Big Video Disruption: How Can Service Providers Cope?
At Light Reading’s 2020 Vision Executive Summit in Rome this past December, Aditya Kishore, practice leader for video and telco transformation at Heavy Reading, followed his presentation, titled “The Video Streaming Explosion & Shake Up,” with a one-to-one interview with Light Reading’s managing editor Liz Coyne. Kishore, also principal analyst at Diametric Analysis, spoke about the challenges of managing and monetizing bandwidth-intensive video.
Kishore’s consultancy focuses on the disruptive impact of Internet distribution on the video and telecom sectors, and how to develop the necessary strategies and technology solutions required to drive profitability. During his conversation with Coyne, he discussed how service providers will need to transform their networks to cope with the big video explosion. He says that streaming video is set to disrupt operator networks and business models.
Here is the interview:
Coyne: You just got off the stage, where you talked about the implications of streaming video for service providers. So, I wondered if you could talk to me about what video apps service providers are most concerned about today.
Kishore: Sure. If you look at what we call the big video explosion, there’s a step change in the volume of video we’re seeing. And that splits into two categories:
1) The pervasiveness of video, where video is being brought into functions where it previously wasn’t. So, that could be things like communication and collaboration within enterprises, more video in social media—Facebook Lite, for example. Mark Zuckerberg has said that Facebook will mostly be video in a few years. So, a lot of video is coming from social media. We used to have user-generated content; now there’s what we call “productive video,” which is video in the enterprise, so things like communication, collaboration.
2) And then there’s what we call “fact video,” which is actually just larger factor files of video coming from applications like ultra-high-definition (UHD) video and virtual reality: New applications that are very, very bandwidth-intensive require a lot of data to be transmitted over networks.
Coyne: Which bandwidth apps are the most bandwidth-intensive?
Kishore: The fact video kind of applications; it’s UHD and virtual reality. Our definition right now is about 20 to 25 megabits per second for video streams, and that’s using fairly advanced video compression. The challenge with that is it depends a lot on the type of content that you’re distributing. Something like live sports, for example: lots of action, lots of movement, lots of new information in each frame—that becomes very, very difficult to compress. Whereas if you’re interviewing somebody like this, for example, it’s much more easily compressed into smaller files.
So, UHD, particularly live sports, are the things most difficult to compress. Then, virtual reality: I think we’re still trying to figure out what the use cases are, as well as there’s a lot of development in the technology approach. But if you think of virtual reality as a 360-degree video experience, then it’s really putting together a series of frames to give you that whole round perspective: both up and down and left and right, all the way around. That requires, again, a lot more information to be delivered, and those are the two applications that are probably going to strain the network the most on an individual basis.
Coyne: How do service providers best monetize these video apps? Live sports is probably a big one. What are some others?
Kishore: I think it’s a challenging exercise. The biggest challenge with video services is it’s very regional, very local. In certain areas, certain types of content can cost a lot, and can generate a lot of revenue. In other cases, the opposite is true. It’s very difficult to come up with a really clear indication. I think you have to be very hyper localized. In terms of revenue generation, generally if you look at the total addressable market, television advertising—just plain traditional television advertising and pay-TV subscription revenue—are probably the largest generators of revenue still. They still contribute by far the most revenue.
But we’re seeing rapid growth in a couple areas. Mobile video is growing … over-the-top (OTT) video, obviously. We’re seeing subscriptions to services like Netflix growing quite substantially. Even in terms of advertising, we’re seeing that social media and online video are the two “hot” applications to watch—where revenue growth is coming from.
Not all of that is going to translate neatly into the service providers’ business model. It’s a question of partnerships. Again, certain things may not work in a market like the United States, but they may work very well in a smaller market where the service provider has more muscle.
From Kishore’s 2020 Vision 2016 presentation:
The explosion of streaming video is shaking up pay-TV business models, driving up bandwidth requirements, creating new piracy threats and generally creating new challenges for content networks and content monetization.
The landscape seems to be constantly shifting as network operators move from paying for and bundling content to creating their own online services to partnering with existing OTT players or buying content and digital advertising platforms.
While cable TV operators are keeping the wolves at bay with their latest initiatives, enhanced offerings from video streamers and other online media continue to push more TV viewers to scrap their monthly cable subscription. Yet, traditional pay TV remains an attractive option for many consumers, and TV advertisers—as Kishore mentions. It still delivers content that’s not readily available on streaming platforms, such as news and live sports.
Overall, market indicators point to the need for cable operators to adapt to the proliferation of video content through digital channels to remain competitive.