The New Eldorado: Video Streaming and Streaming Video Content Production
This latest technology allows for an uninterrupted data stream and is excellent for numerous reasons. From a consumer’s point of view, it means they can save time since one doesn’t have to download and then use their file. Public members don’t have to deal with vast amounts of data and space on their computers’ hard drives or external disks since there’s no data to download or save as the case. From the content producers’ viewpoint, streaming also provides fantastic opportunities. For instance, with the internet’s streaming live-stream events, there’s no download file. It is therefore difficult for most users to save content and then distribute it legally.
Streaming is a relatively new invention because broadband connections must be fast enough to display data in real-time. Suppose there’s a disruption because of an overloaded internet connection; for example, the video or audio will stop playing, or the screen may be blank. Computer systems keep the data in a “buffer” of already received information to reduce the impact. In the event of a drop-out, that causes the buffer to drop for a time and the video doesn’t get interrupted. Streaming has gained traction due to the rise of internet radio stations and various services that stream audio and videos, such as Spotify, Soundcloud, and Last.fm, YouTube, and the BBC’s iPlayer. While it initially made its presence felt in the music industry and music streaming revenue-making $3.3 billion by the end of 2014, streaming is making tremendous progress in the video consumption and distribution market.
The market for video streaming today is moving beyond distribution and into content creation.
The technical part
Technology for streaming video has made significant progress. The most influential group, naturally, is the streaming technology providers who decide the technologies and services they want to incorporate into their respective platforms. This includes Apple, which offers QuickTime and HTML5-based technology for iOS gadgets; Adobe with Flash; and Microsoft with Windows Media and Silverlight. At the beginning of streaming technology, the primary playback platform was Windows and Macintosh computers.
Although Apple and Microsoft have a lot of influence, computers are much more accessible than mobile phones and are the fastest-growing portion of viewers who stream media. Since Apple is the top-rated technology (iDevices) and an operating system (iOS), it has the power to set the standards used in Apple devices. Other mobile influencers are divided between hardware manufacturers including LG, Samsung, Motorola, Nokia, and HTC and mobile operating system vendors like Google (Android) and Microsoft (Windows phone).
Streaming media delivery providers such as online video platforms (“OVPs”) (which are productized services that enable users to upload, convert, store, and playback video content on the internet, often via a structured, scalable solution that can monetize) and such as user-generated-content sites (“UGC sites”), also influence streaming technology adoption. For instance, even though Microsoft launched Silverlight in 2007, it was not supported in the OVP until 2010, thereby limiting its widespread adoption. Contrarily, OVPs like Brightcove and Kaltura, as well as UGC sites like YouTube and Vimeo, are among the very first sites to support the iPad and HTML5, accelerating their adoption.
Although there are numerous providers across both markets, the essential OVPs are Brightcove, Kaltura, Ooyala, Sorenson Media, Powerstream and ClickstreamTV. However, the most well-known UGC sites include YouTube, Vimeo, DailyMotion, Viddler, and Metacafe. Technology has also made tremendous advances in the realm of live streaming video. Specialized OVPs like Ustream and Livestream allow instant broadcasting of live video content created by users with an option of a live chat window that runs alongside the video player, which will enable users to follow the events unfolding and then comment on them too.
YouTube introduced a video live streaming service accessible to its users as well. Now, the topping on the cake: the distribution of video streams and suppliers. The description of the entire video streaming ecosystem would not be exhaustive without mentioning the producers of streaming media-on-demand and video-on-demand services (“SVoD services”). The year 2011 was when the media began to write about the most well-known streaming media services that could provide high-quality commercial content, the general public’s smartphones, TVs and laptops.
The successful business model of music streaming within the video streaming industry. It’s all about scale, baby.
SVoD providers are very well that they not only benefit from the tremendous advances made by streaming media technology in the last few years. However, they also improve their education faster because of their experience and avoid the mistakes that threatened their predecessors, i.e. streaming music providers like Spotify, Deezer, Pandora, Rdio, Grooveshark and Beats (the “SMoD providers”).
Although SMoD providers usually cost USD4.99 to access their services and the possibility of USDD9.99 each month to get premium plans, SVoD providers start their monthly subscription plans with USD7.99 and a max cost that is USD11.99 per month. This includes SVoD services for up to four screens per home. The frenzied Netflix also received a lot of criticism on April 14, 2014 for jacking its subscription fees globally from USD1 to USD2 per month[44. If we can quickly perform the math, we can predict more revenue to be made through SVoD services than SMOD services if these services are increased in size.
