Cloud v. on-premises: the Yin and Yang of Media Broadcasting

Put simply, the cloud represents a growing focus for many media entertainment companies today, but a careful approach is needed to ensure appropriate cost structures and performance targets remain tenable.

In recent years, the media broadcasting industry has undergone a seismic shift, driven by novel technological advancements and the ever-evolving preferences of media consumers. Netflix first pioneered this trend, capitalizing on audiences’ desires for portable, personalized, and convenient access to media content. In fact, Netflix’s platform and device-agnostic approach to content distribution has catalyzed an industry-wide move to alternative distribution methods.

With the cloud, organizations reap the benefits of increased operational productivity, improved infrastructure efficiency, and the ability to connect with global streaming audiences at scale. Considering the industry’s constant pressure to remain relevant and surpass competing companies, many broadcasters have already shifted to the cloud for new applications. Some are even migrating their entire existing workflows to the cloud.

That said, let’s break down the pros and cons of cloud migration for today’s media broadcasters, television operators, and streaming service platforms.

The Cloud: Pros
Here are the top three benefits of leveraging cloud-based video technology as a media broadcaster, operator, or streaming service provider:
Scale, elasticity, and operational efficiency
A major perk of the cloud lies in its ability to instantaneously scale required infrastructure for a large streaming event. Without this capability, a video distributor using on-premises technology might overtax or unnecessarily overbuild their systems, resulting in poor user experience.

Unlike on-premises technology that a company owns, operates, and houses independently within its physical location or a nearby site, cloud-based infrastructure exists outside the organization, and it’s managed entirely through a third-party cloud service provider. The provider, then, handles all technical aspects of the system, oversees system maintenance, and performs upgrades whenever necessary.

For some companies, this hands-off approach to system management is an added bonus, since organizations can save precious time and resources while enabling broadcast-like experiences for all audiences.

Now, leveraging the cloud doesn’t mean broadcasters and operators must give up their existing on-premises infrastructure, including its servers, networks, data centers, and software. The cloud offers the same operational benefits—scalability, efficiency, and cost-effectiveness—while also allowing organizations to maintain secure control over their data, networks, and applications. Large enterprise organizations and telecom companies will often employ a hybrid approach for this very reason.

Moreover, businesses that blend cloud-based systems with on-premises infrastructure can aggregate multiple cloud services, which allows organizations to divide coverage into specific geographical regions and reveal broad infrastructure coverage across the globe. This enables broadcasters and operators to pinpoint the most optimal data center locations for the best services and resources per site, based on users’ locations.

Reliability and security
Security is a big issue for both enterprise organizations and media companies, which is why some broadcasters and operators worry about the safety of their data in the cloud. But rest assured, cloud-based solutions offer the same amount of protection—if not more—as an on-premises set-up. That’s because cloud service providers are the literal experts in cloud security and data privacy, and they go to great lengths to ensure customers’ systems remain highly secure while operating at full capacity. Unlike a company’s IT department that’s constantly inundated with organizational-wide system management requests and integrations, cloud service providers focus solely on customers’ cloud security and operational resilience, all while complying with the strictest of industry regulations. Cloud service providers not only offer reliable data security, but they also help increase customers’ operational bandwidth.

Immediate availability and accessibility
Cloud-based video technology is designed with secure accessibility in mind, so broadcasters and operators can be confident knowing they have reliable, unencumbered access. And since cloud vendors manage all the operational components involved, there isn’t a need for organizations to bring on additional DevOps staff, which saves them considerable operating expense (OPEX).

The Cloud: Cons
Financial model
Despite all the operational benefits of the cloud (namely, its ability to drive efficiency, productivity, and cost savings), it’s not always the optimal choice, especially when the financial model of the cloud doesn’t align with the financial objectives of an organization. For example, if a company measures its financial performance against earnings before interest, taxes, depreciation, and amortization (EBITDA), then the cloud’s operating expense will impact that metric, thereby affecting the desired financial picture. In this instance, a company would fare much better using capital expenditure (CAPEX) options by owning their equipment.

