Grey clouds gather over Apple as Netflix snubs imminent streaming service

Apple is on the verge of announcing something big, but its TV streaming ambitions have been undermined as Netflix dismisses any tie-up with the iLeader.

Speaking at a press event at the streaming giants HQ, CEO Reed Hastings said Netflix would not be partnering with Apple or allowing its content to be hosted on any streaming service it might announce. There are a lot of unknowns about the Apple announcement on March 25, but at least this has been cleared up.

Rumours suggest Apple is going to create a streaming platform which could potentially compete against Netflix, though this is only one facet of the increasingly fragmented content landscape. With Disney and AT&T’s WarnerMedia also set to weigh-in, consumer frustrations are unlikely to be relieved any time soon.

With content becoming increasingly fragmented, a platform which brings everything together could be the winning formula.

“Content aggregation is the holy grail,” said Paolo Pescatore of PP Foresight. “There is too much fragmentation in video/TV; no-one wants to sign up to different services and have numerous apps. It is a disastrous experience.

“Beyond having the right content, the user experience is key. This means getting the content people want in one place, with one bill, universal search and all that jazz. In reality, this is hard to achieve as typically half of a household wants sport and the other half want entertainment, movies and kids shows.

“Netflix has done a great job to date. However, more content and media owners will pull programming off its offering. This represents a significant opportunity for the likes of Apple who has scale and greater resources. There is a role for a small number of players in the future.”

One question which should get a lot of people thinking is what does an effective content aggregator platform look like?

  1. Single bill
  2. Single sign-in/authentication
  3. Integrated content library
  4. Universal search
  5. Consistent customer experience
  6. An excellent recommendation engine
  7. Buy-in from majority of content owners/creators

However, just because it is easy to set out the conditions for an excellent content aggregator platform, doesn’t mean it will a simple task to figure out. The final point, getting the buy-in from the content owner/creator ecosystem, is where anyone with such grand ambitions will find the biggest issue.

The best effort we have seen so far is Sky in the UK. Why? Because it has somehow managed to convince Netflix to let its content be hosted on the Sky discovery platform not its own.

Some might suggest a disproportionate amount of news in the content world is focused on Netflix, but there is good reason for that; Netflix is the best. Few can compete with the current depth and breath of content, the user experience, marketing clout and foresight of Reed Hastings and his team.

Without Netflix on an aggregator platform, there does seem to be a big hole. One of the issues is Netflix does not like handing across the experience associated with its assets to partners. It knows how to keep its subscribers happy so why would it allow a partner to potentially tarnish this reputation.

This is what has made the Sky partnership all the more impressive. Netflix has allowed its assets to be hosted alongside Sky’s on Sky’s discovery platform, marrying two of the best content libraries available to UK consumers in the same place. This is the sort of partnership which ticks all the criteria listed above.

Sky has made an excellent start on the aggregator model, but it needs to continue to add new partnerships, increasing the depth and breadth of its content library to ensure it continues to dominate the premium TV space. Amazon Prime should be a key target.

An interesting development over the next couple of months will be the impact of Disney’s streaming proposition. It will put a dent into Netflix, but how much remains to be seen. Disney does not have the depth or breadth of content Netflix is able to offer, the ‘originals’ and the newly generated local content around the world take it to another level, though Disney will be an excellent partner to have.

We do not want to decide on the Apple streaming proposition until we have had a chance to actually see it but losing Netflix as a potential partner is a significant dent. However, as long as gathers the buy-in from enough partners, creating a proposition which ticks all the criteria we have listed, there is hope for Apple is the services arena.

Almost half of UK value streaming video over pay TV

A report by EY showed 44% of UK households think they get better value from streaming services than from any pay TV operators.

This is one of the key findings from “Zooming in on household viewing habits”, a follow-up deep-dive on the annual survey EY conducted last September, which covered 2,500 UK families. This message from the UK consumers was also corroborated by a separate, US-focused research by Deloitte, where nearly half of all pay TV subscribers said they were dissatisfied with their service, and 70% felt they were getting too little value for their money.

One of the key themes coming out of the deep-dive into the UK family’s media consumption habits is the ascendency of the consumption of content over the Internet, at the expense of pay TVs. Despite that cord-cutting has not yet hit the UK hard, 54% of all families are already spending more time on the Internet than in front of the traditional TV, including two-thirds of young users primarily watch content on streaming platforms.

