With generations of viewers embracing streaming video options as replacements to traditional linear broadcast television, the staunchest pay TV operators, broadcasters and programmers are adopting strategies for competing in the new streaming world. To combat streaming entrants who were first-movers with few other competitive advantages, traditional pay TV providers have started to deploy TV Everywhere (TVE) solutions, “live skinny bundles”, or their own OTT solutions over both managed and unmanaged networks. The end-goals are to either complement or replace pay TV packages and minimize churn, maintain Average Revenue Per User (ARPU), and grow a subscriber base.
“For the better part of fifteen years, pundits have predicted that cord-cutting was the future. Well, the future has arrived...Whatever the cause, it seems naïve to suggest that we have seen the worst of the trend. Instead, this is almost certainly just the beginning.” -- Craig Moffett, MoffettNathanson
The New Normal
Adoption of over-the-top (OTT) broadcasting has greatly increased, with 64% of US households now using at least one SVoD service, up from 47% in 2014. Other statistics that exemplify this change include:
- In Q2 2017 alone, MoffetNathanson reported worldwide pay TV subscribers shrunk by 2.7% -- or 941,000 -- the highest acceleration in rate of decline since data was tracked in 2010. This is in addition to the 762,000 subscribers already lost in Q1 2017.
- Conversely, the ratio of subscribers lost by pay TV providers that were recaptured by virtual MVPDs such as Sling TV, PlayStation Vue, Hulu Live, and YouTube TV remained essentially unchanged at 50% from Q1 2017 to Q2 2017.
Changing Consumer Behavior
A good portion of video consumers today hail from the millennial generation, many of whom have never subscribed to a traditional pay TV provider. Colloquially referred to as ‘cord-nevers,’ this demographic by definition eschews adoption of the traditional TV model in favor of streaming video content. Other cost-conscious consumers may fall into a growing category of ‘cord-shavers’ and ‘cord-cutters,’ who slim down or opt out of traditional multichannel pay TV packages that bundle dozens, or even hundreds, of channels together. In addition to viewing vast amounts of content on sites like YouTube, these groups frequently elect to subscribe to premium à la carte streaming services, and to consume content exclusively on connected devices.
As more and more premium video reaches audiences via the internet, there is corresponding demand for a highly flexible viewing experience. End users commonly expect to stream and time-shift high-quality video on laptops, smartphones and connected TVs. On-demand, catch-up and start-over functionality has become essential as consumers opt to disengage from scheduled linear broadcasts on the main screen to binge watch programming whenever, wherever, and on whichever device they prefer.
Competition Throughout the Value Chain
The uptake of connected devices for streaming video has brought diverse competition into the traditional pay TV provider domain. In the last decade, early disruptors who were only focused on OTT like Netflix have seen the ascendance of other OTT-competitors such as Amazon Video and Hulu. These offerings bypass the need for a managed network to offer premium content to consumers. In fact, they’ve become so popular that pay TV operators like Comcast, Charter, Altice USA, Virgin Media and a dozen more cable operators that previously ignored Netflix have now made it available on their set-top boxes.
Content owners are also adopting complementary streaming strategies while careful not to cannibalize existing carriage deals with operators. For example, HBO Go, NBA League Pass and CBS All-Access offer low monthly pay-as-you-go OTT plans with multiscreen content available both live and on-demand. These direct-to-consumer streaming services represent flexible, low-cost, complementary alternatives to traditional broadcast and pay TV channel offerings.
Finally, pay TV operators and telecom providers are also placing strategic bets on various streaming options to stem subscriber losses. Pay TV operators have released many flavors of streaming solutions in an attempt to gain or maintain market share. The Xfinity TV Everywhere app provides existing Comcast pay TV subscribers access to bundled content on various devices. Dish TV launched Sling TV to stream its content as an OTT offering. And DirecTV’s OTT streaming service, DirecTV Now, has enabled the satellite operator to reduce its churn to 0.79% in Q2 2017, the lowest it has ever been for post-paid subscribers at the carrier.
We know that traditional TV service is not for everyone [and at least half of new DirecTV Now subscribers are cord-nevers.]”-- AT&T CFO John Stephens
Rising Technological Expectations
Aside from consumer and competitive challenges, a streaming service must deliver advanced functionality expected by today’s technically proficient audiences. Operators must consider deploying video content in SD, HD and 4K UHD, across both managed and unmanaged networks, and to the newest devices with advanced functionality, including set-top boxes and other connected devices. Of course, video services must continue to support staple features such as captioning, cloud DVR, on-demand, catch-up and start-over functionality, along with personalized, targeted advertising to maintain the interest of this new audience. These capabilities require a selection of best-of-breed technologies, all of which must be implemented, integrated, and optimized for a streaming media workflow.
Video Solutions from AWS Elemental
Assuming the broadcast rights are available or have been licensed, the challenge then becomes re-deploying existing content via TVE, OTT, or a skinny bundle using technology solutions that are compatible with the existing infrastructure of a pay TV operator and those of its technology partners. Additionally, the operator must decide whether to buy, build, or partner based on the knowledge, resources and time available to select, deploy and integrate best-of-breed technologies that comprise these streaming media workflows.
