which point it will represent 90%
of all 5G traffic.
The source of this data won't necessarily be autonomous cars or IoT
sensors but VR and AR (merging into eXtended Reality [XR] or mixed reality
[MR]). Virtual and augmented reality traffic will skyrocket, Cisco believes, so
that by 2022, it will consume 4.02 exabytes (EB) a month, up from 0.33EB/month
in 2017.
Intel/Ovum states that 1 minute of AR will consume 33 times more data
than 1 minute of 480p video. Yet by 2028, AR games will dominate more than 90%
of 5G AR revenues, or around $36 billion globally.
Intel speculates, "Initially, users will see mobile cloud gaming
become a reality, as cloud-based servers do the heavy graphics and AI lifting
for less powerful mobile devices."
Intel and Ovum also list a variety of ways that video viewers will be
able to enjoy immersive experiences, including "responsive haptic
clothing," that will drive new 5G use cases.