“It’s no surprise the UK is becoming a nation of streamers, but our research shows just how enthusiastically households have embraced it. Over the next 12-18 months we will see the launch of new streaming services to further sate the UK’s appetite for content,” said Martyn Whistler, Global Lead Media and Entertainment Analyst at EY. “However, reports of the demise of traditional TV seem a little premature. Our research shows their popularity is undiminished, with viewers watching them more now than in previous years.”

Although this could spell even more bad news for the pay TV operators, when the consumers do watch broadcast TV, 51% of households mainly just watch the five traditional “free” channels (if you did not count the £150 TV licence as “pay”), up from 46% in 2017.

In general consumers are much more tolerant towards pay TV carrying ads than streaming services do. But, still, more consumers are also willing to pay for the content they like. For example, Netflix ranked number one on the table of apps by consumer spending, according to App Annie. And the Deloitte report showed that in the US, a consumer would subscribe to up to three on-demand streaming services at the same time. The willingness to pay has even extended to catch-up watching, especially to get rid of the ads, according to the report. 18% surveyed would be happy to pay more to stream ad-free catch-up TV, up from 16% in 2017.

Another trends that stood out in the report is the diversification of content consumption platforms and its problems. A third families stream video on multiple screens, while 62% of the 18-24-year olds do so. Meanwhile, a quarter of all households have found it hard to track the availability of their favourite content across different services, apps and platforms. This number went up to 39% among the 18-24-year olds, which should be more tech-savvy.

These trends combined can have some implications for how content is produced, distributed, and monetised. For example, if consumers will most likely binge watch content on streaming services (e.g. the average Netflix user would stream two hours a day), the idea of “episode”, which has worked on broadcast TV, will be less relevant. Or should a long series be released all at once on a streaming platform, or making it available episode by episode as the conventional TV broadcasting does? How should pay TV services improve not only its users’ account management, but also the content’s ID management, to provide more pleasant experience for cross-platform and cross-device users?

As Praveen Shankar, EY’s Head of Technology, Media and Telecommunications for the UK & Ireland, put it: “Our survey demonstrates that audiences are struggling to keep track of their favourite content across various platforms and they are confused by the choices available to them. Technology, Media and Telecoms (TMT) companies need to move away from programme guides and big budget marketing and build artificial intelligence (AI) enabled recommendation engines to push content. This will improve user experience, reduce costs and maximise assets.”

On-demand video streaming has surely gained more impetus again in the last few days. CanalPlus has just launched its own streaming service Canal+ Séries, and Apple is widely expected to unveil a version of video on-demand service on 25 March at an event on its own campus.

Apple expected to launch half-baked streaming platform

Rumours are swirling around the Apple content business once again, this time pinning an April launch date on a streaming product which would offer third-party bundles in-app.

The aggregator platform for content is one which is becoming increasingly popular as the industry starts to realise how difficult it is to be a content creator. Apple has tried over the years, with only a sprinkling of success, but it seems it is hedging this new position by bundling other premium subscription services into the same content platform.

According to CNBC, Apple will create a video content platform to host its own content, which will be free to those who own Apple devices and offer the option for users to tie in premium subscriptions from third-parties. This sounds like an excellent idea, the fragmentation of content across different platforms is a frustration for users, though the absence of some might be a significant stumbling block.

As it stands, Apple has been unable to negotiate a relationship with HBO, though this is still a possibility, while the report also claims Hulu and Netflix will not be on the platform. For such an idea, and it is a good one which will appeal to consumers, all the various options need to be available. As it stands, with some of the most popular streaming services absent the appeal of the platform is severely dented.

“Any move is long overdue and comes at a challenging time for any new player,” said independent analyst Paolo Pescatore. “We’ve seen an explosion in OTT SVOD services.

“For the service to be successful it will need stand heads and shoulders over rivals, great content, great UX, a one stop shop destination. Unfortunately the market is hugely fragmented and consumers do not want to sign up to numerous services. There is an opportunity to unite all of these services. Whoever gets this right will be in pole position. If Apple has serious aspirations to compete in this landscape it needs to make a significant acquisition.”

But what could be the issue? Rumours are pointing towards the terms and conditions set forward by Apple; they might be asking for too much.

