We’re not there yet, not in the age of online video where TV networks are dinosaurs and Netflix reigns supreme. Even though (not surprisingy) Netflix’s CEO thinks that TV as we know it will be extinct in five years or so. But we are clearly in a period of change, driven by a bunch of factors, and what we’re changing to, video-wise, will obviously do something, at least, to shape the future of SDN and NFV.
We can start our journey of assessment of video’s future with the Golden Globe awards and the impressive showing by Transparent and House of Cards shows that OTT video players (Amazon and Netflix, respectively) are capable of producing content that means something. So the question is how much it will end up meaning, and what exactly the meaning will be.
TV is ad-sponsored broadcast-linear distribution, and that still makes up the great majority of viewing. Nielsen’s surveys say that people actually watch more hours of TV now; OTT video is filling in time when they don’t have access to traditional channelized video and giving people something to watch when “nothing’s on”. However, TV is its own worst enemy for two reasons; the law of averages and the law of diminishing returns.
The law of averages in TV means that you have to appeal to an increasingly “average” audience in order to justify the programming to advertisers. How many great shows have turned to crap? It’s not an accident, it’s demographics. You want a mass market and it has to be made up of the masses. This means that a good segment of the viewing population is in a stage of successive disenchantment as one show after the other becomes banal pap for the masses. These people are targets for VoD and OTT.
The law of diminishing returns says that when you add commercial time to shows to increase revenue you drive viewers away, which means you have to add even more time and drive away even more viewers. ABC’s “Galavant” seemed to me to have about a third of its time dedicated to commercials, making a decent show hard to tolerate. People disgusted with commercials can turn to VoD and OTT.
Both these points bring out another because both relate to advertising—commercials. Ad sponsorship’s problem is that there’s only a finite and shrinking pie to slice and an ever-growing number of people slicing it. For every Facebook gain there’s a Google or TV network loss. One thing that Netflix and Amazon prime have going for it is simple—retail. You sell stuff and people pay you. How much depends on your perceived value to them, and it is already clear that there’s a lot more money in selling service than in selling ads.
So more OTT video is in the cards, which means more traffic that ISPs don’t make money on. In fact, many of those ISPs (all the cable companies and many telcos) are going to lose money if broadcast video dies off. And to make matters worse, political pressure is converting regulators to the view that settlement for carriage of video on the Internet is non-neutral because voters don’t like it. Never mind whether the ISPs can be profitable enough to build and sustain infrastructure.
The most likely result of this combination is the increased investment in off-Internet services. In the US, we already have an exemption from regulation for CDNs and IPTV. In Germany, there’s a suggestion that there be two “Internets”, one neutral enough to satisfy advocates and the other where commercial reality guides settlement. I leave it to you to guess which would survive, and Cisco is already opposing the idea because it violates the Cisco principle that operators have a divine mandate to buy (Cisco) routers to carry all presented traffic, profits be hung.
Profit-driven IP, as opposed to the Internet, would be a totally metro affair, with access connected to cloud-hosted services. Given the strong cloud affinity, it’s very likely that we’d build this Profit Internet with SDN and NFV (another reason for Cisco not to like the idea!) and virtual technology in general. We’d use some electrical grooming to separate it from the Internet, and gradually “OTT video” would move to it, complete with settlement for carriage and QoS and all the things regulators say can’t be part of the Internet scene.
Why SDN and NFV? First, you have to keep the regular Internet and the Profit Internet separate or regulators will balk. Second, you have to constrain costs because you can’t overcharge content providers or you kill off the content. Third, full connectivity isn’t even useful in the Profit Internet because everyone is trying to get to a video cache or the cloud and not each other. You don’t need most of routing here.
Advertising can still have a place here, particularly on the “Internet” where there’s no settlement or QoS. Best efforts is fine for free stuff. But if the two principle TV faults are insurmountable in the context of broadcast TV like Netflix thinks, then broadcast itself is at risk. You’d have “VoD commercials” like you have in on-demand TV services from cable or telco providers today.
NGN was going to consume SDN and NFV no matter what, and we were going to end up with some virtualized-L2/L3 model of NGN even if we don’t succeed with SDN and NFV. Metro was always going to be where most money was invested too. So it’s fair to say that shifts in OTT video won’t drive all these changes, but it could accelerate them. In particular, a decision by ISPs to partition profitable services outside the Internet (or create two Internets as has been proposed in Germany) would funnel more money to NGN faster, which could not only accelerate SDN and NFV but put the focus more on service agility.
But remember, the cheapest way to get a new show in front of 60 million viewers is still linear RF. The thing is, we don’t get an audience of 60 million viewers if we’ve trained people to demand just exactly what they want and not what’s the best thing actually on at a given point in time. VoD and DVR are conditioning audiences to be consumers of what they want when they want it, a mission linear RF broadcasting will never be able to support.
I watched a lot of TV as a kid. I still watch a lot of TV. When I was a kid, I had two networks to choose from, and I picked the best of an often-bad lot. Today I have fifty networks or more to choose from, but the “lot” is still getting bad. The very success Nielsen points out is working against the TV industry because the more I view, the more shows move into the “I’ve seen that” category. The ones I wanted to see are being averaged out into drivel. That drives me to other viewing resources.
It’s not all beer and roses for the OTT video people, though. At the root of the video food chain is the producer of the video, who has to buy rights, hire cast and crew, and produce the stuff. Amazon and Netflix proved they can produce content, but not that they can produce enough. The big question on the video revolution is where we can get non-revolting video, and we don’t have an answer to that yet. OTT can still fall on its face, and if it does a lot of my childhood shows may become new again.