They’re also scaled up, and on April 23, 2014, Amazon signed a license agreement with HBO that will grant Amazon Prime members access to HBO’s highly sought-after collection that includes original programming, making it more attractive to become an Amazon Prime subscriber. On April 24, 2014, Netflix’s rival Netflix declared that it had signed agreements with three cable companies to provide subscribers with access to its content through TiVo DVRs. Then, on April 28 2014, it announced a partnership with Verizon to provide Netflix subscribers with high-speed streaming access; the second of these deals Netflix has struck through the Internet service supplier (“ISP”).
The tech industry, and in a way the entertainment industry – operates in a “winner take all” economic model. The streaming industry is an ever-changing battleground brimming with risks and opportunities that allow companies to assert their power and increase the market shares they hold. There are prominent successful companies in the SVoD services market, including Netflix, that during its first quarter in 2014, gained 2.25 million users to its streaming services across the US and 4 million globally. The company is now home to 35.7 million US customers and more than 48 million worldwide, keeping with its long-term target of 60-90 million customers in the United States. The whole thing is logical from a consumer’s perspective. In turn, it has converted the highest-value downloaders (of video and music) to subscribers and by doing so, cut their monthly expenses from $20 to $30, and then $9.99 in the average.
In 2014, the revenue from music streaming was the sum of USD 3.3 billion, which was up 37% over 2013. In comparison, online and TV-based video streaming services combined to pull in a revenue of USD 7.34 billion in 2013, a figure that PriceWaterhouseCoopers (“PwC”) says will rise to USD 11.47 billion in 2016, before reaching USD 17.03 billion in 2018. This growth is primarily due to subscription video services like Netflix and Hulu, PwC says, rather than through subscriptions to TV.
The leap into the creation of content and production
It is interesting to note that SVoD providers are pushing the boundaries of the scope of what SMoD providers have done before: they are moving into the production of content to expand their catalogues and offerings as well as expand their networks and connect with high-powered producers, executives and movie stars, as they assert their newly gained prestige and authority. Video streaming services like Netflix and Hulu will earn more annually than the US film box office in 2017, according to a new report by PwC.
The report estimates streaming will become the largest source of revenue for the American film industry over the next four years. The revenues generated by television and other subscription video-on-demand services reach nearly $13 billion, and that’s $1.6 billion greater than what is earned from the regular theatre box office. So, SVoD providers have and will continue to have plenty of spare money to invest.
What better way to use this money instead of creating high-quality video content to enhance one’s catalogue and the range of products offered? The most significant area in which streaming services could affect the old box office, as the PwC report claims, lies with release dates. Currently, movies are shown for months before transitioning to streaming services. PwC states that the power of firms like Netflix will force the industry to make this change more quickly, providing films to customers earlier.
Most importantly, SVoD providers keep on expanding their inventory of content. Netflix currently has 7.1 billion obligations for licensed and original content. It also recently signed a contract for a new Spanish-language series; a brand new series created by Mitch Hurwitz (the creator of the adored Arrested Development); the third season of House of Cards, and a final season of AMC’s The Killing. The financial returns for House of Cards and the trial case were much more successful than the critical reviews. Netflix’s new strategy strengthened its current revenue model in acquiring and keeping subscribers and created new revenue streams like licensing content or a brand channel partnered with traditional distributors. Netflix has spent around 100 million dollars to develop the premiere season of House of Cards and additional marketing investments, including advertising purchases for primetime TV commercials and billboards with high profiles. Suppose House of Cards brought in half a million other Netflix subscribers and had the same life expectancy as existing customers (an estimated 25-months). In that case, the show could have made it to profitability in less than two years. The actual test was the value over the life of these new subscribers.
What if most were unintentional viewers who decided to cancel their subscriptions a couple of months after watching House of Cards? The breakeven potential would have been very different. For example, if the average customer life span were closer to four months, then Netflix would have needed more than three million new subscribers for the project to breakeven-essentially, a 43% increase over its current average acquisition rate. The argument is over, and, along with the series it has been releasing, which have been very successful, Netflix has recently brokered a variety of theatrical deals. The company plans to release the follow-up to the Ang Lee film Crouching Tiger Hidden Dragon day-and-date online and in Imax theatres. It has signed an exclusive deal for four films in partnership with Adam Sandler – rumoured to have angered some within the industry.
In a keynote address at Cannes’s MIPCOM in November of 2014, Chief Content Officer Ted Sarandos insisted that the company is only trying to improve a theatrical delivery model, which “is pretty antiquated for the on-demand audiences we are looking to serve.” Netflix stated that it does not intend to end windowing but instead to “restore choice and options” for consumers by switching to day-and-date releases. And not only that, Sarandos stated that Netflix would be expanding into new specific genres, such as the financing of art-house and documentaries. Thus, the marketing stunt by partnering with the superstar movie actor Leonardo di Caprio on the release of the documentary Virunga focuses upon the battle against poaching of endangered gorillas within the Democratic Republic of Congo. The documentary premiered simultaneously through Netflix and in cinemas across New York and Los Angeles on November 7. Amazon Prime’s record in the production of content and content creation is impressive. Still, most especially due to the decision is made to hire Woody Allen to write and direct a show on Amazon Prime’s SVoD offerings in January 2015 and to establish itself as competition in the TV industry by securing two Golden Globe trophies for best comedy for its highly acclaimed Transparent and its actor for the series’ the series’ star Jeffrey Tambor also in January 2015.