Looking at the App Store, Apple has traditionally asked for a 30% slice of any subscriptions bought through the platform, a number which decreases to 15% in the second year. It also demands 30% of in-app purchases, leading some developers to take users off-app to complete any transactions, creating a loophole in the terms and conditions. It seems these terms ate being extended to the aggregator platform and might be the reason Apple is finding difficulty in negotiating with partners.

Anonymous sources quoted by CNBC are suggesting HBO is resisting so far as Amazon Prime offered better terms than Apple. Sticking to its guns might sound like an attractive move to the management team and investors, but unless Apple gets a decent level of premium content on the platform to supplement its own mediocre library the platform will not be a success.

“Apple’s strength has always been seamless integration between hardware, software, services and now, presumably, content,” said Ed Barton, Chief Analyst at Ovum. “It has a lot of strengths to leverage in launching a video service. It’s problem is launching a video service in 2019 is about as hard as it has ever been, the competition is insanely strong and very well established in audience viewing habits.

“More well funded competitors are launching this year and making enough shows to attract and retain audiences is getting harder and more expensive. I don’t doubt Apple can launch a great video service, whether apple can sustain a great video service over the longer term in the brutally competitive environment for premium video is the question.”

Another strand of the software and services push will take Apple into the world of magazine subscriptions. Similar to the plans above, premium magazine subscriptions will be offered to users through the iOS news app, though considering the strife traditional content providers are in, Apple might be able to throw its weight around a bit more.

This is perhaps the problem Apple is facing; it thinks it is more powerful and influential than it actually is. Of course, Apple is one of the most respected and dominant brands on the planet when it comes to consumer hardware, though the software world is a completely different dynamic. It cannot bully companies like Hulu, Netflix and HBO into its own terms and conditions, as these are companies which are successful in the content world in their own right. Apple is trying to break into a new space, not necessarily the other way around.

That said, Apple does have a very strong relationship with its hordes of loyal customers. It can add value to any business it partners with, but perhaps it needs to realise it is only one hand amongst hundreds which is trying to lure customers onto its platform. What is clear right now, is that without enough headline grabbing content on the platform, the idea will certainly fall flat.

Netflix doubles profit but Wall Street not very happy

Netflix has increased its annual revenues by 35% and doubled profits over the course of 2018, but that didn’t prevent a 3.8% share price drop in overnight trading.

Total revenue across the 12-month period stood at $15.7 billion, though growth does seem to be slowing. Year-on-year revenue increases for the final three months were 27.4%, with 21.4% for the first quarter of 2019, though this compares to 40.4%, 40.3% and 34% in Q1, Q2 and Q3 respectively. However, when you consider the size, scale and breadth of Netflix nowadays this should hardly be considered surprising.

“For 20 years, we’ve been trying to please our members and it’s really the same focus year-after-year,” said CEO Reed Hastings during the earnings call.

“We’ve got all these ways to try to figure out, which shows work best, which product features work best, we’re a learning organization and it’s the same virtuous cycle, improve the service for our members. We grow. That gives us more money to invest. So, it’s the same things we’ve always been doing at just greater scale.”

This is perhaps the reason Netflix has succeeded in such a glorious manner where others have succumbed to mediocrity or failure. Investments have been massive to build out the breadth of content, while the team has not been afraid to alter its business or invest in content which others might snub. Bird Box is a classic example of a movie some might dismiss, whereas we find it difficult many competitors would have given the greenlight to the original Stranger Things pitch.

On the content side of things, investments over the last twelve months totalled $7.5 billion and Hastings promises this will increase in 2019. Perhaps we will not see the same growth trajectory, as despite the ambitions of the team, another objective for Netflix pays homage to the investors on Wall Street. Operating margin increased to 10% during 2018, up from 4% a couple of years back, though the team plan on upping this to 13% across 2019.

Content is where Netflix has crowned itself king over the last few years, aggressively pursuing a varied and deep port-folio, though it will be pushing the envelope further with interactive story-telling.

“I would just say there’s been a few false starts on interactive storytelling in the last couple of decades,” said Chief Content Officer, Ted Sarandos. “And I would tell you that this one has got storyteller salivating about the possibilities.

“So we’ve been talking to a lot of folks about it and we’re trying to figure it out too meaning is it novel, does it fit so perfectly in the Black Mirror world that it doesn’t – it isn’t a great indicator for how to do it, but we’ve got a hunch that it works across all kinds of storytelling and some of the greatest storytellers in the world are excited to dig into it.”

