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In August of last year, I detailed how some OTT services were starting to optimize their encoding bitrates by reducing some of their top-rungs in their bitrate ladders, utilizing better HEVC compression and other tactics in an effort to save money. Nearly a year later this trend has taken hold across the industry with many streaming services having cut by 25-30% of the total number of bits they were previously delivering. In some cases, the largest streaming services tell me they are saving tens of millions of dollars this year on cloud encoding, storage and delivery costs, compared to their 2022 spend. This trend is only going to continue in 2023 and into 2024 as streaming services focus on profitability and rationalizing spending across their entire video workflow. Disney recently published a blog post on how Disney+Hotstar expedited 4K transcoding by 2-4 times, quadrupling their capacity, and reducing their network storage by 80%, while cutting computing costs by 10–15%.

Compounding the problem for vendors that sell to OTT services is the fact that there is little consumer demand for 4K video. Many inside the industry continue to push the 4K narrative, but consumers are not demanding 4K and in many cases, are not willing to pay more for it. As one executive at a large streaming service recently told me, there are “diminishing returns to offer 4K, even for sports”. YouTube has already confirmed that their broadcast of the NFL Sunday Ticket on YouTube TV later this year will not be in 4K. Amazon’s Thursday Night Football season wasn’t in 4K and Friday Night Baseball games on Apple TV+ are not in 4K either. These are important examples as the companies backing all of these live sporting events, Amazon, Google, and Apple, could all afford to do 4K if they wanted, but even they don’t see the value to their businesses.

Industry executives who still go around saying, “consumers expect 4K video,” or that, “users will churn if you don’t have a 4K option,” are completely disconnected from reality and living in a business world that does not exist. If this blog post sounds familiar to you it’s because I have been talking about the problems with the cost of 4K on the entire video workflow for a long time. In 2014 I did a blog post entitled, “The Dirty Little Secret About 4K Streaming: Content Owners Can’t Afford The Bandwidth Costs,” and that hasn’t changed.

Netflix, Max, YouTube TV and some other OTT services charge a premium for 4K video and in the case of Netflix, they even charge more for 1080p with 720p being the default video quality with their $10 a month plan. Consumers vote with their wallet and decide what level of video quality they want, the streaming industry doesn’t decide that for them. We recently got an interesting data point from Netflix saying, “on average, more than a quarter of Netflix sign ups now choose the ads plan in countries where it’s available.” That’s an important number to keep an eye on over the next few quarters since their AVOD plan maxes out at 1080p.

For vendors that were relying on 4K video quality to grow their revenue, betting that OTT services would need more cloud encoding, storage, video delivery, and computing, they have lost that bet. Companies that bet big on 4K have lost. Last year, many vendors had little to no year-over-year revenue growth, with some even being negative for the year. The lack of 4K adoption in the market is not the only reason for low or negative revenue growth, but it had a big impact. The market for consumer streaming services needing 4K video quality at scale, simply isn’t there and is not coming. At the NAB Show this year, you could even see that realization on the show floor with fewer vendors pitching 4K or 8K proof-of-concept demos. This year was all about doing more with less and the optimization of the current video workflow.

The reality is that today, HD streams, especially with HDR, look so good that many consumers can’t tell the difference between HD/HDR and 4K. And for those that do, many simply don’t see it as a big enough feature to pay for it. Streaming services work very hard to provide a good user experience across so many different apps, devices, platforms, and last-mile ISP issues, that offering a 4K option only increases the chances of a poor consumer experience. All streaming services are trying to deliver the best possible experience across the lowest common denominator.

Going into 2024 will be no different, with content owners large and small telling me how much they will continue to reduce costs from their video pipeline going forward. Many vendors need to make some immediate changes to their business models and cutting headcount alone won’t be enough. Some are doing more than that, but others are still putting out CAGRs (Compound Annual Growth Rate) and TAMs (Total Addressable Market) in the industry that are 100% false and wasting time with press releases that mean nothing with regard to the growth of their business. Doing more vendor-to-vendor partner deals is not what’s needed in the market right now and is not where the revenue growth is going to come from. Vendors need to think about how they repackage and price their services, how customers want to buy them, deploy them and the best approach to selling in the market. You have to know what the customer’s problem is and how you can solve for it. Any other approach is a lost cause.

