11.1 Streaming technology and business models
5 min read•july 30, 2024
Streaming technology has revolutionized how we consume TV and movies. From faster internet to smarter compression, these advancements have made it possible to watch high-quality video anytime, anywhere. The rise of adaptive streaming and cloud computing has further improved the viewing experience.
Streaming business models have evolved to meet diverse consumer needs. Subscription services like offer unlimited access, while ad-supported platforms provide free content. Live TV streaming and hybrid models combine elements of traditional and new media, reshaping how we engage with television.
Streaming technology advancements
Internet infrastructure and video compression
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- Broadband internet infrastructure development facilitated transmission of large video files
- Fiber-optic networks increased data transfer speeds
- High-speed wireless technologies (4G, 5G) enabled mobile streaming
- Video compression algorithms reduced file sizes while maintaining quality
- H.264 codec decreased requirements by up to 50%
- HEVC (H.265) further improved compression efficiency by 25-50%
- Content Delivery Networks distributed video across multiple servers
- Reduced latency and improved streaming quality for geographically dispersed users
- Major CDN providers (Akamai, Cloudflare) optimized content delivery
Adaptive streaming and cloud computing
- Adaptive bitrate streaming adjusted video quality based on connection and device
- Dynamically switched between different quality levels (240p, 480p, 720p, 1080p)
- Reduced buffering and improved user experience on varying network conditions
- Cloud computing advancements provided scalable infrastructure
- Amazon Web Services, Microsoft Azure offered flexible storage and processing power
- Enabled on-demand access to vast libraries of video content
- Smart devices created diverse ecosystem for high-quality video streaming
- Smartphones, tablets, smart TVs supported various streaming apps and protocols
- Game consoles (PlayStation, Xbox) integrated streaming capabilities
Digital rights management and user experience
- Digital rights management technologies enabled secure distribution of copyrighted material
- Widevine, PlayReady, FairPlay protected content from unauthorized access
- Allowed content providers to enforce licensing agreements across platforms
- and experience improvements enhanced streaming adoption
- Intuitive navigation and search functionality
- Personalized recommendations based on viewing history
- Cross-platform synchronization allowed seamless viewing across devices
- Resume playback feature maintained viewing progress across multiple devices
- Cloud-based user profiles stored preferences and watchlists
Streaming business models
Subscription-based models
- Subscription Video on Demand offered unlimited access for recurring fee
- Netflix provided ad-free streaming of entire content library
- focused on exclusive franchise content (Marvel, Star Wars)
- Tiered subscription plans catered to different user preferences
- Basic plans with limited features or lower video quality
- Premium plans with 4K streaming, multiple simultaneous streams
- Niche streaming services targeted specific genres or demographics
- Crunchyroll specialized in anime content
- BritBox focused on British television programs
Ad-supported and transactional models
- Advertising-based Video on Demand provided free content with advertisements
- Tubi offered large library of movies and TV shows with periodic ad breaks
- Pluto TV combined with linear-style channels
- Transactional Video on Demand allowed purchase or rental of individual titles
- iTunes enabled users to buy or rent movies and TV episodes
- Google Play provided similar functionality for Android devices
- Hybrid models combined elements of and AVOD
- Hulu offered ad-supported tier and ad-free premium tier
- Peacock provided free ad-supported tier, premium tier with limited ads, and ad-free tier
Live TV and freemium models
- Live TV streaming services provided access to linear television channels
- YouTube TV offered cloud DVR functionality and live sports coverage
- Sling TV provided flexible channel packages at lower cost than traditional cable
- Freemium models offered basic content for free with premium paid options
- YouTube provided free ad-supported videos with Premium subscription for ad-free viewing
- Spotify offered free music streaming with ads, Premium tier for ad-free listening and offline playback
Streaming impact on viewing habits
Binge-watching and on-demand access
- behavior became prevalent among streaming users
- Netflix released entire seasons simultaneously, encouraging marathon viewing sessions
- Viewers consumed multiple episodes or entire seasons in single sittings
- On-demand access shifted viewing patterns away from scheduled programming
- Users watched content at their convenience rather than adhering to broadcast schedules
- Time-shifting through cloud DVR services reduced importance of live viewing
- Personalization algorithms influenced viewer choices and content discovery
- Netflix's recommendation system accounted for 80% of content watched on the platform
- AI-driven suggestions based on viewing history and user preferences
Multi-device viewing and global content
- Multi-device viewing became common among streaming users
- Viewers expected seamless experiences across smartphones, tablets, smart TVs, and computers
