Learn about the online video trends that will shape 2013 and beyond. You will learn what service providers can do to profit from the rise of OTT video, how the migration to longer-form video content will effect OTT providers and existing Pay TV operators, and how the combination of CDNs and Transparent Caching can be a dynamic duo for service providers.

1. 6 Online Video Trends
to Watch in 2013

2. !
This document features our 2013 predictions.
To see our 2014 predictions, click here.

3. 1. Over-the-Top video will become truly disruptive
For the last several years, the inexorable rise of over-the-top (OTT) video has given internet service
providers (ISPs) legitimate reasons to worry. After all, OTT content is delivered over broadband without
the ISPs’ control, precluding them from sharing in the revenue and relegating them to the dreaded
“dumb pipe” status.
In 2013, the disruptive power of over-the-top video threatens to escalate service provider worries into
full blown anxiety. Consider:
• OTT video providers such as Netflix, Amazon Prime, and Hulu
are estimated to generate $8.2 billion globally
in 2012 and are projected to swiftly quadruple
to $32 billion by 2017; revenue that is not shared
with ISPs (ABI Research). Even worse, Netflix alone
accounts for 33% of primetime downstream traffic
in North America flowing over ISP networks
(Sandvine).
• Total OTT revenue is projected to increase 32% in
2013, with sales from advertising, subscriptions and
transactions expected to climb to US $14 billion
(Informa Telecoms).
• By the end of 2013, more people will be watching OTT video than
walled-garden IPTV services often run by operators. The divide will grow
sharply, with OTT projected to grow to a subscriber base of 380 million by 2015
compared to 163 million for IPTV (Informa Telecoms).
But all is not lost for ISPs, at least for those who are able to offer content delivery services across their
networks. Some of the limitations listed below may actually lead OTT providers to increasingly contract
with operator content delivery networks (CDNs) for video delivery:
• New HD TVs and tablet PCs with high resolution displays have users hungering to watch equally high
definition content on these devices. Over the top video is subject to fluctuating quality common to
content streamed over the Internet, however. As such, it imperfections become more pronounced with
HD devices.
• The rise of longer-form OTT content (see prediction #4) will also change the current dynamic. It’s one
thing to watch a 60 second video that suffers from latency, jitter and frozen frames; it’s another to be
subjected to those conditions for 60 minutes.
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4. Implications:
2013 may be the year when a commercially viable OTT model emerges that is equitable and sustainable
for both content owners and ISPs and allows service providers to actually profit from their infrastructure
investments.
ISPs can leverage their last mile advantage, utilizing their homegrown CDNs to serve video much closer to
the end user, greatly improving quality of experience (QoE) in the process. This benefits content
providers because:
• They can finally provide advertisers with consistently high picture quality and a suitable environment
to showcase their products and services. This is essential because advertisers will not accept poor QoE
that diminishes viewer engagement and tarnishes their brands.
• They can increase their subscriber base by delivering higher quality, uninterrupted programming.
• They can use the Internet to deliver more live, linear programming and on-demand services which, in
turn, will help them reach more screens within the home and provide popular services such as catch-up
TV.
Read more:
How Telcos & ISPs Can Learn to Love OTT
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5. 2. Online video traffic will continue to skyrocket
This prediction appears to have no expiration date for the foreseeable future.
Online video traffic is poised to continue its torrid growth rate, fueled by the proliferation of connected
devices such as smartphones and tablet PCs, the rise of OTT video providers and their expanding content
libraries and the migration of advertising dollars to online video. Consider the following:
• IP video traffic — already staggering in size — will grow another 26% year over year, reaching 37,660
petabytes per month in 2013 (Cisco Visual Networking Index). For context, each petabyte is equivalent to one
million gigabytes!
• By 2013 online video will account for nearly 90 percent of all consumer IP traffic (Cisco Visual Networking
Index).
• Mobile data traffic will grow 10-fold between 2011 and 2016, mainly driven by video
(Ericsson Traffic and Market Report).
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6. Implications:
The continued shift toward consuming video over IP-enabled devices puts Communications Service
Providers (CSPs) in a precarious position.
Sales are tumbling for once reliable sources of business like landline telephone service. In fact, if current
trends hold, the last landline phones in America may be disconnected in little more than a decade (The
Economist). So, CSPs urgently need to replace lost income from waning legacy businesses with new revenue
streams.
At the same time, service providers are being forced to make enormous infrastructure investments to
keep pace with the insatiable OTT video demand on their networks; investments that can not be
recouped through monthly ISP access fees alone.
