November 20, 2014

Surf City

Surf City
Streaming Media West 2014 and the Future of TV

I just returned from the Streaming Media West conference in Huntington Beach, California (aka Surf City, USA). Events like these tend towards the technical and are fairly well attended by the video Technorati, and have earned a well-deserved reputation as ‘the’ place to hear the latest on HEVC and MPEG-DASH. At the same time, insights from these events have proven to be leading indicators as to the direction of the TV and video industry in general.

Last May, for example, the keynote speaker at the Streaming Media East show in New York was from Twitch. At the time, few outside of the gaming community had ever heard of Twitch, much less understood its value.

Three months later Twitch was acquired by Amazon for $970 million. A good show, indeed…

So what was brewing this week in Southern California?

Two things stood out.

1. Broadband Sports is Coming.
Sports as a genre has been of little importance in the broadband video space. YouTube owes its success more to comedy, music videos, and cats clips more so than sports. Netflix and Hulu, for their part, eschew sports completely, focusing instead on scripted TV and movies.

For much of the streaming world, sports has been a side show, not the main fare as with traditional TV. Broadband sports has historically been defined by huge one-off prime events like the Olympics, Super Bowl, World Cup, and March Madness. Not surprisingly, these occasions create tremendous online demand, not to mention allow the industry to pound its chest about how many simultaneous streams folks can (or cannot) engage on a regularly basis. They don’t, however, represent the mainstream, everyday business of broadband video.

If this year’s Streaming Media West was any indication, broadband sports is about to take center stage.

This year’s keynote was delivered by NFL executive Cory Mummery who walked through the league’s new ‘NFL Now’ non-authenticated broadband video offering. The product and multiscreen demo was impressive by anyone’s standards, but more compelling was the culture shift this represents for the NFL. Football is an American passion and an ‘establishment’ sport in the US. As well, it is the ultimate legacy. At the same time, Cory spoke of user engagement and his technology roadmap that included a TechStars startup at demo day. The message was clear – the powers that be are starting to take broadband sports seriously. If anyone failed to get this message during the keynote, Elemental Technologies drove the point home further at its lunchtime roundtable that heavily featured the work of another ‘startup,’ namely the Pac 12 network.

This is no fluke, folks. Broadband sports is going to be a big story in 2015 and beyond. At TDG, we’ve been reading these tea leaves for years. In December, we’ll publish a new report dedicated to the subject of broadband sports, including forecasts of broadband sports viewing from 2015 to 2025.

2. Device Shifts are Accelerating.
In case you haven’t tried of late, accurately forecasting the future is problematic. Despite TDG’s decade-long library of primary research, and rich insight into market trends, it is still extremely difficult to nail five-year forecasts, much less ten-year forecasts. If you prove to be directionally correct within a reasonable margin of error, as a forecaster you have done your job.

In 2013, TDG published The Future of TV: A View from 2013, in which we predicted a major shift in streaming behavior away from PCs and towards smartphones, tablets, and net-to-TV devices. While we were directionally correct, we likely underestimated the pace at which consumers were and are migrating their viewing to these new platforms.

Cory (the chap from the NFL) presented NFL Now’s latest video viewing numbers by device platform, and the results were a bit shocking (to me at least). Three issues stood out….

First, viewing of NFL Now on smartphones was way more popular than anticipated, already representing 49% of all unique visits to the new NFL Now site and 46% of all video starts. Yes, mobile sessions are short (dominated by highlights) but nonetheless represent 21% of all video viewing minutes. If you add tablets, mobile devices easily represent a majority of all views, and 28% of all viewing.

Second, PC video viewing is dropping like a rock. NFL’s data for the new service showed 25% of visits coming from PCs, representing 20% of the video minutes. Just 3 years ago that number would likely have been 90%. Now some of this difference may be due to the specific demographics of NFL Now viewers (i.e. young males) and their particular device preferences, but this is still a dramatic shift away from PC viewing in a very short period of time.

Third, video consumption on connected TV devices (which in the case of NFL Now today only includes Xbox One and 360, Apple TV, Roku 3 and Amazon Fire TV) is exploding. According to the league’s own data, these five devices already represent 19% of video visits, 30% of video starts and a whopping 52% of all video viewing minutes. For me (and I forecast the future of TV for a living) that last number is absolutely stunning and has me thinking that consumer movement between devices is more seamless (and less sticky) than we previously thought.

Conclusion
Surfing is all about balance. Too slow, and the wave passes you by. Too fast, and the wave is likely to come down on top of your head. If this year’s Streaming Media West conference holds true to form, there are two major waves forming just offshore. The first is broadband sports, and it’s going to have major implications for the entire pay-TV ecosystem. The second is a faster-than-expected shift in broadband video from legacy (i.e., PC) platforms to smartphones and connected TV devices.

Stick with TDG and stay on top of the waves.

Joel is a Senior Advisor for TDG and serves as an advisor and Board Member to the video ecosystem and technology companies. He lives near Seattle, WA.

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