At a high level, multiscreen video delivery for TVE, OTT, and skinny bundle services requires encoding, content protection and monetization in terms very similar to traditional pay TV requirements. Encoding functions differ in the ways metadata is handled and in the types and number of outputs required, but input, redundancy and reliability requirements are similar. While many parts of the delivery workflow across these disparate services may be similar, the heavy dependence on consumer devices that are typically updated yearly and delivery standards updated every six months compounds the frantic pace of change.
Support for multiscreen video delivery requires best-of-breed, software-based video solutions that are nimble enough to accommodate rapid change while simultaneously able to maintain the reliability required for 24/7 services. These solutions include at its core a media-asset management solution, customer management system to manage subscriptions and customer content access/rights, robust and flexible encoding systems, streaming protocol support for multiple devices, corresponding DRM, and captioning.
AWS Elemental Live performs real-time video processing to support deployment of live channel playout functionality, including localized content such as sports, news and weather to be made available to consumers on any device, no matter the bandwidth constraints. It also allows for workflow optimization: functions such as de-interlacing, scaling and noise reduction need be performed only once with a common output used to encode both broadcast and multiscreen deliverables.
AWS Elemental Server performs file-based video processing to create video-on-demand (VOD) assets. AWS Elemental Server processes content faster than real time, providing a quick turnaround of individual assets or entire content libraries. It transcodes and packages broadcast, mezzanine and multiscreen video formats, enabling locally-created or personalized content to be prepared for broadcast through a traditional playout solution or for multiscreen delivery.
AWS Elemental Conductor management software offers the features and functionality to coordinate large-scale live workflows including monitoring, creation of new channels, and simple management of large channel lineups. AWS Elemental Conductor provides control and management of multiple AWS Elemental video processing instances, reducing the complexity of multi-instance management while enabling scalability and stability of multi-encoder deployments.
The evolution of streaming protocols and monetization strategies generally requires an advanced origin server, such as AWS Elemental Delta, to perform just-in-time packaging, streaming and DRM. Through an advanced origin solution, content can be encoded once, stored in a deliverable mezzanine format, and repackaged and encrypted uniquely for new devices and evolving customer expectations.
AWS Elemental Delta is a video delivery platform designed to optimize the monetization, management and distribution of multiscreen video across internal and external IP networks. Through just-in-time packaging (JITP) and intelligent caching, the platform enables a complete solution for time-shifted TV and real-time content delivery with advanced levels of customization and control, including network bandwidth optimization, profile manipulation and highly-targeted ad insertion. AWS Elemental Delta origin functionality integrates seamlessly with the AWS Elemental video processing product suite and allows pay TV operators and content providers to monetize assets by deploying video delivery infrastructure that expands content delivery, enhances OTT services and capabilities, and reduces video distribution costs.
For a 24/7 service, regardless of the deployment model or workflow, the possibility of failure at any point in the signal path needs to be well understood, with countermeasures in place to ensure the shortest interruption possible. Failover workflows which duplicate the encoding and origin services guarantee reliability of user experience. The deployment required to enable disruptive multiscreen services is typically faster and carries less risk than traditional linear playout, and those innovations can be applied back to traditional video operations.
The Flexibility of a Software Approach
To alleviate the cost and complexity of deploying a TVE, OTT or skinny bundle to keep up with continual industry transformation, TV operators are now looking to software-based video solutions that can be easily updated to accommodate technology changes and product enhancements. These solutions initially gained a foothold in the multiscreen video processing market and are now being pulled into traditional TV deployments.
Software-based video solutions are in part differentiated by the ability to integrate changes and improvements from different technical specifications such as HEVC/H.265, HDR, and Dolby Atmos. This is not possible with hardware-based solutions for video compression. The ability to take modern codec design techniques and apply them to mature formats is a key benefit of software-defined video solutions.
The traditional pay TV model is under increasing pressure from new types of competition, increasing consumer expectations, and innovative video services that legacy infrastructure cannot easily accommodate without large capital expenditure. Pay TV operators must allocate their capital resources effectively, but doing so requires predictions about the future. Software-based video solutions from AWS Elemental offer the high-performance, cost-effectiveness and flexibility that are key components of any future streaming video solutions.
The software abstraction of video processing functions from underlying hardware infrastructure allows encoders, transcoders, origin servers and multiplexers to be logically configured as virtual modules without the need for manual cabling. New multiscreen, live-to-VOD and targeted advertising services can be deployed alongside traditional and new linear workflows to further drive resource management efficiencies.
Leading operators are using software-based video processing to enable multiscreen TV via TVE, OTT and skinny bundles as well and traditional linear delivery. Unifying these workflows to take advantage of the synergies in operations and processing is a logical next step. Support for new codecs, color gamuts and third-party integrations can be implemented through simple updates, thanks to the flexible nature and shorter development cycles of software.