The State of the Streaming Industry 2013

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As expected, there was a further increase in streaming video consumption in Europe in 2012. However, there were a number of interesting trends in both growth and the way in which content was consumed in the market, both of which were highlighted by comScore, Inc.'s Video Metrix.

The first trend was that Italy is now the fastest growing online video audience in the European Union 5 (EU5; France, Germany, Italy, Spain, and the U.K.) with 24 million Italians now watching an average of 144 videos per month, which meant the total audience grew by 27% year on year.

The growth in Italy was in sharp contrast with more developed markets in the EU5 such as Germany, where the total audience reached 46.9 million users but only showed growth of 2.3% year on year.

However, total engagement continues to grow sharply across all markets. For example, Germany saw an increase of 33.7% in the time spent watching video by the average user. As in other EU5 countries, the growth of video consumption on mobile devices goes from strength to strength showing a 70% increase on smartphones in Germany alone.

In Europe, Google sites continue to attract the biggest audiences of any platform with about 32 million unique video viewers per month in the U.K. and accounting for 90% of the online video audience in Italy. This is, of course, a continuation of the trend of Google sites remaining as the top online video properties in Europe and across the world.

In the U.K., YouTube demonstrated how significant it is even for those content generators who have their own channels and platforms. The BBC YouTube channel still attracts about 2.2 million unique views per month in the U.K. That's less than 20% of the audience of top-rated channel Vevo -- which has an audience of nearly 11.8 million -- but it's still significant when you consider this is on top of about 200 million content requests the BBC delivers through its iPlayer platform each month.

The London Olympics was the biggest streaming event of the year and will probably be viewed as the first true streaming Olympics, with its 24 HD streams of live content and hundreds of millions of views. It was pivotal in continuing to drive the growth of consumption and embedding streamed content as part of the average user's media experience.

Ooyala Expands Into Asia

In 2012, there was expected continued growth in both audience size and the amount of video consumed. This growth continued to support the three main online video platforms (OVPs) to raise further funding and, in the case of Brightcove, Inc., complete an IPO.

Ooyala, Inc. announced its series E round of funding, raising a further $35 million dollars with investors in this round including Telstra, Australia's largest telecommunications service provider.

A key focus for Ooyala was to continue expansion into Asia, which led to establishing a new hub in Singapore to house its regional digital broadcasting operations and services. As part of the deal, Ooyala is working with Telstra to integrate its streaming, monetisation, and discovery platform into Telstra's over-the-top offerings, and in turn Telstra will be attempting to standardise digital distribution and monetisation via the Ooyala platform with other media companies in Australia.

Ooyala Screen

In addition to its presence in Europe, Ooyala identified Asia as a target for further expansion. 

Jay Fulcher, president and CEO at Ooyala, said at the time of the deal, "Two years ago we identified the Asia-Pacific region as a strategically important business imperative, and we're proud today to have become the definitive leader there. Ooyala is providing the technology platform that will soon be the standard for the biggest media and service providers in the region."

Whether Ooyala is able to deliver on that promise of becoming the default platform for providers in the region will certainly be of interest in 2013, particularly as its rivals begin to pay attention to the market.

Ooyala's announcement of an integration of the platform into Twitter cards was also of interest, as it enabled content producers to introduce video to their Twitter feeds without the time required to be approved by Twitter, as the Ooyala players will be preapproved. Social video was a massive area of growth in 2012 for corporations, so this is obviously another small but obvious step for Ooyala to try to expand their foothold in the social media space.

Brightcove Leverages Zencoder Acquisition

Brightcove, on the other hand, took a different approach to wooing content owners and corporations alike by leveraging its acquisition of Zencoder, Inc. in August to reduce the amount of complexity required to produce content for multiple devices.

Zencoder, which had a worldwide customer base of more than 1,000 organisations, seemed like a natural fit for the OVP. In November, Brightcove launched two new beta services based on Zencoder.

The first, Zencoder Instant Play, allows users to make on-demand content playable a few seconds after transcoding had begun, no matter what its size, resolution, or length. This is accomplished by beginning to encode files as soon as they begin uploading and making them available for streaming before they are fully encoded.

The second, Zencoder Live Cloud Transcoding, converts a single live video source into multibitrate HLS and RTMP live streams for delivery across multiple devices. This is a significant area of development that every OVP (including YouTube) is developing. By transcoding one live source stream or file, there should be a reduction in the complexity and number of encoders required for live streaming -- and therefore a reduction in the amount of uplink bandwidth required to cater to multiple devices, streams, and bitrates.

These encoding and transcoding services are also a potentially important source of revenue for Brightcove; according to Frost & Sullivan, the market for video transcoding will grow to $630 million by 2017, up from $264 million in 2012. The costs of these kinds of services may well erode rapidly, as more and more online video platforms offer them; that cost savings should be passed on to the companies supplying live encoding and webcasting services.

Brightcove added 1,370 high-volume customers in 3Q 2012, about 1,130 of whom were acquired as part of the Zencoder deal. The company also added 76 premium customers in 3Q 2012, as well as major new corporate customers such as All Nippon Airways, ExactTarget, Nikon, and Yves St. Laurent. A major win was Viacom, Inc., which has adopted Brightcove's services for digital content delivery across platforms and consumer devices and is using Brightcove's player technology across multiple properties for web and mobile distribution.

Of course, post-IPO in February 2012, Brightcove began to release more comprehensive figures about its financial results, giving all of us more insight into the total size of the business.

The 4Q 2012 results show total revenues at $88 million for the year, which was a 38% increase over 2011; platform fees accounted for the vast majority of revenue, with professional services only accounting for $3.7 million. However, given the subscription nature of a lot of this revenue, Brightcove certainly has a reasonable solid business base as long as it can keep churn down to acceptable levels. Profitability, although getting nearer, may still be a ways off, as the company showed a non-GAAP loss of $7.1 million on a gross profit of $60.6 million for 2012.

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