Mid-Year Review of 2012 Online Video Predictions


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In November of 2011, Skytide published its report, "7 Online Video Trends to Watch in 2012". Since then, over 13,000 people have read it on Slideshare.

As we hit the halfway point for 2012, would be thought it would be interesting and informative to look at current market data and trends to see how our predictions have panned out.

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Mid-Year Review of 2012 Online Video Predictions

  1. 1. Mid-Year Review of 2012Online Video Predictions
  2. 2. Mid-Year Review: 2012 Online Video Trends to WatchOver 13,000 people have read Skytide’s “7 Online Video Trends to Watch in2012,” making it our most popular white paper.As we hit the halfway point for 2012, we thought itwould be interesting and informative to look at currentmarket data and trends to see how our predictionshave panned out.On the following pages, we’ll revisit each of ourprevious prognostications and gauge our success. Let’sget started. 1
  3. 3. 1. Online video traffic will continue to skyrocketWhen we made our initial prediction in November 2011, it was a given thatonline video traffic was poised to continue its meteoric ascent in 2012. Sothe only factor left to be genuinely debated was the rate of growth.Familiar industry sources like Cisco’s Visual Networking Index (VNI) forecastedthat the compound annual growth of online video would be 32% between2010-2015 and would account for 90% of all consumer IP traffic by 2013.Skytide also concurred that online video traffic would soar but we believedthat the industry’s already bullish forecasts were actually too low! Based onthe growth rates from our Telco CDN customers, we made the bold forecastthat online video traffic would grow by more than 50% in 2012 and that theresulting capacity crunch would be even more severe than previouslyconsidered.How accurate was Skytide’s prediction? • Cisco recently updated its VNI Forecast for 2011-2016. Among its predictions: ‣ Video over IP will grow 50% from 2011 to 2012 (excluding fixed private networks). When private networks are included, the growth rate is still a very healthy 40%. ‣ Online video over mobile devices is on track to increase by over 100% between 2011-2012, fueled by the explosion of video now being consumed on smartphones and tablet computers. • The unbridled growth of social media also promises to send online video traffic soaring even higher through the end of 2012. Marc DeBevoise, VP and General Manager of CBS Interactive, recently revealed that social media is driving an average of 15% of the video views on CBS.com. 2
  4. 4. 2. Operator CDNs will make big inroadsWith 41 cable and telco operators reported to be in some phase of CDNdeployment in 2011 (source: Informa Research) and the need for serviceproviders to offload video traffic becoming even more pronounced, wepredicted that the number of service providers launching their own contentdelivery networks would continue to grow and make inroads against legacyCDN services.How accurate was Skytide’s prediction? • Many North American cable multiple system operators (MSOs) have launched their own CDNs or in the throes of doing so. ‣ Time Warner recently presented at the Content Delivery Summit on the critical role its CDN plays in expanding the company’s video delivery capabilities. ‣ Cox Communications also presented at the same conference on choosing the right content delivery strategy. ‣ StreamingMedia.com’s Dan Rayburn and others have reported on Comcast’s CDN ambitions. • In addition, we know of several large new deployments in the works by operators (and large content providers) new to the CDN space. In fact, Skytide will be powering the analytics and reporting for some of them, including one of the largest Operator CDN initiatives to date. 3
  5. 5. 3. Federated CDNs will finally become a realityThe topic of CDN federation has been bandied about for years, with the promisethat it is just around the corner.In 2011, it actually started to turn that corner. First, a formalized body calledthe Operator Carrier Exchange was announced in June of 2011; a few monthslater Cisco revealed the findings from a federated CDN pilot that it hadconducted with several tier 1 carriers. Based on that momentum, we predictedthat a CDN federation could be operationally deployed in 2012.How accurate was Skytide’s prediction?CDN federation is definitely picking up speed. • Akamai announced an operational CDN federation platform While our prediction was more focused on an interconnection exclusively between operator CDNs, it is important to note that legacy content delivery network, Akamai announced in February 20012 that it had deployed its own federated CDN platform. • Edgecast also announced a CDN federation platform Content delivery network, Edgecast soon followed in May 20012 with an announcement that it had also deployed its own federated CDN platform and was already exchanging traffic with unnamed carriers. • Cisco revealed Phase 2 findings of CDN Federation Pilot While it’s still in the pilot phase, Cisco’s federation project continues to move forward. The completion of phase one was announced in October of 2011 and served to validate the concept of a CDN interconnection; the second phase introduced some new participants and examined additional functionality across the federation. Findings from that pilot can be downloaded here. 4
  6. 6. 4. Adoption of Adaptive Streaming will climbThe same market dynamics which led us to predict increased adoption ofadaptive bitrate streaming (ABR) protocols remain at mid-year.Increasingly higher user expectations for a smooth, uninterrupted online videoviewing experience, coupled with the rise of smartphones and other connecteddevices, continue to bode well for further adaptive bitrate streaming adoption.How accurate was Skytide’s prediction?Based on recent announcements and activity, all signs point to an even fasterrate of adoption for adaptive streaming than we originally ventured. • In February 2012, industry heavyweights like Microsoft, Adobe and Netflix publicly announced their support for MPEG DASH (Dynamic Adaptive Streaming over HTTP,) a new ISO standard that could replace proprietary technologies like Apple HLS, Microsoft Smooth Streaming and Adobe Dynamic Streaming. This standard is likely to be embraced by content owners because they could significantly reduce their workflow by creating a single set of files that run on all DASH-compatible devices. • In the meantime, most North American cable MSOs are rolling out TV Everywhere initiatives that deliver video content to iPads via adaptive streaming using Apple’s HLS protocol. • Set-top box (STB) manufacturers are taking note too. French STB manufacturer, Netgem just introduced a hybrid OTT/DTT solution at the Anga Cable Show that incorporates adaptive streaming. Set-top box maker, Amino also made a similar announcement at the show. One has to believe that the rumored Apple TV would come standard with ABR as well. Additional reading: What is adaptive bitrate streaming? 5
