The State of the Media Infrastructure Industry

Akamai’s Media Delivery Solutions division and Brightcove have disappointed The Street with their recent earnings report, and as a result their stock has dropped. Fortunately for Akamai, they have security to make up the shortfall. However, Brightcove has none. The question is what does the recent quarterly earnings tells us about the future of the media infrastructure industry?

We define media infrastructure as video processing and video delivery. In the video process and delivery industry, there are a dozen plus business models which can be sliced and diced into different market segments. Below, we have broken down the industry into six segments. The top 3 in red are the content owners/licensees that use a combination of in-house capabilities plus 3rd party video processing/delivery vendors. The bottom 3 are service providers that process and deliver video for the content owner/licensee.

  • OTT: Netflix, Hulu, HBO, etc.
  • Content: Youtube and Facebook
  • Hybrid: Vimeo, Ustream, Twitch, etc.
  • Cloud Trio: Google + Anvato, AWS + Elemental and Azure
  • CDN: Ingest, processing and delivery
  • OVP: Brightcove, Ooyala, The Platform, etc.

From a competitive standpoint, the top three are in a position of strength, because they have the option to select from dozens of vendors, besides using their own infrastructure to process and deliver video. The result – prices for video processing and delivery have drastically fallen. Next, the Cloud Trio are aggressively moving up the video processing stack. By year-end, they will be able to compete with most CDNs in video processing services.

The OVP segment is in the weakest competitive position. This segment is between a rock and a hard place, the rock being the Cloud Trio and the hard place being the CDNs. Once upon a time, OVP’s provided features that CDNs couldn’t match. Those days are long gone. CDNs can now do what OVP vendors can – ingest, encode, process, 3rd party ads insertion, DRM, DVR, storage, video players, player side analytics, server side analytics, and delivery to any screen. There really isn’t much left to do for the OVP besides being a database for videos.

However, CDNs are also under pressure from the Cloud Trio and that pressure is likely to continue from here on out. You can bet the Cloud Trio will drop prices for video processing and delivery below the cost structure of a few CDNs. But it’s not the end of the world for the middle man. In fact, machine learning is going to breathe new life into the media infrastructure industry and new profitable business models will emerge. More to come on that later.

For now, there are two options for Brightcove: 1) invest in machine learning capabilities so its platform becomes Netflix like or 2) get acquired by Google, IBM, AWS or Azure.

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