Cloud and SaaS within the TV industry (part 1)

Monday, September 21, 2015

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With advertising campaigns from vendors like Microsoft and IBM extolling the virtues of cloud technologies, the idea has been taken up in many quarters of the TV industry that cloud-based solutions can dramatically change service delivery from a CAPEX to an OPEX operation, while offering a number of benefits around scale and resiliency. But is the cloud in the TV industry hype or reality? In this IBE Market Briefing we look at all things ‘as a service’ to consider where cloud is working well and where it still has a way to go. We seek expert guidance on how to evaluate cloud providers and which key technologies need to be understood to help gain the most benefits from the switch to the cloud.



Part 1

Introduction. 1 ..........................................................................................

Changing viewing habits. 2 ........................................................................

Challenges of moving to as-a-service. 2 ....................................................

Understanding drivers for as-a-service adoption. 3 ...................................

Part 2

What cloud and SaaS services are available to the TV industry. 5 ............

Factors for defining a successful SaaS / cloud transition. 5 .......................

Example of SaaS in the real world. 5 ......................................................

Final thoughts. 5 ....................................................................................

Appendix. 5 ..........................................................................................




The TV industry has enjoyed almost a hundred year reign built on dedicated hardware and highly bespoke protocols and transmission technologies. The last three decades have seen the growth of modern information technology based predominantly on Intel servers and IP-based networks, heralding a shift that is helping the TV industry move towards a more IT-focused future. The change spans across the broadcast spectrum; from content creators capturing and exchanging content as files across IP networks, through editing, format conversion, playout and a whole gamut of OTT on-demand services, the move towards an IT-centric workflow is picking up pace.

This switch is in the context of an overall change in broadcast and media technology industry spending patterns. The largest survey of its type conducted by industry association the IABM, and Devoncroft Partners, an analyst firm, found that although the $48 billion spent annually is still growing, the pace is slowing considerably.

According to the study, after experiencing a 4% CAGR (compounded annual growth rate) between 2009 and 2012, the market total for broadcast and media technology products and services slowed considerably between 2012 and 2014, achieving a CAGR of 1.3%. Significantly, revenue from products across both hardware and software declined by 0.5% between 2012 and 2014, while revenue from services increased by 2.9%. During 2014, services accounted for approximately $26 billion, or 54% of total spending by broadcast and media technology end-users.

IABM DC image for news item

It may be that the long-tail of the financial crisis of 2008 had a major impact. But according to Peter White, chief executive, IABM, the change is indicative of a wider rethink from TV industry customers: “Although aggregate industry growth has changed, this is undoubtedly a dynamic time for our industry.  Revenue in some product categories has shown a degree of decline; however other parts of the market are growing quickly. The changing media landscape affecting the demand side of the industry is having repercussions on the supply side as well, requiring a re-thinking of many business models. During this period of “metamorphosis” there has been a slowdown of investment by end users as they seek a clearer vision of the business model and product roadmap going forward.”

The fact that just over half of all spending now comes from services, it is clear that in an emulation of the widespread outsourcing of ICT that the financial services sector underwent in the early 2000’s, the broadcast and media and entertainment industry is following suit in an effort to rein in costs and deliver new services in an increasingly competitive market.


Changing viewing habits

According to media reports, in 2014 Viacom, 21st Century Fox, Comcast, which owns NBCUniversal, and Walt Disney all reported lower advertising revenues for some or all of their networks. The reasons stems from two factors: a switch by brands to internet-based marketing alternatives and a lower number of views for live TV programming, which in turn reduces advertising revenues that are linked to viewership. The audience demographic plays a large part in this changing viewing pattern. In general, younger viewers spend less time watching traditional TV. According to data from Nielsen, for millennials, often described as people who reached adulthood in and around the millennium, traditional TV watching has declined by 32% and by another measure around 10% don’t even have access to traditional TV services, preferring to use online sources exclusively.