  7. 7. 5. MSOs & IPTV services will extend reach into OTTEvolving viewing behaviors and expectations — including the desire to watchprogramming anywhere and on any number of devices — led us to predict thatIPTV providers and MSOs would soon have no choice but to begin exploring OTTmodels.While doing so threatens to lessen their control of the customer experience,they may have little choice in the matter. Viewers want to consume what theywant, where they want and on whatever device they want.At the same time, service providers are eager to find ways to generate revenuefrom over-the-top traffic that is requiring large capital expenditures to upgradetheir networks.How accurate was Skytide’s prediction?Cable and IPTV operators are beginning to test OTT models: • Verizon Wireless recently announced a new mobile video application dubbed, Viewdini that seeks to profit from the over-the-top video coursing its network. It will function as a video portal that enables users to find video across multiple services — Redbox, Hulu Plus, Netflix and Xfinity among them. Rather than charge customers for bandwidth consumed, however, this “toll- free” service may charge the content provider via fees like revenue sharing deals. • Meanwhile, Dish Network just announced a digital video recorder (DVR) called Hopper that allows users to automatically record every prime-time show on ABC, NBC, Fox and CBS in HD for eight consecutive days: it also includes the capability to zap commercials. Dish’s Chairman, Charlie Ergen, described Hopper as a "competitively necessary" response to the threat that OTT video is posing to traditional pay-TV providers. 6
  8. 8. 6. Multi-screen viewing will become the benchmarkWhen we published our online video predictions in November of 2011, sales ofmobile and tablet devices were on a tear and industry analysts and equipmentvendors were heralding the bright future of multi-screen viewing.Fast forward to June of 2012 and the sales of smartphones and Apple iPad’scontinue unabated, fueling a continued rise in multi-screen viewing.How accurate was Skytide’s prediction? • Q1 2012 global smartphone sales topped 144 million versus 101 million for Q1 2011, and are expected to grow by 35% this year (source: Gartner). Similarly, tablet sales grew to 17 million in Q1 and are expected to also grow by 35% (source: IDC). • These smartphone and tablet purchases are being put to use. In fact, research indicates that viewers watch 30% more video on their tablets than they do on their desktop computer (source: Ooyala). • There will be nearly three networked devices per capita in 2016, up from over one networked device per capita in 2011 (source: Cisco VNI). • Not surprisingly, practically every North American MSO is now rolling out services that allow their subscribers to view cable content on their tablet computers. 7
  9. 9. 7. Online video ad budgets will swellA perfect storm was brewing at the end of 2011 to suggest that online videoad budgets would swell significantly in 2012. In fact, a “Video State of theIndustry Survey” projected that budgets would increase 27% in calendar2012.The confluence of improved online video resolution, innovations in videodelivery and devices, and larger inventories of quality content promised tocreate higher levels of consumer engagement and time spent viewing. Thisconfluence would create a virtuous cycle in which increased ad dollarssupport more and better online video programming delivered with higherlevels of QoS, which in turn attract even more ad dollars.How accurate was Skytide’s prediction?From all indications thus far in 2012, online video advertising is booming, atleast within the U.S. • In April, Americans viewed a record 9.5 billion video ads (source: comScore Video Metrix) • Forrester VP and Research Director, David Cooperstein recently predicted that more than 50% of marketers will test the use of digital video in 2012 versus just 20% in 2011. • Forrester also recently published study findings that 70% of marketers plan to increase online advertising this year, especially for mobile video. • From late April to early May, a group of large online video content providers participated in the inaugural Digital Content NewFronts, designed to emulate the “upfront” meetings that traditional television programmers have long used to let marketers purchase TV spots several months in advance. The NewFronts further legitimize the importance of online video, blur the lines with TV and foreshadow media buying and planning alignment between the two. 8
  10. 10. Related White Papers 7 Online Video Trends to Watch in 2012 The year ahead promises to be full of twists and turns for online video and the digital media supply chain that serves it. Dont be caught flat-footed. Read “7 Online Video Trends to Watch in 2012” to get an advance peek at the trends that will shape the industry and how you can capitalize on the disruption to come. Read Now The 4 Keys to Telco CDN Success Many telecom service providers are building their own content delivery networks as a means to capitalize on the surge in Internet video coursing over their networks. With this white paper, we will reveal four key success factors necessary for Telco CDNs to effectively harness their competitive edge and realize success. Read Now How Telcos and ISPs Can Learn to Love OTT With this white paper we will demonstrate how it is now possible for telcos to improve their position in the content-to-consumer value chain, create a more sustainable business model to value chain members and profit from escalating over-the-top (OTT) video traffic. Read Now IP Video Management Analytics 9