The Small & Medium Businesses Market For Paid Video Streaming Services - DaCast White Paper

7/22/2019 The Small & Medium Businesses Market For Paid Video Streaming Services - DaCast White Paper

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Report commissioned by DaCast LLC.

Authored by Anna Le Breton

The Small & Medium Businesses Market

For Paid Video Streaming Services

The viability and profitability of SMB market for Paid Online Video Platform

March 2014


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TABLE OF CONTENTS

INTRODUCTION 3

VIDEO STREAMING IS GROWING FAST AND BIG 4

MORE VIDEO STREAMED EVERY YEAR 4MORE SCREENS,MORE STREAMING 4CDNS ARE GROWING AS WELL 5

PAID STREAMING SERVICES FOR THE SMB MARKET 6

FREE VS.PAID 6AFRAGMENTED MARKET 7SMALLER EQUALS BIGGER 11

THE SMB MARKET: THE FUTURE OF STREAMING SERVICES 13

ATRUE OPPORTUNITY 13AFUTURE GEOGRAPHICAL SHIFT 14THE MOST PROFITABLE SEGMENTS OF TOMORROW 15

CHALLENGES FOR TOMORROW 17

CONCLUSION 18

ABOUT DACAST 19


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THE SMB MARKET FOR PAID VIDEO STREAMING SERVICES

Introduction

Video streaming, which encompasses both pre-recorded video (commonly called video on-demand) and

live streaming, has been considerably growing over the past few years. Industry reports, white papers and

market studies are adamant about it.

Commonly thought and used for personal entertainment, video streaming has also become an essential tool

for businesses, non-profit organizations and other types of institutions. It is an effective way for small

businesses to promote themselves, for religious broadcasters to spread a spiritual message, for NGOs to get

peoples attention or for sports clubs to share their performance with their fans.

Responding to the demands growth for broadcasting services, online video platforms have multiplied and

diversified their offers. Broadcasters now have a choice between paid and free streaming services. Although

paid services are essentially perceived to be reserved to professional and experienced broadcasters, we can

observe a growing demand for premium (paid) services from Small and Medium Businesses (SMB).

This market then represents a new opportunity for the video platforms industry. Although this sector has

proved itself to be dynamic and growing, in particular in terms of traffic, finding a viable and profitable

economic model remains challenging.

In this paper we will discuss the growing demand for streaming services and particularly for paid-services

targeting the SMB market.


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Video Streaming is Growing Fast and Big

More Video Streamed Every Year

It is not a secret; thousands and thousands of videos are uploaded every day online. YouTube alone, reports

that 100 hours of video are uploaded on the site every minute and that 6 billion hours of video are watched

each month on YouTube. The video platformeven adds that it is equivalent to almost an hour for every

person on Earth, and represents 50% more than last year. i

Video streaming is growing and it growing fast and big.

According to Pew Internet report, the number of American adults watching online videos went up to 78%

while the number of people uploading videos doubled between 2008 and today, to go from 14% to 31%.

Note that 18% of those who uploaded videos had created or recorded them themselves. ii

CISCO estimates that by 2017 it will take a person over 5 million years to watch the amount of video that

will cross global IP networks each month. Every second, nearly a million minutes of video content will cross

the network *+.

More Screens, More Streaming

A large part of the video consumption growth is related to the multiplication of devices on which video

content can be streamed. Streaming, which was once limited to computers, is now largely distributed on

mobile devices. Cisco reports that Global mobile data traffic grew 70% in 2012 and that Mobile video traffic

exceeded 50% for the first time that same year. The Networking equipment company also predicts that two

third of the world's mobile data traffic will be video by 2017.iii

Video streaming is, however, not limited to computers and mobile devices: television is becoming a major

channel as well. A quick look at AmazonsBest Sellers in Televisions & Video Products will confirm it: Google

Chromecast HDMI Streaming Media Player, Apple TV, and Roku 3 Streaming Media Player are the Top 3 best

sellers (as of November 2013).


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CDNs Are Growing As Well

Another major factor indicating the growth of video streaming is the growth of the Content Delivery (CDN)

industry itself. Indeed, the video portion represents a large part of CDNs activities.

