Operational Discipline in Streaming is Now Non-Negotiable
Cost control is a major priority for streaming services today. Gone are the years of rapid growth that defined the 2010s and 2020s boom when drawing in new subscribers was relatively straightforward. Attracting and retaining subscribers has become much more challenging in recent years as competition has increased and consumers have grown more critical of their monthly subscription costs. At the same time as all this, core video service operational costs including bandwidth, storage and infrastructure, have risen. Streaming service providers also face the added complexities and costs from having to deliver consistent experiences across a fragmented device ecosystem. In my discussions with global streaming leaders, one thing is certain: profitability is now a technical requirement, not just a financial goal
In this new landscape, output must be maximized, which requires every process and workflow to be optimized and tightly controlled. Operational friction must be reduced, efficiency increased, and AI-driven automation used where it makes sense. Underpinning all of this, video providers need smarter architectures that enable resources to be optimized, unnecessary costs prevented, alongside better use of data, and effective financial practices that enable cloud spend to be kept under control. Ultimately, video providers need to implement the strictest operational discipline across every aspect of their service.
Achieving Operational Efficiency
Operational efficiency can only be achieved by optimizing workflows to minimize costs and resources. In practice, this involves mapping existing processes, technology and tools to identify bottlenecks, inefficiencies and unnecessary operating costs. Once that’s done, remedial action can then be taken that may involve switching up the technology stack, optimizing resource allocation, removing unnecessary steps to streamline workflows, and employing AI-driven automation where appropriate.
Encoding for example is a resource-intensive process that if not done efficiently, can result in avoidable costs. VOD encoding technology has, however, advanced significantly in recent years, and the latest technology is highly efficient at optimizing file sizes and accelerating content processing. By swapping out less efficient encoding technology, and replacing with more efficient versions, video providers stand to make significant savings on storage and bandwidth costs.
Reducing Operational Friction
Workflows and technology that were effective when a service was small can create inefficiencies and bottlenecks as it scales. As such, it’s not uncommon for operational friction to emerge over time as a video service grows and evolves. Take errors in playback for example, while a service is relatively small, diagnosing errors and resolving encoding issues may be relatively easy, but as it scales, engineering teams may find themselves spending a lot of time diagnosing playback errors, which is inefficient.
Additionally, operational friction may also arise as a result of providers operating overly complex technology stacks with a patchwork of tools from different providers. No matter the cause, eliminating operational friction, or at least reducing it as much as possible, is a key component of operational efficiency.
Technology can also be instrumental in helping to reduce operation friction. In terms of the playback error example just given, if technology can provide engineering teams with clearer and more actionable error messaging, this helps them to resolve issues faster, thereby reducing time spent diagnosing pipeline failures. When it comes to operational friction arising from complex fragmented technology stacks and complex vendor ecosystems, one potential solution is for OTT providers to move away from working with a hodgepodge of tools and vendors towards working instead with a small number of strategic partners or clearly differentiated specialists. The era of the 'Franken-stack' is over. If your vendor isn't solving for unit economics, they are part of the problem.
Adopting Smarter Architectures
With video services continuing to extend to new devices and regions, and evolving to meet audience expectations, workflows need to be flexible and able to evolve continuously. We all know this is possible with architecture that leverages flexible cloud-native services and infrastructure. However, architecture can also be designed in a way that enables operating costs such as CDN, egress, and storage costs to be minimized. Having this kind of smarter architecture in place can significantly reduce a service’s cost-per-stream hour through lowering these infrastructure costs. This is becoming a primary KPI that unites cross-functional teams that are building and operating streaming services.
This could involve opting for a multi-CDN strategy to enable cost optimization through traffic steering and failover; making use of dynamic scaling features and using spot instances to handle high compute tasks such as encoding to reduce unnecessary usage costs; and utilizing technology such as per-title encoding, which significantly reduces overall bitrate, and split and stitch, which breaks files into smaller parts for parallel processing and faster processing times. Specialized technology also has an important role to play here because it can deliver measurable returns helping to preserve profitability. Video processing units (VPUs), for example, encode and decode video more efficiently using significantly less power than CPU and GPU alternatives. VPUs aren't just an "efficient alternative"; they are the key to decoupling growth from compute costs.
Enabling Data-driven Decision Making
Another key component to operational discipline is having access to data that facilitates effective decision making. Insights gathered from observability and analytics tools are critical for a number of reasons, not least because they help to optimize resource provisioning and inform strategic decisions around service delivery.
With the right insights, video providers can also detect issues impacting viewer experience so that root causes can be pinpointed and problems resolved quickly. This protects from revenue loss as the result of viewers getting frustrated and disengaging or churning. Observability and analytics data also enable ad playback quality to be monitored so that ad delivery errors can be minimized and ad-revenue maximized. Ultimately, a data-driven decision-making approach enables services to protect precious margins while still leaving room for innovation.
Implementing a FinOps Approach
It’s clear that financial planning and budgeting methods designed for managing traditional resources and infrastructure outside of the cloud are not effective when applied to the cloud because of its highly dynamic and elastic nature. Therefore, to avoid rising and unpredictable cloud costs, video providers need to implement effective cloud financial management processes and practices to ensure they can track, manage and control their cloud spend.
FinOps is the most widely used operational framework for this, helping companies to make informed decisions on how to allocate and manage their cloud costs. Crucially, it seeks to create financial accountability through collaboration between engineering, finance, and business teams so that different arms of a business have a better understanding of how their decisions impact cloud spend.
Getting Started
While operational efficiency and cost management may well make or break a streaming service, it’s also imperative that quality is not compromised. The key here is to balance cost efficiency with performance so that viewers still receive the high-quality viewing experience they expect. The streaming services making the most headway currently are the ones operating with the strictest discipline alongside smarter architectures that enable costs to be reduced, while still maintaining all-important quality. True operational discipline isn't just about cutting. It's about freeing up the capital required to build the hyper-personalized features that actually drive retention. You can't innovate on top of an inefficient foundation.
Needless to say, achieving operational discipline is the result of a concerted and consistent effort over time. That said, you’ve got to start somewhere, and you can begin the process immediately by carrying out an operational audit, starting with the following three actions. Firstly, map the full cost of a single stream-hour across your media tech stack. Next, audit ghost cloud spend using a cross-functional FinOps task force. Thirdly, identify one legacy CPU-only workflow and pilot a VPU-based alternative. These three actions are great foundational steps towards achieving true operational discipline.
[Editor's note: This is a contributed article from Bitmovin. Streaming Media accepts vendor bylines based solely on their value to our readers.]
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