HD Online at the Tipping Point
Sagan went on to say that, in previous years, HD streaming was available but a bit of an anomaly, whereas this year is the first time HD streams were the primary streams, with users hooking up to large flat panel and watching content as if they were watching television content.
"It is not a full 1080p experience, as it would require 5Mbps," said Sagan, "but the quality at 720p quality online, meeting the HD definition and being delivered at 1-2Mbps."
The Future
Sagan then quoted a set of numbers that he said would soon be released by IDC, noting that 63% of world only watches standard definition, while now at least 37% of viewers now watches some clips online in HD.
"For an identical program, if shown in HD, engagement time increases, driving increased revenues," said Sagan, adding, "as eyeballs leave standard definition, or even print newspapers, the revenue is leaving those audiences."
"IDC is also announcing that HD content revenue generated approximately $32 million last year," said Sagan, "with assumptive growth to $2.25 billion annually by 2012."
Even so, Sagan said he doesn't expect online video to replace television viewing experiences, even when online video reaches 1080p quality. Instead, he expects to see the tipping points generate opportunities on the go, outside of the living room.
"So where are the tipping points globally?" asked Sagan. "They are all based around bandwidth speeds: the average user speed in the United States is 1.5Mbps, with 20% of users now using 5Mbps or more. If 720p is the tipping point of quality, we're measuring hotspots that meet at least the 1-2Mbps range. Western Europe, plus key developed areas of Asia, have higher bandwidth speeds, so there is more opportunity outside US, as majority of peak speeds are above 5Mbps."
Having addressed the tipping points, Sagan then closed the keynote with a series of challenges and potential solutions.
"The last mile has seen significant investments, as evident in the billions of dollars the telcos and cable services have rolled in to upgrading connectivity to the home," said Sagan, "as well as headend upgrades. The same is true for upgrades to the 'first mile' at the data centers and network cores. Yet even the biggest Tier 1 network in the world only has a single-digit share of on-net delivery [content not required to go off network and on to the inter-networks, or Internet] so the 'middle mile' and edge ISPs are the bottlenecks since video is being delivered from a data center or a Tier 1 network."
Sagan also mentioned the argument that states "the Internet won't scale for Video over IP" as being true if traditional Tier 1 networks are used to deliver to TV-sized audiences.
"Over 100 terabits of connectivity would be required," said Sagan. "The technology exists (and this is my shameless plug for our solution) if the strategy of summing the last mile is used. It even works for high-definition delivery if coupled with variable bitrate streaming (dynamic or smooth streaming) to take care of the issue of buffering. We've been able to do this at scale, so we're seeing new opportunities."
Sagan referenced two solutions, one each from Microsoft and Adobe.
For Microsoft's Smooth Streaming, Sagan mentioned that "Microsoft's pushing the envelope as test sites such as smoothhd.com, as well as consumer-ready sites such as www.rai.tv in Italy."
On the Adobe front, Sagan referenced current Major League Baseball’s HD content at MLB.com and the soon-to-be-launched Epix streaming site that will allow viewership of "HD quality full length movies, part of a joint venture between Lionsgate, MGM, and Paramount, for a subscription-based website for the studios' extensive catalog of motion pictures."
The MLB.com sports-related content was emphasized again in a follow up question from an audience member who asked Sagan what the biggest surprises were, from a consumer standpoint, in the past few years.
"Viewers want exclusive content, where they don't know the ending," said Sagan, "so sports content like MLB.com works very well. But consumers have also reminded us they don't like commercials. There was a foreshadowing with the advent of the VHS recorder—and later with the DVR—where technologies to zap commercials gained popularity. So if we don't target advertising well to consumers, users remind us that they really don't like two minutes of commercials in short-form content."
[Not all attendees were quite as enthusiastic as Sagan. Just after the keynote, one audience member said "Always same story: "Look at what we can do, look at what we can do!' How can we pay for it? 'Oh, we're still trying to figure that out!' "]