Video is the strongest-growing segment of the digital content market and will make a huge contribution -- second only to gaming -- to the projected $180 billion in revenues that will roll in by 2017, a new study by Juniper Research reveals. But that growth comes with a cost to the carriers and cable operators that manage all that data traffic streaming over their last-mile networks.
For example, Netflix, YouTube, Spotify and Facebook generate a combined 500 million hours of streaming video and audio traffic per day, Juniper said in a whitepaper supporting its latest report, "Digital Content Business Models – OTT & Operator Strategies 2016-2021."
To subsidize the cost of meeting capacity requirements, Juniper suggests that carriers and other internet service providers should partner with OTT providers to get a piece of their subscription or advertising revenues -- a strategy that is in line with what Comcast is doing by integrating Netflix into its X1 set-top boxes (and as other Tier 2 cable operators have done over the past couple of years).
Overall, the forecast represents more than $40 billion in growth from 2015, when digital content brought in a total of $140 billion in revenues. That kind of revenue leap is attractive to just about any provider – and carriers can get in on the growth track by working out carrier billing (or integrated billing) arrangements with partner OTT providers.
"In the first instance the operators have extensive and often long-standing billing relationships with consumers," said Juniper. "Secondly, they have the capability to offer 'zero-rated' carriage to partner OTTs, meaning that any data used by consumers in the course of accessing the OTT does not count against their monthly allowance. Given that many of the streaming services are extremely data hungry (witness Netflix's data volumes), then a partnership could reduce the overall cost to the consumer."
Net neutrality issues regarding zero-rated data aside, the business model could resolve one sticking issue in the OTT story, providing another way for operators to fund continued network capacity upgrades. For the next few years, adding capacity to handle increasing content traffic will continue to be crucial as more SVOD services launch, and online gaming and eSports rockets upward in popularity.
Gaming currently accounts for the largest share of digital content sales, Juniper noted, with video content running a close second and accelerating. "Players such as Netflix have capitalized on this migration, while many broadcasters are now introducing streaming services in a bid to keep pace with the OTTs."
Hence, it's time for operators to come up with new monetization models that tap into this disruptive market.
"Increasingly, the telecommunications networks operators are recognizing that, unless they wish to be reduced to dumb pipes facilitating consumer data access, it is critical for them to be in a position to add value in some shape or form," Juniper concluded.
For more:
- see the release
Related articles:
Netflix's slowing U.S. subscriber market may have driven truce with Comcast
Pay-TV industry reacts as court upholds FCC's net neutrality rules
Cogent has resolved port issues with half of the largest ISPs, says Schaeffer
Netflix downgrades mobile video for Verizon and AT&T, drawing ire