Early this year, CISCO was reporting that CDNs will carry over half of Internet traffic in 2017, and that video

on-demand traffic will nearly triple by 2017 (equivalent to 6 billion DVDs per month)iv. Finally, it is estimated

that the video portion of the CDN market will reach about $1 billion by the end of 2015.v


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Paid Streaming Services for the SMB Market

Free Vs. Paid

There are currently two types of model for video streaming on the market: free streaming (aka ad-supported

services) or paid services (ad-free services). A same company can carry both types of services.

Ad-supported serviceshave built their economic model around ads that will be played for a few seconds

before the viewer can access the content. In this system, it is not the broadcaster that remunerates the

video platform but the ad networks. The more videos are watched, the more revenues the streaming

provider gets. This is the system developed by YouTube for instance.

Non-professionals who do not have any budget to allocate to broadcasting generally seek that type of

service. These broadcasters often want wide distribution and do not mind their content to be associated

with ads (on which they do not have control over). The player is branded by the company providing

streaming services and cannot be customized. The content providers usually give up their copyrights (or part

of their rights) to the profit of the video platform used.

On the other hand paid online video platforms (OVPs) provide more complete offers to professionals or

amateurs willing to allocate a budget to broadcasting. In this model, the broadcasters directly remunerate

the video platform. Streaming providers generally sells their services as a plan based on bandwidth or

viewing hours and storage. Depending on the level of plan, the broadcaster can get access to a number of

features, including branding, customization, analytics, chat and commenting features, password protection

and security features. Some paid OVP also provide monetization options (this is the case for DaCast, for

instance).

Usually, broadcasters who are willing to pay for streaming do not want there content to be associated with

ads. They also want to be able to integrate their own logo in the player without showing the service

providers brand (white label player). Keeping control and full ownership on their content is also essential to

them. In this case, video streaming is used as a professional tool.

Today, paid services are not only reserved to professional broadcasters or companies with a large budget.

Prices have considerably dropped and premium-streaming services are now accessible to institutions with


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smaller budgets such as schools, amateur sport clubs or houses of worships, without cutting off on the

features available.

A Fragmented Market

The Small and Medium Businesses market is by definition very large but fragmented. They are many

segments, and even niches, for streaming services that need to be approached differently as they do not

necessarily have the same needs, both in terms of volumes and features. Indeed, for some, broadcasting

represents an essential part of their activity, while for others it is a nice to have addition. Some will use it

as a source of revenue, monetizing their content thanks to a paywall, while others will offer it for free as a

public service. The use can also be internal (i.e. internal video intended for employees, or educational video

for students) or external (i.e. promotional campaign, movies, etc.).

The SMB market for streaming services is, hence, quite complicated to define, since needs and usage can go

from one extreme to another. The only true common denominators are the followings:

- They are organizations (or individual entrepreneurs) using streaming services for their professional needs,

(rather than individual using videos as a social tool).

- Their needs are small to medium and they do not broadcast mainstream content.

- Their budget is small to medium.

The main segments composing that market were established thanks to a study realized on DaCast LLCs

clientele. These segments are the following: faith and spirituality, sports, media, government, school and

education, event production, marketing and communication, entertainment and business promotion.


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The definition, needs and characteristics of each segment are given in the table below:

Faith

This segment includes both houses of worship and other spiritually

oriented organizations. Religious or spiritual broadcasters typically use

online streaming to broadcast church services for their parishioners and/or

spread their spiritual message to a larger audience (i.e. churches, temples

and spiritual websites). They value support, as most of them do not have

prior streaming experience.

Sports

This category encompasses online classes, games and sport events, as wellas online TVs focusing on sports only. Sports broadcasters usually

appreciate the opportunity to monetize their stream through pay-per-view

and use online broadcasting to reach sports followers anywhere in the

world. Niche sports such as ultimate Frisbee, combat sport like boxing or

university sport departments are the typical sport online broadcaster.

Media

This includes TV stations, radio stations, magazines and news websites

(other than sports only). It can be local TV/radio stations adding online

broadcasting to their panel or online only TV/radio programming. They

tend to broadcast 24/7, both live and pre-recorded content, and monetize

their stream through subscription fees or advertisement.

Government

This is a fast growing segment including all types of administrative divisions

(state, district, city and town). They use online streaming to enhance

transparency and support democratic participation. Their streams are

mostly free and published on governmental websites.


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Schools &

Education

This category regroups all streams published for educational purposes.

Broadcasters are schools, colleges, universities and any type of educational

program/training provided by an institution or an individual (i.e.

instructional videos). It excludes college athletics departments as those are

considered pertaining to the sport segment.