The future looks promising for SVoD providers. However, what is the biggest threats to their dominance and market shares?
A sad state of affairs for SVoD providers as well as conventional video distributors: counterfeiting the market for video streaming
A tentative expansion into international territories? A false alarm
Initially, the main obstacle to the growth and growth of SVoD services across the globe was the inability of several European nations to accept and “psychologically adapt” to the business model of Netflix.
The French mainly had a problem with the phrase French Minister for Culture Aurelie Filipetti “(the French) are not going to close the door to (Netflix), but they need to get used to the differences with the French market and how they can participate constructively.” France has one of the most challenging rules to protect its music and film industries, and none of them will make it simple for foreign companies such as Netflix to make a huge impact on the market. Netflix, which began providing SVoD solutions in France in November 2014, is subject to higher taxes than it has been accustomed to, such as 20% VAT and mandatory investment quotas derived from its earnings. In reality, SVoD services based in France that earn more than 10 million euros must give 15% of their profits in the direction of industry professionals in the European film industry and twelve% of the profits to French filmmakers.
However, France insists that 40% of broadcasters’ mainstream content has to be French and existing SVoD providers – like Canal Plus’ “Infinity” and Wild Bunch’s “Filmo TV” – are currently required to wait for 36 months following a film’s release in cinema before streaming that content online. The rules dubbed the “Cultural Exception” – mean that France has a strong music and film industry, despite fierce competition from the Anglo-Saxon world. Although some commentators have claimed that this model is outdated because the ever-growing number of people access their entertainment via the internet instead of traditional radio and TV, France is nevertheless continuing to take every step to protect its local industries.
Despite these challenges, Netflix eventually started offering SVoD services in France, which was the most challenging market for foreigners to access to date, in the fourth quarter of 2014. In MIPCOM 2014. Netflix Chief Content Officer Sarandos was quoted as declaring that the behaviour of viewers for Germany in addition to France was “on par with our successful launches elsewhere in the world” and that the Netflix the prison dramedy ‘Orange’ The New Black is the most-watched series on their SVoD service across every one of the six new European countries. Sarandos further stated that the distribution of viewing in Europe, around 70% of TV shows and 30% of a feature films, was similar to the one seen on Netflix services across the globe. So, the most significant danger against SVoD providers and more traditional video distributors is elsewhere.
The culprits are illegal video streaming services and their providers.
The illegal download of music has declined compared to earlier estimates (about 25% of those who use streaming services for music are still downloading music illegally against 33% at the end of September), and 35% of those who use SVoD are downloading TV and movies illegally. This is based on the Trends in Digital Entertainment study, released in January 2015, carried out by GfK and published every quarter. Some illegal SVoD providers are still alive and well, like Time4popcorn. They provide SVoD services to the general public via the internet without paying the proper and agreed-upon licensing royalties for the rightful owners of the video content streaming on their channels.
The most notorious of that unlawful SVoD provider was Aereo.com, which applied to start Chapter 11 reorganization proceedings in November 2014. In June 2014, Aereo.com was reorganized in June 2014 when the US Federal Supreme Court handed an order on ABC Aereo v Aereo. Aereo was a company that offered TV-over-the-internet services. It had introduced a revolutionary business model that relied on thousands of tiny antennas in a warehouse, which were used to stream live television signals encoded into packets and delivered directly into the users’ homes. The company was sued by broadcasters (originally comprising 21st Century Fox, CBS, NBC and ABC) for violating their copyrights in public performances. Aereo was able to defend its actions, saying it only provided a platform to view a program that was already on the market. In the end, however, the Supreme Court decided in favour of broadcasters, deciding that Aereo, as well as its technology based on the cloud, was like the traditional cable companies to claim that its service was not infringing. The failed watch-TV-on-the-Internet startup Aereo.com may come back, though, since TiVo bought its trademarks, domain names and customer list at a bargain price of USD1 million in March 2015. TiVo may be considering providing an Aereo-like service, but one licensed by television networks.
