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 | StreamingMediaBlog.com.

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.

Cord Cutting Explained: Telcos, MSOs and the Existential Crisis - A Conversation with Roy Peterkofsky, Skytide

What is cord cutting? The term cord cutting is commonly used to describe the trend of consumers who cancel their cable and satellite television subscriptions and "cut the cord" in favor of receiving their television programming from Over-the-Top Television (OTT) solutions available through the Internet. While this is a growing trend fueled in part from the wide availability of content from Netflix, Hulu, YouTube and millions of other video sites, there is an existential crisis facing the telcos (telephone companies) and cable companies, also known as MSOs (Multiple System Operators), that could threaten the continued growth of the next generation television industry.

I spoke with my friends at Skytide, an Oakland, California-based company specializing in performance analytics for large scale content delivery and digital media providers, to get an inside perspective on the current situation. According to Roy Peterkofsky, Skytide's VP of Product Management, this issue came bubbling to the headlines in the mainstream press with the news that Netflix accounts for 20 percent of network traffic at peak times in the U.S. along with the feud between Comcast and Level 3, which is all about the impact of that amount of traffic on the ISPs (Internet Service Providers).

Peterkofsky pointed out that in the Comcast vs. Level 3 feud, Comcast is wearing its ISP hat and not its hat as a cable paid TV operator. Comcast claims that it's being swamped by all the traffic coming from Level 3, the ISP that serves as the backbone of Netfix's content delivery. Level 3 says that Comcast is charging unfair fees for the right to send data to its subscribers. As video consumption continues to grow at astonishing rates that could occupy 90 percent of all Internet traffic by 2014 – that's a lot of traffic getting dumped on the ISPs of the world and is generally uncompensated traffic.

More evidence of this issue was seen even today, as AT&T announced a broadband cap of 150 GB per month for its DSL subscribers and 250 for U-Verse subscribers, which are similar caps made by Comcast and Charter back in 2009.



Telcos, MSOs and the Existential Crisis

Peterkofsky noted that if you look at the historical context of the companies that are ISPs, which tend to be the telephone company and the cable company, you really start to see what a huge existential crisis this may turn out to be. He explained that once upon a time you had only one line that came to the house and that was your telephone line. Back then the telcos once held a monopoly because the telephone was a necessity. Consumers were locked in either through a governmental or regulatory monopoly and the telcos could upsell them on other services like long distance plans, voice mail, call waiting and Internet access.

At some point this other line got hooked up to your house, which was the cable line, but it was no big deal to the telcos because cable was only for video entertainment and never in a million years did the telcos think they would ever have anything to do with video entertainment. Peterkofsky said, that was before deregulation, competitive access, cable companies offering the triple-play which included the Internet and VoIP (Voice over Internet Protocol) telephone services and before mobile phones and people thinking they didn't need a landline anymore. It was obvious that the the core revenue source of telcos was under attack.

Peterkofsky clarified:

"You hear the term cord cutting thrown around a lot lately, but it's generally used in relation to cable companies, and it cant be taken literally. Because it usually talks about people who are going to stop paying the pay TV subscription but they would still keep the cable line typically as their ISP in order to bring in the OTT video services that allow them to no longer want their pay TV service. So it's not literally cutting the cord. But if you look at the situations that the telcos are facing, you could take the term cord cutting quite literally. Because a lot of people just have no need for the telephone company anymore and they could completely sever that relationship; and once the telco loses that customer relationship they lose that ability to upsell you on more and more services – that's their whole growth model completely out the window."

Peterkofsky said that some telcos have started to offer IPTV services over their networks to regain some of that revenue turning the tables on the cable industry that was once the nemesis of the telcos, and now finds itself under fire from two directions – the IPTV services and the OTT video services that lead to what is typically referred to as cord cutting. So, in many ways the telcos and MSOs are in the same boat dealing with loss of revenues from subscribers canceling their services and the uncompensated cost of delivering OTT video content which continues to rise.

"What you have there is a cost-revenue squeeze, and that is why I call it an existential crisis."

A disruptive solution

So, what can they do about it?



Peterkofsky pointed out two options:

1. find a way to make it compensated 
2. reduce the impact of it as a cost driver. 

He described that the second option is one that many network operators have figured out that they could through something called, transparent proxy or reverse caching, where an ISP will use caching on its servers to de-duplicate traffic traversing their network.

One example of this could be any popular movie available from Netflix's Instant streaming catalog that may have originally come from a CDN can be stored locally on the near end of the ISP network closer to the end user, and all other requests are served from that same cached file, rather than making another file request or thousands of requests to the CDN serving up the original content.

So buying a few servers to cached with is a great way for ISPs to reduce their network costs and much more cost effective then building out their networks by laying more fiber lines. But if this approach becomes more widespread and on a greater scale, Peterkofsky said, "you might start to see some interesting second order effects."

Effects which Peterkofsky said, can become highly disruptive for the CDN industry. Since the ISPs can use local caching to reduce the amount of traffic traversing over the Akamai, Limelight or other CDN's network, they can disrupt the revenue models between the content owners and CDNs, which are structured primarily on the amount of content delivered over the network. So if you're a content owner, Peterkofsky said, "you're either paying a whole lot of money for a whole lot of nothing, or you may just not be paying."

