Eric Black, CTO, General Manager of Media, Edgio
The current economic situation has meant many viewers are looking carefully at how much they’re spending on subscriptions, which has a knock-on effect on the whole industry. At the same time, media companies are facing an increase in the cost of creating content. These challenges are forcing them to re-align their business models to prevent operating spend and maximize average revenue per user (ARPU); the latter leading to experimentation around varied monetization methods, such as subscriptions, ad-funded, free ad-supported TV (FAST) syndication methods and in many cases a hybrid approach. They must also identify any optimizations in their technology stack to find cost savings for the escalating cost of buying or creating high-value content and drive cashflow-positive business models in a rapidly evolving landscape.
In recent years, it has been fairly common practice for the industry’s largest organizations to have their tech in-house to capitalize on the “streaming wars”. However, we are now at a stage where delivering a best-in-class experience to viewers is becoming increasingly complex and costly. To create greater efficiencies in their technology while remaining competitive, many media companies are turning increasingly towards third-party vendors. In this article, I’ll explain why.
Flexibility vs. complexity
Flexibility is essential in today’s market. The current economic climate means audiences may not be willing to pay for multiple subscriptions; as such, media companies are experimenting to find the best way to deliver and monetize their content both on 1st and 3rd party platforms. There’s no one-size-fits-all approach as each streaming service has its distinct audience and priorities – and must try out different options to find its winning strategy for growth and ARPU.
Some may need to offer tiered subscription/advertising models; others may need to utilize FAST channels; others may charge more for premium features, like 4k or Dolby Atmos. Technology never stands still, and with the challenges of multi-platform support, budget restrictions, and changing audience demands adding to the difficult economic landscape, flexibility is key. The market is evolving so quickly that media companies must have flexibility built into their tech stack from day one to adjust strategies at short notice. A benefit of outsourcing some of these functions is that it’s the job of partner specialists to anticipate changing demands, operating efficiency, feature functionality and prepare for this – and pick up the associated cost, which can be spread across several of the vendor’s customers instead of one media company going it alone and absorbing all the cost.
Time-to-market is business-critical
Another benefit of outsourcing specific technology is that partner specialists can offer a quicker time to market leveraging technology investments already made, which, in business terms, is crucial for securing audience and revenues. With a partner vendor, the baseline tooling already exists, and the expertise is there to customize, deploy and manage it. The in-house route requires engineers to build a lot of technology from scratch, which takes time and tends to result in delays and overspending. For media companies looking to establish themselves in the streaming market, time-to-market is critical.
Best in breed technology
Leveraging partner technology in your digital workflow adds a best in breed approach to technical deployment. Learning from a larger pool of client workflow is integrated into “world class” solutions that add to cost efficiency, higher level of reliability and increased resiliency. Taking advantage of open frameworks to identify the proper technical solutions that are fit for purpose has proven in countless software deployments spanning multiple industries to deliver better customer results than bespoke build. Identification of what IP should be owned vs partnered on will be a critical decision OTT providers will continue to re-evaluate as we continue to evolve as an industry.
Media companies as an SI
Even if streaming technology is built in-house, media companies with largely owned tech will likely be stronger in some areas than others. Larger firms with big engineering teams will act as a system integrator (SI) for the full end to end technical stack. Advantages exist for external thought leadership from trusted partners and SI’s to help optimize not only 1st but 3rd party workflow and technical integrations based on all aspects of the technical and revenue equation.
Others need a larger relationship with a trusted partner to take on the SI role and provide a complete end-to-end solution based on existing upstream systems and workflow. In both cases, flexibility is essential to allow variation in revenue strategy over the long term. With trustworthy partners in place, media companies can remove all of the technology headaches and help their operators sleep at night. These partners must provide flexibility and operational robustness in equal measure by having effective and efficient technology that will support their customers’ goals, allow them to focus on what they do best – great content – and enhance their brand.
Taking the next steps
After weighing up the factors of the buy vs. build approach, media companies are in an ideal position to mitigate the hurdles they are facing today. Ultimately, media companies must decide what they think is the best approach for their audience and their business and the most effective way of delivering it. With the right strategy in place, there is every reason to believe streaming services can navigate short-term economic pains and be successful over the long term.