Podcast Episode 60 is live! This week we discuss the recent increase in Netflix’s stock price which hit a 52-week high, all based on “assumptions” in new sign-ups based on four-day’s worth of data from third-party firm Antenna. We also question if YouTube TV is cracking down on password sharing ahead of NFL Sunday Ticket, with more users reporting pop-up messages reminding them that they need to return to their home location. We discuss how Telly, the company that plans to give away a dual-screen TV for free, has the ability to deactivate the TV if consumers don’t use the TV as they want them to. Finally, we detail the launch of a new commercial CDN offering from Orange, for CDN services within France specifically.

Companies and services mentioned: Netflix, Amazon, Disney, Orange, IPL, Antenna, YouTube TV, NFL Sunday Ticket, Telly, Vizio, Vimeo, Edgio.

Orange has launched a new commercial CDN offering in France and is now selling content delivery services for live and on-demand video, software downloads and dynamic content. In a briefing with the product team, the company tells me their underlying CDN software is from Gcore and that Orange has twelve POPs in France with a total CDN capacity of 5 Tbps, supporting both unicast and multicast delivery.

With all the POPs inside Orange’s network, the company sees their CDN offering as a “premium” service, with their value proposition being a guaranteed level of capacity on a network they own and operate. Their go-to-market strategy is to focus on customers who want a higher level of QoS in the country as opposed to competing on price or trying to undercut other CDNs to win business. The company also plans to be flexible on their pricing models offering flat per subscriber pricing for OTT services in addition to the standard per GB delivered and per Mbps sustained models.

Phase two of Orange’s CDN deployment will be rolling out in Africa and the Middle East with the company suggesting they could grow total capacity in France to 10 Tbps by the end of the year. As of now, the Orange website doesn’t have any product page or details about their new CDN offering but the company says they will have more details to share around the IBC show in September. With a total capacity today of 5 Tbps in France, Orange won’t be displacing any competitive CDNs but they could be looked at as another CDN option for large customers using a multi-CDN approach or for smaller customers who don’t need as much capacity.

Orange isn’t the first telecom operator or network carrier to offer commercial CDN services in a specific country as a regional offering. More than a dozen years ago, many telcos and carriers around the world were offering commercial CDN services by way of a LCDN (Licensed CDN) or MCDN (Managed CDN) approach. (see this post from 2017 for a list of telco and carrier based CDN deployments) Telcos as large as AT&T, Telefonica, Deutsche Telekom, Korea Telecom and others were all in the commercial CDN business wanting to compete with the likes of Akamai and others.

In 2011, some carriers got together to discuss the idea of federating their services into one offering, via something they called the OCX (Operator Carrier Exchange), in an effort to bypass commercial CDNs. While on paper it seemed like a good idea, in reality, it didn’t make any sense from an operational standpoint and the idea never got off the ground. Most telcos and carriers shut down their own commercial CDN offerings a long time ago when they realized the market opportunity for CDNs services wasn’t as large as they thought and realized they could not compete with dedicated CDN providers. Many carriers re-purposed the CDNs they built to handle traffic from their own video services internally across their network and a large portion of carriers, like AT&T, started reselling Akamai. This is the model by which most telcos are operating today, reselling a third-party CDN platform or not offering CDN services of any kind commercially.

Last month, Ron DeSantis took to Twitter Spaces announcing he was running for President, via a live audio only stream. Not surprisingly, the Twitter platform had technical issues that impacted the event proving that Twitter is not a stable platform for large-scale broadcasting.

For nearly 30-minutes, Twitter couldn’t get the audio stream to work with about 600,000 users waiting for it to start. There was a host of issues reported by users including with the Twitter app on phones, with some users saying it only worked in a browser. When it did get underway, the stream peaked at 257,831 simultaneous users in David Sacks main space and when combined with Elon and DeSantis’ spaces, concurrent listeners peaked at “over half a million“, according to Twitter. Elon Musk suggested the technical problems were due to the fact that so many people showed up to listen to the stream and that they, “broke the internet”, which is laughable. Twitter didn’t break the Internet, it simply broke Twitter, without a lot of traffic, showcasing just how poorly their platform scales. Twitter also called it, “the largest-ever social media gathering”, and that the size of their audience was “staggering”, but neither of those are accurate.

David Sacks who moderated the audio event and has some sort of technical role with Elon Musk, tried downplaying the technical problems saying, “we got so many people here that we are kind of melting the servers, which is a good sign.” A good sign? If all it takes is 6000,000 users trying to listen to a low-bitrate audio stream on Twitter to “melt their servers”, it shows just how poorly the Twitter platform performs. A low-bitrate, audio only stream is as easy as it gets. Last week, Jio announced they hit 32 million simultaneous users for video, for IPL and I’ve learned the bitrate was around 1Mbps.