The team are attempting to figure out what works and what doesn’t for the interactive-story segment, but this is one of the reasons why people are attracted to Netflix. The team are exploring what is capable, brushing the dust away from the niche corners and experimenting with experience. They aren’t afraid of doing something new, and the audience is reacting well the this.

Looking at the numbers, Netflix added 8.8 million paid subscribers over the final three months of 2018, 1.5 million in the US and 7.3 million internationally, taking the total number of net additions to 29 million across the year. This compares to 22 million across 2017, while the team exceeded all forecasts.

However, this is where the problem lies for Netflix; can it continue to succeed when it is not diversifying its revenues?

According to independent telco, tech and media Analyst Paolo Pescatore, the Netflix team need to consider new avenues if they are to continue the exciting growth which we have seen over the last couple of years. New ideas are needed, partnerships with telcos is one but we’ll come back to that in a minute, some of which might be branching out into new segments.

This is perhaps most apparent in the US market, as while there is still potentially room for growth, this is a space which is currently saturated with more offerings lurking on the horizon. Over the next couple of months, Disney and AT&T are going to launching new streaming services, while T-Mobile US have been promising its own version for what seems like years. If Netflix is to continue to grow revenues, it needs to appeal to additional users, while also adding bolt on services to the core platform.

What could these bolt-on services look like remains to be seen, though Pescatore thinks a sensible route for the firm to take would be into gaming and eSports. These are two blossoming segments, as you can see from the Entertainment Retailers Association statistics here, which lend themselves well to the Netflix platform and business model. Another area could be music streaming, though as this market is dominating by Spotify and iTunes, as well one with low margins, it might not be considered an attractive diversification.

The other area which might is proving to be a success for the business are partnerships with telcos.

“It’s sort of been this March from integration on devices and just makes that a point to engage with the service to doing things like billing, on behalf of or we do billing integration,” said Greg Peters, Chief Product Officer.

“And now the latest sort of iteration that we’re working with is, is bundling model, right. And so, we’re early on in that process, but I would say we’re quite excited by the results that we’re seeing.”

This is a relatively small acquisition channel in comparison to others, but it is opening up the brand to new markets in the international space, a key long-term objective, and allowing the team to engage previously unreachable customers. This is an area which we should expect to grow and flourish.

The partnerships side of the business is one which might also add to the revenue streams and depth of content. Pescatore feels this is another area where Netflix can generate more revenue, as the team could potentially offer additional third-party content, hosting on its platform for users to rent or purchase. Referral fees could be an interesting way to raise some cash and Netflix certainly has the relationships with the right people.

Netflix has long been the darling of Wall Street, but it might not be for much longer. The streaming video segment is becoming increasingly congested, while the astronomical growth Netflix has experienced might come to a glass ceiling over the next couple of years. The businesses revenues are reliant on how quickly the customer base grows; such a narrow focus is not healthy. Everyone else is driving towards diversification, and Netflix will need to make sure it considers it sooner rather than later.

Netflix back in the cash with 36% revenue growth

Last time Netflix reported its quarterly financials it disappointed investors. Three months later its back to its blistering best with revenues of $3.9 billion.

The year-on-year growth of 36% represents a strong quarter for the streaming giant, capturing 6.9 million additional subscriptions, the vast majority of which came from international markets. Net income stood at a healthy $403 million, compared to $130 million in the same period of 2017.

“Overall, this was a strong quarter for the company,” said independent analyst Paolo Pescatore. “Normal service has been restored.

“This was a key quarter for the company following the challenges of the prior one which was a one off and largely down to seasonality. More importantly strong growth in its overseas market is encouraging.”

Back in Amsterdam during this year’s IBC, the international markets were highlighted as critical to Netflix’s continued growth. This is not to say the US market has hit a glass ceiling, but with the current penetration (58 million subscribers) and intense competition for attention, this is not a market Netflix can use to continue the momentum investors have become accustomed to. For Maria Ferreras, VP of EMEA Business Development at Netflix, new markets, new content and new partnerships are key.

