Learn about the online video trends that will shape 2014 and beyond. You will learn how social TV will fundamentally change how online video is consumed and shared, what's likely to happen with ongoing digital rights battles, and what's needed to improve QoE so that online video can reach its full potential.
2. This document features our 2014 predictions.
To see our 2015 predictions, click here.
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3. !
1. Social TV will take off
Given the torrid growth of social media services — and the influence they have on how users consume
broadcast TV programming — it was only a matter of time until they began to intersect.
While the ground was laid in 2013, with Twitter hashtags being overlaid into every conceivable program,
the pace should really accelerate in 2014. Witness some recent announcements and launches.
• In October, Comcast formally announced its new “See It” feature that it hopes will turn social media
conversations into instant content consumption and become as
widespread as Facebook “likes.” Comcast inked its first partnership
with Twitter and will initially enable its NBCUniversal followers to
click a “See It” link embedded in a show’s tweet to immediately
watch live TV, access video on demand programming or watch it
online on any mobile device. In essence, “See It” holds the promise
to transform connected devices into online remote controls.
• Nielsen, best known for its TV ratings, recently launched Twitter TV
Ratings which measure how posts on Twitter impact television
viewing. Clearly, Nielsen anticipates that social platforms like
Twitter will grow in their impact on viewership and engagement, as
evidenced by the deluge of social media conversations that
accompanied the “Breaking Bad” finale.
• Companies are also leveraging Facebook for Social TV. Optimal, a
social advertising company, recently announced a new service that
allows brands to buy ads that display on Facebook almost
simultaneous to its commercials running on TV. That way, if a viewer
is splitting his or her attention between the TV and a second screen
companion device, chances are greater that they will be engaged with one of the brand’s messages
and perhaps both.
• Hardware sales and app development should continue to also fuel social TV integration, especially
since viewers increasingly consume content from social media and television in unison. Sales of
tablet devices are projected to grow another 43% in 2014 (source: Gartner) and global smartphone
shipments are forecast to surpass 1.2 billion units (source: Digitimes Research).
The hope from MVPDs is that they can reframe social networking from a threat to an opportunity. By
inserting themselves into the social dialogue and establishing new ways for viewers to discover shows,
Pay-TV providers and broadcast networks can actually drive more consumption. In a world of continuous
partial attention, instant gratification and meme-driven media, that’s a big deal.
4. !
Implications:
The rise of Social TV and second screen viewing portends fundamental shifts in how video content is
consumed, shared, promoted, measured and monetized.
Some obvious challenges that will only increase over the next year include:
• How to accurately measure engagement with TV programming. When a person is constantly shifting
attention between a television program and second screen content — which may or may not have
anything to do with the TV show — how is that multi-tasking accounted for in the measurement info?
• How to value TV commercials. A Magna Global study recently revealed that the number of Tweets
jumps 21% during commercial breaks. That’s sobering news for advertisers, whose commercials are
already being skipped with increasing frequency by viewers using digital video recorders (DVRs).
But the challenges also give way to opportunities:
• Social TV activity throws off a lot of data, some of which can be mined to create more effective
commercials and more informed programming decisions. Getting what is, in effect, real-time focus
group information holds significant promise.
• Advertisers can use social applications to extend the reach and effectiveness of their commercials.
For instance, some advertisers encourage viewers to use their Shazam app while the commercial is
playing, which spawns special promotional offers. This, of course, assumes that the viewer is
engaged with the commercial and isn’t fiddling with their companion device.
• Some are looking to alter user behavior, incentivizing viewers to tune into live broadcasts — and the
Social TV activity that accompanies them — by rewarding viewers for watching and participating.
The next great test for Social TV will arrive in February at the 2014 Winter Olympics in Sochi, Russia. All
the elements should be in place for peak interactivity: a global audience, a post-holiday crowd with new
connected devices, a built-in fanaticism for sports, and the usual controversies and Hallmark moments
that accompany the Olympics.
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5. !
2. Digital rights battles will escalate
The summer dust up between Time Warner Cable and CBS that resulted in a 32 day blackout of the
latter’s programming to TWC customers underscored the festering tensions between broadcast networks
and multichannel video programming distributors (MVPDs) over digital rights.
While this was originally covered by the media as a tussle over retransmission fees — where cable
operators must compensate broadcasters for retransmitting their content — the real nut of the problem
revolves around TV Everywhere rights.