After the event, some current Twitter employees told me that there was no pre-planning for the event, no stress test done and no contingency plan in place if there were technical issues. None of this is surprising since Twitter laid off so many employees tied to their infrastructure and those responsible for their servers, cloud services, storage, etc. The decision to do a live audio only stream also makes you wonder why video wasn’t used? There is no better medium for storytelling than video, so I find it odd there was no video option. Post-event, Twitter said, “Ron DeSantis’ presidential campaign announcement proved to be a tremendous success,” and Twitter is still spinning that narrative two weeks later.

Podcast Episode 59 is live! This week we discuss the Netflix password sharing notifications that have started rolling out in 103 countries and territories and the challenges users are having in understanding how Netflix will enforce the rules and what exactly classifies as a violation. We also detail the roll out of Max, with less than .1% of HBO Max accounts having technical issues and highlight some new details from YouTube TV around NFL Sunday Ticket regarding simultaneous stream counts, multiview and video quality. We also breakdown the laughable comments by Elon Musk and others at Twitter who suggested they “broke the internet” and “melted their servers”, due to 600,000 users trying to stream live the audio of Ron DeSantis announcing his 2024 presidential bid on Twitter Spaces.

Companies and services mentioned: Netflix, Disney, Twitter, Max, YouTube TV, Warner Bros. Discovery, HBO Max, AOM, Beamr.

Netflix announced that password sharing notifications started rolling out in the US, Europe, Asia, New Zealand, Australia, and Middle East (103 countries and territories total) for members of their standard and premium plans (without ads), but with some changes on how they have done it in other countries. As expected, an account is only allowed to be shared with individuals living in the same “household”. You can add another member for $7.99 a month per person (US) and the extra member (1 or 2 max depending on account type) must be activated in the same country where the account owner created their account.

But unlike the password sharing rollout in New Zealand, Canada, Portugal and Spain, I don’t see Netflix asking US users to set a “primary location” for their account. See my post on that roll out here: “Netflix’s New Account Sharing Rules Are a Mess With Confusing, Incomplete and Conflicting Information.”

It’s unknown how Netflix plans to enforce the restriction of password sharing with members who don’t pay to add new users to their account. It is interesting to note they are not giving users a pop-up message telling them to set a physical default location, like they implemented for users in New Zealand, Canada, Portugal and Spain. In those regions, Netflix said that if they, “detect persistent use of a device outside of the primary account owner’s household, we may ask them to verify that device before it can be used to watch Netflix.” Netflix said that members that trigger this alert will have to sign into their account and verify the device based on a, “verification code sent to the account owner email address”. It’s not clear if that’s how they plan to enforce password sharing in these new locations, but I would expect to see some sort of verification required.

During Netflix’s Q1 2023 earnings results, the company briefly discussed their paid sharing policies, which went into effect in New Zealand, Canada, Portugal and Spain in February. Although the company acknowledged there was an initial cancel reaction in Canada and the other markets, they said that churn was quickly offset, but didn’t give out any numbers on churn or cancellations. It should also be noted that the new rules rolled out about six week before the end of Netflix’s Q1 2023 quarter, so not enough time had gone by for them to truly see what the short or long-term impact might be, good or bad on their business.

As of the writing of this post, I have not gotten my notification email from Netflix as of yet nor do I see many on Twitter talking about the changes. But it’s coming and there is going to be quite the backlash online. Short-term, Netflix will take a hit with some cancellations but long-term, it’s possible they make more money by cracking down on account sharing. It’s something wall street and everyone else in the industry will be closely watching over the next few quarters.

Podcast Episode 58 is live! This week I discuss the technical issues that YouTube TV, Apple TV and Netflix all had in the past 30-days with a live event/stream on their platform. I also break down all the key numbers from Disney’s earnings including the 3.8 million sequential decline of Disney+ Hotstar subs, their comments that the price increase for Disney+ without ads had no meaningful negative impact on churn, and the latest non-news on ESPN going DTC. Also highlighted are comments from FOX’s CEO on why they don’t have a D2C sports offering and Netflix’s announcement that their ad-supported plan has nearly 5M monthly active users globally.

Companies and services mentioned: Netflix, Disney, ESPN, Hulu, Peacock, NFL, IPL, FOX, Apple TV, YouTube TV, MLS Season Pass.