Remember that old saying “Content is king?” Maybe we’re getting a lesson that it’s still true, and if it is, the truth it represents might reshape online service, service providers, and even vendors. First, AT&T announced a deal with Discovery to merge its Time Warner assets with Discovery’s assets to create a new company that will be a streaming giant, potentially a threat to players like Netflix, Hulu, and Disney. We then heard that Amazon acquired MGM, and the two in combination could be, or could indicate, revolution, despite the financial analyst commentary that it’s a defensive move.
There’s never been much doubt that broadband traffic is dominated by video, and for decades it was linear television that justified a lot of the wireline connections, including things like cable and Verizon’s FiOS service. The combination of these two truths has always been a bit of a contradiction; if streaming video is dominating broadband, what’s the fate of linear TV? There seem to be two forces driving change here, one on the demand side and one on the supply side.
Streaming video gained popularity with the widespread use of cellphones and the availability of 4G or better broadband. Mobile users couldn’t use linear video, and they had a harder time watching things that were “on” at a specific time. We saw years of streaming growth even before 2020.
Demand for streaming video has boomed with the pandemic, in part because people were at home more and thus needed a wider range of viewing options, and in part because the lockdown stalled production of many shows that would ordinarily have been part of “live TV”. Netflix, among others, has shown that the growth in streaming may not continue now that lockdowns are easing, but a lot of people got used to watching what they liked rather than what was on, and some at least will likely continue to frequent streaming providers.
On the supply side, we’ve had things like Google’s FTTH, that was a pure IP delivery not suited for linear delivery, for some time. The real change is 5G, both mm-wave technology and even traditional cellular/mobile 5G, as a replacement for fiber or copper delivery media to the home. 5G is already staking a claim as a player, and potentially a price leader, in the broadband space for areas where direct fiber isn’t economical because of low demand density. And guess what? 5G would require streaming TV.
Streaming uses broadband connectivity, and the majority of streaming video providers aren’t broadband providers at all, they simply ride on whatever broadband is available. There’s no infrastructure to deploy, and there’s no “preferred region” as there is with most wireline/fiber broadband. So we have users who have gotten more into streaming, a 5G broadband model that may well become ubiquitous and will support any streaming video service. What does that say?
Obviously, AT&T thinks it says that they need to separate the “telco” side of their business from the content side in general, and the streaming content side in particular. The new company would be able to push consumer video anywhere that suitable broadband was available. This is particularly important for AT&T because Verizon’s territory has much higher demand density, and Verizon can therefore be profitable with FTTH to way more customers. Why not, instead of fighting Verizon for FTTH supremacy when demand density ties AT&T’s hands, sell AT&T streaming video to Verizon customers? Yes, they could have done that before, but the new company will have a lot more mass, a lot more content to play, and won’t confuse users who might think AT&T content was available only to AT&T broadband customers.
Amazon’s position also seems clear. They don’t get most of MGM’s video library under the deal because of co-production constraints, but if streaming is to become universal, then is it not logical to assume that differentiation for streaming providers will be critical? What better way to differentiate than to be able to produce more content? Amazon already produces live shows, but adding MGM to the story would create even more opportunity for streaming content.
We might even be seeing the end of “live” TV for more and more original material. Obviously, news and sports have to be offered live (even if the latter is often viewed time-shifted anyway). Amazon produces multi-show series, but instead of dribbling them out in a specific weekly timeslot, they release the whole season at once, to be viewed any way the consumers like.
The overall situation is chaotic, and it’s likely to become more chaotic before we shake out a new video viewing market model. It’s certainly not a simple matter of companies like AT&T fleeing content ownership, because all the indications are that content is about the only durable asset in the whole swirling mess. It does suggest very strongly that linear TV may fall by the wayside, even to the point that eventually some spectrum used for over-the-air broadcasting may be salvaged for broadband service delivery.
One clear winner in all of this is the equipment vendors who provide broadband access technology. A lot of people will see the IP-video shift as benefiting “the Internet”, but in traffic terms the great majority of video is actually delivered from content caches in the viewers’ metro areas. Metro networking, which tends to be a bit more like switching than like routing, is the sure winner. We can expect to see more aggregation done to link viewers to cache points, but the Internet backbone isn’t going to grow as fast as the edge under streaming video pressure. Forget the core network, the sweet spot for equipment vendors may be metro aggregation.
A not-clear-but-increasingly-likely winner is edge computing. 5G will play a big role in driving change in metro infrastructure, and 5G relies more on feature hosting than any other mainstream network technology. Caching video, and CDN hosting in general, are other reasonable edge applications. Thus, the video shift might increase the value of edge hosting more quickly than other glitzy edge applications like IoT, or even gaming. This raises (again) the question of whether a 5G deployment model could be cloud-friendly enough to serve as a broader edge strategy.
The hardest thing to predict, perhaps surprisingly, is the impact on streaming services, and those who offer them. Consolidation at the media level could mean that some content owners could refuse to participate in streaming package deals like those offered for streaming live TV (Hulu, YouTube TV, etc.) Consumers might end up with a la carte programming (which they’d like) but end up paying much more because they have to buy most everything that way. Today, a good streaming TV service could cost perhaps $64 per month, and that’s equivalent to roughly eight a la carte deals with networks, assuming the networks don’t raise their own prices. You get more channels with today’s packaged streaming services.
Change is inevitable, and let’s face it, it’s been clear for decades that there was going to be a major change in the whole TV-and-video space at some point. It looks like that point has arrived.