On the content side of things, the localisation strategy will have to be accelerated. Creating local content, using local production companies and journalists, is key for engagement, though with new rules in the European Union, the focus will have to be razor-sharp. The new rules will eventually require subscription streaming services to devote a minimum of 30% of their catalogue to European works, while some member states will force Netflix to reinvest the revenues realized in those markets back into local production. This is generally the Netflix strategy, though it might have to accelerate timelines.

In terms of localisation, this is not just on the content side; partnerships with regionalised pay TV providers, ISPs and mobile operators will continue to play a more prominent role. Such partnerships offer a faster route to the customer than organic marketing can, and there are already dozens of examples around the world. Examples from this quarter include the first mobile bundle in Japan with KDDI and an expanded partnership with Verizon to pre-install the Netflix app on Android phones.

“All of its rivals are now making huge bets on video and it cannot afford to be left behind,” said Pescatore. “It now needs to rely more than ever on its extensive cable and telco relationships.”

For the next quarter, Netflix is again expecting good things. Revenues are expected to grow 26% to roughly $4.2 billion, with the team targeting an additional 9.4 million subscriptions. The international markets will be the primary generator of this growth, expected to add an additional 7.6 million subscriptions, though only growing revenues by 10%. With offers and partnerships playing a strong role in creating this momentum, lower revenue growth is to be expected.

Netflix is the premier streaming service worldwide and it doesn’t look like it is going to lose that position anytime soon. Amazon’s own content business is making progress as well, while Disney is bound to offer some resistance, but Netflix is still dominant. New partnerships in the international markets and an increased focus on regionalised content will only add to the momentum. 26% growth over the next three months is a big ask, but the signs are all positive.

AT&T will launch Netflix competitor next year

In an SEC filing, AT&T has confirmed it will launch a new streaming service focused around HBO content to challenge the dominance of Netflix and Amazon Prime.

While details are relatively thin for the moment, though AT&T Entertainment boss John Stankey formally announced the new offering at the Vanity Fair New Establishment Summit in Los Angeles confirming the Time Warner assets would form the foundation of the streaming platform, with some third-party content building out the breadth and depth.

“On October 10, 2018, we announced plans to launch a new direct-to-consumer (D2C) streaming service in the fourth quarter of 2019,” the SEC filing states.

“This is another benefit of the AT&T/Time Warner merger, and we are committed to launching a compelling and competitive product that will serve as a complement to our existing businesses and help us to expand our reach by offering a new choice for entertainment with the WarnerMedia collection of films, television series, libraries, documentaries and animation loved by consumers around the world. We expect to create such a compelling product that it will help distributors increase consumer penetration of their current packages and help us successfully reach more customers.”

HBO, Turner and Warner Bros content will create an interesting proposition, though this of course relies on a successful merger with Time Warner. As it stands, District Court for the District of Columbia Judge Richard Leon has given the green light for the deal, though the Department of Justice is appealing the decision, suggesting Judge Leon did not appropriately consider the implications of the merger. It looks to be a done deal, though the DoJ is being as awkward as possible.

The question which remains is whether the Time Warner content will be enough, even with its library of titles and additional third-party content. Netflix and Amazon Prime are surging ahead of the competition in terms of subscriptions, 130 million and 100 million respectively, though Disney’s new streaming service could be an interesting offer with the 21st Century Fox programming assets. Hulu might not be on the same scale as these three, but with 20 million subscribers it is certainly a platform worth considering. AT&T is entering a very competitive market.

What this does also offer AT&T is potential entry to the international content market. This is where Netflix is targeting future growth, suggesting at IBC 2018 competitiveness in the US market won’t bring the growth figures investors consider appropriate.

The Time Warner acquisition has been one of the biggest talking points of the industry for the last 18 months, though one of the big questions is whether AT&T can effectively manage a business in such a different vertical. The traditional telco approach to risk and expansion will not work here, for this venture to be a success AT&T will have to be a lot more aggressive and embrace the concept of the fail-fast business model.

With the cards now laid out on the table, it won’t be long before we find out whether AT&T has the capability to effectively diversify outside of the traditional telco battlefield.

World Cup: Understanding is the key to avoid scoring own goals

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece Derek Canfield, General Manager, Business Analytics at Teoco talks about the network challenges associated with major sporting events like the World Cup.

Imagine the scene. It’s the World Cup final and 80,000 people in Moscow’s Luzhniki stadium are craning their necks from the seats to watch a referee look at his small video screen beside the pitch. Meanwhile a worldwide TV audience expected to top one billion people will not only see the replays themselves, they’ll have experts and former referees explaining what is happening to them.

