Hybrid Video Streaming Revenue Models Coming?

How video streaming business models might change in the future now is a growing issue. For the past several years, most content owners have been working to assure investors that they have a growth plan for transitioning away from linear formats and towards on-demand streaming. 

The new issue raised by slowing Netflix subscription growth is the addressable market potential. Might the potential market be smaller than earlier forecast? And though original content on a global scale has been an unquestioned tactic in recent years, observers are starting to wonder what changes if growth starts to slow. 

How much investment in original content makes sense? The other issue is whether subscription fees are sufficient to drive the revenue model or whether some shift, where possible, to other monetization schemes begins to make sense. 

source: CCbill 

Think Amazon Prime with its “free shipping” focus, or ad-supported services, product placement fees or licensing original streaming content to linear services. Some might ponder whether a streaming subscription could be bundled with other services beyond video entertainment, such as gaming or delivery services. 

Netflix is at least considering introducing release windows for its top original content, shifting to the older model of theatrical release before making new content available to other distributors. And though Netflix was built on a foundation of pre-recorded content, it is thinking about getting into the business of non-scripted live video as well. 

Content owners are looking at different revenue models as well. All of that means video streaming might be heading towards a hybrid model where multiple revenue streams are relied upon: subscriptions, advertising and transactions.

Telcos, Cable Will Keep Trading Market Share

As important as new sources of revenue might be--from edge computing, private networks, internet of things--gains and losses of market share in legacy products will determine the fortunes of U.S. cable and telco contestants, as has been the pattern for two decades.

In other words, what moves financial fortunes has generally been the ability to gain or protect market share. Some 20 years ago, the plan was for telcos to build fiber-to-home networks to take video share as cable took voice share, while holding their own in home broadband. 

What none of the contestants initially saw was that aggregate demand for linear video and voice would decline. That reframed the strategy of "taking market share."

As both voice and video have become declining businesses, the focus shifted to home broadband and mobility services. Cable won the home broadband market share battle, while telcos owned mobility.

Now the new issue is how much share will shift as telcos take home broadband share while cable operators take mobile share. Of all the leading service providers, Verizon and T-Mobile seemingly have the most to gain from 5G fixed wireless, while cable operators have the most to lose from fixed wireless.

Ability to meet customer demand matters in any competitive market, and limited spectrum resources seem to explain Verizon’s struggles to meet demand for 5G in the U.S. market. Ample capacity hleps explain T-Mobile's success.

Over the past two years, T-Mobile, with the most-capacious spectrum resources, has led net account additions, while Verizon, the most challenged, has lagged. That is why C-band assets are important for Verizon: new mid-band spectrum addresses the 5G capacity supply issue. 

source: Ookla 

To be sure, there are other shapers of supply and therefore demand. The quality of 4G network performance, 5G coverage and pricing policies, plus new competitors (Dish Network and cable operators), all shape demand and could shift market shares. 

source: Ookla 

AT&T and Verizon seem determined to raise prices, while T-Mobile notably is capping them. Cable operators are gaining share and might be the long-term challengers to all the mobile leaders, as they have proven to be the key competitors in the home broadband business. 

Fixed Wireless, FTTH Will Eat Into Cable Market Share

Most equity analysts following U.S. home broadband expect cable TV operator market share to continue dipping as telcos and other independent internet service providers ramp up investments in fiber to home and 5G fixed wireless. 

The amount of fiber to home investment also will be propelled by private equity and institutional investor interests who are buying access network assets with an eye to upgrading copper access networks to optical fiber. 

source: NextTV, Lightshed Partners 

For most of the past two decades cable operators have steadily gained market share and installed base, often getting 80 percent to 100 percent of net home broadband account additions in any given year. 

But that has largely been possible because hybrid fiber coax networks have trounced telco digital subscriber line networks in terms of performance. That changes as DSL is replaced by fixed wireless and FTTH. 

So we can be sure that mobile accounts will eventually replace home broadband as the cable operator revenue growth driver.

Some "Metaverse" Related Trends Will Detract from Realism

It is not clear how soon metaverses will be commonly used for gaming, commerce or other content use cases. It is safe to argue that some platforms providing realism and a three-dimensional representation of reality could come much sooner. 

As we experiment, it also is possible that the movement towards higher realism will be set back, as when people on a video conference use avatars instead of a live image. Still, as a rule, the advantage of any of the technologies underlying the metaverse is "greater realism."