In the AIPPI Congress in September 2014, Elizabeth Valentina, Vice President of Content Protection for Fox Entertainment Group (speaking on her behalf since Fox was still in the process of defending the matter) pointed out Aereo’s business model was based on the streaming broadcasts without authorization, permission, or license and for which Aereo was charging its subscribers. This business model was hurting the content owners and broadcasters by decreasing the value of their content and preventing exclusive deals that allowed content to be distributed via the internet and mobile devices, as well as diverting attention away from TV advertising revenues. The harm was recognized by Judge Nathan in the first instance when the broadcasters filed a preliminary request for an injunction. In the same congress, Sanna Wolk (Associate Professor at the University of Uppsala, Sweden and co-chair of the AIPPI’s copyright committee) contrasted the US decision with the one adopted in the EU, where there was a CJEU on March 13, 2013, decided that streaming near-live online from TV Catchup, a UK Company, TV Catchup was an illegal “communication to the public” as defined by the Article 3(1) of Directive 2001/29 (InfoSoc Directive) and therefore an actionable violation of copyright. The CJEU determined that, as TV Catchup was making the works from their first “terrestrial” TV broadcast available on the internet and therefore using different technical methods to transmit the broadcast, it was a “communication” within the meaning of Article 3(1).
Additionally, under the situation, the court didn’t have to determine whether it was a communication to the “new public”, as the new transmission needed an individual and express authorization from the copyright holders. Although a full-blown lawsuit is a prominent and most commonly used response to copyright infringements and counterfeiting in streaming video services, there is a debate about whether ferocious combat against piracy in streaming video is worth the effort. In reality, taking the lessons learned from the unsuccessful battle fought by the music industry against the illegal downloading of music tracks provided through peer-to-peer sites at the beginning of the 2000s and early 2000s, it might be worthwhile to take a risk and explore alternatives for this crippling and endemic copyright infringement.
For instance, Popcorn Time, dubbed “Netflix for pirates”, was recently in trouble. Time4Popcorn.eu, one of the more well-known versions of the infamous movie website, was able to have its URL revoked in October 2014 by European regulatory authorities back in October of 2014, effectively shutting off the lights on the website that was attracting millions of users within just two months.
The European ID Registry knocked Time4Popcorn.eu down due to suspicion that the site was registered using the incorrect admin contact information. The site developers did not provide correct contact details; they just moved to Time4Popcorn.com. With increasing legal decisions requiring ISPs to restrict access to specific websites within the regions they serve, the most method of legal action is to seek an injunction in the most critical areas to allow ISPs to prevent users from accessing websites run by illicit SVoD providers.
What’s the future of video streamers and traditional sitcom and feature film producers?
In the near term, I think that traditional players in the television and film industry, including Hollywood large studios, will be feeling pain because their revenues are being impacted by the financial and creative achievements of both illegal and legal SVoD service providers in the same way. This means that the traditional producers of feature films and television series will need to step up their game by focusing their creative and financial efforts exclusively on “blockbuster” material projects. It will be increasingly difficult for young independent producers and directors to finance their creative processes shortly.
In the future, it will take an upward trend towards higher-quality content being developed (with more compelling plots, bankable stars, and exceptionally talented actors, directors and writers as part of the production blend) through both traditional and streaming providers: Darwinism will be in the making, with the survival of the strongest. Film distributors and studios will have to change or go under, as video streaming will be around for the foreseeable future and will soon expand more because of the greater ease of access and affordability in big consumer territories as well as better connectivity to wifi (in particular, because of the increasing use of optical fibre) as well as a wide range of devices that can view and stream video (smartphones tablets, computers television screens, etc.) and changing attitudes towards consumption of culture (such as the inability to pay for movies or stay in front of a film screen for more than 2 hours for younger viewers, and the increase in cocooning).
In the end, the introduction of SVoD services and the variety of SVoD providers is a blessing to consumers as they have a wide selection to enjoy only the best quality content. They can avoid the gruelling and obligatory advertisements ruining TV shows, specifically on US television channels. They will also have more control of the devices they want to watch television series and feature film programming.
Law and agents (i.e. legislators, judges, lawyers) must be able to accommodate this shift in the way people consume content and the market offerings in a manner that is flexible and practical, as well as protecting, enforcing and protecting the rights of owners of content and creators to encourage the production and creation of most high-quality content in an environment of competition.
1 “What the numbers tell us about streaming in 2014” by Mark Mulligan, Music Industry Blog October 16 2014.
2 “Occupy video showcases live streaming” by Jennifer Preston, The New York Times December 11 2011.
3 “5 of the Best Streaming Media Services Compared”, Christina Warren, Mashable, February 14 2011.
4 “What the Netflix price increase means in the current streaming content market”, Tom Caporaso, Money for Lunch April 30 2014.
5 “TiVo buys Aereo Assets at Auction. Is a legal Aereo coming? “, Forbes March 1, 2015.