After years of preparation for an anticipated media and entertainment (M&E) industry migration to the cloud, studies confirm that the tipping point has finally been reached. Long-standing resistance to cloud-based operations extending from production to distribution were blown away by pandemic-driven technology advances, consumer behaviour changes, and monetisation opportunities. Content producers, TV networks, pay TV distributors and broadcast TV stations are actively moving to cloud-based operations.
The M&E industry may have gotten a late start on cloud transformation, but it caught up quickly. In 2021 the Enterprise Cloud Index showed M&E leading all other industries in its use of multiple public cloud services and human-computer interaction (HCI) technology.
Two key developments continue to drive this historic shift. First, the successes of streaming service providers’ ability to deliver broadcast quality content over the internet and leveraging cloud infrastructure, which also has resulted in legacy providers’ confidence that they could exploit the benefits of IP technology without sacrificing quality of experience (QoE). Second, the success of advertising as a revenue source that allows streaming service providers to lower their subscription prices to levels far below established pay TV services.
The streaming juggernaut
The ability of streaming operators to deliver premium video content to any type of connected device, including UHD-enabled connected TVs (CTVs), has unleashed a competitive juggernaut against pay TV operators with the firepower to draw viewers fast. The stats tell the story:
- The global streaming market is projected to grow from $372.07B in 2021 to $1,690.35B by 2029.
- Global pay TV revenue is going in the opposite direction, having peaked at $202B in 2016 and falling to a projected $136B by 2027.
- The global volume of streaming subscriptions is expected to nearly double what it was in 2021 by 2025.
- 82% of U.S. broadband households are streaming subscribers while just 58% subscribe to pay TV.
- Streaming service penetration in Europe stands at 64.9% and is projected to hit 75.2% in 2026.
- The live streaming market is expected to grow from $55.96B in 2021 to $247.27B in 2027.
- Connected TVs (CTVs), including smart TVs and older models utilising internet media players, are now the preferred viewing platform for streamed services by an overwhelming margin.
The success of streaming is both pushing and enabling the migration. There’s no way to reach worldwide scale without the cloud and this is forcing organisations to think differently about their operation. They start at the origin server and work their way back into the media supply chain and pull the entire thing up into the cloud because that’s where they have to deliver it.
The power of dynamic advertising
A newer development contributing to the M&E industry’s migration from legacy to IP-based distribution has been the success of advertising as a revenue source for new streaming services. Content and service providers’ ability to employ dynamic advertising insertion (DAI) in unicast IP streams to target their messaging has been a big factor in the streaming advertising surge.
This server-side DAI approach, often referred to as SSAI, is far superior to client-side DAI. In client-side advertising with legacy pay TV services, targeting flexibility and capacity is limited by the number of ads that can be stored for insertion at the set-top box. In client-side approaches with internet-delivered content, consumers can use ad blockers, which is impossible when ads are streamed to devices as part of the core content.
Advertisers are willing to pay a premium for targeted ads. For example, whereas traditional linear TV 30-second spots might garner between $10 and $25 per 1,000 viewer impressions (the cost-per-1,000 views) or CPM), targeted ads are generating $40-$50 CPMs.
This turn of events is driving a dramatic surge in ad revenue flowing to advertising video-on-demand (AVoD) and free ad-supported streaming TV (FAST) services, and now even to what had been subscription-only video-on-demand (SVoD) services. Digital TV Research projects the global ad total for streaming video services will more than double over the next five years, reaching $70 billion by 2027. That’s more than half the combined subscription and ad revenue total Fortune Business Insights projects in that timeframe.
DAI-dependent FAST services, which began in the US and have spread across much of the world over the past two years, are especially vivid indicators of what dynamic advertising means to industry fortunes. A 2022 Comcast report showed that FAST is outpacing AVoD and SVoD growth with penetration more than doubling to 18 per cent of US households in Q4 2021 compared to a year earlier, and that six out of ten households with CTVs were viewing FAST services.
It’s no wonder that Comcast and the second largest U.S. cable operator, Charter Communications, recently expanded their Xumo FAST service joint venture to include a full TV-caliber service streaming nationally under the Xumo TV brand. The move, coming in the wake of another quarter of massive losses in pay TV subscriber counts by both operators, represents the most significant acknowledgement yet seen in the US and possibly anywhere that the future for MVPDs lies with internet streaming.
The M&E industry’s migration to the cloud is now in full swing, marking the next inevitable step in what amounts to the most transformative moment in media distribution since the invention of television. Content producers, network aggregators, broadcasters, and distributors of every type recognise the future belongs to companies who can exploit the power of cloud technology to generate new levels of viewing experience while opening new paths to monetisation.