Limited customization
In terms of service integration, a cloud-based deployment offers fewer customizable options than its on-premises counterpart, and for one good reason: the cloud market hasn’t yet reached a critical point of maturity to allow cross-cloud integrations and applications. And while traditional on-premises approaches still offer the most flexibility, organizations should consider the added costs of integration and system maintenance. In other words, companies shouldn’t expect a turnkey, plug-and-play solution with the cloud just yet.

Operational challenges
Swayed by the operational efficiencies of cloud-based technology, many companies have accelerated cloud adoption without taking time to consider the challenges it could pose on the organization itself—namely, its IT department.

According to a recent survey from 451 Research, today’s organizations say there’s a sizeable skills gap in cloud infrastructure and applications among staff, making cloud operations and governance a challenging drawback of cloud adoption.

A Cloud-Based Reality Check
Given the objective strengths and weaknesses of leveraging cloud-based video infrastructure, an important question arises: is cloud migration a major business priority for broadcasters today? According to a recent survey from the analyst firm, Devoncroft Partners, the answer is yes…and no. Let us explain.

Each year, Devoncroft conducts its “Big Broadcast Survey,” currently the largest annual demand-side study of the global broadcast media industry. Several thousand respondents from across the world participate, providing feedback that allows Devoncroft to consistently track the various factors driving purchase decisions within the media tech sector.

To gauge the priority level of cloud adoption among broadcasters, analysts compared two sets of data: one from their 2022 study, and another from 2023. The results were revealing. For one, records show today’s broadcasters have been steadily increasing spend on media and entertainment (M&E) cloud infrastructure, with budgets peaking in 2022.

Based on this information, one could assume broadcasters and operators consider cloud-based M&E technology a valuable asset, which would explain organizations’ continued willingness to allocate budget toward cloud investments. However, the 2023 survey data shows broadcasters have only dedicated 11% of their annual media technology budget toward cloud providers and/or cloud-based products, while 17% has been allocated to non-cloud investments.

In our view, the takeaway boils down to perceived versus actual value. Considering organizations have continued increasing spend on cloud-based infrastructure while only spending 11% of their total budget, it begs the question: what are broadcasters paying for, really?

That leads to a second key insight. In 2022, when Devoncroft conducted its annual broadcast survey, respondents listed their topmost business priorities. Out of 19 total priorities, cloud computing landed at number seven. Meanwhile, IP networking and content delivery ranked as numbers one and two, respectively. However, in 2023, when respondents answered that same question, they listed 21 priorities in total, ranking cloud computing as number seven. In comparison, IP networking and artificial intelligence (AI) took the top two spots, respectively. Now, here’s where it gets interesting.

Devoncroft then compared broadcasters’ 2023 business priorities against those of M&E technology vendors. Vendors listed 20 business priorities in total, ranking cloud computing as the number-one focus for this year, which gives some critical insight into the disconnect happening between these two groups.

While vendors remain highly focused on building their existing cloud business, it appears broadcasters have taken a more pragmatic approach toward investing in cloud technology, assessing its value based on current financial, technological, and operational obligations. Broadcasters and operators can’t simply tear down their existing infrastructure and revert everything to the cloud—it’s just too complex of a process to manage, and the cost is high.

Hence, it’s better for broadcasters and operators to find a healthy balance between implementing new cloud-based applications and maintaining their investment in existing on-premises workflows. Realistically, if broadcasters could leverage the cloud to cover about 35% of their business needs, it would be quite an achievement.

Our Take on the Cloud
MediaKind has been leveraging virtualization and cloud technology in various forms over the past ten years. Our platform was the first to launch as a media and entertainment-specific cloud service on Microsoft Azure, and since then, we’ve introduced and operated a collection of services that leverage diverse cloud technologies and infrastructure. In fact, MediaKind’s recent partnership with one of the world’s most premier professional sports organizations has resulted in over one billion video views, complete with dynamic advertising, exceptional quality, and latency that rivals many broadcast television networks.