And that problem shows no signs of abating.
MVPDs are leaning heavily on TV Everywhere
to keep their customers from defecting to
free or low-priced subscription video-on-demand
alternatives like Netflix that deliver
content over-the-top (OTT) of broadband
connections. Ideally, operators would like to
negotiate fees for content rights that
transcend device, so that they pay the same
cost whether a customer views that content
on a TV, tablet, smart phone or other
connected device.
Unfortunately for them, many broadcast networks don’t see it that way.
As their advertising revenue continues to get squeezed by various forms of online advertising, broadcast
networks and their affiliates are coming to view retransmission fees as an important revenue stream and
means to profit from the disruption being caused by new distribution channels and devices.
CBS CEO, Les Moonves clearly articulated his position on a recent analyst call, saying: “The right of our
content traveling with the consumer, we think we should be getting paid for that. .....everything can’t
be included in the one rate that we negotiate with the (MVPDs).” And also, “It’s our content. We spend a
lot of money for the intellectual property, and we want to fully monetize that.”
Flaming the tensions further, broadcasters are pushing for shorter, more flexible agreements that allow
them to capitalize on any further market disruption to come. That way, they won’t be confined to rigid,
long-term contracts and unable to respond to a fluid, changing landscape.
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6. !
Implications:
It would seem that the balance of power is currently with the broadcast networks and their affiliates and
that they will continue to press for compensation across all delivery platforms. Not to mention, an
increased push for increased flexibility in cutting distribution deals with the SVOD players that are
causing traditional Pay-TV operators so much heartburn in the first place.
With Netflix forecasting that it will double streaming volume by 2016, that bodes further problems for
multichannel video programming distributors.
To blunt the continued encroachment of OTT content and gain leverage, cable TV operators like Liberty
Media CEO, John Malone believe that MVPDs could benefit from consolidation and partnerships, possibly
to launch their own national streaming video service. In fact, there are reports that a Time Warner Cable
- Comcast merger may be in the works.
Whether the multichannel video programming distributors can reset the balance of power anytime soon
remains to be seen, but it is likely that the power battle being waged with broadcasters will continue to
see flare ups and further standoffs in the year ahead.
Read More:
What is the difference between IPTV and TV Everywhere?
7. !
3. Quality of Experience will trump all
The correlation between positive quality of experience (QoE) and high user engagement levels is well
known by now. You generally can’t achieve one without the other, as lots of
research reports will attest.
• In 2011, a 1% increase in buffering time during video-on-demand
(VOD) content resulted in a reduction of three minutes of
viewing time. Today, that same 1% increase in buffering time
cuts viewing time by a whopping 8 minutes (source: Conviva).
• Another study, conducted by Akamai and the University of
Massachusetts, revealed that viewers who experience re-buffer
delays of 1% or more of a video’s total duration play 5% less of it
compared to a similar viewers who experience no re-buffering.
The problem is, research also indicates that producers and broadcasters are
falling short in their quest to elevate the perceived value of online video and
match the lofty expectations consumers have come to expect from cable TV.
While technologies like adaptive bitrate streaming and CDN-switching have
greatly narrowed the quality gap, they still fall short.
• Because bitrate downshifts are noticeable to users and because low bitrates
(like re-buffering) are correlated to reduced viewer latency, publishers may
be hesitant to use ABR to its full extent. Clearly, re-buffering is not the only
goal or the only element of video quality.
• Switching between upstream CDNs does nothing to address problems in the last mile. Regardless of
which CDN is used, video must eventually travel over a viewer’s ISP. Also, despite the claims of CDN
switching vendors, the switching capabilities offered are not as real-time or dynamic as they want
one to believe.
Ultimately, end users’ desire for high-definition video images is outstripping the capability of their
internet connections and their ISPs’ networks to deliver such data streams. Until every user has a
faster internet connection and all ISPs can support these at times of peak usage, quality will
continue to suffer.
To compound the problem, poor online video quality tarnishes the content brand more than the internet
service provider or video hosting provider. In fact, a recent survey from online video platform service,
Brightcove revealed that 62% of viewers are more likely to blame the brand when they experience poor
video quality rather than the offending ISP or hosting provider.
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8. !
Implications:
The persistence of poor quality experiences threatens to prevent online video from reaching its full
potential.
While users increasingly expect the convenience of watching video anytime, anywhere, on any device,
the classic “living room” experience continues to set the standard by which all other viewing experiences
are graded.