This situation is common for the American sports fan. The lead official at an NFL game can often be seen going under the hood to review on a private screen a tight call in a game that has countless interpretations available. And while the crowd boos or cheers the big screen replays, the audience at home get a detailed explanation from an ex-official or rules expert on the situation unfolding and the possible verdicts.

But is it right that the paying audience in the stadium, often including the most passionate fans, is left a little in the dark, so to speak? Of course not, and thus we see a good number of them will have their smartphones out trying to track what’s happening, and get the inside scoop on the likely decision moments before it is revealed. In fact, our digital world is intended to give the passionate fans the best of both worlds: the energy and of the live event, enriched by readily available content and analysis on their respective devices.

However, unless the stadium’s communications capacity is being actively managed and flexed to allow the live audience to keep track of developments on their mobiles, it is possible and even likely the stadium will score a network own goal and leave its audience frustrated.

Simply cranking up the network capacity is only part of the solution. To really improve things for the fans on site, operators need a much better understanding of what the spectators in the stadium are actually doing. This involves tracking the apps they are using, the feeds they are watching, and understanding all of the services they are trying to access. Without access to that level and granularity of data, it will be almost impossible for the stadium service provider to really improve the quality of service being provided.

Unfortunately, the challenge in those circumstances is that the majority of the data traffic in the stadium will be encrypted. In fact, Gartner has predicted that by next year as much as 80 per cent of all web data traffic will be encrypted. So how can the operators know what’s going on, if they can’t actually see the services being used?

With advanced analytics solutions, operators have found it is possible to gain actionable insights and make their massive event preparations run smoothly on the big day. By applying machine learning and heuristics together with our real-time digital analytics to the problem operators get deeper visibility into the big blind spot of encrypted data traffic to extract the metrics. Armed with this intelligence, they can make adjustments to the network and service without compromising data security and privacy.

Machine learning is used to provide sufficient visibility of the encrypted data and the traffic flow so that the network can effectively ‘self-identify’ the application service being used, for example streaming video on demand from specific sports app playing in HD resolution. Armed with that knowledge, the operator can then apply modelling to understand how it should adjust the network to deliver the best experience.

At this year’s Super Bowl in Minneapolis we worked with the stadium network operator to provide real-time analysis of stadium upload and download network traffic. At any point during the game the operators could see a full picture with subscriber-level granularity on numerous items. Some examples include top ten apps services being used, the balance between HD and standard definition in terms of video streaming, how much content people were uploading, and what average data speed was being achieved.

With spectators messaging friends, capturing videos and pictures of themselves or the players to upload to Twitter or searching for feeds showing highlights and replays; it’s vital to track all that network activity in real time. As well as maximising network performance, it becomes possible to detect any part of the stadium with connectivity issues, or even highlight a rogue user consuming a vast amount of data by trying to live stream the whole match.

At the World Cup, the service providers will also be dealing with roaming subscribers from all over the world, many of whom will only wish to use free operator stadium Wi-Fi. Without that full network traffic visibility in near-real time, managing the service to deliver a quality experience will be all but impossible.

But here’s the thing – spectators at an event have an increasing appetite for internet services and content. They represent a captive audience whose interests have been defined by their very presence in the venue – making them prime targets for special offers, promotions and add-on services. Those operators able to track ‘what’s going on’ within the network in real time, will not only provide the best customer service, they will also have the best knowledge of customer behavior to sell additional airtime and game-related services.

By enabling users to do what they love to do, when and where they want to do it, operators have the ability to enrich life’s experiences. And in doing so, operators have the ability to create additional content services opening up new revenue opportunities. Keeping the activities and priorities in sync is fundamental for the operator to score profits while players on the field vie to score goals.

 

Derek Canfield - TEOCODerek Canfield is the General Manager responsible for Business Analytics at Teoco. He is a veteran of the telecom industry, having spent the first half of his twenty-year career working for a North American operator and the second half with Teoco. At Teoco, Derek leads the go-to market strategy for the analytics suite of products and services focusing on that key tenant of aligning technology with business objectives to drive innovation and market leadership.

Streaming approaches half of all music industry revenues

It might not be anywhere as near as data intensive as video, but the growing influence of music streaming is another part of the network congestion question which needs to be factored in.

