ACG Research

ACG Research
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Friday, January 22, 2016

2016: Over the Top for Video Services

2015 was the year that premium OTT video delivery graduated from peripheral to core business. Market leaders released products such as Sling TV from Dish, which delivered without the aid of a set-top box. Verizon added Go90, and; Comcast added Stream TV Smart devices got smarter and more impressive. Apple TV got a well-deserved update; Fire TV became even better; and Roku was embedded in consumer TVs. With these developments we turn to the question of momentum. Is this the start of unprecedented TV experience?

Let’s look at what I predict will happen in 2016:

Broadband Is the “New Black”
Broadband home service is a strong alternative to video and a bright spot for pay TV providers and can create tremendous opportunity for another revenue stream by offering cable-plus broadband services. Broadband home growth driven by OTT gains is helping to offset the higher programming costs and the decline in video revenue caused by cord-cutting. Large and even small operators may likely go back to basics, making broadband more of their future focus. To weather the rapidly transforming nature of traditional media consumption, cable companies appear to be beating the no-pay TV trend by focusing more on Internet services and creating a robust broadband ecosystem to emphasize more of data delivery instead of video while broadening broadband pricing as the demand grows.

Super-Sized and Connected TV Will See Growth
Smart and connected TV video-streaming devices are continuing to lure audiences back into the living room, and with the rise in OTT and streaming, the industry is looking ahead to a new and more immersive reality. Viewers on the go are watching more video on their pocket gadgets, but the average minutes per phone device per month is far less than the average for connected TV devices. Companies will be working for an improved search and discovery functionality for a better user experience and utilizing cloud to make it easier for operators. Ten percent of Americans stream video to a connected TV every day, and we expect streaming media homes will likely overtake pay TV homes in 2016.

Premium Content: a Visual Delight
To improve consumers’ experiences we will see operators increase bitrates range his year. Until now, nothing much has happened at the very top of the pyramid; streams of 5 Mbps or more aren’t growing very rapidly, although we are seeing a shift towards the 2–5 Mbps range. The lower end will continue to be there because video continues to be watched on smaller screens connected to cellular networks, but the same range would be unacceptable on a big screen TV. 

Premium Content Will Have Reliable Delivery
One of the challenges for any business operating on the Internet is management. Moving data of any kind, especially video, from the point of origin to the point of consumption is an intricate and tricky business. Some services try to go at it alone; others contract with content delivery networks (CDNs) to get the job done, which results in a markedly superior viewing experience. 2016 will be the year that premium streaming video providers phase out legacy in-house delivery networks and commit to CDNs. 

Conclusion or the Start of 2016
OTT is rapidly gaining acceptance and is a fait accompli by broadcasters and pay TV operators. If 2015 was the year that OTT stepped into the spotlight, 2016 will be the year of its maturation. Much of what is being forecasted for 2016 are trends that started to develop in 2015. Skinny bundle offerings, which were new last year, will be judged for the service they provide rather than their uniqueness. And as audiences are not driven by appointment viewing and won’t accept subpar viewing experiences anymore, they will be drawn to providers that can provide quality content. Companies will remain strategically focused on the best possible combination of factors where audiences, data, content and technology meet to deliver a good or even exceptional viewing experience.

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Meghna Zutshi