Event

Production

There are companies (sometimes individuals) offering services such as

filming, providing a venue, organizing events (corporate conferences,

conventions, weddings, concerts, etc.). They have AV technicians and are

usually quite knowledgeable. Streaming live events is their area of focus (as

opposed to videos on-demand).

Marketing

&

Communication

They are small advertisement agencies, ad networks and public relation

firms. They use videos as advertising or promoting tools for their clients.

Their main interest lies in on-demand videos.

Entertainment

This category regroups content producers such as film productions,

festivals of all types, live theaters, music bands, bars and clubs, etc. They

seek streaming services that offer both live and on-demand. Video is one of

their main channels to reach their audience.

Business

They are all types of businesses mainly using video streaming as a way to

promote their business. They value ad-free white label options and tend to

use Video On-Demand rather than live streams.

OthersAny type of broadcaster that does not fit any of the previous categories but

still pertains to the SMB market because of its size, budget and needs.


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Note that another segment was identified while studying DaCasts clientele: web services. This category

was set aside, as it is constituted of resellers. Resellers build their systems around Dacasts and resell it to

their customers. We do not have data on the end-users here.

In order to illustrate how fragmented that market is, here is DaCasts clientele repartition, both in terms of

volume and in terms of revenues:

CLIENTS REPARTITION Broadcasters Revenues

Faith 25% 21%

Business 12% 9%

Sports 11% 14%

Media 9% 18%

School and Education 9% 9%

Web Services 9% 7%

Event Production 8% 6%

Entertainment 6% 6%

Other 6% 6%

Marketing and Communication 3% 3%Government 1% 2%

We observe that Faith clearly represents the largest segment. Indeed, the Faith segment counts for 25%

of all DaCasts paying broadcasters. This segment is also the largest source of revenues since it is responsible

for 21% of DaCasts revenues. However, Media corresponds to only 9% of DaCasts broadcasters, but

makes up to 18% of DaCaststotal revenue. It is then an interesting segment as their streaming needs are

higher. Sports is the third largest segment, both in terms of broadcasters (11%) and revenues (14%).

Also, note that Media, Government and Sports in that orderare the three leading segments were

the broadcasters spend the most for streaming services. These are also the segments where the

broadcasters will be likely considered as medium businesses rather than small. The Faith segment on

the other end is mainly composed of small administrations, since the broadcasters percentage is higher

than the revenue percentage. The other segments are more homogenous as broadcasterspercentages are

equal or almost equal to the revenue percentages.


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Smaller Equals Bigger

DaCastsbasic pricing is mainly based on three monthly plans: Starter, Plus, and Pro. Pay as You Go optionsare also available. Subscriptions and revenues are distributed as described in the table below.

PLANS Starter Plus Pro PYG

Subscriptions 69% 8% 6% 17%

Revenues 43% 12% 18% 27%

It appears that Starter plans representing 69% of the total number of plans are the main source of

income (43%), demonstrating that there is a real demand for affordable and small streaming plans. Not only

is the demand strong, but it also allows DaCast to realize a very large part of its sales. Plus plans and Pay as

You Go, which are both a step above the Starter plans, represent together another 39% of DaCasts

revenues, confirming the true value of the SMB market.

Geographic repartition for monthly plans1

REGION Starter Plus Pro Total

North America 85% 8% 6% 100%

Europe 82% 10% 8% 100%

Australia & NZ 67% 19% 14% 100%

Latin America 69% 13% 18% 100%

Asia 75% 20% 5% 100%

Africa 69% 20% 11% 100%

WORLD 83% 10% 7% 100%

It is also interesting to note that North America is the region with the highest proportion of broadcasters on

a Starter plan: 85% of North American broadcasters who subscribed to a plan with DaCast chose a Starter

plan.

1Pay as You Go plans are excluded


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The proportion of Starter plans is slightly lower in the other regions of the world although it remains

considerably higher than any other plan. The lowest proportion of Starter plan recorded is in Australia and

New Zealand, and still scores as high as 69%.

This confirms, again, the demand for small plans.


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The SMB Market: The Future of Streaming Services

Our research shows that the worldwide SMB market for streaming services should represent $600 million by

the end of 2014, $1.7 billion by the end of 2016 and $3.4 billion by 2018. Note that Faith and Sports will

remain the most important segments, both in terms of units and revenues.