During the days of yesteryear, queues would form around the corner for the latest release of the next chart topper, but gone are those days. Those of more advanced years might look badly nostalgically about the anticipation of getting their hands on the latest Beatles banger (Ask Scott, Ray or Iain for more details), but now gratification is all about a simple click on the mouse.

Music is an aspect of the digital economy which is rarely discussed from a telco perspective, but it will start to have an impact before too long. Video is of course the big headache when it comes to traffic management and network congestion, but there are so many more moving cogs which collectively will have an impact; that is important to remember about them every now and then.

According to findings from MIDiA Research, music streaming is fuelling growth in the $17.4 billion global music industry, with a 39% year-on-year uplift in revenues to now represent 43% of the total revenues across the industry. An increase in revenues is the most obvious way to measure usage in the industry, but when popular streaming services like Spotify offer ‘all you can eat’ music, revenues do not perhaps tell the entire story.

Looking at the bitrates used by some of the more popular services, Apple Music uses a 256 kbps bitrate, which suggest an hour of music streaming would eat up 115 MB, while other apps use multiple options. Google’s music offering has three categories; the bitrate on low ranges from 96 kbps to 128 kbps, medium is 256 kbps and high is 320 kbps. On low quality you could use between 43 MB and 58 MB in an hour, while on high it would be 144 MB. On Spotify, the default mobile bitrate is 96 kbps and for desktop is 160 kbps, while users have the option of using 320 kbps.

In terms of users, Sportify now has at least 71 million subscribers (as of December 2017) and 157 active users worldwide. Apple has said it has 36 million subscribers, while Google has around 7 million (2017), including its YouTube subscriptions. These are not mind blowing numbers, but growth is continuing to be very healthy.

Over the course of 2017, users in the US spend more than 32 hours a week listening to music, up from 26.6 hours according to Nielsen Music research, with on-demand streaming up 12.5% year-on-year. This might not sound massive but streaming music has been normalised for years. The accelerated growth you usually see at the beginning was a long time ago, though 12.5% is still a significant number to bear in mind. These numbers will have a notable impact on the information highway.

Video is continuing to grow, but less data intensive trends are continuing to play a role in the connected era. Music streaming might not be a game changer when it comes to network congestion, but when you add up all the minor impacts of music, gaming, navigation, messaging etc. the headaches start to become a bit more varied. Always worth noting every now and then.

Telcos didn’t predict HD video uptake hitting 38% – Openwave Mobility

New research from Openwave Mobility claims the stress on mobile networks around the world can be put down to user uptake of HD video, which now stands at 38%.

Openwave Mobility didn’t go as far as to say telcos are not prepared for such uptake, but it is a logical conclusion. If telcos didn’t anticipate it, and are now experiencing bottlenecks on the network, preparation was lacking.

The research is based on live deployments at 30 mobile operators around the globe from 2013 to 2017. HD video only represented 5.7% of video traffic four years ago, though this number has swelled to 38%, with the team expecting this trend to continue upwards to 50% by the end of 2018. This has been pinned down to the popularity of OTT streaming services such as YouTube and Netflix on mobile devices.

“OTTs have launched a land grab,” said John Giere, CEO of Openwave Mobility. “In 3 years OTTs wiped out voice revenues. In 2.5 years they wiped out messaging revenues. Is mobile data next? You bet. Along with encryption obscuring mobile networks, operators have to grapple with the unstoppable appetite for HD video content from OTT players.”

It is a story which we have become very familiar with over the last couple of years. The telcos pay for the infrastructure, only to collect the crumbs as the insatiable appetite for data continues to grow. The OTTs are only encouraging this gobble of data, while simultaneously offering free services which wipe out the cash cows of the telcos. It’s a trend which will have a lifetime, but the end doesn’t seem to be in sight for the moment. The OTTs seem happy to continue biting the hand that feeds them.

Telcos have continually been frustrated by trends, and you have to have some sympathy for them. Admittedly they were slow off the line and never got ahead of consumer trends, but the commoditization of data is essentially ‘death by a thousand cuts’.

Perhaps the most frustrating aspect of this report is the need for HD video. We understand it will produce a better resolution, but considering the size of the screen on most mobile devices, you have to question whether the benefit outweighs the increased data demands (or whether there is any notable benefit to start with). This is one instance where data throttling might be considered appropriate.