Based on all that cumulative experience, here are our learnings:
Continuous integration, continuous deployment
The automated processes of continuous integration (CI) and continuous deployment (CD) both streamline and accelerate the software development lifecycle, allowing organizations to consistently update and maintain a reliable software system without the need of human intervention. Developers can leverage the cloud, with its baked-in technology tool chains, to not only automate and apply frequent code changes, but also integrate, test, and deliver these code changes effectively across the organization. Through this approach, companies have a lot more flexibility with cloud infrastructure APIs, which allows them to enable reliable systems of support and drive a faster return on software investment.

However, for some organizations with established on-premises systems, reverting this process entirely to the cloud could introduce significant capital constraint, and it makes it difficult to gauge whether an investment in automated technology will be worth it in the end. For those organizations, we recommend using the cloud as a supplementary tool for broader transformation. If using the cloud requires a company to invest even more in CI and/or CD automation, on top of the necessary costs of maintaining on-premises infrastructure, it would make more sense for that company to build essential automation as needed into the cloud, then migrate it over to its on-premises environment.

Best-of-breed approach.
Whether it’s in the name of efficiency, convenience, or cost, companies sometimes opt for the best-of-breed approach, which entails mixing and matching specialized technology services across multiple providers instead of relying on a single vendor for a complete workflow. But lo and behold, the best-of-breed approach invites far more complexity than it’s worth, as its claimed benefits end up getting lost in the cost of integration and limited interoperability between complex systems.

Instead, we recommend adopting a complete workflow from one provider, with the ultimate goal of implementing multiple competing workflows from various providers. This allows organizations to reduce system maintenance costs, enable fast and easy scalability, and provide seamless data processing and delivery.

Hybrid systems
Simply put, moving an entire operation to the cloud just isn’t practical, nor is it cost effective for organizations that already own and operate legacy infrastructure and data centers. Still, the cloud offers an ideal complementary solution for broadcasters and operators in need of dynamic scaling, particularly for things like recording and delivering livestream events, storing content data, managing streaming nodes, and facilitating ad insertion. In these instances, the cloud provides broadcasters and operators with the high-grade compute resources necessary to enable permanent 24/7 service.

That said, there is a small exception to this recommended hybrid system. For broadcasters and operators starting from a clean slate without any legacy systems or codes in place, the cloud could provide a complete and simple solution. Without any existing restrictions or dependencies, organizations can easily maintain an exclusive cloud-based environment while benefiting from economy of scale.

Hybrid System Case Study
Now, here’s an example of one such organization that’s been able to simplify operations, reduce OPEX spend, and maintain quality service for viewers across the globe, all through hybrid video infrastructure.

As one of the leading film, television, and digital studios in the broadcasting industry, this organization owns and operates a hugely popular streaming service, delivering movies, television shows, and live events to millions of viewers worldwide. While the company originally ran its entire video workflow through the cloud, creating an end-to-end solution for data encoding, packaging, and delivery of video content, stakeholders realized the increasing costs of the cloud were making it difficult to remain financially stable. Consequently, they had to find a way to optimize spending while maintaining exceptional video quality for global audiences.

Ultimately, the solution was to implement a hybrid approach to limit consumption-based pricing. By leveraging the cloud for less sensitive, bursty workloads, like encoding and packaging, and utilizing on-premises systems and private data centers to handle more mission-critical components, like live video streaming, the company was able to reduce streaming costs by 40% when compared to its cloud-only deployment spend.

Along with a significant cost reduction, this flexible hybrid approach also enabled the company’s streaming engineers to innovate faster and develop new encoding optimizations and streaming features, all without having to undergo a lengthy infrastructure procurement process. On top of that, the hybrid system allowed the company to future-proof its streaming capabilities as well. Stakeholders were able to optimize workloads across private and multi-cloud footprints to efficiently meet viewer demand.

Overall, moving to a hybrid model empowered this large media company to gain agility, security, scalability, and cost savings while delivering even higher quality video experiences to satisfied customers. MediaKind