Reducing TCO for Streaming Services
Viewers are engaging with video more than ever before and competition in the space has increased dramatically. This is driving video services to be even more innovative as they strive to meet consumer demand for high-quality, seamless streaming experiences.
Against this backdrop, the financial pressures felt over the last few years has led to a new set of challenges around total cost of ownership (TCO). Video services are now tasked with finding ways to reduce spending and increase revenue generation, all without increasing churn, and this has caused the age-old build versus buy debate to resurface.
Understanding Total Cost of Ownership
Understanding total cost of ownership in video streaming is a complex undertaking, encompassing operational and technical layers, which themselves overlap and intertwine. Alongside easily visible costs such as infrastructure provision and maintenance, CDN fees, storage costs, licensing costs, and the costs of hiring and training staff to manage and operate the service, video services also need to understand the impact of decisions around technology. These decisions determine how easily a service can scale, innovate, and adapt to changing business needs, which in turn impacts TCO.
This is where a lot of hidden costs can sit because TCO needs to reflect the time engineers spend maintaining workflows, fixing playback issues, and implementing new features. For example, if encoding and processing is inefficient, storage and bandwidth costs increase, and if playback quality is poor with delays and errors, lots of resource is spent troubleshooting and fixing issues, while viewer experience suffers.
When streaming video content, providers need to carefully balance efficiency and cost reduction with user experience. This applies whether providers are operating a niche or local streaming service, a regional service, or a global platform. Reducing TCO isn’t just about reducing spend, it must be focused on optimizing spending for maximum return on investment.
Following on from that, the decision over whether to build in-house solutions or adopt third-party technologies is an important consideration when managing TCO, particularly because while there are some advantages of following the build route, it can be linked to increased risk and higher development and maintenance costs.
How Build vs. Buy Decision Impacts TCO
Whether to build or buy is a conversation that video services have been having for a long time. As with most things, there are advantages and disadvantages to both approaches. The build route gives providers full control over workflows and customization. This may appeal to larger platforms, but it only holds true if teams are experienced enough to turn the right knobs. For small-scale or startup platforms, building can also appeal because it can potentially carry a lower cost than buying in a commercial solution, especially in the early days when numbers of viewers are relatively small and workflows remain basic.
However, the build approach generally carries a high engineering and maintenance burden. It can also make it harder to scale and stay current, particularly given the fragmented device landscape. With so many new devices coming to market, providers would need to continually test on (and thus buy) hundreds of different devices. This is neither feasible because of the costs and effort involved in acquiring and testing hundreds of devices, nor manageable because of the operational burden it adds. Additionally, unless a service has the very best team of developers (among all those aspects, from understanding video codecs and containers, over device and compatibility testing, to real-time monitoring) out there, there is arguably a greater risk of errors and inconsistent output, which can negatively impact viewer experience.
Conversely, buying in streaming workflow solutions can result in faster implementation and time-to-market, consistent output quality across devices, reduced internal engineering overhead, and ongoing access to new formats and standards. Another important point to note is that buying in can make it much easier for video services to scale as viewership grows. That said, video services need to factor in licensing costs, which may be cost prohibitive to a smaller service, as well as potentially having less control over customizing workflows and the direction in which the commercial product is developed.
Most video platforms have at least some systems built in-house, perhaps because when they were smaller, it seemed faster or more economical. However, those same services have scaled fast in recent years, and while their systems built in-house used to work, they’re now finding them to be less effective. These built systems are all too often consuming more engineering resources than is manageable and adding costs in ways that don't always show up on a single budget line. It’s also worth remembering that while there may be opportunity to reduce costs by building part of the workflow in house, this comes with opportunity costs. While engineering teams are building and maintaining workflows, they’re not spending time on activities that can generate more revenue or strategic value.
For most providers looking to lower TCO, commercial streaming solutions are preferable because they reduce complexity, optimize performance, and speed up time to market for new features. However, the relative impact of choosing to build or buy on TCO does depend on what stage of growth a streaming service is in.
Reducing TCO at Different Stages of Growth
Small or startup streaming services will typically have smaller teams with less in-house expertise, and a very limited budget. As a result, to minimize TCO, it makes sense that they focus on reducing complexity so that specialized video engineering knowledge isn’t required and development time is kept to a minimum. Services of this size will usually benefit from using streaming solutions that require no specialized knowledge to set up and manage so that less time is spent configuring settings. This blueprint, however, only leads to success if the market they operate in tolerates a basic and non-optimized viewer experience.
For larger streaming services distributing content on a regional basis, reducing TCO is more about optimizing the entire delivery workflow rather than simply lowering costs. While they are likely to have larger more experienced teams than smaller services, resources are still tight, so efficiency is critically important. Video services of this size need more advanced automation and as well as technology that is able to adapt quickly to meet changing business needs. Additionally, as a video service grows and expands its content library, its processing needs become more complex and varied because high-priority and long-tail assets need to be differentiated in order to avoid overspending. Therefore, it’s important that streaming technology is flexible enough to meet this need.
With a global streaming service, viewers may well number in the tens or even hundreds of millions of viewers. At this level, reducing TCO is primarily about maximizing delivery efficiency at scale. When delivering content to millions of viewers, even small bitrate improvements can translate into millions of dollars in CDN and data transfer savings. Yet, efficiency must be delivered without compromising on quality. One way to do this is to deploy advanced technologies such as AV1 and 3-Pass Encoding, which reduce bandwidth requirements while still maintaining a premium viewing experience.
Key Takeaway
The streaming industry is continuing to evolve and expand at pace, and given the financial pressures that providers face, understanding and managing TCO is crucial for services seeking to maintain financial viability alongside the ability to innovate. As is evident every day, streaming technology is also advancing rapidly, and so video services need to ensure they are in a position to adapt and utilize this new technology, which in turn also creates new opportunities to reduce TCO.
[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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