These declining revenues from legacy businesses and increased costs from network build out are creating
a real “double whammy” for service providers, with unbridled growth of online video traffic poised to
significantly aggravate the situation.
To free themselves from this bind, CSPs must leverage their core strengths as network operators to
create new revenue streams and reduce capital investments (realistically, cost reduction will come first,
followed by new forms of revenue.) To that end, many operators are launching their own content
delivery services as an essential tool to more effectively deal with the onslaught of online video traffic.
To successfully compete in delivering video content, they will need advanced analytics and reporting to
help them harness these advantages, optimize quality and precisely provision capacity.
Read more:
The 4 Keys to Telco CDN Success
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7. 3. Online video advertising will really hit its stride
2012 was a very big year for online video advertising. Ad spending for online video rose 27% (Adap.tv) and
the number of ads inserted into videos increased a whopping 68% (Freewheel). Meanwhile, the perception
of online video among advertisers continues to improve, with 64% of advertisers ranking online video
spots as effective as TV ads (Brightroll).
These conditions should remain very favorable for online video advertising in 2013. Consider the virtuous
environment that presents itself for the coming year:
• The rise of programmatic online video ad buying from services like TubeMogul, BrightRoll and Adap.tv is
bringing the efficiencies and accountability of the Internet to media buying. It promises to break down
the wall between media buying for TV and online video, enabling a more integrated, complementary
approach to target ad messages.
• The trend toward more long-form online video content will also create more premium ad inventory.
• Smartphones and tablet PCs comprised 70% of all devices sold in 2012, with another 1.2 billion
projected to be purchased in 2013 (Gartner). The staggering rise of these connected devices will further
induce increased time spent with online video and, in turn, increased exposure to online video ads.
• Innovations in online video delivery, like adaptive bitrate streaming (see prediction #6) will continue to
improve the online viewing experience and create opportunities to seamlessly insert advertising
directly into a video stream, more closely paralleling traditional TV advertising.
Implications:
Online video advertising is maturing to the point that advertisers are allocating it ever larger media
spends, confident that the viewer experience and overall environment will befit their brands.
This could create a virtuous cycle in which increased ad dollars support more long-form online video
programming delivered with higher quality levels, which in turn attract even more ad dollars.
Read more:
How Much Online Video Quality is Enough?
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8. 4. Long-form video will give rise to new subscription revenue
To date, online video has largely been based on short-form content — sports clips, pet tricks, music
mashups and the like — monetized through advertising. That will begin to change in earnest in 2013 as
more long-form video content like movies and TV programming is delivered over IP, laying a foundation
for subscriptions and video on demand transactions to play a more significant role. Two trends will drive
this:
1. User behavior will evolve
Viewers who have enjoyed watching short video clips on
desktop PCs and laptops will increasingly allocate a
larger share of their video watching to longer-form
content on connected TVs — televisions and set-top
boxes that integrate Internet functionality.
• The percentage of North American households that
own connected TVs will increase by about 40% in
2013 (Parks Associates).
• Connected TVs will comprise 70% of all televisions sold by
2016 (IMS Research).
2. TV Everywhere initiatives will push more long-form content to portable devices
Viewers who already consume long-form cable programming on their TV sets will supplement that
with increased viewing of the same programming — via TV Everywhere services — over connected
devices like tablet PCs and smartphones.
• The time spent watching long-form video on tablet PCs grew 50% between Q1 and Q2 of 2012
(Ooyala Global Video Index Report).
• Most every major North American multiple system operator (MSO) is offering, or contemplating, a
companion in-home tablet service.
Bottom line, some IP video traffic will migrate from desktops to connected TVs while some CATV traffic
will move from the TV to other IP-enabled devices. Either way, subscription services will become more
important. As consumers come to crave longer-form HD video content viewed anywhere, anytime, on
any device, they will need to pay for it.
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9. Implications:
Consumption of longer-form online video will continue to rise as viewers watch increasing amounts of
OTT content over connected TVs. This bodes well for OTT subscription and video on demand (VOD)
services likes Netflix, Apple iTunes and Amazon Prime but poses a considerable threat to Pay TV offerings
from cable, satellite and IPTV providers.
These legacy Pay TV providers are digging in for a battle. Many of them have launched OTT video services
and can leverage network assets to successfully compete against the raft of newcomers; or in some
cases, to work with the competition.
