The Three Stages Of OTT Delivery

9th February, 2017 by

In the beginning, there was YouTube. And it was good. So good, in fact, that an entire industry has developed around streaming video services. Over the top video content (OTT) is one of the world’s fastest-growing consumer markets; industry leader Netflix is now available in almost 200 countries, while arch-rival Hulu recorded 30% growth last year.

Ready To Join The OTT Revolution?

This rapidly maturing market still offers huge opportunities for new content providers. Ever-improving domestic connection speeds are encouraging more consumers to join the OTT revolution. Yet the hundreds of competing service providers all follow a similar business model, involving three basic principles. There’s the production or acquisition of original content, its conversion into a streaming format, and the subsequent delivery to a plethora of display devices. In this article, we consider these stages in turn.

  1.     Acquisition

To broadcast content, you first need to acquire it. That might sound easy in an age when budget smartphones have integrated HD cameras, and $400 drones can record digitally stabilized 1080p video footage. However, there’s a big difference between acquiring video content, and acquiring video content people will actually be willing to pay money (or watch advertisements) for.

A major survey last year by Streaming Media magazine indicated a fairly even split between live and on-demand content provision among OTT providers. The latter is more expensive to acquire and typically demands higher production values. However, it offers a longer shelf life and more scope for word-of-mouth publicity among audiences. Live content streaming is heavily reliant on esports, whereas on-demand content can include a larger pool of subject material.

The burgeoning competition among OTT service providers for flagship content has seen rival cable/satellite broadcasters fighting back with their own exclusive programming and original commissions. Bidding wars often break out over high-caliber content, which means a large percentage of any VOD provider’s budget will need to be used purchasing or making the material to grow content libraries. Exclusive content encourages customer loyalty, while episodic uploads keep audiences coming back regularly.

  1.     Preparation

We live in an age of unprecedented variance in broadcast quality, from 3D to 4K via VR and High Frame Rate (HFR). HFR and 4K are projected to become the industry standards by 2020, as broadband connection speeds standardize and 5G rolls out. The commercial failure of 3D televisions and a lack of VR-compatible hardware mean OTT providers should instead concentrate on acquiring conventional 2D material in the highest resolution possible. A consumer watching on a standard digital TV can still enjoy something recorded in UHD, providing it’s been rescaled to suit the output device and available bandwidth. Conversely, something recorded in 720p can’t be upscaled to look good on a 4K TV.

The incorporation of metadata is vital to the success of recommendation engines or curated search functionalities, which recommend certain programmes based on each account holder’s stated preferences or viewing history. This metadata helps OTT providers track customer viewing habits to determine which content is popular. It also prevents the unauthorized redistribution of subscriber-only material. Metadata gathering can also support targeted advertising – a leading method of funding OTT services.

  1.     Delivery

Perhaps the most crucial element of any VOD service is the integration of transcoding middleware. This is the software that reformats media files according to the tech specs of different output devices, from iPads and Android phones to Linux desktops and Windows-powered games consoles. Each manufacturer has its own proprietary standards and software, so an OTT provider needs to cater for as many formats as possible. After all, one of this industry’s main USPs for consumers involves being able to watch streamed content wherever they happen to be and on whichever device is at hand.

The risk of incompatible output devices has been further reduced thanks to dynamic streaming, with standardized codecs like MPEG-DASH compatible with most modern hardware. Adaptive bitrates can respond with split-second accuracy to fluctuations in bandwidth, adjusting the quality according to variations in the end user’s connection. This is less pertinent on hardwired devices, but a major benefit on wireless platforms or when streaming content across mobile networks.

Of course, OTT providers have many other decisions to make, not least the hotly-debated choice between subscription-based or advertiser-funded business models. Nevertheless, adhering to the three stages outlined above is vital for any new market entrant to succeed in today’s OTT marketplace.