Streaming in the 2020s—an industry comes of age

During the last decade, video streaming services have come of age. Media and entertainment companies around the world have made rapid progress in developing and launching high-quality services in their domestic markets, and many are now launching services internationally. The 2020s will be the streaming decade, marked by a steady shift toward on-demand, app-based multiscreen viewing—with profound implications for the future of the industry. Despite their rapid growth and development, streaming services remain a relatively new part of the industry.

It was only in the mid-2000s that broadband speeds and costs had improved sufficiently to support the launch of a service like YouTube, and Netflix only launched its streaming service in the USA in 2007. Moreover, the underlying technologies and infrastructure supporting streaming services have evolved rapidly during the last decade, with new standards and streaming media formats, new devices and operating systems, a shift from browsers on PCs to smartphones and apps on connected TVs, and the growing adoption of public cloud and microservices architectures.

The dawn of the new decade—streaming comes of age
Nearly 20 years since the first broadband internet services began to roll out, the media and entertainment industries have embraced streaming. Around the world, major media conglomerates, commercial broadcasters, pay-TV providers, rights holders, and a wide range of video start-ups have launched streaming services, with notable recent launches including NBC Universal’s Peacock, WarnerMedia’s HBO Max, and Quibi. Although the growth and development of streaming has undoubtedly been one of the most important developments of the last decade, it is easy to forget how relatively new streaming is, in its current guise.

In 2002, Flash-based video players began to proliferate, and streaming media began to take off, with the launch of YouTube, Netflix, and the first streaming TV services in the mid- to late-2000s. However, it was the launch of internet standards like HTML5 and HTTP-based adaptive streaming, which quickly became the formats of choice for premium streaming services and live-streamed events, that saw streaming TV truly come of age. MPEG-DASH (dynamic adaptive streaming over HTTP), the foundation of today’s streaming industry, was formally ratified as a standard only in 2011, supporting the delivery of on-demand video, live streaming and time-shifted services, either multiplexed or as independent streams, over existing internet infrastructure, with the support of CDNs.

Since then, streaming has developed rapidly, supported by the growth of connected TVs, ongoing improvements in fixed and mobile broadband availability and speed, and by the rapid development of cloud services. Equally importantly, the widespread adoption of codecs like H.264 to support better video compression have made a huge difference during the last decade. Taken together, these developments have made it far easier to set up and rapidly deploy streaming TV services over the internet.

Current approaches—how are companies managing their TV streaming services?
As the market has evolved, so too have the approaches adopted by media and entertainment companies to managing and operating their streaming services. It is a long journey to operational stability, although there is still much work to be done. Today, TV industry operating models for streaming services fall into three broad categories, varying roughly in line with the scale, complexity, and maturity of the offering: Small-scale providers, relying on outsourcing models, self-serve streaming platforms, and cloud-based service tools to monetize their video content libraries; mid-scale companies, typically operating streaming services with a mix of internal and external; and large media and entertainment companies, with large internal technology and operations teams, typically numbering several hundred staff.

Operational scale—investments correspond to operational complexity
Why do approaches vary so much between these different tiers of service? In general, the simplest streaming services tend to operate on a standalone basis, separate from any broadcast channel, offering smaller catalogs of library material or pre-existing content. In addition to scale, there are four important use cases that drive operational complexity, resulting in a need for larger teams and increased investment:

• In many countries, larger commercial networks are often running streaming services that are closely aligned to their broadcast channels, providing live simulcasts, catch-up content, and library or archive material;
• Delivering live services like sports and news, is another challenge, especially for services that can attract a large number of concurrent viewers;
• Virtual MVPD (vMVPD) offerings, incorporating channels from multiple suppliers, is also highly complex, especially when the vMVPD service includes a combination of live and non-live content; and
• The cultural and operational challenges of agile development at internet speed within an incumbent broadcasting business.

Converging on best practice—common themes
After nearly of decade of operating their services, what does best practice look like? Many Tier-I providers are converging on common approaches and best practices:

• All of the top tier providers have established well-resourced internal teams to support their streaming services, working hand-in-hand with expert suppliers and service providers;
• A steady transition toward microservices architectures over the course of the last decade;
• A concerted effort to run multiple streaming services applications from the same back-end platforms; and
• Many providers refer to a common challenge, relating to the resources required to develop and maintain streaming applications across multiple devices and platforms.

