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The Keys to Launching Premium Quality, Profitable VOD Services in 2021

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Global VOD usage is massive. According to a recent 2020 THEME Report from the Motion Picture Association (MPA), subscriptions to online video services in 2020 surpassed one billion for the first time – reaching 1.1 billion globally – and this number is set to continue rising. In addition, the global VOD service market is expected to reach a valuation of around $183 billion by 2031.

Given the explosive growth track of VOD and today’s super-competitive landscape, it’s more  important than ever for content owners, service providers, operators and broadcasters to understand the key elements required to launch a profitable VOD service. Cloud-based video streaming platforms offer significant benefits over on-premises hardware, the depths of which will be explored in this article.

Scale On-Demand Content in Seconds

One of the most tedious tasks when installing an on-premises video delivery solution is forecasting. It can be challenging for service providers to predict what their audience size looks like in two, three or even five years. Service providers need to determine how much storage, traffic, and compute they will need now and in the future. With on-premises video delivery solutions, service providers typically end up in one of two scenarios. They either overspend money on hardware to avoid performing an upgrade every year, or they under-build their infrastructure, which may leave them without capacity if their audience grows faster than anticipated.

When VOD service providers run video streaming platforms in the cloud, they can automatically scale to meet whatever demand is generated. Cloud-based video streaming services can be scaled to support millions of viewers in minutes if not seconds. There’s no longer any need for complex forecasting. The origin server scales up during primetime and scales down when the viewing audience goes to sleep. 

Cloud software as a service (SaaS) platforms are based on a pay-as-you-grow business model, ensuring that service providers only pay for what they use. They are economical in that they offer service providers infinite capacity without costing anything when not in use.

Optimize File Storage and Reduce Video Buffering

Another way that cloud-based streaming platforms simplify VOD delivery is by improving file-based storage and decreasing video buffering. The demand for SVOD streaming services has been skyrocketing over the last year. Using a cloud platform, service providers can tap into advanced technologies such as content-aware encoding (CAE), which reduces overall CDN and storage costs by up to 50% without impacting quality. 

CAE leverages artificial intelligence to save bits where the human eye can’t see, which directly translates into less buffering time for viewers because the segments of video they’re downloading are smaller. Since CAE is a software and cloud-native solution, service providers can be assured that they are always running the most up-to-date version. As algorithms are optimized, service providers can further increase file storage efficiency and enhance streaming quality.

Grow Revenues with Targeted Advertising and FAST

Service providers can leverage the cloud for more than just VOD delivery. A growing number of VOD service providers are using the cloud to deliver targeted advertising, launch linear services and create popup channels for live events. 

Ad-supported streaming services, in particular, is an area where service providers can substantially increase their revenues. In 2020, AVOD revenue was $10.69 billion, and it is expected to reach nearly $3 billion in 20201, according to Digital TV Research. That number will rise to $32.61 billion by 2026. 

Having a cloud-based dynamic ad insertion (DAI) solution with manifest manipulation capabilities service providers can deliver targeted ads to households and even individual subscribers in real time. Since ads are delivered from the server side, there is no ad blocking. DAI solutions with manifest manipulation support more than just VOD services. Video advertising elements can be inserted seamlessly into live, linear programming and VOD content.

Because service providers are leveraging the cloud, they can scale their AVOD service infinitely. Even if there are millions of subscribers watching the same content, each person can be individually targeted with an ad that is specific to them, which ultimately translates to increased ad revenues for service providers. 

Free Advertising-Supported Streaming TV (FAST) is another opportunity that involves taking existing high-value VOD or AVOD content and turning it into 24/7 premium linear channels that are free to watch for viewers and monetized through DAI. There is a huge market for FAST channels and explosive growth. Today, there are more than 530 FAST channels available across seven platforms to over 35 million unique users.

Creating a FAST service is relatively simple with a cloud-based streaming platform. Service providers can create these channels from their existing content libraries leveraging video delivery software in the cloud. Since cloud streaming platforms are opex-based, there is minimal to zero upfront capital investment involved to launch a FAST channel.

A Real-World Success Story

Recently, a tier-1 Western European telecommunications operator simplified its transition from legacy IPTV delivery to video streaming. One of the operator’s main challenges was deciding whether to use an on-premises or cloud-based streaming platform. After conducting a thorough examination of both deployment models, the operator determined that the cloud would drastically simplify the launch of its VOD streaming service.

In total, the operator has about 1 million file-based video assets, requiring 1 PB of storage, and  more than 1 million subscribers. The operator simulated what its TCO would be for different scenarios, including cloud and on-premises video streaming. From a financial perspective, shifting to the cloud minimized the operator’s risk by providing it with a platform that could grow immediately, with real-time scaling based on usage patterns. If the operator were to experience a peak in viewing, having a cloud-based streaming platform would protect it from having to scramble and make on-premises upgrades. 

Conclusion

The VOD landscape is evolving. Leveraging cloud-based video streaming platforms, service providers can deliver on-demand content at scale. Cloud-native platforms, in particular, help to optimize file storage and reduce video buffering to ensure high-quality streaming experiences. With a cloud-based streaming platform service providers are empowered to support targeted advertising and FAST channels for increased business growth.

[Editor's Note: This is a contributed article from Harmonic. Streaming Media accepts vendor bylines based solely on their value to our readers.]

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