Online Video Trends to Watch in 2014

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1. Social TV will take off

Given the torrid growth of social media services and the influence they have on how users consume broadcast TV programming it was only a matter of time until they began to intersect. While the ground was laid in 2013, with Twitter hashtags being overlaid into every conceivable program, the pace should really accelerate in 2014. Witness some recent announcements and launches. In October, Comcast formally announced its new See It feature that it hopes will turn social media conversations into instant content consumption and become as widespread as Facebook likes. Comcast inked its first partnership with Twitter and will initially enable its NBCUniversal followers to click a See It link embedded in a shows tweet to immediately watch live TV, access video on demand programming or watch it online on any mobile device. In essence, See It holds the promise to transform connected devices into online remote controls. Nielsen, best known for its TV ratings, recently launched Twitter TV Ratings which measure how posts on Twitter impact television viewing. Clearly, Nielsen anticipates that social platforms like Twitter will grow in their impact on viewership and engagement, as evidenced by the deluge of social media conversations that accompanied the Breaking Bad finale. Companies are also leveraging Facebook for Social TV. Optimal, a social advertising company, recently announced a new service that allows brands to buy ads that display on Facebook almost simultaneous to its commercials running on TV. That way, if a viewer is splitting his or her attention between the TV and a second screen companion device, chances are greater that they will be engaged with one of the brands messages and perhaps both. Hardware sales and app development should continue to also fuel social TV integration, especially since viewers increasingly consume content from social media and television in unison. Sales of tablet devices are projected to grow another 43% in 2014 (source: Gartner) and global smartphone shipments are forecast to surpass 1.2 billion units (source: Digitimes Research). The hope from MVPDs is that they can reframe social networking from a threat to an opportunity. By inserting themselves into the social dialogue and establishing new ways for viewers to discover shows, Pay-TV providers and broadcast networks can actually drive more consumption. In a world of continuous partial attention, instant gratification and meme-driven media, thats a big deal.

Implications:
The rise of Social TV and second screen viewing portends fundamental shifts in how video content is consumed, shared, promoted, measured and monetized. Some obvious challenges that will only increase over the next year include: How to accurately measure engagement with TV programming. When a person is constantly shifting attention between a television program and second screen content which may or may not have anything to do with the TV show how is that multi-tasking accounted for in the measurement info? How to value TV commercials. A Magna Global study recently revealed that the number of Tweets jumps 21% during commercial breaks. Thats sobering news for advertisers, whose commercials are already being skipped with increasing frequency by viewers using digital video recorders (DVRs). But the challenges also give way to opportunities: Social TV activity throws off a lot of data, some of which can be mined to create more effective commercials and more informed programming decisions. Getting what is, in effect, real-time focus group information holds significant promise. Advertisers can use social applications to extend the reach and effectiveness of their commercials. For instance, some advertisers encourage viewers to use their Shazam app while the commercial is playing, which spawns special promotional offers. This, of course, assumes that the viewer is engaged with the commercial and isnt fiddling with their companion device. Some are looking to alter user behavior, incentivizing viewers to tune into live broadcasts and the Social TV activity that accompanies them by rewarding viewers for watching and participating.

The next great test for Social TV will arrive in February at the 2014 Winter Olympics in Sochi, Russia. All the elements should be in place for peak interactivity: a global audience, a post-holiday crowd with new connected devices, a built-in fanaticism for sports, and the usual controversies and Hallmark moments that accompany the Olympics.

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2. Digital rights battles will escalate

