The State of Live Video 2018

“The key for [ESPN’s service] being a threat is going to be dependent upon the content that it has,” Sappington says. “Consumers have proven that they’re willing to pay for interesting, compelling content. If ESPN puts interesting and compelling content online, then sure, that will compete for a portion of the consumer pocketbook. If it’s less interesting, then it will target niche audiences, smaller audiences, and is much less likely to have an industrywide effect.”

While social platforms and sports leagues have been busy signing sports deals up until now, don’t look for that to continue or turn into a viable distribution channel. Deals struck by Twitter, Yahoo, and Amazon were created to show that the platforms were viable and draw attention, Sappington notes. These deals were about promotion, and were intended to simply break even rather than earn a profit.

Latency in live video was a popular talking point in 2017, but Sappington doesn’t believe it’s actually that big an obstacle for the viewers. When consumers want to stream a live event, their first obstacle is simply getting access. Once they have a connection, they’re concerned with performance. Latency is only an issue if the audio track doesn’t sync with the video, he says. While long latency can produce spoilers on social networks, that’s easy enough for fans to avoid. He thinks fans will put up with a delay if that’s the only way they can get the content they want.

“The biggest problem in latency in addition to congestion on the network is just the distance it is between where the video’s being created and where it’s being consumed,” Sappington adds. “Ultimately, you can’t fix that for live streaming. There are some operators, some vendors, some technology companies that are looking into ways to be able to optimize that to try and streamline the process, the path, for video packets to get from creation to consumption.”

The U.S. is currently seeing growth in skinny bundle services, also known as virtual multichannel video programming distributors (vMVPDs), which offer both live and on-demand content. Viewers like that these services provide access to local news and weather, as well as immediate access to shows and events, making them a price-sensitive option for cord-cutters. While many viewers love on-demand services, which give them access to all episodes of programs whenever they want them, there’s a limit to on-demand’s appeal, and viewers still want to be part of the conversation for appointment television. Services like Hulu TV, DirecTV Now, and Sling TV have risen up to fill that need, as have smaller players like FuboTV and Philo. The question is, how many more can the market absorb? Will we reach the saturation point in 2018?

“That is the billion-dollar question for the whole industry. If we begin to reach a saturation point, we should notice it mid- to late-2018. I think that if we grow throughout the end of 2018 in virtual MVPDs then what you’re seeing is a sea change in terms of how paid TV is offered and what it’ll look like in the future,” Sappington says. “I think that you’re going to see more services. If you see growth continue then you’ll definitely be seeing more subscribers attracted to those platforms. I think the other thing you’ll see is a change in competition. You’ll see more operators, more pay TV providers, opting to get into the market for nationwide services to compete nationally rather than competing only within their wireline footprint.”

What consumers are looking for is reliable, quality service and access to the content that matters to them. Sappington is seeing strong growth in the upper end of the market, with most households willing to pay for three, four, or five different services.

Net neutrality rules are now history, and that could spell big changes for the online video industry in 2018. Sappington can imagine it turning into a positive for live video. If operators create priority fast lanes for live video, speeding it along past content that isn’t time-sensitive, it could reduce live video latency. But if we reach a point where video providers routinely have to pay extra in order to assure good service, he thinks the FCC will step in. In the short run, he doesn’t see much changing.

“I have confidence in the fact that the internet would go freaking crazy if things got out of hand quickly. I think that you would have people boycotting and complaining about ISPs in a way that we’ve not ever seen before. That is a very vocal crowd,” Sappington says. “There’s already relatively low net promoter scores for broadband providers. I think that starts to become a real issue and a real concern. Also, broadband providers would have to be careful, because if Netflix is the number one video service and if you make the service a poor experience, then consumers have every reason to go to your competitor, even if it’s more expensive.”

For another opinion on the hot topic, we turned to Mark Peters, a partner with IBB Consulting Group. Peters agrees with Sappington: While operators could use this opportunity to jack up their profits, there’s too much at risk.

“I think that any significant changes by any party that could leverage a change in that policy would be ... I think we would be unlikely to see that next year,” Peters says. “There’s too much at stake in creating a discontented user base by using that legislation to force behavior change in the audience. I think basically we have to wait and see how that plays out, but my expectation for next year is that we won’t see anything significant.”

So maybe operators won’t create fast lanes for people willing to pay for access and slow lanes for everyone else. Maybe public pressure will prevent them from acting in their own short-term financial best interests. It’s a crazy thought, but it could happen.

One area that Peters is keeping an eye on is teen-oriented social live video apps such as Live.me and Live.ly. While these services have been around for years—attracting a passionate but niche audience and allowing some talented and telegenic young people to make big money by talking to strangers from their bedrooms— people over 30 are unaware that they even exist. Peters thinks it’s time for them to enter the mainstream.

“I see a j-curve, with the x-axis being audience and the y-axis being success or profitability, and I think at the left side of the x-axis and the j-, we’ll see live platforms where perhaps up-and-coming stars can really connect with their fan base,” Peters says. “The currency will be gifting and e-tipping—non-advertising currency. It’s been remarkable to watch how some of these apps and platforms have taken off particularly with the teenage segment, and there’s many anecdotes about young starlets making several thousand dollars a month when they cash out the electronic gifts.”

While many companies have created apps to cash in on this social live video gold rush, Peters says that isn’t sustainable. Look for some services to fold or merge in 2018, while major stars will emerge from these platforms.

Live video was the hot growth area for 2017, and in 2018, look for it to expand and mature. While on-demand entertainment drove the rise of streaming video, live video will keep it relevant and social.

[This article appears in the 2018Streaming Media Industry Sourcebook as "The State of Live Video 2018."]