• Because they own the “last mile,” operators can cache OTT video deep in their networks and deliver it
much closer to the end user. That results in a more reliable, high quality viewing experience. This
capability positions service providers to be valuable partners for over-the-top content providers;
witness Netflix’s initiative to place its caches within ISP networks.
• Operators have long standing relationships with content owners. They can improve their standing
further by offering content owners with guaranteed levels of quality.
• Those carriers who have launched IPTV services can also draw on that expertise and apply it to OTT.
They can market varied offers to their ISP subscribers and, eventually, to the subscriber bases of other
ISPs.
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10. 5. CDNs and Transparent Caching will link up
Perhaps no piece of the video ecosystem has been more negatively affected by the huge surge of online
video traffic than broadband providers. Spiraling IP video traffic has required ISPs to constantly upgrade
their networks, eroding profit margins in the process.
To reduce transit costs and defer additional infrastructure
buildout, broadband providers have increasingly
begun to cache video at the network edge using
CDNs or Transparent Caching solutions. Until now,
they have typically used one of these solutions or
the other, but 2013 will see the beginning of
converged approaches that combine the best of
both technologies. Here’s why:
• The surge of OTT video traffic will force the hand of
operators — even those with their own CDNs — and necessitate a
second look at transparent caching systems as a a proven technology to handle
unmanaged traffic.
• Emerging business models and lines of business will require that operators select the best tool for the
job. In 2013, more and more carriers will operate both OTT and IPTV businesses.
Implications:
A combined CDN - Transparent Caching solution offers service providers the best balance of flexibility and
cost savings. The CDN can provide the most extensive, reliable caching of content from participating
content owners, while Transparent Caching can cache the unmanaged OTT content.
However, harnessing the power of such a hybrid solution will require a single, unified view into all
caching activity. By doing so, operators can compare performance and quality across both platforms,
identify which kind of traffic is routed by which type of caching system, and track quality improvements
and savings trends over time.
Read more:
Combining CDNs & Transparent Caching into a Dynamic Duo
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11. 6. The embrace of Adaptive Streaming will grow stronger
As the proliferation of devices and volume of video data coursing over IP networks escalate, the
importance of technologies like adaptive bitrate streaming (ABR) grows too.
• ABR enables faster start times and a continued, uninterrupted experience by adjusting the bit rate up
or down in relation to the quality of the network connection. This results in less time spent watching
spinning buffer icons and more time watching programming.
• With the rise of video viewing on tablet PCs and smart phones, the benefits of adaptive streaming
really come to light. A subscriber to a mobile data plan currently gets charged
for the time that a video takes to load, not for time that the video
is actually watched. Adaptive bitrate streaming can remedy
this discrepancy and lower charges for data plans.
• Adaptive streaming also stands to gain in importance for
mobile service providers and video publishers in 2013 too.
Currently, mobile operators clog up their networks with
video downloads. Meanwhile, content providers pay content
delivery networks to deliver video that is never consumed.
Adaptive bitrate streaming promises to significantly mitigate
these issues.
• Because adaptive bitrate streaming enables CDNs to stream over
HTTP using inexpensive server software and commodity hardware,
it can also substantially reduce the need to purchase costly server
licenses for proprietary solutions.
The dynamics that propelled adoption of adaptive streaming protocols in 2012 will continue in 2013.
Consider:
• Consumers increasingly expect to be able to view any content, anywhere, anytime, on any device,
connected to any network. Cable and IPTV operators are rolling out TV Everywhere and OTT services
to fulfill this expectation and need to provide a high quality, uninterrupted experience in order to be
successful.
• The global installed base of smartphones and tablet devices is on track to surpass that of PCs by the
second quarter of 2013 (Mary Meeker / Kleiner Perkins Caufield & Byers). As a consequence, mobile broadband
providers will need to leverage the benefits of adaptive bitrate streaming to reduce network
congestion and keep customers satisfied.
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12. Implications:
For all its benefits, adaptive bitrate streaming also introduces a significant drawback; it makes
measurement exponentially more difficult.
It wasn’t long ago that an entire movie delivered over IP could be measured as a single file. With
adaptive streaming, that same movie can introduce tens of thousands of 2-10 second file fragments that
need to be measured. Extrapolate that to a network with 150 channels and the number of separate files
for a single bitrate could easily be in the tens of millions.
At that scale, separating the signal from the noise becomes very difficult. Going forward then, capturing
meaningful data from online video streamed via ABR will require an analytics and reporting solution that
can identify, re-aggregate and report on actual content assets.
Read more:
What is Adaptive Bitrate Streaming
and Why is It So Difficult to Measure?
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