Posted by : Randy Cooper in (CDN)

Summing up SME2009 – How’s the streaming business? | Strategic Research Agents


Summing up SME2009 – How’s the streaming business?

Growth and Advertisement

Generally, it’s growing – a convincing stance for the market in time of recession. Putting things into perspective, while in 2009 the volume of spendings for online advertisement overtook traditional TV ads, advertisement in streaming media still has a very small share of that. On the other hand – as Guy Phillipson of the Internet Advertising Bureau pointed out – it is the fastest growing market segment in advertisement. To keep up that growth, it is necessary to further advance the standardisation of advertisement standards. Those are currently still fairly high-level and best-practice rules. However, demand is hight enough to have stimulated the emergence of tools for specialized video advertisement consumption analysis. While we’re still in the beginning, standardization of streaming media advertisement would facilitate business in the market. It is inevitable that advertisement is going to be one of the major business models in streaming media. Perhaps the hoped-for consolidation will finally stimulate a broad range of rights-owners to start globally offering their content in an ad-financed fashion.

Content Delivery Market Turbulences

The growth of the streaming media delivery to big audiences has brought the CDN market into major focus. It is undertaking several changes currently. With classic Telco companies entering the market, as well as cloud hosting services eating up classic CDN ground. Also P2P media delivery has appeared on the horizon. CDNs seem to react differently to those changes. Some of them, like CDN Limelight, seem to believe so strongly in their business models that they dismiss the new competitors as not mature enough. CDNs are usually big American companies. Their market-focus and business models are tailored to US-scales. The cultural diversity in Europe however presents a totally different environment. There seems to be a non-understanding and to some degree ignorance from CDNs regarding that. Replying to criticism that their billing models are unsuitable for small businesses, they said that they don’t see themselves as directly interacting with small businesses. Those are supposed to be served by proxy of aggregators. That of course raises the real-world cost for content delivery, which is especially critical in Europe as the audiences are not as big. Are those CDN business models going to sustain in Europe, are young European CDNs with different approaches taking over the market? Time will tell. There definitely is loads of unused potential.
One interesting thing that we observed was connected to rumours of Google further entering the CDN market. At least they are expanding their streaming offering. The fact was mentioned in pretty much every session. But traditional companies were very reluctant to give real commentary on how they judge this move to their business. Is it that nobody wants to harvest Google’s disgrace? Questions were usually discarded by stating that the normal business rules of the market don’t apply to Google.

Telcos pout

Internet Service Providers and Mobile Network Providers that had a vocal presence at the conference. According to them we have a bandwidth capacity problem created by streaming media. Which I guess a valid point in the omnipresence of flat-rates and unlimited data plans. Interesting: There are technical approaches like IP Multicast to tackle this. But significantly it is the ISPs that hold back internet-wide adoption of the technology. Due to the one-to-many nature of Multicast, it does not fit into the ISPs current billing model. It seems that they are not able or willing to make up a billing model for this kind of traffic. Instead they just continue rambling that all that wild-growth video streaming is a problem. Many mobile network providers are blocking RTSP video streams in their networks. The software and devices industry answered with betting on HTTP delivery methods that are difficult to distinguish from normal HTML web traffic. Just to make mobile video work reliably in all networks.
But isn’t it good for the ISPs to see a high demand? The prices could rise and they could further grow their core business. It seems however they are about something else than their core business. Telco companies don’t get tired to moan about them being out of the equation in the big revenue streams. They say extending their networks would not pay off for them. Instead they reroute the discussion towards introducing technologies like IMS that offer authenticated services inside their own networks. But how is this supposed to solve the investment in bandwidth problem on the internet? Especially when calling into mind that IMS requires enormous up-front investments from the ISPs into their own networks.
I think the answer is: It is not supposed to solve the problems of the internet. With IMS they rather want to pull the most valuable parts of the online service and streaming media business inside their own networks, where they would have full control over data and revenue streams. They would promise quality of service only for their own services. The worse the performance on the internet, the higher the value of the own IMS services is. This is an approach to try shifting over market revenues.
Having a choice between the ISP’s internal and the public internet-based services would be a positive thing of course. But I see two dangers in the implementation of IMS. The fact that the ISPs also control generic internet traffic is somewhat concerning, traffic that generates much less revenue than their own service usage. All access control in one hand I potentially see the freedom of choice for the user rather endangered than complemented by those plans.
By creating such a market place on their own premises it is important that the network providers understand to make it a viable place for everyone. They can’t take too big a chunk of the revenues just because they are in control. When the Telcos want to implement IMS they only do because they expect good return on investment in a foreseeable time. The high investments that are required for building the IMS infrastructure they have to get back in however make me sceptic that this will leave much of a business for third-parties. Like in the Finnish SMS services market, where they took so hight rates that they basically killed off the market. We can only hope that the Telcos would not repeat the mistakes they did in other places.

Strategic Research Agents @ Streaming Media Europe 2009: Summing up SME2009 – How’s the streaming business?

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