A 2014 study by Ofcom, a UK media regulator, found that although over the last decade the overall number of minutes watching TV every day has decreased only slightly, there has been significant fall amongst millennials. They now spend 50% of the average four hours of audio and visual time on non-live TV, with short duration clips typical of Multi-Channel Networks accounting for 8%, and set to rise. Meanwhile the 11 to 15 age group watch half the amount of live TV per day as adults. In addition, roughly half (45%) of this younger audience watch online video clips on websites every week compared with just 20% of adults. This switch in time spent away from traditional TV is forcing broadcasters to look at new and increasing ways to deliver content. This ranges from VoD and catch-up services to multi-screen offerings that fit better with an increasingly flexible audience.


Challenges of moving to as-a-service

Although the media and entertainment industry is expected to be worth more than 424 billion Euros by 2018 according data from analyst firm iDate, it is not advertising that is driving revenue but subscription-based services which will account for around 195 billion Euros at this point. With consumers’ direct subscription driving revenue, operators are keen to deliver new chargeable services, yet they are faced with a number of uncertainties, which fall into three broad categories:

1)       Complexity: Traditional broadcasters are not set up for the delivery of new IP-based services and lack the skills and infrastructure to capitalise on OTT

2)       Cost: The substantial CAPEX and soft cost around staff training to deliver new subscriber services is high and there is no guaranteed payback in a market with rivals such as Netflix and Hulu

3)       Risk: The timescales involved to develop services in-house can be lengthy and the moving goalpost of subscriber demands and technological changes makes projects high risk


These three factors explain why SaaS and other cloud-based solutions are playing particularly well with the TV industry and look set to grow. The shift to SaaS and cloud mirrors the drivers impacting a wider desire to align with subscriber and service delivery demands. According to an annual broadcast industry survey conducted by Devoncroft Partners across 10,000 broadcast professionals in 100+ countries, the need to go multi-platform is the most pressing requirement. With the exception of the switch to 4K and UHD, the remainder of the top five drivers are increasingly available as a service function from a growing number of TV industry suppliers.


Understanding drivers for as-a-service adoption

In addition to the removal of technology restrictions, attitudes towards the use of services are also changing. To understand how TV operators, at least in Europe, are adapting to the challenges, Clearleap engaged in a research project with IBE to study 31 different European TV services operators including satellite, cable, MSOs, hybrid, pure play OTT and newer direct-to-brand content providers. The survey found several key trends that provide context for the adoption of SaaS and cloud

Widespread IP deployment

A headline finding was that OTT and TV over IP services are already well established, at least in a 1.0 version. 48% of operators surveyed stated that they had already launched an OTT service in some form; a further 45% had launched an SVOD service. When asked about plans for the next 18 months, an additional 16% of the surveyed group planned to launch an SVOD service.

 However, a surprise finding was the number of respondents planning to launch OTT services in the next 18 month did not increase. To understand this seeming anomaly, when the data is analysed further, it seems respondents from Free to Air broadcast TV and satellite providers were keen on delivering new SVOD offerings such as catch-up TV and blockbuster films, but did not specify an interest in necessarily launching their own streaming OTT TV services.




TV industry already uses limited outsourced services with OTT operators at the forefront

When asked to describe how they currently manage their business processes to offer TV services to viewers, the majority (65%) said they used some form of partnership or third party managed service. Surprisingly, the small fraction (6%) that said they “relied heavily” on third parties were all OTT operators.



Using services is growing popular around commodity tasks

When asked about their future plans for delivering TV services to subscribers, the overwhelming consensus (87%) were considering increasing their use of third party service providers with particular interest around areas such as content management, distribution, billing and playout. Around 16% stated that it was a “major strategic goal” to move the vast majority of non-core tasks to a specialist third party.



Although brand specific tasks are not popular for switching to as-a-service

When asked to agree or disagree with the suitability of outsourcing for various tasks, content processing, billing and payment processing were deemed the most suitable, while marketing and advertising were considered the least suitable tasks to handing over to a third party. When tracked against the type of TV service operator, this data demonstrated that OTT operators were more in favor of using a third party service provider compared to broadcasters that had come from a Free to Air Digital Terrestrial TV background.

In part 2, we look at the types of cloud and SaaS services available to the TV industry and examine the key criteria to for implementing a move to an as-a-service model, along with a real world example to highlight its potential.

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