Video is eating the internet: clouds, codecs and alliances

A couple of news should have caught your attention this week if you are interested the video streaming business.

Amazon Web Services confirmed yesterday the acquisition of Elemental. This is the outcome of a trend that I was highlighting in my SDN / NFV report and workshops for the last year with the creation of specialized clouds. Elemental's products are software based and the company was the first in professional video to offer cloud-based encoding on Amazon EC2 with a PaaS offering. Elemental has been building virtual private clouds on commercial clouds for their clients and was the first to coin the term "Software Defined Video". As Elemental joins AWS, Amazon will be one of the first commercial clouds to offer a global, turnkey, video encoding, workflow, packaging infrastructure in the cloud. Video processing requires specific profiles in a cloud environment and it is not surprising that companies who have cloud assets look at creating cloud slices or segregated virtual environment to manage the processing heavy, latency sensitive service.

The codec war has been on for a long time, and I had previously commented on it. In other news, we have seen Amazon again join Cisco, Google, Intel, Microsoft Mozilla and Netflix in the Alliance for Open Media. This organization's goal is to counter unreasonable claims made by H.265 / HEVC patent holders called HEVC advance who are trying to create a very vague and very expensive licensing agreement for the use of their patents. The group, composed of Dolby, GE, Mitsubishi Electric and Technicolor is trying to enforce a 0.5% fee on any revenue associated with the codec's use. The license fee would apply indiscriminately to all companies who encode, decode, transmit, display HEVC content. If H.265 was to be as successful as H.264, it would account in the future for over 90% of all video streaming traffic and that 0.5% tax would be presumably levied on any content provider, aggregator, APP, web site... HEVC advance could become the most profitable patent pool ever, with 0.5% of the revenues of Google, Facebook or Apple's video business. The group does not stop there and proposes a license fee on devices as well, from smartphones, to tablets, to TVs or anything that has a screen and a video player able to play H.265 videos... Back to the Alliance for Open Media who has decided to counter attack and vows to create a royalty-free next generation video codec. Between Cisco's Thor, Google's VPx and Mozilla Daala, this is a credible effort to counter HEVC advance.

The Streaming Video Alliance, created in 2014 to provide a forum for TV, cable, content owners and service providers to improve the internet video streaming experience welcomes Sky and Time Warner Cable to the group already composed of Alcatel-Lucent, Beamr, CableLabs, Cedexis, Charter Communications, Cisco, Comcast, Conviva, EPIX, Ericsson, FOX Networks, Intel, Irdeto, Korea Telecom, Level 3 Communications, Liberty Global, Limelight Networks, MLB Advanced Media, NeuLion, Nominum, PeerApp, Qwilt, Telecom Italia, Telstra, Ustream, Verizon, Wowza Media Systems and Yahoo!. What is remarkable, here is the variety of the group, where MSOs, vendors, service providers are looking at transparent caching architectures and video metadata handling outside of the standards, to counter specialized video delivery networks such as Apple's, Google's and Netflix'

All in all, video is poised to eat the internet and IBC, starting next week will no doubt bring a lot more exciting announcements. The common denominator, here is that all these companies have identified that encoding, managing, packaging, delivering video well will be a crucial differentiating factor in tomorrow's networks. Domination of only one element of the value chain (codec, network, device...) will guarantee great power in the ecosystem. Will the vertically integrated ecosystems such as Google and Apple yield as operators, distributor and content owners organize themselves? This and much more in my report on video monetization in 2015.

Q2 multiscreen video news

I use a service to curate and collate my news. Reading through the last few months, I realized that there are so many subjects worthy of comment that a single post wouldn't begin to address them meaningfully. I reserve in-depth analysis of specific trend or topic for my paying clients, so I decided to review and comment on press clippings and announcements as they become available as a way to illustrate the trends, threats and opportunities surrounding our market.

Here is what caught my attention in the last quarter:

Technology: Is 4K the new 3D?

April of course is synonymous with NAB frenzy. Sifting through the trough of announcements at the show, I have noticed a sharp change of direction in vendor’s announcements and claims from last year. When 2013 was all about HEVC H.265, this year seems to be about 4K. While HEVC licensing terms have been agreed and announced by MPEGLA in February, Google’s royalty-free VP9 has captured some support as well, forcing chipset and platform vendors to contemplate fragmentation and multi codec support. Obviously, the battle for codec and protocol will determine who controls the management and delivery of 4K content going forward. In this race, not surprisingly, YouTube is siding with its parent company with VP9 support, while Netflix is adopting H.265. Both companies agree though, and are adamant, that 4K is a lot easier to manage and deliver for OTT properties than for traditional broadcasting payTV providers. Netflix forecasts mass market for 4K to be five years out at the current rate of TV replacements. My opinion is that 4K adoption will suffer from H265/VP9 fragmentation. We will probably see further delays because of the cost of implementing dual protocol stack throughout the delivery chain.

Technology: Cloud, SDN, NFV

At NAB as well, vendors were eager to show off their new acronyms, touting dreams of cloud-based virtualized, self-managed, software-defined networks that would… In reality, most MSOs are still focusing on rolling out HD, improving and automatizing workflows and overall costs reduction. I think we still have 5 years to go before seeing practical, mature implementation of SDN in professional video. Anything else is a science experiment or a proprietary implementation at this point.

Business: MSO to OTT

One of the big news was the announcement from AT&T regarding their intent to invest, jointly with the Chernin Group up to $500million to create SVOD and advertising based web streaming services. Umm... Is it too much or not enough? $500 million goes a long way if you want to build a web streaming service, but it does not seem nearly enough if you want to build an attractive content offering.

HBO, the next day was reported to have signed a multi-year agreement with Amazon. The deal should see some of HBO’s back catalogue series made available to Amazon Prime subscribers. Little by little, HBO nudges the boundaries. You will remember that it signed a deal with Comcast last year to offer HBO Go to Comcast broadband subscribers, without a cable subscription. All signs point that HBO could be a major league OTT provider when they will be ready to cross over.

Business: OTT to Wireless

Almost coincidentally, rumours emerged that Netflix was in discussions with the Vodafone Group to distribute Netflix services on some Vodafone subscriptions. It is likely that these deals will increase in frequency. LTE /4G will see opportunities for cord-never and cord-shavers to access their favourite service and content on cellular networks. That is… if they figure out the charging model (paying 8$ a month for Netflix and $150 in data overage charge to Vodafone wouldn't really work).

Business: OTT to MSO

Netflix has integrated its offering on Atlantic Broadband, Grande Communication and RCN Telecom services set-top boxes, a first in the US after having piloted the concept in Europe. Subscribers will be able to select the service from their PayTV provider. It is an interesting strategy for small MSOs to bundle Netflix in hybrid Set top boxes. It increases reach, provides an attractive offering and good differentiation against market leaders.

Business: M&A

Kaltura bought TVinci to expand its SVOD offering to live and linear programming. Arris bought SeaWell Networks for its advertising insertion and packaging at the edge technology. SeaWell Networks’ strong adaptive bit rate streaming skill set will be invaluable to expand the company’s multiscreen strategy.

That’s all folks for this quarter! I will keep all the good net neutrality commentary for next month, hopefully when the smoke dissipates from the PR battlefield.