When the going gets tough

S04E04: Game of Streams (When the going gets tough)

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.

The TV and video industry, like any other industry, is going through some strange times at the moment. The ongoing pandemic has changed the world for all of us, and in many cases accelerated trends that started already before the outbreak.

The internet is used more than ever and video, together with online gaming, contributes to a large part of that. The increased viewing of movies, series, and news is partly compensated by lack of live sports and the consumption patterns are more evenly spread, although on a higher level. And in some cases, we see bottlenecks in the narrow trails of the internet.

Due to those narrow trails, the EU asked Netflix and other services to reduce the streaming bandwidth. Reed Hasting quickly adapted and reduced the bandwidth in Europe by 25% and most other major services followed the days after. The truth is that we are not running out of internet and the bandwidth reduction is purely a political game.

But we have one key takeaway from this. Netflix, that already before this reduction, was one of the most efficient services when it comes to compression, could reduce additionally 25% without noticeable quality decrease. If they can do that, most other services have a lot of savings to do. A lot of bits are sent over the internet unnecessarily.

What we could run out of, is new content and originals as most movie production is halted. I trust that the movie production industry, as the majority of all other businesses, finds their way of adapting and making move production less dependent on people on site. Cloud services and low-latency contribution technology, that has been adopted by live sports broadcasting, could be used also for scripted movie production.

Cord-cutting

One thing that has been accelerated the last weeks is cord-cutting, or cord-shifting as I prefer to call it. The acceleration is more visible in the US, but also seen in the Nordics. AT&T reported a net loss of 897,000 subs for DirecTV and AT&T TV during Q1. And Verizon reported that they lost 84,000 Fios TV subscribers in Q1, the worst quarter ever. And just reported, Comcast lost 409,000 pay TV customers.

To compensate for the loss, WarnerMedia announced May 27 as the launch date for HBO Max and AT&T will bundle HBO Max with its most expensive TV, wireless and internet plans. Verizon is offering Fios Internet subscribers a free year of Disney Plus.

NBCUniversal launched Peacock earlier for Comcast subscribers and later July 15 for the general public.

In Sweden Telia, Tele2 (Com Hem), and Telenor all reported a loss in traditional TV subscriptions. Telia also reported a loss of 30 000 CMore subscriptions, and release Telia Play to the public, not requiring a Telia subscription. On the other hand, we have Viaplay, which reported a growth of more than 100 000 subscribers since the beginning of the year. So even if it’s not as strong as in the US, cord shifting is accelerated also in the Nordics.

One of the main reasons is that the OTT offerings are getting more attractive and start to be proven stable enough for the general public. I believe we still have a way to go before we see the real advantages of online streaming.

Advertising

One area within the video industry that got a bit of bumpy road lately is the ad-funded services. No live sports that usually drive ad revenue, and more news that usually is less attractive for advertisers. My personal belief is that these bumps are very temporary for ad-funded TV providers. At times of crisis, TV remains the go-to source for trusted information. TV is a stable source of news for the nations and by that a trustworthy place to be seen.

When the marketers rethink the existing strategies and budgets, influencers and other sources might be the place to cut. However, Facebook reports signs of stabilization in the Q1 earnings, after seeing a steep decrease in advertising revenue in March.

As mentioned earlier, this crisis has accelerated cord shifting and I would expect this trend to continue. Agencies should, therefore, invest in online TV to maximize reach of their audiences. As an example, we have online retail, that also an industry that has accelerated during the last months and is expected to continue. Using online video for their campaigns would enable targeted reach to specific customer segments, that is otherwise hard to reach.

Get ready for the (new) normal

When the going gets tough, the tough gets going. The pandemic has accelerated a lot of trends that started long before and has created new. The companies that seize opportunities can get a lot of rewards.

What are the new services that can come out of these tough times? How could you as a company best use the time to explore new technologies. Should you find new ways to monetize your catalog trough new business models or new delivery methods? Should you as a company use the time to be prepared when things go back to normal? Explore low latency streaming and high frame rate so that you can deliver premium quality sports when that is again available. Revisit your video pipeline so that you can handle the increased demand that comes with cord-shifting.

To quote Charles Darwin: “It is not the strongest or the most intelligent who will survive but those who can best manage change.”

To watch out for the coming months…

A lot of interesting webinars, virtual conferences, and podcasts are available. These are usually for free and very educational. Good opportunity to utilize the time at home to gain new knowledge.

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.

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