In Broadcast - February 2016 - 44


44

www.inbroadcast.com | Vol: 6 - Issue 2 | February 2016

InMedia

OTT - The Future
Is Cloudy
Once upon a time on the world map, red was the
colour of Empire, now it's Netflix. Contributing Editor
Andy Stout looks at the war of the OTT services...

I

n a performance that almost
defines the word 'bravura', Netflix
CEO, Reed Hastings, used his keynote
speech at January's CES in Las Vegas to
announce that the streaming giant was
expanding its presence into a further
130 countries, then and there. Not next
month, not a steady rollout over the
course of the year, but straight away.
Of course, this would not have
been possible without the power
of the cloud and the ability it gives
organisations to spin up servers almost
instantaneously, but it shows the
muscle of the new breed of internet
native organisations.
It's not quite '#netflixeverywhere'
as the hashtag insisted - China is a
notable holdout to the company's
blandishments, and there are several
countries such as North Korea and
Syria currently indicted by the US
government that it can't venture into
as a result - but Netflix is now available
to a substantial majority of the world's
population, pretty much making it the
first genuine global media power of
the 21st century.
As such though, it is just at the head
of an increasingly febrile market
which is seeing a gigantic three-way
battle for viewer eyeballs develop
between the internet natives - Netflix,
Amazon, Hulu and their ilk; the OTT
platform providers such as Google,

Roku and Apple TV; and the traditional
broadcasters themselves who are
finding that the move into online
territories is becoming easier all the
time.
Forecasting The Future
Hardly a day goes by without a new
survey from another research analyst
detailing the immense structural
changes that are going on in the
industry as a result of all this activity.
Whether traditional TV is dead and OTT
triumphant, or not, is almost more of
an ideological position, than one that
can be borne out by any of the data
though, which is often conflicting.
Probably the best summation of
recent months comes from accenture,
which in the fifteenth annual edition
of its Predictions for the Technology,
Media
and
Telecommunications
sectors, characterises the near future
of the US market in particular as one
of 'erosion not implosion'. It estimates
that cord-cutting will run at a rate of
1%, increasing to 2% by 2018, and that
viewing on the traditional TV set will
fall by 10 minutes per day per year
from its current 330 minutes (with
Millennials watching substantially less
- 150 minutes).
"TV's decline is more likely to happen
at a slow, steady and predictable
rate. An apocalypse is not around

The budget for Amazon Prime's new car show eclipses all but the most high-end drama

Netflix is now available to the
majority of the world's population

the corner," accenture summarised.
Which is probably not the most
comforting statement anyone involved
in television is likely to read this year.
Either way, all the players are
chasing after the prize of increasing
online revenue. This is already
substantial and, according to Digital
TV Research for one, getting more
substantial all the time; the analyst
saying that global online TV and
video revenues over fixed broadband
networks for 51 countries are expected
to jump from a current $19bn to
around $42bn by 2020. That's a leap of
222%, with the US and SVOD forecast
to be the main twin engines of growth.
Factor in the sort of global reach that
Netflix now enjoys, and those figures
could yet have to be revised upwards.
Hurdles And Issues
As sci-fi author William Gibson
famously noted, "the future is
already here - it's just not very
evenly distributed". And one of the
big problems that the OTT providers
have to face is getting their content to
people.
The latest release of the Netflix ISP
Speed Index (December 2015 at time
of writing) states that the country
with the fastest average connection
worldwide is Luxembourg, which
provides its citizens with an average
of 4.12Mbps. Canada is the fastest
territory in the Americas, its 3.46Mbps
just edging the US' 3.45Mbps, while
New Zealand takes the award in the
Asia-Pacific region with 3.77Mbps.
Netflix' own help files suggest that
a minimum of 5Mbps is needed for
reliable HD streaming, never mind
anything else. So while much is being
made of the OTT providers being
able to make a significant play for
the nascent 4K market, outside of a
few urban heartlands at the moment
it seems something of an unlikely
proposition just yet.
Securing HDR 4K content is, of

course, something that the major film
studios have voiced disquiet about,
reasoning that the higher quality
the content, the more liable people
are to pirate it. However, while the
data so far doesn't seem to bear this
out (Torrent Freak's year end piracy
report suggesting that 480p copies
of TV shows remain the most popular
followed by 720p and then 1080p
bringing up the rear) the sheer volume
of online piracy is eye-opening. HBO's
Game of Thrones again was the most
pirated show of 2015, with its finale
alone racking up an estimated 14.4
million downloads via BitTorrent, close
to double its official US audience.
Something has to be done. In
concert with its global expansion,
Netflix cracked down on the VPNs that
allowed people to bypass geo-blocking
controls and access content with
rights-clearances for other countries.
It might not sound like a serious
problem, but given the numbers
involved in populous countries where
VPNs are popular - it was estimated
back in November 2014 that 63.4
million people are using the BBC's
iPlayer via VPN - and with piracy as
a whole moving to a live streaming
paradigm, protecting OTT and TV
Everywhere content and thus revenues
is becoming a pressing problem.
And content is, of course, king.
Strategy Analytics published a chart
last year that looked at the different
weighting consumers attached to OTT
issues. 8% of issues were related to
usage and quality, 39% were related to
price, but the majority, 52%, were all
regarding content.
The Costs Of Competition
The problem, of course, is that
content costs. Amazon Prime has
famously committed somewhere in the
region of £160 million to produce 36
episodes of a car-based magazine-style
format fronted by Jeremy Clarkson and
his fellow ex-Top Gear presenters,
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