Build or Buy?
S04E05: Game of Streams (Build or Buy)
Our Media Solution Specialist, Magnus Svensson, is sharing his reflections from the online streaming industry in this post. This is part of a monthly series so make sure to follow us here if you don’t want to miss an episode.
People are streaming video more than ever. The movement towards streaming has been ongoing for some time and has been accelerated by the pandemic. As a content owner or content rights owner, how do you select a solution and platform to reach your audience? It’s not easy to understand and sometimes even harder to make the right decision. There are no “one size fits all” and each situation is unique and requires careful considerations.
It usually starts with the business needs, the capabilities of the organization, and in many cases also the already existing solution. Without an understanding of the current and future business, it’s hard to make the right decision. Equally important is the capabilities of the organization when it comes to technical competence. For both business needs and organizational capabilities, a set of questions needs to be answered.
To simplify, you need to answer a couple of questions in each step, which will guide you towards a strategy.
Business needs and strategy
The first thing you need to consider is what kind of service you want to offer. Should you run a subscription, transactional, or ad-funded service. The truth might be a combination. Maybe you could give your customers a choice, to pay with money or pay by watching ads.
As a start-up, before you have a large audience, it might be hard to attract advertisers to invest in your service which means that subscription or transactional might be your only choice. But if you plan to include ads, have that in mind when deciding on a video platform.
Reach in terms of devices is your next choice. Web-based clients and mobile phones (iOS and Android) might be the default choice. But you also have an almost endless number of other devices to consider, from streaming devices, smart TVs, and game consoles. All require development and maintenance. It will become a trade-off between reach and cost of development.
The choice of device reach will also determine the needs for specific delivery protocols and DRM technology. So, even if you don’t start with all kinds of devices, you should consider future additions when selecting your encoding and delivery pipeline.
Not to forget, you need a good strategy how to collect and structure data. Without good analytics you are more or less blind both in terms of quality of experience but also how to evolve your service, gain more subscribers and reduce churn. A good data strategy will pay back many times around.
Build or buy?
One of the main deciding factors for a build or buy decision is your organization’s technical capabilities. Do you have, or plan to have, technical staff that can handle the development and maintenance of a video platform? Depending on how much of the platform you build yourself, the more staff you’ll need. Scalability if the second deciding factor for this choice. Will you have enough scale to justify the investment to build your own solution?
My experience is that very few organizations and services can justify and calculate the return of investment to go for a tailormade technical platform. The cost to build a video platform is in most cases to big, both in terms of cost and technical personal that you will be able to get the numbers to add up.
Best of breeds
If you have technical staff and you believe that you will have enough scale to justify your own platform, you will most likely go for a best of breeds approach. This means that you select the best vendor or solution for each of the components in the video workflow. You select the ingest workflow based on your needs and requirements, bring in encoders based on cost and quality needs and delivery pipeline depending on criteria such as global reach, quality, and cost.
For each component, you need to consider many different criteria, both current and future needs. The more components and vendors you choose you will have more risk of interoperability issues. Even if most protocols and interfaces are standardized, there is always room for interpretations and choices. A rule of thumb could be to select vendors that already have established partnership of proven interoperability.
Managed services
For most services and organizations, a fully managed service is probably the best way to go. You could then focus on your business, to produce content, and market your service. The managed service provider usually has many similar customers and could by that reach the scale so that this becomes a profitable business. As a customer you can, a bit depending on the situation, grow with your business without the need for big investments. Many of the managed services providers have a pay as you grow model or even revenue share options.
Another benefit of using a managed service is that you might be able to start earlier with advertising. If the managed service vendor could bundle your service with other services and provide enough eyeballs to attract advertisers, it could benefit everybody.
Summary
As you understand, it’s not an easy choice to select your video platform strategy. The options and choices are endless, and you need to carefully select the path that is best for your situation. But don’t forget to have the end target in mind when doing your initial choice. Ensure that your initial step takes you towards your end goal, even if just a small step.
To watch out for the coming months…
To quote Bob Iger, CEO of Disney: “The riskiest thing we can do is just maintain the status quo”. This is very applicable to the current situation. The ongoing pandemic will be with us for a while, and the world will not be the same again. So, let’s face the facts and see how we could adapt. The streaming industry has a very good opportunity for growth.
Stay safe!
Magnus Svensson is a Media Solution Specialist and partner at Eyevinn Technology. Eyevinn Technology is the leading independent consulting company specializing in video technology and media distribution.
Follow me on Twitter (@svensson00) and LinkedIn for regular updates and news.
