Saturday, February 18, 2012

Skytide's 7 Online Video Trends to Watch in 2012

In a recent white paper, 7 Online Video Trends to Watch in 2012, online video management analytics company Skytide outlined the emerging trends in the online video industry and the content delivery supply chain that serves it. If the last few years were any indicator of the hockey stick affect of rapid change within the video sector, 2012 promises to be full of twists and turns and major and disruptions. While predictions are a dime a dozen, they have much more relevance when coming from an industry expert and authority on the subject. I caught up with Patrick Hurley, VP of Marketing of the Oakland, California-based Skytide, and author of the white paper, to get an insider perspective on their online traffic projections, federated CDNs and why Telco CDNs will dramatically change the content delivery market. The white paper has been very well received, as Hurley noted, since it was first posted on Slideshare late last year where it's currently accumulated over 8,000 views to date and was featured among their 12 best presentations with predictions for 2012. It is also the number one search result on Google for video trends.

1. Online video traffic will continue to soar

Skytide says the first trend to watch in 2012 is that online via traffic will continue to soar. Hurley admits that while this is no big surprise, they have data to back that up, including Cisco's Visual Networking Index (VNI) that forecasts online video will account for 90% of all consumer IP traffic by 2013 and a compound annual growth of 32% from 2010-2015. Skytide's own large Tier 1 customers are very bullish on this and have seen growth rates exceed all industry expectations. Skytide is even more bullish and believes that it's possible for the coming years that online video traffic will grow 50% or more annually.
"The implications for that are really significant, for the Telcos and Communications Service Providers (CSPs)," explains Hurley. "Because that could compound an already serious problem that they have. They're caught in a vicious cycle."
The cycle starts with the fact that their legacy businesses (landline, telephony, etc.) which used to be their cash cows are really declining quickly and they can't count on them anymore. At the same time, consumers continue to have this insatiable appetite for online video, but that demand requires that the big Telcos, ISPs and CDNs invest heavily in capital expenditures to support their infrastructure. That would be great, if they could recoup those costs, but the problem is, the only thing their getting from online video consumers is a very modest monthly fee, which is your ISP bill, so they aren't able to monetize their capital expenditures.

Hurley says that CSPs need to extricate themselves from this vicious cycle and pursue new strategies. One of the trends we saw in 2011 will continue into 2012, says Hurley, and that is that the Telcos and cable companies are going to get into the content delivery business, which is an inherent strengths they can leverage as owners of the network infrastructure with direct relationships with end users and content owners. That helps them on both sides of the ledger and create new revenue streams.

2. Telco CDNs will make big waves

Owning the network is the biggest advantage that the Telcos have because they control the Quality of Service (QoS) over the last mile, and more importantly, there's a cost savings component there as well. In particular, CDNs like Akamai and Limelight have to lease the bandwidth from the network operator, and network operators don't have that issue.

Based on those advantages, we'll be seeing more of that in the next year, which leads to Skytide's next prediction, that Telco CDNs will make big waves in 2012. Over the last several years the Telcos have waded in the CDN waters slowly, but now they're diving in head first. Some of the world’s largest telcos have now deployed their own CDNs, which is diminishing the dominance of pure-play CDNs. Companies from outside the space (Amazon, Google) are getting into the CDN business and the trend by major content providers (Yahoo, Microsoft, Google) to operate their own in-house CDNs. Dan Rayburn lists many of them on his blog here: Updated List Of Carriers, Telcos and Pure-Play Companies In The CDN Business |

3. Federated CDNs will finally shift from  
    concept to reality

The third prediction is that Federated CDNs will finally shift from concept to reality in 2012. This has been a hot topic of discussion at content delivery conferences over the last year, and Hurley says that's for good reason. As Federated CDNs move from concept to reality, it will cause a seismic shift in the CDN market.
"CDN Federation stands to be very disruptive, giving service providers an unprecedented opportunity to compete directly with market leaders like Akamai and Limelight in the global CDN arena."
In June of 2011, Dan Rayburn announced on his blog that a group of telcos had founded an Operator Carrier Exchange (OCX) to formalize the process and standards of interconnecting their content delivery networks. Just a few months later, Cisco announced at the CDN World Summit that it had completed a CDN interconnection pilot with several tier 1 telco providers (BT, KDDI, Orange, SFR and Telecom Italia).

In my conversation with Hurley, he skipped over the following three trends, but encouraged people to download the white paper to read more about how they'll be taking greater shape in 2012:

4. Adoption of Adaptive Bitrate protocols will grow 
5. IPTV providers & MSOs will extend reach into OTT models 
6. Multi-screen viewing will become the norm 

7. Online video advertising budgets will soar

And, finally the last trend is that online video advertising budgets will soar. Hurley says that it's created a virtuous cycle based on a confluence of factors that plays in its favor. First, technology is finally at a point where online video resolution and reliability is to the advertisers liking.

"Advertisers buy an audience," says Hurley. "They also buy adjacency to content and they have to have that in a quality experience, and that's what they're able to get now."
They're also able to to tap into new technologies like adaptive bitrate streaming which holds the promise of ad insertion into a live stream, and that mirrors the model of traditional TV advertising. But most importantly, advertisers go where the audience and the audience is increasingly going to tablets, mobile phones and laptops to watch online video. So that confluence of virtuous events is really poised make online video advertising budgets grow 27% in 2012.

To download the white paper, go to: Skytide website
Slideshare: 7 Online Video Trends to Watch in 2012

About Skytide
Skytide, the leader in Online Video Management Analytics, provides content delivery providers and digital media companies with the most complete operational view of their streaming video businesses, delivering the information necessary to make better-informed business decisions. Only Skytide's out-of-the-box analytics and reporting solutions can process massive amounts of disparate data sources and turn it into detailed reports in near real-time. Skytide is venture-backed and works with leading digital media and technology companies including: British Telecom, Broadpeak, Cisco, Clear Channel Communications, HP, Juniper Networks, Telecom Argentina, Telecom Italia, Telefonica and Telstra.

Update  2/21/2012: Revised copy, added numbers 1-7.