A classic case of disintermediation

Peterkofsky maintained that the ISPs decide to get into the CDN business they offer a couple of key advantages over the incumbents in the space. One is a cost advantage because they own the underlying network, not the Akamai and Limelights of the world that lease their bandwidth from network owners and tack on their own margin.

According to Peterkofsky:

"This is classic disintermediation. This is cutting out the middle man. Network owner providing the CDN services themselves."

ISPs also have a serious quality advantage over CDNs because ISPs own the connection or "last mile" all the way to your house and can provide better Quality of Service (QoS) through deeper caching. This becomes more important when you're talking about online video taking the place of conventional cable and satellite TV because QoS directly affects viewer engagement.

Overall, Peterkofsky thinks that the cost and quality advantages that ISPs have over CDNs will drive a lot of these network services providers to running their own CDNs through an invisible CDN through transparent caching, a commercial CDN or internal CDN to support their own IPTV services or if they're a MSO, their own TV Everywhere services.

On the consumer side, Peterkofsky doesn't believe that getting consumers to pay for the added content delivery costs will work either. Comcast is trying to push the cost back in the other direction toward the content owners but at some point it will circle back to consumers, but it won't fly. However, as Peterkofsky pointed out, with the music and video industry consumers will pay for content if it's convenient and inexpensive. But if it becomes too inconvenient or expensive for consumers they will either find ways to get content for free, or cancel their subscription.

Peterkofsky concluded that:

"The real solution is things that take cost out of the system by clever applications of technology."

As cord cutting continues to be a growing trend among consumers, it's likely that more ISPs move into the CDN business in 2011 and big changes in the space are expected in 2012.

Read Skytide's new white paper: The Four Keys to Telco CDN Success


Related posts:

• Skytide Sees Big Changes Within the CDN Market, Releases Insight 2.0 Reporting & Analytics Solution for CDN Providers and Resellers
• Skytide Shares Insight for Online Video Publishers, Identify the “Sweet Spot" and What is "Good Enough"

About Skytide
Skytide is a privately held, venture-backed company founded in 2004 and headquartered in Oakland, California. Customers include Accenture subsidiary, Origin Digital; British Telecom; Cisco; Clear Channel Communications; Comcast subsidary, thePlaform; MTV Networks and Qwest. Skytide enables leading content delivery and digital media providers, like British Telecom and MTV Networks, to precisely measure and optimize the performance of their streaming video businesses. Its out-of-the-box reporting & analytics applications are built on top of Skytide's patented platform architecture, which devours massive amounts of highly diverse data and quickly turns it into actionable insights.

• Skytide Insight for Content Delivery Networks uses server-side log data to provide CDNs and IP video networks — and their customers and business partners — with deep insight into streaming media performance.
• Skytide Insight for Video Players uses client-side log data captured directly from the video player, enabling a detailed understanding of quality of service (QoS) and viewer engagement metrics.

Skytide Shares Insight for Online Video Publishers, Identify the “Sweet Spot" and What is "Good Enough"

In part two of my conversation with Roy Peterkofsky, VP of Product Management at Skytide, I asked what can publishers really get from analytics that could really help monetize their businesses. Roy suggested that businesses are waking up to the fact that the online video part of their organization does need to be a real business. He recommended that people should read Warren Buffet, because all businesses make decisions based on resource allocation. Among the core challenges facing online video publishers, is how to define the "sweet spot" and what is "good enough" when it comes to the affect that quality has on viewer engagement. Quality can be defined in terms of both quality of service (QoS) of the content delivery network, and the actual quality of the content that is produced and published online.



Some digital media companies assume that "more is better" and that the road to higher profits lies in maximizing QoS levels, thinking that it will result in higher viewer engagement levels, and in turn, more consumption of their content. Roy suggested that performace-based metrics can help with editorial and content programming decisions, whether a certain genre performs better than another. Or when data shows that viewers stop watching a 5 minute video after 2 minutes, viewer drop off can impact the production of future videos and dictate their total run time. Also, since the shelf life of a video online is pretty short – to get value out of analytics, you need to be able to use the analytics predictively.

Roy said:

"People talk frequently about the need to push higher resolutions, higher bit rates out to their customers – to be as close to HD, whatever that means in the Internet world – as they can be. But the question that remains unanswered is – is it worth it? Do you really get more viewer engagement to the extent that it drives monetization out of doing this?"

According to Skytide's customer data, there is a correlation between engagement and bit rate when it's down in the lower reaches and not good enough, people will abandon the video quickly. But once you get to a level that's good enough things really start to flatten out, and you really don't get that much added value.

So what is good enough?

"Well basically, it's kind of about if you're using the maximum capability of a typical DSL line. That seems to be good enough for most people. Above and that you're spending a lot on encoding, you're spending a lot of money on pushing out bits through your CDN – and you're not getting that much return from it."

Skytide advises that publishers measure and understand the impact of online video investments before spending the money.

