Technology abiogenesis is a rarity in the digital media industry. Although the industry’s rate of technology development may seem swift, video solutions obey – and evolve in accordance with – incremental, predictable processes. In order to think clearly about the next decade of video solutions, we need not engage in unfounded speculation, or ruminate on discontinuous, nigh-unforeseeable step changes that may or may not occur.
The 2030 video UX industry will be defined by four antecedents. One, the market for single-purpose, managed video hardware is contracting. Two, technology value is shifting to software. Three, demand for measurement and analytics solutions is ballooning. Four, the importance of content brands, and content sources, is dwindling. We explore these antecedents – and what they will mean for video technology vendors – below.
The OEM set-top business as we know it will disappear
The video industry has prognosticated the set-top’s demise for the past decade. The logic revolves around the simplistic but erroneous argument that the internet’s very existence – coupled with reliance upon broadband-based distribution – obviates the need for managed, broadcast devices.
Broadband penetration is high across many markets, but penetration rate alone is not a condition sufficient to relegate set-tops to the junk heap. Operators continue to ship boxes not because they adore them, but because they must. Connected video devices, fixed and mobile, abound. Big-screened, connected living room devices do not.
By 2030, most households will contain a large-screened device capable of accessing an Android, tvOS or Roku software platform. Operating system flavors and nomenclature may well – and likely will – change. Any such changes will be totally orthogonal to device strategy. The penetration rate of large-screened, connected media devices will brush arbitrarily close to 1, and bring-your-own-device models will become reality. Dedicated set-tops – essential today as reach-extension and service-uniformity mechanisms – will lose their utility.
Value will shift to software…but not in the way we might imagine prima-facie
Absent dedicated, single-purpose, managed video hardware, we might naively assume that the set-top based experience – a compelling UI; an operator-branded UX; a tiled matrix of video assets – will simply and transparently be mapped onto an app. Two, we might assume that today’s middleware vendors – the hegemons of set-top software – will be well-placed to define and develop this app-based experience.
We believe the latter assumptions to be tenuous. The market for, and value of, traditional UI software is built upon two features of the media industry. One, many sellers exist. Most markets or territories contain a high volume of channels, aggregators, operators, or subscription new-entrants. Two, those sellers maintain a direct relationship with viewers. Virtually every media service in existence today requires its own app and proprietary UI, and these apps co-exist as numerous, independent island-universes that connect the viewer with a single, direct source of content: the seller’s.
What happens if content source ceases to matter, and branded bundles of content – Netflix; Comcast Xfinity; Disney+, Hulu – become near-brandless menu items within a super-aggregation platform? The process of source abstraction has in fact already begun. The AppleTV+ service integrates Hulu, Amazon Prime, ESPN+, CBS All Access, AT&T TV, HBO, and Showtime content, and exposes this content via generic headers such as Movies, TV Shows, or Sports. Sky is now integrating Netflix and Disney+ programming. For all but the very largest players, these super-aggregation strategies muddy content provenance, have the potential to curtail the addressable set of firms who require a proprietary UI, and repudiate the notion that consumers should or need care about a value chain comprising creators, licensees, distribution, and, ultimately, independent brands.
Today’s multitude of branded, proprietary apps will give way to a more circumscribed ensemble of portals and super-aggregation platforms where search and discoverability – and not the ability to skin a beautiful program guide or UI – will be paramount. Technology value, consequently, will shift away from current UI incumbents, and toward two classes of firms: metadata providers; discovery and recommendation specialists.
Presently, metadata and discovery vendors have positioned themselves as ecosystem partners to the UI and software incumbents who define a media service’s overarching UX, and app experience. In 2030, successful metadata and discovery vendors will be those whose technology is prepared to be the UX. This shift – from browsing, to implicit recommendation and immediate discoverability – will almost certainly require vendors to adopt, and apply, AI and ML technologies in novel ways. Given these technologies’ low adoption across the current landscape – encompassing the Nielsen, Red Bee, Tivo, and ThinkAnalytics of the world – the segment is ripe for competitive upheaval.
Software and UI incumbents will execute a pivot…that in fact has already begun
As value shifts toward discoverability, what then of our set-top software and UI incumbents? In arguing that super-aggregation will seriously perturb operator and D2C models, we do not wish to suggest that the operator-led, video aggregation and video distribution business will implode in its entirety. Indeed, the world’s largest players – those who are technology driven; those who can afford to secure content exclusivity – are well positioned to play a new aggregation game. Small to mid-tier players are not. Although the latter operators are likely to continue to assemble content bundles – and expose these bundles through others’ portals – demand for proprietary apps, UIs, and software integration will necessarily contract. This contraction will force many vendors to look for new sources of revenue.
Thankfully, opportunity abounds. In 2030, the digital media industry will require, to an ever-greater degree, content security, predictive business intelligence, and monetization solutions. Short of acquiring a metadata or discovery provider – a very real possibility – the latter segments will nonetheless offer a large addressable market.
The goliaths of pay TV technology have already begun to invest in a breadth of security, intelligence, and monetization products. Be it Synamedia or Nagra, both firms have augmented their encryption-based security solutions with a range of sophisticated anti-piracy and monitoring services that, while video-centric, hint at ambitions to move into the adjacent, operational security space itself.
It is worth revisiting why analytics, business intelligence, and monetization solutions will be so critical within a 2030 time horizon. In a world defined by aggregation, we anticipate that the cost of assembling a unique, multi-source, source-abstracted bundle will be astronomical. Over the past few years, content and programming spend has increased markedly, and eviscerated margins concomitantly. We expect this digital media cost dynamic to persist over the coming decade. Media firms only have – and will only continue to have – two forms of recourse. One, sell more subscriptions. Two, figure out a means of generating a significant, ancillary revenue stream.
The first strategy – sell subscriptions – is not a panacea. Many consumers are likely to be repulsed by the entry-price of a full, multi-source bundle. There may exist another way. To the extent that media firms understand who their viewers are, what they watch, and how much they watch, we believe the 2030 super-bundle will not be monolithic, but will be segmented into genre, theme, or even consumption-based subscription tranches. Targeted packaging, much like advertising, is and will be impossible in the absence of analytics, audience measurement, and business intelligence platforms.
The second strategy – generate ancillary revenue – simply and transparently relates to the first. In lieu of placing audience measurement and audience definition into separate technology silos – one for packaging; one for advertising – we maintain that all forms of monetization and revenue generation will rely upon a single, common backend.In addition to security, it is this intelligent backend that our technology goliaths have already begun to explore, and productize. We are equally certain that the digital media, business-intelligence opportunity is not lost on the Amazon AWS, Google Cloud, and Microsoft Azure’s of the world…all of whom have considerable prowess in data processing, prediction, and large-scale computation.