The SMBs value for streaming services (geographic repartition):

A True Opportunity

The SMB market appears to be a true opportunity for online streaming service providers. Fast growing and

large, it represents an attractive market for investors. With dropping the price downboth for providers

and broadcasters premium-streaming services are now accessible to smaller broadcasters. High speed

Internet, cheap hardware and free software have made broadcasting possible for businesses and

entrepreneurs with small budgets.

In the meantime, the growing demand for long-tail videos is making streaming media more attractive to

institutions such as houses of worships, sport clubs or event production companies. How long before having

its own channel becomes as essential to a business or an institution as having a website is today? For many,

it has already switched from nice to have to a must-have critical technologyvi that a company or

organization needs in order to compete effectively on its market.


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Research shows that video is one of the best wayif not the best wayto conduct a message, retain an

individuals attention and get visibility on the marketvii. In other words it is the most efficient way to

advertise and engage ones audience. Streaming video platforms represent therefore a very affordable and

effective advertising solution for small businesses and other organizations.

A Future Geographical Shift

The portion of the market that is already using streaming services is currently mainly located in North

America (United States and Canada). This is explained by different factors: development level, Internet

access, cultural behaviors, etc.

Indeed, the Internet penetration rate averages 79% in North America and the standard of living is considered

among the highest in the world. Church attendance is particularly high in the US and sport is very much

followed, whether amateur or professional. Consequently, many American churches or sport associations

engage in broadcasting. This also explains that these segments were highly represented in the result of the

study, especially since DaCast clientele is mainly located in the United States.

Today this trend is influencing other regions of the world as well. Europe, Australia and New Zealand are

engaging more and more in broadcasting although the process is still sometimes slowed by the lack of high

speed Internet in some areas of these regions. Internet access is definitely the major factor influencing the

growth of the demand for online streaming services.

We predict that streaming services demand will grow tremendously as more regions will get Internet access,

notably in South America, Asia and even Africa. Latin Americas Internet penetration - currently at 48% -

should reach 58% in 2016 and hit 65% by 2018. Similarly, Asias Internet penetration should run around 41%

in 2016 and up to 51% in 2018. Consequently, Asias2streaming needs should be exceeding those in North

America by the end of 2018.

DaCast already observed a net rise of demand coming from India. Information requests and subscriptions to

trial accounts were much higher in 2013 than in 2012. The growth is already noticeable although the actual

Internet penetration in India is only 12.6%, according to The World Bank's World Development Indicatorviii

.

However, if the number of contract subscribed by Indian broadcasters is also higher; the increase is not as

high as it is for prospects. The reason is the following: if Internet is spreading fast in India, the connection

2 China and North Korea excluded.


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speed is still quite low. Consequently, in some instances the prospect will try the service but wont always

have a satisfactory experience because of slow Internet connections. This issue is particularly true for those

located in rural India.

The Most Profitable Segments of Tomorrow

Our research shows that the worldwide SMB market for streaming services should represent $600 million by

the end of 2014, $1.7 billion by the end of 2016 and $3.4 billion by 2018.

The SMBs value for streaming services (segmented repartition):

Two of the three most profitable segments of today, should remain as the most profitable segments

throughout the period studied: faith and sport. The third should be Businesses and others according to this

study. This is due to two factors:

The use of video to promote ones business should dramatically increase over the next few years.Indeed, thanks to online video platforms, video editing software and lower streaming cost, creating

and publish a promotional video is becoming accessible to everyone.


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The Business and Others category, regroups many different type of businesses. It is by definitionlarge and eclectic.

Some reservations should be expressed about the findings for the media segment. A conservative approach

was chosen while realizing this study. This led to take into consideration existing media only, while ignoring

the future media. Also, this segment should have included online radios and TVs as well. However, reliable

data could not be found on existing online-only media. Many online TVs and radios are created every day,

using streaming technologies. This segment should, then, actually be much larger than represented.


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Challenges for Tomorrow

Such an opportunity comes with its share of challenges.

First, the market is geographically spread out, which implies that many different languages are involved. In

order to address that market, streaming service providers need to adapt their websites to their customers.

English is essential but might be insufficient for a true development. Language is not the only important

aspect when addressing a geographically large market; currencies accepted are also a crucial factor. The

Euro, the Pound and a few others may be essential in order to truly penetrate markets overseas.