In many cases, providers use specialist developers to build applications for certain platforms. They use third-party developers to build apps on certain platforms, outsourcing development of iOS and Android to specialists. It does not make sense to have in-house specialists for every platform. Others are experimenting with solutions like React Native, which supports cross-platform app development for iOS and Android, as an alternative to fully native app development.

The next 5 years
How do executives believe the streaming market will develop over the coming years? Perhaps unsurprisingly, there are widespread expectations that a decade of further change and disruption lies ahead, as the ongoing growth of streaming continues to drive changes to TV consumption and business models—creating a growing need for business transformation across the media and entertainment industries. Four key developments informing their thinking about the future:

The growth of streaming will continue to drive transformation. Up until recently, streaming services were undervalued and, in some cases, underinvested. Apps were poorly aligned with broadcast channels and were often used to house a collection of random library content, with poor usability and limited marketing support. That mindset has changed. Inevitably, there is a growth of in-home media consumption driven by the COVID-19 pandemic and the shelter-at-home mandates in force in many countries.

Consumption of TV and streaming services is up, generally by around 30 percent or more year-on-year, versus previous months, with providers expecting to see consumption continue to grow, as audiences become more familiar with what is available. How will the growth of streaming services change the market? The most important consequence expected is a significant increase in competition, for audiences and subscribers.

Smaller networks can survive and play in the niches. Companies anticipate an exciting future for niche channels, with a far greater diversity of distribution options. The costs of running channels are also expected to come down.

Ad-funding will drive the next wave of streaming services. As streaming services grow, providers expect to see advertiser investment in OTT grow steadily, as advertisers can take advantage of better targeting and better measurement than on traditional over the air, cable, or satellite networks. Magna Global recently predicted, before the current crisis, 31 percennt year-on-year growth in OTT ad revenues in 2020, reaching around USD5 billion. Hybrid models are seen as the way forward for many networks, with some viewers paying more for an ad-free version, and others paying less for an ad-lite offering. Many networks see the growth of streaming as a compelling opportunity for growing advertising revenues.

The re-aggregation opportunity. Re-aggregation will be an important theme in the next decade, as streaming platforms, device manufacturers, vMVPDs, and MVPDs create their own bundles of various OTT services and channels. Recommendations and discovery are seen as a potential driver.

The road ahead—transformation priorities for the 2020s
Clearly, priorities vary across the different categories of streaming service provider. For smaller providers, transformation from current approaches is widely seen as challenging. For Tier-I providers, the major commercial networks, and MVPDS, four main priorities for digital transformation have emerged:

• Priority 1: Building delivery models to reliably support high-quality streaming experiences and rapid growth;
• Priority 2: Completing the digital transformation of broadcasting operations;
• Priority 3: Harnessing the opportunities afforded by machine learning and automation; and
• Priority 4: Developing integrated solutions for advanced TV and video advertising.
  
  A vision for 2025
  Looking ahead, if everything comes together, how will leading media and entertainment companies be running their streaming services in 2025? The industry foresees a diverse, competitive, and dynamic streaming industry, closely integrated with the wider media and entertainment market. Streaming services will routinely complement and provide additional optionality for TV and film companies, in terms of windowing and monetization.

The market will include distinctive tiers of provider, including light-touch services delivering content predominantly via third-party streaming platforms and channel marketplaces (a self-service model) at one end and fully featured, high-end streaming services at the other.

By 2025, the best TV streaming services will benefit from:

•  An optimized delivery environment that supports the delivery of streaming services, live and on demand, at scale—to major markets around the world;
• A more integrated approach to advertising, end-to-end, that allows TV and streaming services, linear and non-linear, to be transacted at scale, seamlessly;
• An AI-powered industry, making extensive use of machine learning and automation to improve workflows, customer experience, content curation, and monetization; and
• Transformed broadcasting operations, more agile and running on cloud, supporting a much faster pace of innovation.

Based on The TV 2025 Initiative: Streaming in the 2020s—an industry comes of age, an MTM-Comcast Technology Solutions report.