The Challenges of the New Broadcast Economy: The Changing Approach to Live Production, Networking, and Streaming
Fundamental shifts in consumer behavior are driving content creators to cater to an increasingly fragmented audience with their approaches to both live and on-demand content. Not only are these shifts presenting significant challenges to the established broadcasters and the developers that supply them with video workflow solutions, but they are also opening up opportunities for new broadcasters and new solution providers to enter into the market.
In this post, the first in a new series exploring how the broadcast industry is evolving, we are going to explore the new economic realities of broadcast, how new players are thriving in this new world, and how traditional broadcast players will need to evolve to stay relevant.
New Economic Realities for Broadcast
There are three principal trends that are signaling the new economic realities to which the broadcast world must adapt: more households are “cutting the cord,” audience sizes are shrinking, and live streaming platforms continue to expand their reach.
More consumers are choosing to cut the cord, abandoning traditional pay TV (cable, satellite, and telecom TV providers). According to the latest research conducted by eMarketer, the number of US households with cable, satellite, or telecom TV packages has dropped 7.5% year-over-year, the biggest such drop ever. Furthermore, that total is down 22.8% from pay TV’s peak in 2014. By the end of 2024, fewer than half of US households will subscribe to a pay TV service. Conversely, 80% of US consumers have at least one paid streaming video subscription to a service such as Netflix, Hulu, or Amazon Prime Video. (Deloitte: Digital Media Trends)
Audiences are also shrinking, and nowhere is that more apparent than in the world of live sports. While it is doubtless that the COVID-19 pandemic is at least partially responsible for some of the shrinkage in live sports viewership, there are many who believe that this is an acceleration of a trend, as opposed to an anomaly. To quote a recent Washington Post headline: “Sports has a Gen Z problem. The pandemic may accelerate it.” Younger audiences are changing not only how they watch sports, but what sports they like, as esports viewership has continued to grow over the last year, helping to fuel the rise of live streaming platforms like Twitch, which has seen a 50% growth in viewing time over the COVID-19 pandemic.
Audiences, especially Millennials and Generation Z, aren’t abandoning live content – they’re simply changing how they’re watching. Younger people are nearly 62% more likely to not watch terrestrial TV at all; 17.3% say they didn’t watch any during the week of the survey versus only 10.7% of those aged 41-66 according to data from Attest’s US Media Consumption Report 2020. Many Millennials and Gen Z’s are instead turning to live stream platforms such as Twitch, YouTube Live, and Facebook Live. According to StreamElements and Arsenal.gg, while there were gains across the board, they weren’t distributed evenly. Twitch – the biggest live-streaming platform – reached a viewership milestone in October 2020, with more 1.6 billion hours watched, that’s 99% year-over-year growth.
New Production Realities for Broadcast
Audiences are changing – live events remain popular, but more live events are receiving fewer viewers per event. Everyone in the broadcast world, from broadcasters, the talent that brings shows to air, to vendors, needs to adapt to these new economic realities.
To do this, costs need to be aligned to accommodate declining per-event revenues and operations need to become flexible for scalability. There are three main areas in which these changes must take place:
Contribution: Per-event costs need to be minimized through rapidly adopting remote production techniques that leverage low-cost live connectivity. Traditional approaches to event coverage, with large on-site OB production vans and teams of staff, are simply no longer sustainable as the number of events continues to grow, and the number of viewers per event continues to shrink.
Production: Broadcasters must also be able to scale production to match new broadcast economics. Cloud-based production solutions are designed to be scalable, according to demand, and enable workforces to be flexible, allowing them to work virtually from anywhere. Older methods of scaling production, like adding production suites to facilities, is simply no longer feasible. Broadcasters everywhere are shifting their operational focus from capital expenses to operational expenses.
Delivery: The cost of OTT delivery in the new broadcast economy is by its very nature variable based on consumption bandwidth. However, new network delivery technologies are becoming available to reduce the cost of and optimize delivery through techniques such as multi-CDN optimization and peer to peer frameworks. Broadcasters today also have a close eye on maximizing revenues of smaller broadcasts through very targeted digital ad insertion.
These realities of the new broadcast economy are stretching both traditional broadcasters and solution providers into areas that they are not fully comfortable with and creating market opening for “new world” broadcasters and solutions to enter into, and further transform, the market.
The Race Between New World and Traditional Broadcasters
Technology is constantly evolving, and recent innovations in live IP video and cloud workflows are helping bring down barriers. With these barriers gone, new business models can emerge for providing coverage of live events of any kind – even events that traditionally wouldn’t attract a large enough audience to justify costs associated with producing the content.
Traditional broadcasters were often challenged by their own cost and distribution model, making smaller 2nd or 3rd tier events cost-prohibitive to cover. But new entrants into the market are nimble and unconstrained by their existing investments in big iron tech. They can leverage flexible software solutions, worldwide OTT delivery, and metered-based pricing that makes covering even smaller events with hyper-local, niche audiences economically viable. And with the rapid rate of technology innovation that is democratizing live broadcast workflows, the new broadcasters are poised to grow quickly and potentially begin competing with the traditional broadcasters when covering higher-value content.
However, the traditional broadcasters are not resting on their laurels. They have extensive knowledge in broadcasting high-quality content for the world’s most prestigious events. Their experience in traditional workflows and distribution channels, plus their access to resources and large audiences, means they can experiment with the latest technology innovations and eventually expand what they cover in an effort to satisfy the ever-growing appetite for live content and win the battle for eyeballs. It will be a battle.
The Emergence of New Broadcast Solution Providers
The need for live IP video workflows is driving innovation led by new technology solution providers – most notably a new group of smaller, nimble companies who are enabling broadcast workflows through the use of cloud technology.
These companies are unhindered by legacy SDI video-based products and can simply focus on innovations that address pure IP and cloud workflows, not only for distribution and delivery of live video, but increasingly to address live contribution and production workflows.
These new technology companies are disrupting traditional broadcast workflows and are providing easy to use solutions that may not yet be as robust as existing legacy, big iron systems. However, the new cloud services offer a significantly lower barrier to entry with consumption-based pricing models and minimal capital expenditures to get started, and technology-wise are addressing enough problems to appeal to a new breed of broadcasters – notably companies with niche viewership or younger demographics that only consume content online.
Embracing the Future of Broadcast Solutions
It is increasingly clear that the current economic trends in broadcast aren’t an anomaly – they’re the future. And the broadcast solutions providers that have emerged in the face of this new world, like Haivision, are not only prepared for this future – they’re helping to shape it.
It is also clear that broadcasters, both new and old are embracing this future and adapting to the new economic realities of the industry. Because if they don’t embrace the future, they will be left in the past.