Competition, consolidation, and … Cosmo? A look at OTT's year to come

Samantha Bookman, FierceOnlineVideoOn a holiday trip to visit family, I finally got the chance to try JetBlue's much-touted Fly-Fi service, as well as the Amazon Prime Instant Video streaming service that the airline has promoted since partnering with the retail giant earlier this year.

The results? Just so-so. My experience varied dramatically between aircraft, indicating that in-flight Wi-Fi still has a long road to travel before it becomes stable, fast and reliable.

It's easy to browbeat satellite-based broadband for its drawbacks, but the experience was a stark reminder that even on the ground, the infrastructure powering online video delivery is still not ideal -- and may never be, since it's delivered over the top of a decentralized network that wasn't originally designed for video.

Still, it's early in a brand-new year, and while everyone else is detailing trends that we'll likely see for OTT video, I think it's just as appropriate to trot out a short wish list of online video trends I'd like to see:

  • Live streamed games that only lag a second or two behind the TV broadcast, rather than a full minute or two
  • Content agreements negotiated with the viewer in mind, not just companies' budgets
  • Major broadcast networks streaming all their content to viewers
  • Advertising that makes sense for online video, rather than being shoehorned in

However, much like in-flight Wi-Fi, the online video world's reality doesn't often live up to its promise in several key areas. In 2016, expect the industry to tackle some issues head-on, like content licensing and improved delivery. But other problems, like advertising fraud, seem to only be getting lip service for now.

Here are some areas in the online video industry that will see interesting times in 2016:

Viewers clamor for OTT content, but won't get what they want

Pity the cord-cutter for a moment. The person who used to have pay-TV, and who knows what it was like to see all of the available programming out there by scanning through a single user interface using a single remote. That same experience just doesn't exist in OTT: to get all the content they want, users have to sift through multiple online video services, and often must switch from one device to another, be it a PlayStation, a Chromecast or an over-the-air antenna.

The demand for OTT content is growing, but thanks to tangled content licensing agreements viewers have to navigate multiple services to see the TV shows and movies they're interested in. That's one reason why Netflix content head Ted Sarandos has been working to secure global rights for the content it streams. Unfortunately it is perhaps the only really new licensing strategy out there that takes both the viewer and the distributor into consideration.

Parks Associates Director of Research Brett Sappington told FierceOnlineVideo that the content issue means that OTT will continue to see a lot of churn in 2016 as consumers "stack" services, adding and dropping SVOD (subscription video on demand) or AVOD (ad-supported video on demand) services to get the lineup they want. "Right now we're seeing most people take Netflix and then kind of add to that, and churn through some other services to find the mix of services that they want. What we're not sure of yet is, are they switching these other services because they've burned through all this content and are looking for something new, or are they just experimenting as they try to figure out what are their favorites?"

While Sling TV CEO Roger Lynch has stated that churn doesn't really concern him or adversely affect his linear OTT service, other providers might not hold up so well if their subscriber numbers don't see a steady rise.

Anticipating viewers' content needs could give new OTT entrants more of a competitive edge, however. YipTV Co-Founder and CEO Michael Tribolet said that churn rates are low for the linear streaming service, which targets multicultural, largely Hispanic consumers with a package of international TV channels. That's partly because "we're now seeing what I call attachment rates. So [subscribers] watch one type of content that drives them to another content. For example if they're watching futbol, it drives them to a news channel right after."

YipTV has been able to sign several additional channels since launching in 2015 and has quite a few anchor-level channels such as BeIn Sports, while keeping its price point at $14.99 (plus a free streaming tier with about 17 channels).

"That's actually the cool part of OTT is we can adapt to what needs to happen. I think that's what OTT is about beyond just content, it really adapts to the customers," he said.

Live streaming's looming capacity challenges may compound its latency issue

In 2015, live streaming became perhaps the biggest topic in OTT video. The technology was certainly filling workshops and panel sessions at conferences like Streaming Media West. Chris Knowlton, VP and streaming evangelist at Wowza, said that there was a change in the audience attending his live streaming workshop. In the past, about one-third of his audience were "really experienced … usually people hoping to pick up something new to add to their toolkits. And this time it was a lot of folks who raised their hand and said they were not only doing streaming but they were doing live streaming. So the experience level in the room was much higher than what we would normally see."

But as live streaming grows and more providers add it to their service portfolios, one nagging technical challenge remains: latency.