The summer dust up between Time Warner Cable and CBS that resulted in a 32 day blackout of the latters programming to TWC customers underscored the festering tensions between broadcast networks and multichannel video programming distributors (MVPDs) over digital rights. While this was originally covered by the media as a tussle over retransmission fees where cable operators must compensate broadcasters for retransmitting their content the real nut of the problem revolves around TV Everywhere rights. And that problem shows no signs of abating. MVPDs are leaning heavily on TV Everywhere to keep their customers from defecting to free or low-priced subscription video-ondemand alternatives like Netflix that deliver content over-the-top (OTT) of broadband connections. Ideally, operators would like to negotiate fees for content rights that transcend device, so that they pay the same cost whether a customer views that content on a TV, tablet, smart phone or other connected device. Unfortunately for them, many broadcast networks dont see it that way. As their advertising revenue continues to get squeezed by various forms of online advertising, broadcast networks and their affiliates are coming to view retransmission fees as an important revenue stream and means to profit from the disruption being caused by new distribution channels and devices. CBS CEO, Les Moonves clearly articulated his position on a recent analyst call, saying: The right of our content traveling with the consumer, we think we should be getting paid for that. .....everything cant be included in the one rate that we negotiate with the (MVPDs). And also, Its our content. We spend a lot of money for the intellectual property, and we want to fully monetize that. Flaming the tensions further, broadcasters are pushing for shorter, more flexible agreements that allow them to capitalize on any further market disruption to come. That way, they wont be confined to rigid, long-term contracts and unable to respond to a fluid, changing landscape.

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Implications:
It would seem that the balance of power is currently with the broadcast networks and their affiliates and that they will continue to press for compensation across all delivery platforms. Not to mention, an increased push for increased flexibility in cutting distribution deals with the SVOD players that are causing traditional Pay-TV operators so much heartburn in the first place. With Netflix forecasting that it will double streaming volume by 2016, that bodes further problems for multichannel video programming distributors. To blunt the continued encroachment of OTT content and gain leverage, cable TV operators like Liberty Media CEO, John Malone believe that MVPDs could benefit from consolidation and partnerships, possibly to launch their own national streaming video service. In fact, there are reports that a Time Warner Cable - Comcast merger may be in the works. Whether the multichannel video programming distributors can reset the balance of power anytime soon remains to be seen, but it is likely that the power battle being waged with broadcasters will continue to see flare ups and further standoffs in the year ahead.

Read More: What is the difference between IPTV and TV Everywhere?

3. Quality of Experience will trump all

The correlation between positive quality of experience (QoE) and high user engagement levels is well known by now. You generally cant achieve one without the other, as lots of research reports will attest. In 2011, a 1% increase in buffering time during video-on-demand (VOD) content resulted in a reduction of three minutes of viewing time. Today, that same 1% increase in buffering time cuts viewing time by a whopping 8 minutes (source: Conviva). Another study, conducted by Akamai and the University of Massachusetts, revealed that viewers who experience re-buffer delays of 1% or more of a videos total duration play 5% less of it compared to a similar viewers who experience no re-buffering. The problem is, research also indicates that producers and broadcasters are falling short in their quest to elevate the perceived value of online video and match the lofty expectations consumers have come to expect from cable TV. While technologies like adaptive bitrate streaming and CDN-switching have greatly narrowed the quality gap, they still fall short. Because bitrate downshifts are noticeable to users and because low bitrates (like re-buffering) are correlated to reduced viewer latency, publishers may be hesitant to use ABR to its full extent. Clearly, re-buffering is not the only goal or the only element of video quality. Switching between upstream CDNs does nothing to address problems in the last mile. Regardless of which CDN is used, video must eventually travel over a viewers ISP. Also, despite the claims of CDN switching vendors, the switching capabilities offered are not as real-time or dynamic as they want one to believe. Ultimately, end users desire for high-definition video images is outstripping the capability of their internet connections and their ISPs networks to deliver such data streams. Until every user has a faster internet connection and all ISPs can support these at times of peak usage, quality will continue to suffer. To compound the problem, poor online video quality tarnishes the content brand more than the internet service provider or video hosting provider. In fact, a recent survey from online video platform service, Brightcove revealed that 62% of viewers are more likely to blame the brand when they experience poor video quality rather than the offending ISP or hosting provider.