- Cross-device synchronization allowed users to start on one device and continue on another
- Global content accessibility exposed viewers to international programming
- Netflix invested in local content production in various countries (Money Heist, Dark)
- Increased demand for diverse and multilingual content
- Short-form content platforms influenced attention spans and preferences
- TikTok's rapid growth demonstrated appetite for bite-sized video content
- Traditional streaming services experimented with shorter formats (Quibi, YouTube Shorts)
Social viewing and interactive content
- Social viewing experiences emerged in streaming platforms
- Netflix Party (now Teleparty) enabled synchronized viewing with chat functionality
- Twitch popularized live streaming with real-time audience interaction
- Interactive content blurred lines between passive viewing and active engagement
- Black Mirror: Bandersnatch allowed viewers to make choices affecting the story
- Trivia games and choose-your-own-adventure formats gained popularity
Streaming model sustainability
Content costs and market saturation
- Content production and acquisition costs rose dramatically
- Netflix spent $17 billion on content in 2020
- Disney+ invested heavily in original programming for Marvel and Star Wars franchises
- Market saturation and subscription fatigue emerged as concerns
- Average U.S. household subscribed to 3-4 streaming services in 2021
- Churn rates increased as users rotated between services for specific content
- AVOD models faced challenges balancing ad load with user experience
- Optimal ad frequency debated (e.g., 4-5 minutes per hour vs. traditional TV's 16 minutes)
- Competition with traditional television for advertising budgets intensified
Niche services and hybrid models
- Sustainability of niche streaming services depended on loyal subscriber base
- Crunchyroll maintained over 3 million subscribers by focusing on anime fans
- Shudder carved out horror niche with curated content and original productions
- Hybrid models combining subscription and advertising showed promise
- Hulu's tiered system provided flexibility for users and diverse revenue streams
- HBO Max planned ad-supported tier to complement premium offering
- Vertical integration became strategy for ensuring content supply
- Disney acquired 21st Century Fox to bolster content library for Disney+
- WarnerMedia merged with Discovery to create content powerhouse for HBO Max
Live TV streaming and technological advancements
- Long-term viability of live TV streaming tied to content deals and differentiation
- YouTube TV and Hulu + Live TV competed with traditional cable by offering cloud DVR and flexible packages
- Sports rights remained crucial for attracting and retaining subscribers
- Technological advancements continued to shape streaming landscape
- 5G networks promised to improve mobile streaming quality and reduce latency
- AI and machine learning enhanced content recommendations and user experiences
- Data analytics played increasing role in content production decisions
- Netflix used viewing data to inform development of original series and films
- Streaming platforms leveraged user behavior insights for targeted content acquisition
Key Terms to Review (19)
Ad-supported model: An ad-supported model is a business framework where content, typically in the form of television programming or streaming services, is offered to consumers for free or at a reduced cost in exchange for the inclusion of advertisements. This model generates revenue primarily from advertisers seeking to reach audiences, creating a dynamic interplay between content creation and advertising strategies.
AVOD: AVOD stands for Advertising-Based Video On Demand, a streaming model that allows users to access video content for free while being served advertisements during or before the content. This model is designed to attract a large audience since there is no subscription fee, and it monetizes the service through ad revenue. AVOD is popular among platforms aiming to provide extensive content libraries without charging viewers directly.
Bandwidth: Bandwidth refers to the maximum data transfer rate of a network or internet connection, indicating how much information can be transmitted over a given time period. In the context of streaming technology, sufficient bandwidth is crucial for delivering high-quality video and audio content without interruptions or buffering, impacting user experience and business models that rely on streaming services.
Binge-watching: Binge-watching refers to the practice of watching multiple episodes of a television show in one sitting, often facilitated by streaming platforms that allow for the seamless playback of episodes. This behavior has transformed viewing habits, leading to changes in how television is produced, distributed, and consumed across various platforms and formats.
Content curation: Content curation is the process of finding, organizing, and sharing relevant information or media on specific topics to create a meaningful narrative or resource for an audience. It involves selecting high-quality content from various sources, providing context, and presenting it in an engaging way to help users discover valuable insights. This practice has become crucial in the digital landscape, especially within streaming platforms that curate content to enhance user experience and drive engagement.