"…as more (companies) move toward the streaming world, they're going to use things like adaptive bitrate streaming which typically has 30-40 seconds of latency from glass to glass. How can we actually reduce that so as people start putting on more live events, especially if it's a sporting event that's time sensitive? … we have to reduce the lag from that perspective," Knowlton said.

One company, Net Insight said it will solve the latency problem with its True Live OTT solution. However, its initial demo took place under somewhat controlled conditions. The company has signed at least one major customer, Tata, but for now, how well the offering performs out in the wild remains to be seen.

In the meantime, IneoQuest, a Massachusetts-based vendor, sees capacity and infrastructure issues as part of the latency problem. It's currently putting together a portfolio of applications that mix appliance-based solutions with virtualized solutions for live-streaming service provider customers. "Think about live events and the scalability issues you have now," said Kurt Michel, senior director of marketing for IneoQuest. "We're focused on the idea that intelligence planning for capacity in the (OTT) environment is going to be needed."

For example, Akamai's content delivery network was able to easily handle the record-breaking streaming audiences during the 2014 FIFA World Cup. But that was just a single event, Michel said. The rise in popularity of eSports will create a much bigger live-streaming challenge. "Gaming is one of those things that people aren't paying much attention to but there is a huge amount of video traffic in gaming. And those can be global events," he said. "… When you look at multiple events like that happening, even an Akamai is not going to be able to handle that kind of churn without some level of automation."

Amazon and Microsoft drive the OTT delivery segment

Last year, we saw Amazon Web Services and Ericsson snap up two vendors: Elemental and Envivio, respectively. Likewise, IBM acquired Clearleap as its shored up its position in the cloud services market, and Harmonic nabbed Thomson Video Networks.

According to Parks Associates' Sappington, we should expect more of this consolidation within the online video delivery segment.

"I've been saying for a while that the marketplace will really consolidate. We're seeing more and more of the companies that do that, and that offer solutions like SaaS and PaaS -- so really everything is becoming "as a Service" for video delivery… Everybody's trying to get into that space," Sappington said. Microsoft Azure and AWS will be perhaps the most dynamic companies in the market this year as they try to carve off "key parts" of the segment and challenge other competitors, he said. "Their whole focus is huge volume at super low cost and drive everyone else out of market."

Other providers will need to create value-added services if they want to compete with these two behemoths. "If you're Ooyala or Brightcove or a number of other companies in that market, how you deal with that, how you play and how you survive is really important. Whether it's ad insertion, analytics … they've gotta do something unique in order to stay in business," Sappington said.

'The world is at our doorstep'

But, back to the consumer end of the OTT video space. It's already a given that we'll see a lot of new launches of SVOD services in 2016. While we know about a few of them -- NBCUniversal's Seeso, which launched last week, Telletopia, which hopes to launch in the first half of this year, for example -- others are just speculation.

For example, The Walt Disney Co. launched an SVOD service, Disney Life, in Europe -- but not here. Discovery Networks International has an OTT service on the Continent, as well -- but not here. However, those could just be test runs ahead of a U.S. launch, perhaps this year. And other providers, most notably BBC, are planning U.S. launches of over-the-top services.  "The world is at our doorstep," Sappington said.

Meantime, expect a boom in boutique or "niche" SVOD services, as a study last year predicted. Sappington said that major magazines might consider their own SVOD services: Cosmopolitan, for example, has been testing the video waters with exercise videos that air on ESPN. The magazine has already licensed its name to a Canada-based OTT website, Cosmo.tv, that is co-owned by its parent Hearst and Corus Entertainment. And other magazines like Sports Illustrated are swishing their toe in the waters of digital video.

"It makes sense for them to get into video, and the magazines in particular. They're experts in subcribership, experts in advertising, and they have every reason to get into video. Some have really strong brands. You see a Sports Illustrated, or a GQ or People Magazine. If they decided they wanted to do a service, they could really knock it out of the park," Sappington said.

The platform for such a service is already available from a number of enterprise-focused vendors such as JW Player. But can a glut of niche services really attract -- and keep -- viewers who are already struggling to piece together their own bundles of SVOD services? It's likely that many new entrants will fall victim to the most powerful business driver of all: how much money the consumer is willing to pull out of his or her wallet.--Sam

Revised Jan. 13 to correct Net Insight customer stats.