Replacing Lost Ad Revenue is the Key Video Streaming Business Model Issue

One might argue there is almost no problem the video streaming business model has that could not be fixed if advertising revenues are boosted or somehow replaced by other new sources. 

Most of the other revenue and cost elements for linear and streaming models are comparable. Streaming does impose new costs in the areas of on-demand support, but has the same marketing and technology costs as does linear delivery. 

And though original content production is generally deemed to be more important for streaming, and often means higher costs, overall content licensing content costs can be lower, in many cases.

Element	Video streaming (%)	Linear video (%)
Revenue
Subscription fees	50-60	10-20
Advertising	20-30	70-80
TVOD (episode sales)	5-10	0
PPV (live event sales)	0-5	0
Merchandising	0-5	0
Cost
Content licensing	30-40	40-50
Production	10-20	0-10
Marketing	10-20	10-20
Technology	10-20	10-20

Still, the big difference in the revenue part of the business model really is the shift from ad support to subscriptions. 

On the cost side of the model, the need for original programming to drive streaming service take rates and retention is the biggest difference. The acquisition of library content arguably is less an issue, compared to linear services. 

On the other hand, the immediate practical problems for streaming services seem always to revolve around subscription issues. On a day-to-day basis, customer acquisition, churn and market share account for as much as 80 percent of results, since subscriptions are the major revenue source. 

Issue	Percentage importance
Customer acquisition	30%
Churn	30%
Account scale	20%
General lack of advertising revenues	10%
Need to invest in original content	10%

Substitutes Will Limit 5G Network Slicing Opportunity

Rarely in the networking or computing businesses is there but one solution for any given problem. And that almost certainly applies to 5G network slicing as well. There are many other alternatives offering functionality that is comparable or better, with costs that might also be lower. 

The issue is whether there are use cases where a 5G slice is the best-performing or only solution for a particular application and use case. 

One of the unknowns about 5G network slicing is the number of slices that can be created at any single base station. The number might be far more restrictive than some might suspect. 

Depending on the amount of bandwidth used by each virtual private network, as few as 10 or as many as 100 network slices might be supported at any single base station. 

The 3GPP (3rd Generation Partnership Project) standard does not formally limit the  number of slices that can be supported at any base station. However, capacity is limited in practice by the hardware and software resources available, and the need to respect a few requirements including::

• Each slice must be isolated from other slices to prevent interference.

• Each slice must have its own dedicated resources, such as bandwidth and processing power.

• Each slice must be able to be scaled up or down independently of other slices.

In addition,  the number of slices that can be supported is affected by

• Some slices, such as those used for mission-critical applications, may require more resources than other slices.

• The more isolated the slices are, the more resources may be required.

• The heavier the traffic load on a slice, the more resources it may require.

For such reasons, it is possible--and perhaps likely--that many enterprise customers would choose some other method of assuring features touted for 5G network slicing. 

Feature	Network slicing	Dedicated circuits	VPNs	QoS	Traffic shaping	Edge computing
Low latency	Yes	Yes	Yes	Yes	Yes	Yes
Guaranteed bandwidth	Yes	Yes	Yes	Yes	Yes	No
Reliability	In development	Good	Good	Good	Good	Good
Cost	High	High	Medium	Low	Low	Medium
Availability	In development	Fair	Good	Good	Good	Fair, growing

Just how much revenue mobile and other service providers could earn supplying network slicing is somewhat hard to forecast at the moment, since most enterprises still do not have the option to buy it. But most forecasts seem reasonable, putting network slicing revenue somewhere between three percent and 5.5 percent of total mobile service provider revenue by 2026 to 2030 or so. 

At least in principle, those sums should not include infrastructure revenues earned by the likes of Nokia, Ericsson and others selling gear to enterprises to run their own private networks, or revenues earned by system integrators operating such networks on behalf of enterprises. 

Forecaster	5G network slicing revenue forecast (USD billions)	Global mobile service provider revenue expected (USD billions)	Network slicing revenue as a percentage of total mobile revenues
ABI Research	30 by 2026	1,200 by 2026	2.5%
Ericsson	100 by 2030	1,800 by 2030	5.5%
Gartner	20 by 2025	1,000 by 2025	2.0%
IDC	50 by 2027	1,400 by 2027	3.6%
McKinsey & Company	100 by 2025	900 by 2025	11.1%
Nokia	100 by 2030	1,800 by 2030	5.5%
Omdia	40 by 2026	1,200 by 2026	3.3%
Ovum	30 by 2025	900 by 2025	3.3%
STL Partners	50 by 2027	1,400 by 2027	3.6%
UBS	100 by 2030	1,800 by 2030	5.5%