In some cases that also applies to the ability to model changes to any system if one or more parameters are changed. It is safer and a better use of deployed capital to conduct a "what if" experiment not on an actual real world system but on its virtual twin.

Digital twins seem ideally suited for many industrial use cases, for example. Real-time reporting might not always be the advantage. Sensing and control functions might already be available. 

What is new is the ability to vary parameters and play “what if” scenarios, much as accountants in the early days of the personal computer used spreadsheets for financial analysis. 

The other new element is the ability to apply machine learning to performance data. 

source: SWAN 

Such practical implementations are both easier to create, as they are confined to a bounded universe of requirements. Other more-immersive environments will take longer to construct, as they are more complex and have the relative disadvantage of an uncertain advantage over legacy ways of doing things.  

It is easy to underestimate the challenge of introducing major immersive new experiences to any legacy process. Though not a full “metaverse,” three-dimensional experiences are expected to improve video conferencing, for example. 

source: Rave 

But the shift to business and consumer use of video conferencing already has consumed the better part of a half century in practice, and nearly two centuries as a concept. Some users might prefer the use of avatars within the conferencing experience. Others might see that as a step backwards in terms of realism.  

Metaverse Roles for Connectivity Providers?

If “metaverses” become a salient feature of the internet experience, such experiences will be supported by a range of computing and connectivity roles: edge computing, data centers, 5G and Wi-Fi, high-speed and low-latency access and transport networks. 

For Verizon, metaverse roles include compatibility with 5G and multi-access edge computing.  For SKT metaverse roles include creation of an actual platform, ifland . For Deutsche Telekom metaverse means creating a German version of SKT’s ifland. 

Many “over the top” roles related to connectivity also are possible, such as new ways of providing ownership of mobile phone numbers. 

In principle, there are many roles or functions beyond connectivity or cloud or edge computing that connectivity providers could seek to embrace. Just as obviously, few will succeed, if history is any guide. 

But some will try. As we have seen earlier in internet history, investments in content, or content production, are possible new roles some will try. 

For most, connectivity, edge real estate, managed private networks and other features or products are more likely to produce measurable revenue boosts. 

source: ey

"You Will," AT&T Said About 30 Years Ago. Mostly, We Do.

Predicting the future always is hard, but AT&T Bell Labs has to try. And so it did. Smart home technology, video on demand, distance learning, smart watches, videoconferencing, voice activation AT&T got right. 

But not every prediction proves correct. It is a hazard of the craft. 

Can IoT, Edge Computing, Private Networks Move the Service Provider Revenue Needle?

Estimates of annual global telecom service provider revenue vary by about $300 billion to $400 billion, from a low of about $1.4 trillion to a high of about $1.8 billion. Those figures typically are of little importance to most people inside and outside the industry, but are vital for analysts who estimate the importance of new revenue sources and markets. 

This matters, for example, when trying to assess the revenue contribution any new product might represent. Under normal circumstances, global service provider revenue grows by at a slow rate. Growth in the 1.5 percent range or less is the present status for the industry overall, though some markets and some companies see higher growth than the average. 

The point is that organic revenue growth can be as low as $20 billion to $30 billion in a typical year. So any new product that generates $20 billion to $30 billion in industry new revenue in any given year is a big deal.  

It is almost certain that global service provider revenues from multi-access edge computing, for example, will be in the single-digit billions ($ billion) range over the next few years. The same is true of forecasts of service provider internet of things revenue. The service provider 4G or 5G private networks revenue stream is likely to be small as well. 

The point is that new revenue sources such as edge computing, IoT and private networks are unlikely to move the global service provider revenue needle over the next several years, and perhaps not for a decade. 

Those revenues might be more important in a handful of markets, however, such as large countries that are early adopters. Even there, however, the large installed base of revenue means the incremental growth from the new services will make a generally slight contribution. 

In some part, the growth challenge is the result of the size of the installed base itself. 

When including the value of subscription TV services, the global telecom services market (mobile plus fixed) amounts to about $1.8 trillion in annual revenues, according to Precedence Research. The firm uses a cumulative annual growth rate of 4.85 percent from 2022 to 2030, a figure most observers would likely agree is too optimistic. 

source: Precedence Research 

Grand View Research estimates revenue in about the same range. But others, such as Analysys Mason, tally global revenue at a lower level. closer to $1.4 trillion. 

source: Analysys Mason

IDC forecasts are close to those of Analysys Mason, with 2021 revenue in the $1.5 trillion range. 

source: IDC 

As a rule, I have found the more-conservative figures are closer to reality. What matters is the impact new service sources could make.