If IP-based video viewing experiences cannot approximate the stall-free experience of cable, satellite,
and terrestrial broadcasting, online video will always remain in the realm of the niche services. Given
the well-established connection between QoE and viewer engagement, online video services will need to
measurably improve quality of service (QoS) levels in order to justify subscriber fees or appeal to
advertisers.
The clear path for publishers and network providers to deliver a quality of experience on par with
existing Pay-TV operators is to make a serious investment in infrastructure. Those publishers that don’t
yet use CDNs and those ISPs that don’t use transparent caching, need to do so. Beyond that, bandwidth
and other forms of capacity need to be increased across all stages of the network — a sheer "brute force"
effort to smooth the path of digital video.
Unfortunately, there is a disconnect between the beneficiaries of such investment: the online publishers
who collect advertising and subscription revenue and the network operators who are required to make
the investments. ISP customers will balk at the notion of increased monthly fees to subsidize these
improvements, especially if they perceive that the impetus has more to do with further enriching
content owners. Instead, there needs to be a new cooperative model in which content owners, CDNs,
and ISPs can all work together to optimize video delivery, sharing costs and risks proportionally to the
benefits they stand to realize.
Read more:
How Much Online Video Quality is Enough?
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9. !
4. Subscription video on demand content gets exclusive
To date, subscription video on demand (SVOD) services like Netflix, Hulu Plus and Amazon Prime have
thrived with a formula of low price, large selection, cross-platform delivery and tailored programming
recommendations.
What they haven’t had is exclusive, must-see programming like many of the Pay-TV channels (think:
HBO’s “The Sopranos” or AMC’s “Mad Men”). But that started to change in 2013, as SVOD providers began
to offer growing libraries of original content. That trend will accelerate in 2014 as these services look to
differentiate their offerings and increase the perceived value of subscriptions.
Netflix has demonstrated that it isn’t timid about making bold moves to secure exclusive content.
According to its Chief Content Officer, it wants “to become HBO faster than HBO can become Netflix.”
• In an impassioned speech that went viral, actor Kevin Spacey
lauded Netflix for taking risks, eschewing the need for series
pilots and having the patience to nurture shows over time.
Spacey’s “House of Cards” is one of the most high profile forays
by Netflix into original content programming.
• Netflix also famously resurrected the cult classic comedy
series,“Arrested Development” and has a potential new hit on its
hand with “Orange is the New Black.”
Amazon has also made notable investments in exclusive content, even
establishing its own studio.
• Amazon secured exclusive licensing rights to stream the BBC hit
show, “Downton Abbey,” including the right to stream episodes
that have yet to air in the U.S.
• It also recently ordered pilots for programming from big names like Chris Carter, creator of “The X-Files”
and Michael Connelly, an award-winning author of detective novels.
Not to be outdone, Hulu is also touting original programming as an incentive to woo prospects to upgrade
to its Hulu Plus service.
• In perhaps its most notable deal to date, Hulu has partnered with Lionsgate Television to produce
10 episodes of a new original series, “Deadbeat,” that will air in 2014.
• It has also invested in several other exclusive content programs, including animated serials like
“Mother Up!” and the “The Awesomes,” as well as the documentary series like “Behind the Mask.”
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10. !
Implications:
As SVOD services begin to accrue exclusive libraries of original programming, OTT content gains even
more legitimacy as an alternative to traditional Pay-TV and premium channels like HBO and Showtime.
By increasing the perceived value of their service, SVOD providers hope to reduce churn and boost
subscribers, appealing even more to the cord cutters, cord shavers and cord nevers that are retreating
from cable and satellite TV plans. Original content also provides subscription video on demand providers
with a justification to possibly raise prices in the future or create multiple pricing tiers.
Just as importantly, the investment in original content also provides SVOD services with a hedge against
spiraling content licensing costs, which have increased 700% in just the past two years. While
investments in original content can be expensive and risky, it buys leverage and the potential to better
control their fate.
Despite all these advantages, Netflix and its peers also don’t want to bite the hand that feeds them.
Subscription video on demand services don’t necessarily want their original programming to eclipse that
of their suppliers — the networks and studios — or they will will be viewed as a direct threat and find
their access to third party content greatly diminished. It will be a balancing act.
Check out our extensive list of OTT providers
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11. !
