The Paradox of Quality and Cost for OTT Businesses

Since “over-the-top video” became synonymous live and on-demand TV, numerous businesses around the world have popped up (and gone under) to bring video to consumers.

Pure-play OTT platforms focus on delivering broad or specialty content to large audiences. Many of the business models – while initially free – now offer “all you can watch” packages for a low, fixed monthly price.

We’ve made tremendous progress in improving internet connectivity speeds in recent years. Not so long ago, 10 Mbps at home was unheard of, whereas today subscribers to internet services can easily get 100 Mbps or even 1 Gbps in many countries. This will continue as the cost of bandwidth and access declines. OTT providers welcome these improvements to reliably deliver their content across the internet.

However, large telecom operators operate a dual network: one part of their network is “managed” and can be used for very high quality IP video delivery, and the other part of the network is “unmanaged” or “best effort.” These providers typically do not offer original content outside of their managed network, leaving OTT companies to leverage the un-managed, best-effort part of the network for their video services.

As the name best-effort suggests, there’s no guarantee of up-time, performance or overall reach. Thousands of OTT services are therefore delivering content to a myriad of devices over a public internet connection that they do not manage or control. They make content available and provide a portal. From that point on, it’s fingers-crossed.

Consumers in many markets meanwhile have traditionally enjoyed content from cable and/or satellite television, which is reliable, always on, and offers solid quality. Many are not aware that to deliver the same level of reliability, content providers go to great lengths to optimize video compression, leverage adaptive bit-rate technologies and turn to content delivery networks. These CDNs aim to deliver content as close to the end-user as possible to the eliminate latency and packet-loss that impact bandwidth throughput and buffering on the last mile.

Content owners pay CDNs either on total bandwidth or consumption, measured in Gigabytes per month. Ironically, as the demand for quality from the consumer increases, so does the load on the CDN and so does the bill for the publisher. A consumer watching HD content (let’s assume 3,000 Kbps) for 1.5 hours per day consumes approximately 60 Gigabytes per month. If the same user watches for 3 hours per day at HD quality, he now consumes 120 Gigabytes per month. If the same user watches 1080p at 6,000 Kbps, the consumption doubles again. So there is a direct correlation between the number of viewers, quality (bitrate) consumed and viewing time.

The downside is that content owners are typically not able to charge more or monetize more for the same content delivered. Sure, you can have a 4K pricing differential, but 4K video is typically consumed at 12-15 Mbps, and it is highly doubtful that the content owner is able to charge 3-4 times the price merely for content offered in 4K instead of HD.

Traditional CDNs charge a per Gb model that penalizes broadcasters for growing audiences and higher bitrates.

So paradoxically, the consumers – who are typically price-sensitive – demand high quality video (they’re used to TV image quality), yet the content owner is penalized for offering higher quality as every increase in consumption (time and/or quality) immediately leads to a higher bill. The issue is exacerbated by the trend towards higher resolutions, binge watching, and increased multiscreen viewing. It is a constant evaluation and tradeoff between quality, cost and customer satisfaction.

The Internet, in all its glory, capability and tremendous capacity, has traditionally not been a medium that can scale affordably to TV-sized audiences around the world without either having to compromise on picture quality (bitrate) or play-back quality (playback consistency, elimination of buffering and re-buffering). This leaves content providers with quite a conundrum.

Until now?  

Our hybrid CDN approach, Mesh Delivery, finally offers broadcasters an easy-to-implement technology that breaks the correlation between viewer behavior and the cost of delivery.

Mesh Delivery offers a fixed price per session or per viewer, decorrelating the cost of delivery from viewer behavior.

While it is not a one-size-fits-all approach, it comes much closer than traditional CDNs to providing a highly reliable distribution platform with a business model that mimics satellite or cable-tv infrastructure. Using fixed fees per video session or per concurrent viewer, Streamroot no longer forces broadcasters to choose between offering higher quality and running a profitable business. In fact, it stimulates them to offer higher quality as there is no additional cost. And as we well know, an increase in video quality can ultimately lead to more engagement, higher consumption of premium content and overall customer satisfaction. And of course, to improving the bottom line.

This content is provided for informational purposes only and may require additional research and substantiation by the end user. In addition, the information is provided “as is” without any warranty or condition of any kind, either express or implied. Use of this information is at the end user’s own risk. Lumen does not warrant that the information will meet the end user’s requirements or that the implementation or usage of this information will result in the desired outcome of the end user. This document represents Lumen’s products and offerings as of the date of issue. Services not available everywhere. Business customers only. Lumen may change or cancel products and services or substitute similar products and services at its sole discretion without notice. ©2020 Lumen. All Rights Reserved.

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