Another area of frustration for the telcos is increased volume of encrypted data. There are of course security and privacy benefits to encryption, but from an experience perspective, how can the telcos improve something which they are not aware of.

“Facing an onslaught from OTT encrypted traffic, the challenge for operators is – how can you manage what you can’t see?” said Giere.

Users are becoming less and less tolerant of buffering, though telcos are seemingly unable to do anything at the moment. The research claims 75% of all mobile traffic is now encrypted, stifling the mobile operator’s ability to maintain subscriber Quality of Experience, as encryption protocols prevent operators from being able to profile or optimize data using conventional traffic management tools.

Most of the time we are perfectly happy to point the finger at the telcos and say they are not spending/being adventurous/thinking long-term enough, but this is an area where you have to have a bit of sympathy. It is questionable whether HD is necessary, and they can’t even do anything to optimize it.

Vodafone has a surprisingly good go at tariff innovation

UK operator Vodafone has come up with a couple of new tariff ideas that, for once, look like they actually add some value to the consumer.

We’ve come to the expect the mobile industry to gratuitously dick about with its tariffs every now and then, apparently just to show it hasn’t completely given up on innovation. But usually the tweaks are so superficial and inconsequential to the end-user that we wonder why they bother. A couple of Vodafone’s bright ideas, however, seem to have some genuine merit.

For postpaid punters we now have ‘Vodafone Passes’, which allow you to pay extra for unlimited data on certain apps – effectively zero-rating them for a flat fee. Here’s the full range:

  • Chat Pass (£3/month) – Facebook Messenger, WhatsApp and Viber
  • Social Pass (£5/month) – Facebook, Instagram, Pinterest and Twitter
  • Music Pass (£5/month) – Spotify, TIDAL, Deezer, Napster, SoundCloud, Amazon Music Unlimited and Prime Music
  • Video Pass (£7/month) – Netflix, Amazon Prime Video, DisneyLife, Vevo, My5, YouTube, UKTV Play and TVPlayer, which includes channels like HISTORY, Lifetime, MTV & Comedy Central
  • Combo Pass (£15/month) – all four Passes in one

By far the most useful of these is the video one, especially if you can also use it via tethering in a tablet or whatever – which Vodafone has confirmed you can. The chat one is pretty useless for nearly everyone as IM uses so little data, and you can mostly say the same for social media. But we can imagine why people would pay extra to use Spotify on their phone without inhibition and that applies even more so to Netflix, etc.

Having commended Vodafone for innovating it should be noted that it’s far from the first UK operator to try this sort of thing. Three zero-rated a few streaming services in its ‘Go Binge’ tariff earlier this year, which itself seemed to copy T-Mobile US. And Virgin Media got the ball rolling over here last year by zero-rating some social media. But Vodafone seems to have a lot more apps available for zero-rating, something it’s stressing in its marketing.

The other bright idea is something called ‘Pay as you go 1’. This is a daily prepaid tariff that costs at most a quid, and possibly less. From 10 November you can set yourself up with Vodafone such that if you don’t use your phone at all in a day (presumably this doesn’t include incoming calls/texts) you don’t pay anything. You’re then charged 20p per minute for calls, 20p per text and 20p for 5MB of data until you hit a quid (i.e. almost immediately).

After you hit the £1 threshold you get unlimited minutes and texts as well as 500 MB of data for the rest of the day. The sub-£1 increments seem a bit pointless but the subsequent allowances seem generous and the flexibility to leave the phone in a drawer for days without it costing you anything will probably appeal to some.

Nick Jeffery, Vodafone UK CEO, said: “We want our customers to be able to use their phones exactly as they want to,” said Nick Jeffery, Vodafone UK CEO. “With Vodafone Passes, they can keep in touch, keep tuned in and keep watching without having to keep an eye on their data meter. With Pay as you go 1, we’re ripping up the existing Pay as you go rulebook, so that customers can use their phones knowing they won’t pay for what they don’t need, and they’ll never pay more than £1 a day.”

This sort of flexible, ad hoc tariff offering is what everyone has been saying operators need to do to generate fresh revenue streams for ages. Vodafone seems to have nicely augmented both its postpaid and prepaid offering with these new tariffs and it will be interesting to see if the rest follow-suit.