Mobile Video Trends and Their Implications for Telco Players

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Video has quickly risen to be the biggest data consumption factor worldwide. By 2016, 60 percent of all mobile data traffic was caused by mobile video according to the Cisco VNI report*.  Global mobile video data traffic will grow 9-fold in the next five years to 38 Exabyte per month, representing 78 percent of the total mobile data traffic in 2021.

A series of factors contribute to the surge of mobile video data usage. First, the ever-growing data speed and widespread mobile broadband coverage is creating a much smoother viewing experience than ever before. At the same time, data has become increasingly affordable for mobile customers. The chart below shows the development of the median price for mobile data from 2015 to 2016.

Second, new products and new content formats are becoming mainstream for mass consumers. 4K video recording has gone from being a deeply exotic feature to something that pretty much every truly high-end flagship smartphone “must have” — Apple originally introduced a 4K video recording option with the iPhone 6s and further enhanced it with a dual-camera on the iPhone 7.

[1] Ovum Mobile Broadband Pricing Analysis, 3Q16, 02/10/2017

Content distributors have also stepped up in the game of innovation and video quality improvement. Netflix first announced its plan to support HDR (High Dynamic Range) video content at Mobile World Congress 2016 and further announced a lineup of 15 HDR shows in April 2016. The increasing popularity of high definition video content will scale up data usage in wireless networks very quickly.

Another trend that is not to be overlooked is the surge of the so-called “So-Mo” videos – mobile videos generated on social platforms. Snapchat, Facebook, Instagram … became famous media outlet for Millennials. The 5-year-old company Snapchat (Snap, Inc.) has reached daily 10 billion video views in April 2016 (Figure 4). Although the videos are typically short snapshots – Snapchat’s video length limit is 10 seconds; Instagram allows users to upload a maximum of 60 seconds. However, the high user engagement rates (71 million daily active users; 18 times average daily app visits per user[2]) result in substantial data usage collectively. Cisco’s VNI (visual network index) service gauge tool indicates that an hour of social network usage (approximately 90,000 KB per hour) is equivalent of 1.5 hours of music streaming (approximately 72,000 KB per hour) and 3.13 hours of business IP telephony (approximately 28,800 KB per hour) in terms of data usage.

[2] Data from Snap Inc. S-1 filing, February 2, 2017

Moreover, social platforms are also eyeing up long format videos. In May 2017, Facebook signed deals with millennial focused news and entertainment creators such as Vox Media, BuzzFeed, and ATTN for its upcoming video services[4].  According to Facebook, the company will launch two tiers of video entertainment that are 20 – 30 minutes long and 5 – 10 minutes long.

Facing the surging demand of mobile video, telecommunications network operators have deployed various strategies – either monetizing directly through data usage from their customers, upselling higher data bundles, or directly entering the competition head-to-head with OTT service providers.

Launching own VoD mobile applications.

A few telco players have tested the waters with their own applications – with mixed success. Verizon launched Go90 in October 2015 and poured in significant amounts of cash (approximately 250 million dollars) into original content production and re-vamping the platform infrastructure. Nevertheless, the app is struggling to get traction as hoped. It is currently ranked 85th in the free entertainment category on Apple’s App Store – a fair bit to catch up with the likes of Netflix and Hulu. Hooq, on the other hand, seems to be successfully building its presence in Southeast Asia and India. Hooq is a joint venture owned by Singtel, Sony Pictures, and Warner Brothers.  It has raised $95 million from all three investors in two rounds. Currently, it is focusing on growth in covered markets by offering original local content. Hooq’s CEO believes that attractive local content is the key to set the brand apart from global competitors. The strategy seems to be working — it has claimed the number 1 position in Indonesia, the Philippines, and Thailand.

[3] Data from April 2016. Note that Snap Inc. Facebook and YouTube have different measurement for daily video views
[4] Reuters, May 24, 2017

Vertical integration.

Telco players are also expanding up and down the value chain. After the merge of AT&T and DirecTV in July 2015, AT&T proposed a $85.4 million deal to acquire Time Warner Inc. in October 2016. The combined business will expand on top of the traditional Pay TV channels: the two companies envision a mobile platform, which provides over-the-top premium video content with a monthly package price of about $35.  The package is expected to attract the “cord-cutters” – 20 million American households who left the traditional pay TV system behind. Younger generations navigate smoothly within Netflix and YouTube, but do not know what a TV channel is, and why people need to wait for a certain time slot to watch a show. The marriage between a content producer and a network operator could well respond to this behavioral shift and attract the millennial customer segment.

Data booster.

For mobile-only operators, mobile video has become one of the most important drivers to attract younger segments, upsell higher data packages, and improve customer churn rates. T-Mobile US is the first among its global peers to include free video streaming in its postpaid bundle package. T-Mobile Binge On was launched at the 10th release of the Un-Carrier initiative. It allows anyone with a T-Mobile Simple Choice plan with 3GB data or above to stream video on mobile network without using any data allowance. Although the new feature has stirred up controversy around Net Neutrality topic in the U.S., content providers such as Netflix seem to welcome this practice. An increasing number of players are expected to follow suit. The Australian mobile operator Optus launched Mobile TV Stream option in October 2016. When mobile subscribers turn on the option, streaming from certain video or TV content providers (Netflix, Stan, ABC…) does not count towards the monthly data allowance. Hrvatski Telekom — Deutsche Telekom’s subsidiary in Croatia – has included the feature “Stream On” in its postpaid bundle “Youngster” with the aim to attract millennium mobile customers.

In summary, global network operators are exploring various approaches on how to leverage the consumer behavioral shift in video viewing for value creation or expansion. Mobile video will remain highly relevant for network operators in the near to mid-term future. It is highly important for global telco players to leverage their network assets and follow a cohesive strategy.

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