Streaming Media White Paper 2008 - (Page 31) www.streamingmedia.com 31 Moving Beyond Monetization to Profitability GRAHAM WILLIAMS, DIRECTOR CDN PRODUCT MANAGEMENT thinking only about monetization and start thinking about profitability. The marketplace for content delivery is changing—again. Trends indicate that we are at the cusp of yet another explosive increase in the amount of digital content demanded by consumers. With the expected explosion in demand for content, a focus on monetization will not be enough. The coming boom represents an exciting opportunity, but as we move beyond the experimentation phase to the need for a profitability phase, monetization is only part of the equation. It’s time to move beyond The Coming Video Boom After the amazing growth of the internet to date, it may seem absurd to call for explosive growth in content consumption, but this is precisely what technological and consumer trends indicate. • Over 70% of U.S. households have access to a broadband connection.1 • Average household broadband speeds of over 2.5Mbps are capable of supporting HD video streaming. • Major broadcast networks have invested heavily in online destination sites such as ABC.com and Hulu.com. • Devices such as Apple TV and the Netflix Player by Roku are coming online. Demand for online video is poised to grow with multiple providers jumping into the market.Besides the user-generated phenomenon Figure 1. Online Video Viewing Growth of YouTube, when it comes to professionally generated content, Apple offers over 1,200 titles available for rental in the United States. Netflix recently announced unlimited consumption for its online library of 6,000 titles. These are small steps when considering the enormous size of the digital video content libraries that are yet to be made available. As an example, the iTunes store has shipped over 4 billion audio Figure 2. IP Video Minutes Growth tracks since its inception,2 representing 24PB of data; in contrast, while it file size to be 100%. Let’s also assume that has shipped only 7 million movies, this because the video is better quality, users are represents 14PB of data.3 As access, speed, and posting and watching more video. A devices become more ubiquitous, consumers conservative increase in video viewing might are showing that there is enormous latent be 20%. The overall net increase in content consumption would therefore be 140%. The demand for digital content. question to ask, however, is whether the 140% increase in CDN expenses was met with an Don’t Let Rich Media Make You Poor The fact that consumption of online adequate increase in revenue to sustain the content is exploding is certainly good news business model. As with any business, content providers in for content providers in terms of demand. On the other hand, if an exponential increase in this situation have two levers to pull: increase content consumption is not paralleled with a revenue and decrease expenses. commensurate increase in revenue, providers may find their business models overwhelmed Lean on Your CDN Provider by content delivery costs. This may be true To thrive through an explosion in video whether the business is subscriber- or content consumption, content providers advertising-supported.Recently,this grim scenario should lean on their CDN providers to help played itself out in the marketplace as companies them monetize content and reduce content with explosive traffic were overwhelmed by delivery expenses.The profitability equation is content delivery costs and folded. best maximized with a commitment from To see how this might happen, imagine a both the content provider and CDN provider social networking site that, in order to remain to do so. competitive, decides to allow users to share and stream higher quality video. Content Your CDN Provider and Monetization consumption increases on two fronts. First, the With monetization,the emphasis is typically raw data delivered per stream increases by the on tools to conduct targeted content delivery, increase in file size that is required to achieve advertising, digital rights management, and the higher quality.Let’s assume this increase in detailed reporting, such as audience file- http://www.streamingmedia.com http://ABC.com http://Hulu.com
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