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Implications:
The persistence of poor quality experiences threatens to prevent online video from reaching its full potential.! While users increasingly expect the convenience of watching video anytime, anywhere, on any device, the classic living room experience continues to set the standard by which all other viewing experiences are graded.! If IP-based video viewing experiences cannot approximate the stall-free experience of cable, satellite, and terrestrial broadcasting, online video will always remain in the realm of the niche services.!Given the well-established connection between QoE and viewer engagement, online video services will need to measurably improve quality of service (QoS) levels in order to justify subscriber fees or appeal to advertisers.! The clear path for publishers and network providers to deliver a quality of experience on par with existing Pay-TV operators is to make a serious investment in infrastructure. Those publishers that dont yet use CDNs and those ISPs that dont use transparent caching, need to do so.! Beyond that, bandwidth and other forms of capacity need to be increased across all stages of the network a sheer "brute force" effort to smooth the path of digital video.! Unfortunately, there is a disconnect between the beneficiaries of such investment: the online publishers who collect advertising and subscription revenue and the network operators who are required to make the investments.!ISP customers will balk at the notion of increased monthly fees to subsidize these improvements, especially if they perceive that the impetus has more to do with further enriching content owners. Instead, there needs to be a new cooperative model in which content owners, CDNs, and ISPs can all work together to optimize video delivery, sharing costs and risks proportionally to the benefits they stand to realize.

Read more: How Much Online Video Quality is Enough?

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4. Subscription video on demand content gets exclusive

To date, subscription video on demand (SVOD) services like Netflix, Hulu Plus and Amazon Prime have thrived with a formula of low price, large selection, cross-platform delivery and tailored programming recommendations. What they havent had is exclusive, must-see programming like many of the Pay-TV channels (think: HBOs The Sopranos or AMCs Mad Men). But that started to change in 2013, as SVOD providers began to offer growing libraries of original content. That trend will accelerate in 2014 as these services look to differentiate their offerings and increase the perceived value of subscriptions. Netflix has demonstrated that it isnt timid about making bold moves to secure exclusive content. According to its Chief Content Officer, it wants to become HBO faster than HBO can become Netflix.

In an impassioned speech that went viral, actor Kevin Spacey lauded Netflix for taking risks, eschewing the need for series pilots and having the patience to nurture shows over time. Spaceys House of Cards is one of the most high profile forays by Netflix into original content programming. Netflix also famously resurrected the cult classic comedy series,Arrested Development and has a potential new hit on its hand with Orange is the New Black.

Amazon has also made notable investments in exclusive content, even establishing its own studio.

Amazon secured exclusive licensing rights to stream the BBC hit show, Downton Abbey, including the right to stream episodes that have yet to air in the U.S. It also recently ordered pilots for programming from big names like Chris Carter, creator of The XFiles and Michael Connelly, an award-winning author of detective novels.

Not to be outdone, Hulu is also touting original programming as an incentive to woo prospects to upgrade to its Hulu Plus service.

In perhaps its most notable deal to date, Hulu has partnered with Lionsgate Television to produce 10 episodes of a new original series, Deadbeat, that will air in 2014. It has also invested in several other exclusive content programs, including animated serials like Mother Up! and the The Awesomes, as well as the documentary series like Behind the Mask.

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Implications:
As SVOD services begin to accrue exclusive libraries of original programming, OTT content gains even more legitimacy as an alternative to traditional Pay-TV and premium channels like HBO and Showtime. By increasing the perceived value of their service, SVOD providers hope to reduce churn and boost subscribers, appealing even more to the cord cutters, cord shavers and cord nevers that are retreating from cable and satellite TV plans. Original content also provides subscription video on demand providers with a justification to possibly raise prices in the future or create multiple pricing tiers. Just as importantly, the investment in original content also provides SVOD services with a hedge against spiraling content licensing costs, which have increased 700% in just the past two years. While investments in original content can be expensive and risky, it buys leverage and the potential to better control their fate. Despite all these advantages, Netflix and its peers also dont want to bite the hand that feeds them. Subscription video on demand services dont necessarily want their original programming to eclipse that of their suppliers the networks and studios or they will will be viewed as a direct threat and find their access to third party content greatly diminished. It will be a balancing act.

Check out our extensive list of OTT providers

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5. Online video traffic will continue to soar

Online video traffic will continue its sizzling growth rate, propelled by the virtuous cycle created by brisk sales of connected mobile devices, the consumer embrace of SVOD and OTT content and the increasing allocation of advertising dollars to online video. Consider the following: IP video traffic already enormous will grow another 28% year over year for consumer use and 40% for business use, reaching a combined 45,585 petabytes per month in 2014 (Cisco Visual Networking Index). By 2014 online video will account for nearly 90 percent of all consumer IP traffic (Cisco Visual Networking
Index).