Copyright issues: Copyright issues refer to the legal complexities surrounding the ownership and usage rights of creative works, including television programs, films, music, and other forms of media. These issues are particularly significant in environments where content is shared or modified by users, raising questions about original creators' rights versus users' rights. As participatory culture thrives and streaming technologies evolve, understanding copyright becomes crucial for both creators and consumers in navigating legal frameworks.
Cord-cutting: Cord-cutting refers to the trend of viewers canceling their traditional cable or satellite TV subscriptions in favor of streaming services and other digital platforms. This shift is a response to changing consumer preferences for more flexible, on-demand viewing options and has significant implications for the television landscape, influencing how content is produced, distributed, and consumed.
Disney+: Disney+ is a subscription-based streaming service launched by The Walt Disney Company that offers a vast library of content, including movies and TV shows from Disney, Pixar, Marvel, Star Wars, and National Geographic. It serves as a major player in the streaming industry, reshaping how audiences consume entertainment and impacting both the traditional television landscape and the business models that govern streaming services.
Disruption: Disruption refers to a significant change that alters the way an industry operates, often leading to the decline or transformation of established companies and practices. In the context of streaming technology and business models, disruption is characterized by the emergence of new platforms that challenge traditional media consumption, distribution, and revenue structures, often reshaping audience behavior and industry standards.
Globalization of content: Globalization of content refers to the process by which media, entertainment, and information are produced, distributed, and consumed on a global scale, transcending national and cultural boundaries. This phenomenon has been significantly influenced by advancements in technology, particularly streaming platforms, which have enabled audiences worldwide to access diverse content. It represents not just the spread of cultural products but also the blending of local and global narratives, allowing for cross-cultural exchanges and hybrid forms of storytelling.
Market share: Market share refers to the percentage of an industry's sales that a particular company or brand controls over a specific period. It provides insight into the competitive landscape, indicating how well a company is performing compared to its rivals within the same sector. This metric is crucial for businesses, especially in industries like streaming, where competition for viewership and subscriber growth is intense.
Net Neutrality: Net neutrality is the principle that Internet service providers (ISPs) must treat all data on the Internet equally, without discriminating or charging differently by user, content, website, platform, application, or method of communication. This concept is crucial in maintaining a fair online environment, impacting the accessibility and distribution of digital content across various platforms.
Netflix: Netflix is a streaming service that offers a wide variety of award-winning TV shows, movies, anime, documentaries, and more on thousands of internet-connected devices. It has significantly influenced the way people consume media and interact with television, as it combines digital convergence, multi-platform content delivery, and original content production in a competitive landscape.
Recommendation algorithms: Recommendation algorithms are systems that analyze data to suggest content, products, or services to users based on their preferences and behavior. These algorithms utilize user interactions, preferences, and similarities with other users to personalize experiences, driving engagement and consumption in the realm of streaming technology and business models.
Streaming protocols: Streaming protocols are standardized methods used to deliver audio and video content over the internet, enabling real-time playback without needing to download the entire file first. They ensure smooth and efficient transmission of media by breaking the content into smaller packets, which can be sent over networks and reassembled for playback. Different protocols address various needs such as speed, quality, and adaptability to varying bandwidth conditions.
Subscription model: A subscription model is a business approach where consumers pay a recurring fee to gain access to a product or service, usually on a monthly or annual basis. This model creates a steady revenue stream for companies while providing users with ongoing access to content, making it particularly relevant in media industries like cable TV and streaming services.
SVOD: SVOD, or Subscription Video on Demand, is a streaming service model that allows users to access a library of video content for a recurring subscription fee. This model has gained popularity due to its convenience, providing users with unlimited access to a wide range of films and television shows without additional costs per title. SVOD services are often characterized by their ad-free experience and original content offerings, which set them apart from other video distribution models.
TVOD: TVOD, or Transactional Video on Demand, is a business model where consumers pay for individual pieces of content, such as movies or TV shows, instead of subscribing to a service. This approach allows users to rent or purchase specific titles for a limited time or permanently, catering to those who prefer flexibility over commitment. TVOD is significant as it complements other streaming models and addresses diverse consumer preferences in the digital content landscape.
User Interface: A user interface (UI) is the point of interaction between the user and a digital device or application, facilitating communication through visual elements, controls, and feedback mechanisms. In the context of streaming technology and business models, a well-designed UI enhances user experience, enabling seamless navigation, content discovery, and personalized viewing options that are crucial for engagement and retention in a competitive market.