5. Online video traffic will continue to soar
Online video traffic will continue its sizzling growth rate, propelled by the virtuous cycle created by brisk
sales of connected mobile devices, the consumer embrace of SVOD and OTT content and the increasing
allocation of advertising dollars to online video. Consider the following:
• IP video traffic — already enormous — will grow another 28% year over year for consumer use and 40%
for business use, reaching a combined 45,585 petabytes per month in 2014 (Cisco Visual Networking Index).
• By 2014 online video will account for nearly 90 percent of all consumer IP traffic (Cisco Visual Networking
Index).
• Mobile data traffic will grow 10-fold between 2011 and 2016, mainly driven by video
(Ericsson Traffic and Market Report).
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12. !
Implications:
The inexorable march of online video consumed over IP-enabled devices puts Communications Service
Providers (CSPs) in a real bind.
With sales of old standbys like landline telephone service plummeting and cash cows like SMS at risk by
newer technologies like long term evolution (LTE), CSPs need to establish new revenue streams that can
replace these waning incomes.
If that weren’t a formidable enough task, the surge of online video coursing across their networks is also
requiring Communications Service Providers to make substantial infrastructure investments just to keep
pace; investments they can’t recover simply by increasing monthly ISP fees.
To extricate themselves from this bind, service providers will need to leverage their position as network
operators to find ways to forestall further capital investments and create new revenue streams. Many are
launching their own content delivery services as a way to achieve both.
To successfully compete in delivering video content, they will need advanced analytics and reporting to
help them harness these advantages, optimize quality and precisely provision capacity.
Infographic:
Who is Powering the Rise of Online Video?
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13. !
6. Pay-TV bundling is here to stay
For traditional Pay-TV providers, 2013 has been a challenging year.
For evidence, you need not look further than the net subscriber losses that cable and satellite TV
providers have begun to post this year, hemorrhaging 217,000 subscribers in the second quarter of 2013
compared to the same period last year (source: SNL Kagan). Contributing to this decline are:
• IPTV services like AT&T U-verse and Verizon FiOS that are poaching customers from traditional Pay-
TV providers. While cable and satellite providers were shedding subscribers, IPTV services added
398,000 net new subscribers in Q2 and now account for 11% of the U.S. Pay-TV market (source: IHS).
• The rise of more affordable subscription video on demand services like Netflix and Hulu that have
led a growing number of consumers to cancel their cable altogether (cord cutting) or pare back to a
more basic pricing plan (cord shaving). In fact, 2013 will mark the first time that cable and satellite
operators have posted a net loss of Pay-TV subscribers (source: IHS).
Given these ominous trends and competitive pressures, industry pundits have increasingly questioned
whether MVPDs and content owners can preserve the status quo of imposing high priced content bundles
on consumers. The answer appears to still be “yes”.
New entrants have tried to shake things up but to little avail. Most notably, it was recently announced
that Intel plans to sell of its OnCue IPTV service to Verizon before ever formally launching. OnCue had
planned to offer “flexible programming bundles,” speculated by some in the media to mean that it would
allow consumers to lop off less popular channels and pay only for smaller content bundles, albeit at a
premium.
The truth is, however, that there is still no compelling reason for
content providers and MVPDs to kill the golden goose and
radically change the way they do business.
Bundling works for content owners by allowing them to leverage
their premium brands to secure distribution and carriage fees for
their secondary offerings (think: ESPN Classic or truTV). Bundling
works for the MVPDs by enabling them to package a smorgasbord of content
into flat-rate pricing packages that lots of consumers find appealing. In the process the operators also
benefit from a consistent revenue that bundling provides, as opposed to the wide fluctuations that come
with a la carte offerings.
As long as both sides see value in the current arrangement and there is no urgent reason to change,
bundling will remain and likely evolve over time. There may new and different tiers rolled out, like Time
Warner Cable’s recently announced Starter TV with HBO option, but it’s still a bundle.
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14. !
Implications:
The commercial appeal of unbundling Pay-TV services is obvious; the idea being that consumers can
gain control of the channels that they select and save money in the process.
The reality is a bit different.
There is no supporting evidence that a consumer who currently pays $100 a month for 100 channels
would pay, say, $10 a month for 10 channels under an a la carte subscription scenario. Those kind of
economics would decimate the Pay-TV industry and, in turn, the content owners who profit from
bundling. Instead, consumers would likely pay a significant premium for the 10 channels and not save a
meaningful amount of money. According to a Needham & Co. study, the unbundling of Pay-TV would
result in:
• The death of 124 channels that could not continue to operate on the reduced revenue that a la
carte subscription pricing would cause. That scenario would also bring result in the loss of 1.4
million media jobs.
