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Encompass Digital Media: 2017 Online Video Industry Predictions

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Today, increased competition from newer players in areas like OTT and VOD is forcing traditional broadcast companies to re-think strategies and adjust to modern viewing habits. For years, digital media companies came to consumers via technology first and content second. This model struggled to provide broadcast-quality content to a growing, built-in audience of younger, digital natives. That is no longer the case—Netflix and Amazon are great examples of companies spearheading the trend of producing broadcast-quality programming on digital platforms. Broadcast and cable providers now realize the need to offer traditional content digitally, but bringing content from the broadcast format to digital is an enormous and expensive undertaking.

Most executives in any industry would choose to devote more resources to core business functions that lead directly to monetization. Unfortunately, there are a lot of moving parts in running a successful company, many of which often go beyond areas of expertise, which then dig into employee time, resources and profits. Content must be available all the time, from anywhere, on any screen. Remaining competitive in this industry requires keeping up with content distribution methods and platforms that are increasingly complex and varied.

Forward-thinking media companies that recognize this shift have benefitted immensely from outsourcing difficult and constantly evolving technical operations to shared services partners like Encompass. It’s not the delivery that makes you special, it’s your content. Invest in YOUR differentiators. As a leading managed service provider in the industry, let Encompass handle the behind the scenes stuff like delivering media anywhere with broadcast-level quality. Focus instead on making killer, high-quality content that keeps you competitive and in demand while Encompass navigates you through an increasingly challenging environment. Ask what you can do now to ensure you can afford the next blockbuster when it comes. For more information, visit www.encompass.tv.

See below the video for a transcript of our interview with Chris Walters. See the rest of the 2017 Streaming Media Executive Predictions in the related articles below, or download the entire batch here. 

Eric Schumacher-Rasmussen: Hi, I'm Eric Schumacher-Rasmussen Rasmussen, the editor of Streaming Media magazine. I'm here today with Chris Walters who is the CEO of Encompass Digital Media. We're going to talk about his executive predictions article that appears in the January/February issue of Streaming Media magazine. Chris, thanks for joining us.

Chris Walters: Absolutely, happy to join. Thanks for having me.

Eric Schumacher-Rasmussen: You bet. Before we get started, why don't you tell our viewers a little bit about Encompass, in case they're not familiar with it?

Chris Walters: Sure. Encompass is a leading technology services provider that supports large cable broadcast networks as well as tech and telecom companies and digital media companies with a few things. We capture, process and deliver video content from any source, in any format to any destination. Hundreds and hundreds of the streams that you see on television for cable and broadcast networks around the world make it through our operation or are generated in our operations as well as many of the streams that you see on digital platforms.

Eric Schumacher-Rasmussen: Great. In your article you write about the challenges that OTT publishers have in delivering broadcast quality content. Are things improving on that front? Is it getting easier to deliver something approaching broadcast quality?

Chris Walters: I think it is getting better every year. I think the market started many years ago. There were so few viewers that honestly most people who were focused on OTT didn't have a focus on quality. I think a couple of things have change over time. One is consumers' expectations are consistent across every platform. They want absolutely perfect experiences. The second thing is the explosion of social media makes even if you have a thousand viewer experience, if it's a bad experience there's going to be a whole bunch of people talking about it. That can make it to millions of people. The implications of not delivering that high quality are immense.

In terms of progress that's been made, there's been huge progress made. Technology continues to improve. People are figuring out how to deliver these very high-quality services. Still, every element of the value chain hasn't worked out the kinks. In many cases some of the experiences that are most disrupted relate to the last leg of connectivity which is outside of most parties' direct control, but they're having huge strides made over the last number of years.

Eric Schumacher-Rasmussen: That's talking about OTT publishers trying to achieve broadcast quality. What about the broadcasters who are embracing the digital world? Are they still trading the classic line about broadcast dollars for digital dimes? Even if they are, it seems to be they are committed to it regardless of what the return on investment is at the moment.

Chris Walters: I think right out of the gate, initially, dating almost back a decade most things online or OTT video was ad supported. The beauty of cable models is that there's both a subscription revenue stream as well as an advertising revenue stream. What you're seeing is there's been a whole host of successful launches, obviously, with Netflix being one of the earliest ones where there's premium content, and people are paying subscription fees. You see it more and more being launched over the years. A lot of the broadcasters and cable networks are getting more sophisticated about how they monetize with some of the content being in front of paywalls and ultimately that being ad supported and lots of content being behind paywalls and then receiving subscriptions.

I wouldn't say it's dollars for pennies because in many cases the rights fees are pretty substantial for the content that sits behind paywalls. It's still a small fraction of the revenue and total consumption for these broadcasting cable networks. If you look around the globe, the video industry is roughly the revenue from advertising and subscriptions fees is about a half a trillion dollars. A little bit less than 5% of that is OTT right now. That's going to change a lot in the coming years, but it's still a small fraction of revenue.

Eric Schumacher-Rasmussen: How can service providers like Encompass help both digital publishers and broadcasters achieve their goals?

Chris Walters: There's a few things. I talk to most of our clients around the globe, many of them who have been longstanding clients. They may use slightly different words, but really what they're looking for is a few things. They want unbelievable levels of reliability, so the highest quality experiences across all platforms 100% of the time. The second thing they're looking for is efficiency. They turn to a service provider like us because we operate at a greater scale than any of them in television or in digital. When you operate at a greater scale you learn what the processes are that are most efficient and best practice. You understand all the technology changes that are going on, and how to employ them and when to employ them. In many cases you don't want to lead the market or be leading edge because some of the things may not be as reliable. You can do that at exceptional cost.

The last thing that many clients are looking for us to do is simplify their lives. If you think of most media companies, the way they differentiate their financial performance is typically driven by acquiring or producing the best content, figuring out how to build audiences for that content through the marketing and promotions and monetizing it, figuring out through advertising or subscriptions the maximum value they can get. The part or the role that we play is there's massive amounts of complexity in a television and digital video supply chain. We can manage all that complexity at a lower cost than they can do themselves and help them focus on those three things that really drive their differentiated performance.

Eric Schumacher-Rasmussen: Great. What can we expect from Encompass over the next year or so?

Chris Walters: There's a lot of new, fun projects that we're working on right now. We've had great success over the last year in winning new business. You'll see a number of those clients will be launching services. We've also been pivoting a bit in terms of the breadth of our products and service offering driven a lot by this digital explosion in consumption. While it's a small share of revenue for our clients, virtually every one of them is delivering content to over-the-top VOD platforms or streaming content either behind paywalls or directly to consumers. We thought as a company we have a huge advantage because we've already ingested and archived and QC'd all of the content for many of our clients.

Our incremental investment for us and our clients to deliver that content anywhere is modest. What we needed to do was build out a really robust suite of full digital services many of which we own but a number through partnerships with great partners like Microsoft and Cisco and others. What you'll see in the coming years, there will be more press about us launching with some great, big clients for some more comprehensive OTT solutions.

Eric Schumacher-Rasmussen: Great stuff to look forward to. Thanks for taking the time to talk a little bit about Encompass today and the bigger digital media picture, Chris.

Chris Walters: Great, thanks so much for having me.

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