See part one of my interview with Roy Peterkofsky here. You can also request a copy of Skytide's white paper Streaming Video Quality: Is more always better?


About Roy Peterkofsky, Vice President of Product Management

Skytide Sees Big Changes Within the CDN Market, Releases Insight 2.0 Reporting & Analytics Solution for CDN Providers and Resellers

Skytide is a software-as-a-service company that provides reporting and analytics solutions for online video publishers and Content Delivery Networks. Today, the Oakland, California-based company announced the "next generation" of its Insight for CDNs reporting and analytics platform, upgraded to support what Skytide sees as "the innovative business models proliferating among CDN providers and resellers". Skytide has been around since 2004, and recently won a 2009 Streaming Media Readers' Choice Award for its Skytide Insight for Flash Video Players video analytics solution that combines viewer engagement and quality of service (QoS) metrics. Skytide's patented digital media performance management solutions pull high volume data from disparate data sources — like web analytics data, CDN logs and online video ad data — and integrates them into a single dashboard to help companies see the big picture of how their company works, and how the different parts are interrelated to each other.

According to Roy Peterkofsky, Skytide's VP of Product Management, it's all about resource allocation. Companies that publish and deliver online video need more advanced analytics that clearly detail how their content is used, in order to maximize their online video investments. While it's great to know about viewer engagement and quality of service, it's even better to know how quality of service affects viewer engagement – and how viewer engagement drives revenue, or sometimes not. I recently spoke with Roy about the latest release of Insight 2.0 and the significant changes his company is seeing within the content delivery space.



Roy said that:

"One of the things we're seeing is really a change in the whole digital media supply chain – where a lot of companies are going to be entering the CDN space and doing so with innovative business models. So probably 6 months or a year ago, everybody thought the CDN market was commoditizing and was going to consolidate and there's only going to be two or three or four big ones left – but interestingly enough for various reasons we're seeing a lot of new companies enter the field, often they're Telcos.

Telcos, they really own the network that the Akamais and Limelights of the worlds are operating under. So, flashback to 10 years ago to Web 1.0, the original dot-com boom, the disintermediation was big then because it was all about using the web to eliminate middle men. So if you're a Telco and you've got the Akamais and Limelights of the world making money off of your network, wouldn't you want to know – why can't I be taking the margin for myself? Why don't I disintermediate that CDN?" 

But the way Skytide sees it – it goes way beyond that, and it's really a dramatic change and disruption within the ecosystem with cable operators wanting to do TV Everywhere, Telcos moving into the CDN business, the rise of P2P networks, and what used to be an ISP can be a CDN,  or a CDN can be a conent aggregator and what used to be a publisher can be a pure content factory without its own website. Skytide is seeing it all and working with many companies that have projects that are so secret, they don't even know about them yet but they are providing the reporting and analytics for many of them.

Skytide President & CEO, Michael O’Donnell also pointed out that “seismic changes are afoot in the content delivery arena" and that Skytide's new offering will help those companies emerging to challenge CDNs hold on the content delivery market. He said:

"Those entering the space will need a reporting & analytics solution that can accommodate evolving business models and handle the massive amounts of data that CDNs generate — something that Skytide is uniquely capable of handling out of the box.”

Among the new Skytide Insight Version 2.0 features are:

• Custom Dimensions: Content delivery networks, CDN resellers and their customers and business partners can now measure traffic distribution by any desired attribute; for example, by content categories, customer types or service types.
• ISP / Business Partner Portal: Content delivery networks and resellers can stay on top of rapidly changing business models by providing business partners - like bandwidth suppliers, content owners or syndicators - with their very own reporting portals.

These new features augment Skytide's existing CDN reporting & analytics capabilities, including more than 144 distinct reports that can be used to isolate and correct service quality issues, forecast traffic and provision capacity, justify pricing and ensure accurate billing.

Not all data that CDNs provide to their customers is accurate, and Skytide has found that in some cases that data is incorrect. Roy cited a few examples where data from their system when compared to an unnamed CDN, helped in one case, improve video start up times of content in a certain Asian country that had been unnecessarily rerouted through a POP in an entirely different continent. In another case, a certain type of content that was licensed only in the U.S. found that 20% of the views came from outside the U.S. Skytide's data helped the customer close the leak of the geo-blocked content that this specific CDN missed.

Stay tuned for part two of my interview with Roy Peterkofsky where he further the discusses the changing CDN space, and how publishers can benefit from analytics to better monetize their businesses.

About Skytide
Founded in 2004, Skytide provides Digital Media Performance Management to leading digital media companies and content delivery providers with the most complete view of their operations, delivering the information necessary to make better-informed business decisions. Only Skytide's software-as-a-service and on-premise solutions can process massive amounts of disparate data sources - including CDN log files, ad insertion logs, and web analytics data - and consolidate them into a single 360° view. Skytide is venture-backed and works with leading digital media and technology companies including: Accenture subsidiary, Origin Digital; Cisco; Clear Channel Communications; Comcast subsidiary, thePlatform; IBM; MTV Networks and Qwest. Press Contact: Patrick Hurley, 510-435-9865 phurley@skytide.com
 
Skytide has a series of white papers that you can request on download here.