Mobile data traffic will grow 10-fold between 2011 and 2016, mainly driven by video
(Ericsson Traffic and Market Report).

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Implications:
The inexorable march of online video consumed over IP-enabled devices puts Communications Service Providers (CSPs) in a real bind. With sales of old standbys like landline telephone service plummeting and cash cows like SMS at risk by newer technologies like long term evolution (LTE), CSPs need to establish new revenue streams that can replace these waning incomes. If that werent a formidable enough task, the surge of online video coursing across their networks is also requiring Communications Service Providers to make substantial infrastructure investments just to keep pace; investments they cant recover simply by increasing monthly ISP fees. To extricate themselves from this bind, service providers will need to leverage their position as network operators to find ways to forestall further capital investments and create new revenue streams. Many are launching their own content delivery services as a way to achieve both. To successfully compete in delivering video content, they will need advanced analytics and reporting to help them harness these advantages, optimize quality and precisely provision capacity.

Infographic: Who is Powering the Rise of Online Video?

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6. Pay-TV bundling is here to stay

For traditional Pay-TV providers, 2013 has been a challenging year. For evidence, you need not look further than the net subscriber losses that cable and satellite TV providers have begun to post this year, hemorrhaging 217,000 subscribers in the second quarter of 2013 compared to the same period last year (source: SNL Kagan). Contributing to this decline are: IPTV services like AT&T U-verse and Verizon FiOS that are poaching customers from traditional PayTV providers. While cable and satellite providers were shedding subscribers, IPTV services added 398,000 net new subscribers in Q2 and now account for 11% of the U.S. Pay-TV market (source: IHS). The rise of more affordable subscription video on demand services like Netflix and Hulu that have led a growing number of consumers to cancel their cable altogether (cord cutting) or pare back to a more basic pricing plan (cord shaving). In fact, 2013 will mark the first time that cable and satellite operators have posted a net loss of Pay-TV subscribers (source: IHS). Given these ominous trends and competitive pressures, industry pundits have increasingly questioned whether MVPDs and content owners can preserve the status quo of imposing high priced content bundles on consumers. The answer appears to still be yes. New entrants have tried to shake things up but to little avail. Most notably, it was recently announced that Intel plans to sell of its OnCue IPTV service to Verizon before ever formally launching. OnCue had planned to offer flexible programming bundles, speculated by some in the media to mean that it would allow consumers to lop off less popular channels and pay only for smaller content bundles, albeit at a premium. The truth is, however, that there is still no compelling reason for content providers and MVPDs to kill the golden goose and radically change the way they do business. Bundling works for content owners by allowing them to leverage their premium brands to secure distribution and carriage fees for their secondary offerings (think: ESPN Classic or truTV). Bundling works for the MVPDs by enabling them to package a smorgasbord of content into flat-rate pricing packages that lots of consumers find appealing. In the process the operators also benefit from a consistent revenue that bundling provides, as opposed to the wide fluctuations that come with a la carte offerings. As long as both sides see value in the current arrangement and there is no urgent reason to change, bundling will remain and likely evolve over time. There may new and different tiers rolled out, like Time Warner Cables recently announced Starter TV with HBO option, but its still a bundle.

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Implications:
The commercial appeal of unbundling Pay-TV services is obvious; the idea being that consumers can gain control of the channels that they select and save money in the process. The reality is a bit different. There is no supporting evidence that a consumer who currently pays $100 a month for 100 channels would pay, say, $10 a month for 10 channels under an a la carte subscription scenario. Those kind of economics would decimate the Pay-TV industry and, in turn, the content owners who profit from bundling. Instead, consumers would likely pay a significant premium for the 10 channels and not save a meaningful amount of money. According to a Needham & Co. study, the unbundling of Pay-TV would result in: The death of 124 channels that could not continue to operate on the reduced revenue that a la carte subscription pricing would cause. That scenario would also bring result in the loss of 1.4 million media jobs. The potential loss of $45 billion in TV advertising revenue. The destruction of $80-$113 billion in U.S. consumer value. Short of legislation mandating a la carte pricing options and that is unlikely to pass anytime soon given the political stalemate in Washington D.C. Pay-TV bundling will be with us for the foreseeable future. Any word to the contrary for 2014 may be provocative but unlikely.

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