Secondly, the very large majority of the broadcasters falling in this market are novices. They need support

and education. This can be provided through online video tutorials and documentation, live support chat,

phone, ticketing systems, etc. A simplified and user-friendly video platform is also an attractiveif not

essentialfeature for these customers. Indeed, support can be costly for a streaming company, hence

reducing considerably margins. On this market benefits are made thanks to the large numbers of

subscriptions, as margins are already quite small due to low pricing. The platform must be conceived to

generate the lowest need for support possible. This can only be made possible thanks to an intuitive and

user-friendly video platform, and complete online documentation (walkthroughs, video tutorials, FAQ, users

community, etc.).

As mentioned earlier the SMB market is composed of various segments and each segments has different

needs. In order, to succeed in the SMB market, the number of customers must be high, which means

pleasing a wide range of customers. Many different options are thought by different type of customers. For

instance, sports broadcasters seek pay-per-view options, while online TVs prefer viewer subscription

options. The features requested are numerous and while some are not essential, they can still weight greatly

in a competitive environment.

Finally, the SMB market is quite sensitive to pricing. Keeping the costs lowfor both the streaming services

provider and the customerwill lead to success in this market. This is true as long as the features sought by

broadcasters are available. Indeed, it is important to not forget that the SMB market for paid streaming

services remains, as long as free services do not offer as many features (unlikely for now). It is now up to the

streaming services providers to remain innovative and competitive.


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Conclusion

The SMB market represents a real opportunity for online video platforms: it is a wide and valuable market. It

became possible to smaller broadcasters to access online streaming services thanks to the bandwidth price

drop that has been happening since 2009. Therefore, today the competition does not limit itself to

bandwidth pricing. On the contrary, competition focuses on options provided and user experience.

Streaming providers do not sell a commodity (bandwidth) but a service, providing fully integrated solutions

(online video platforms).

In order to be successful on that market, an online video platform will need to demonstrate its capacity to

provide complete solutions to broadcasters at a competitive price. This is not an easy market to address but

it represents an opportunity that is still underexploited at this time.


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About DaCast

DaCast is a Streaming as a Service video platform, delivering affordable, professional streaming services for

all. By leveraging the cloud, DaCast takes the headache out of video streaming, leaving content owners and

broadcasters to focus on what they do best. Trusted by over 35,000 broadcasters, DaCasts white label, all-

in-one video streaming platform allows content owners and broadcasters to be in total control of their

online video content. For additional information, visitwww.dacast.comand follow @DaCastSF on Twitter.

CONTACT

DaCast LLC

31 Water st., San Francisco, CA 94133

San Francisco office: 855-896-9300

Paris office: +33-972-430-825

[email protected]
http://www.dacast.com/http://www.dacast.com/http://www.dacast.com/http://www.dacast.com/


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ENDNOTES

iYouTube Statistics, November 2013

http://www.youtube.com/yt/press/statistics.html

iiPew Research Centers Internet & American Life Project, Online Video 2013, October 10, 2013

http://pewinternet.org/~/media/Files/Reports/2013/PIP_Online%20Video%202013.pdf

iii Cisco, Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 20122017, 2013

http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-

520862.html

iv Cisco, Cisco Visual Networking Index: Forecast and Methodology, 20122017, 2013

http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-481360_ns827_Networking_Solutions_White_Paper.html

vRayburn D., Video CDN Market Growth Slowing, But Should Reach $1B By 2015, January 15, 2013http://blog.streamingmedia.com/2013/01/video-cdn-market-growth-slowing-but-should-reach-1b-by-

2015.html

vi Ozer J., What is streaming?,Streaming Media Magazine, February 26, 2011http://www.streamingmedia.com/Articles/Editorial/What-Is-.../What-is-Streaming-74052.aspx

viiVideo: The new ROI star of marketing (2013), Demand Gen Report, 2013

http://www.demandgenreport.com/industry-resources/white-papers/2174-rock-your-roi-with-video-analytics.html#.UxqB3OddWv4

viii Sen S., India to surpass US in Internet users soon, Business Today, December 5, 2013

http://businesstoday.intoday.in/story/india-to-surpass-us-in-internet-users-soon/1/201229.html

ILLUSTRATION CREDITS

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image.php?image=22805&picture=thailand-girl

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image.php?image=9275&picture=kayaking-in-rapids

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The Small & Medium Businesses Market For Paid Video Streaming Services - DaCast White Paper