• The potential loss of $45 billion in TV advertising revenue.
• The destruction of $80-$113 billion in U.S. consumer value.
Short of legislation mandating a la carte pricing options — and that is unlikely to pass anytime soon
given the political stalemate in Washington D.C. — Pay-TV bundling will be with us for the foreseeable
future. Any word to the contrary for 2014 may be provocative but unlikely.
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15. !
Related Skytide Whitepapers
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Read “6 Online Video Trends to Watch in 2013” to see the trends that Skytide
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16. Bigger, more pervasive mobile advertising
Google is planning ads that will take over the entire screen of your phone http://www.businessinsider.com/
google-launches-full-screen-mobile-ads-in-admob-2014-9
Better cross platform tracking
Facebook, Nielsen will soon track your TV habits on tablets, smartphones http://www.digitaltrends.com/
mobile/facebook-nielsen-will-soon-track-tv-habits-tablets-smartphones/
Peering will continue to be a source of conflict
Peering fights will soon be a thing of the past http://www.fastcompany.com/3032148/most-innovative-companies/
twitter-acquires-live-clipping-service-snappytv?partner=rss
Why the Comcast / TW merger is good for Netflix http://blog.streamingmedia.com/2014/04/netflix-comcast.
html http://venturebeat.com/2014/04/21/netflix-comes-out-against-the-comcast-twc-merger-says-it-
will-hurt-the-open-internet/
Verizon support rep admits anti-Netflix throttling http://feedproxy.google.com/~r/boingboing/iBag/~3/
FkcXRa5W0G8/story01.htm
Netflix cuts deal to pay Verizon for direct access http://www.fiercecable.com/story/netflix-cuts-deal-pay-verizon-
direct-access/2014-04-29?utm_source=feedly&utm_reader=feedly&utm_medium=rss
Social TV
Twitter snaps up SnappyTV in bid for more social TV http://www.adexchanger.com/social-media/twitter-snaps-
up-snappytv-in-bid-for-more-social-tv/ http://www.fastcompany.com/3032148/most-innovative-companies/
twitter-acquires-live-clipping-service-snappytv?partner=rss
Original Content
Microsoft to kill its original TV programming plans, shut down Xbox Entertainment Studios http://
venturebeat.com/2014/07/17/microsoft-to-kill-its-original-tv-programming-plans-shut-down-xbox-entertainment-
studios/
Amazon’s new original series ‘Transparent’ will follow Netflix’s binge-release formula http://
www.digitaltrends.com/home-theater/amazon-wades-into-binge-watching-waters-with-original-series/
Unbundling
Stand back, HBO: CBS is launching its own online streaming service, too http://venturebeat.com/
2014/10/16/stand-back-hbo-cbs-will-launch-its-own-online-streaming-service-too/
HBO Go-It-Alone: There Goes the Cable Bundle? http://feedproxy.google.com/~r/TheAtlanticWire/~3/
Y3SiEPQG2EQ/story01.htm
17. November 5, 2014 | By Daniel Frankel
CBS Corp. and Discovery Communications have confirmed in their
separate third-quarter earnings reports that their programming has been
licensed by Sony for the launch of the Japanese conglomerate's
upcoming virtual pay-TV service.
Services like Sony's upcoming over-the-top platform "will help expand
the universe of opportunities for companies like CBS that make the best
programming," said Les Moonves, CBS CEO, during his company's
conference call with investors Wednesday. "More deals along these
lines are coming soon," he added.
A Sony representative confirmed both the CBS and Discovery deals,
noting that more details will be offered up at a later date.
http://www.fiercecable.com/story/sony-adds-cbs-and-discovery-ott-service/
2014-11-05?
Mobile Video
On the advertising front, video is still going strong, but increasingly those videos are being
watched on mobile devices. Americans now spend some 33 minutes per day watching videos
on their phones, and 62 percent of smartphone users are "OK with 15- to 30-second ads" in
exchange for video content. The Mobile Marketing Association reports that non-skippable ads
ranging from 15 to 30 seconds in length receive high completion rates, and that "excessive"
mobile video ad frequency can drastically reduce completion and click-through rates.