OTT Video: 2016 review and industry trends

2016 was undoubtedly… eventful. While it may be difficult to separate this past year from the many events that rocked the world stage, our 2016 review shows an exciting year for OTT video. As always, let’s take this opportunity to look back at the advances made over the last twelve months and forward to what we can expect in the new year.

emerging use cases

Streaming continued to be the dominant vehicle for video-viewing both in the home and on the go. In 2016, content providers once again concentrated their efforts on crafting innovative OTT offerings over traditional cable bundles.

UHD and HDR offerings multiplied, and more and more hardware (Amazon Fire TV, Chromecast Ultra and Roku just to name a few) came equipped to handle this kind of content. Netflix and other OTT providers meanwhile rolled out more and more content in these formats.

360° video and VR offerings also gained ground. While actual figures will come out in the next few weeks, VR seemed well on its way to becoming a multi-billion-dollar industry in 2016. Hardware costs came down and demand among early adopters rose. By Q3, it was estimated that 3.5% of broadband households in the US owned a VR headset – small in absolute terms, but up significantly compared to just months before. Video innovation continued with many media companies such as Sky and Warner Bros launching VR offerings.

While the staying power of VR has yet to be proven, this new wave of video technology brings a variety of opportunities and challenges for OTT providers and infrastructure companies. With the massive amount of bandwidth and complexity of handling and delivering nearly real-time 360° and VR experiences, network performance and delivery will continue to hog the spotlight in 2017.

Monetization woes

Despite huge growth in the OTT market, content owners continued to struggle to effectively monetize their content. Adblocking was particularly painful in 2016. According to Ogilvy’s Key Digital Trends for 2017 report, adblock usage jumped to 34% of internet users in the US. Ad stitching and more sophisticated ad insertion techniques were on everybody’s mind at this year’s industry trade shows.

On top of this, the industry got a reminder that video metrics themselves were not always infallible. Facebook announced this fall that it had been overestimating video view metrics by up to 80%, a wakeup call to all advertisers of just how important accurate metrics really are.

As delivery costs increase and revenue stagnates, broadcasters will have to be increasingly innovative in their monetization models and ad insertion techniques, while adopting reliable, data-driven performance monitoring to effectively grow their businesses.

Consolidation and media-telco giants

Mergers are nothing new in the industry, and 2016 saw continued consolidation as telcos and media conglomerates vied for the largest share of the video pie – centralizing content production, delivery and internet services all under one roof.

AT&T announced its intent to acquire Time Warner Inc. for $85.4 billion in cash and stock in October. With this deal, AT&T would own blockbuster content from the cable and streaming service HBO, feature film franchises such as Harry Potter, a number of TV series, and international cable networks including CNN. This comes on the heels of the company’s DirecTV purchase in 2015.

Verizon meanwhile pursued competitor XO Communications and made a bid for Yahoo, which will likely move forward despite the word of massive security breaches that came towards the end of the year. The US’s third largest telecommunications company CenturyLink fortified its internet infrastructure and cloud services offering with the acquisition of Level 3.

The internet titans meanwhile hardly sat on the sidelines. From Google Fi wireless internet to Amazon’s rumored internet service and Facebook’s foray into the developing world (not to mention Facebook Live and Zuckerberg’s admission that the social network is actually a media company), these companies do not intend to be outdone by traditional telcos.

As we have seen before (here), the lines between telecommunications, internet and media have become irreversibly blurred. Look out for more reshuffling of the cards in 2017 as tech companies and telcos vie for dominance.

Of course, it remains to be seen how mega-mergers will fare under a Trump presidency, and net neutrality under a Republican majority in the FCC…

Technology Advances

Lastly, we could not look back on 2016 without examining advances in OTT technology.

Overall, higher internet speeds continued to hit the market in both broadband and wireless networks. Broadband speeds reached an average of 50 Mbps in the US by mid-2016 according to the Speedtest Market Report, while Akamai reported that overall connection speeds were up nearly 30% year-on-year in many places around the world.

Network performance gained ground with IPv6 on track to be the norm and widespread support for HTTP/2. QUIC and other UDP-based protocol experiments should continue next year as a means to further improve quality.

On the player side, 2016 brought the (long-awaited) Fall of Flash. In June, Safari began blocking Flash by default, prompting users to approve the use of Flash. Chrome followed suit in December and Firefox promises to do so in 2017.

Hailed by many as a return to open standards, HTML5 has taken the forefront as the video tech of the future. Youtube and Facebook led the way for many broadcasters to use HTML5, and if you haven’t made the switch, the time is now.

(And for a little shameless self-promotion: We often help broadcasters manage the complexity of this transition, from encoding to formats to choosing an HTML5 player. Check out our presentation on it at Streaming Media West!)

On the format front, 2016 brought an exciting step towards the possibility of single-format delivery with Common Media Application Format and Apple’s decision to support fMP4 in HLS. Welcome news, this brings hope that broadcasters may one day be able to serve both HLS and DASH from a single set of files.

The end of the year brought some uncertainty for DASH, however, as MPEG-LA announced a patent portfolio license that will mean royalties for certain applications and clients using the DASH standard. While questions remain about what exactly will be covered by the license, we are confident that this news will not stymie DASH adoption.

That’s a wrap!

2016 unsurprisingly brought both significant technological advances and ever-greater complexity. Widespread popularity of immersive video will raise the stakes at every point along the video value chain – especially when it comes to network performance and bandwidth provisioning.

As users come to demand video perfection, we will all have to step up to the plate. Streamroot is excited to be a key piece of that puzzle, and we look forward to seeing how peer-accelerated streaming can rise to the challenge of delivering this new generation of OTT video at scale.

Thanks for making 2016 a great year. We look forward to many projects in the new year and working with you towards the holy grail of television-grade OTT video.

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