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5 reasons mobile video streaming will rule 2017

As we look back to last year, it's safe to say that video delivery in 2016 looked absolutely nothing like it did a few short years ago.

It was the year of mobile video streaming, with OTT Video platforms regularly finding their way to the top of both download- as well as revenue charts and massive adaptation of video in the social media ecosystem. Nevertheless, this rapid rate of adaptation is showing no signs of slowing down and it's safe to assume 2017 will be mobile video's biggest year yet.

For your information and entertainment, 5 reasons mobile video streaming will rule 2017:

1. All the data point towards continued growth

According to recent research by mobile app analytics firm AppAnnie, in several European markets both the number of users on video streaming apps, as well as the data usage skyrocketed. Germany saw a massive increase from 300 petabytes in the period from September 2014 to August 2015, to 700 petabytes the following year:

Chart 1

Ericsson's most recent mobility report seems to concur, as their forecast is that as much of 70 percent of mobile data traffic will be video in 2021. That's a compound annual growth rate (CAGR) of 55% from 2016.

2. Better mobile networks will further increase video quality

Chart 2Currently, the vast majority of data used by mobile devices for video is delivered over Wi-Fi. For Western-Europe these percentages range from 86% in France to 97% in Germany. Even though this is mostly caused by the expense of mobile data, recent Ericsson research found that two-thirds of users that watch video over a mobile connection are unhappy with the quality. If Cisco's VNI Global Mobile Data Traffic Forecast proves correct, we should see average speeds increase roughly 30% per year in Western Europe for the next couple of years. While Asia and Latin America are likely to see similar growth, Central and Eastern Europe, as well as the Middle East and Africa will see 36-45% growth per year. Network coverage and - speed are limiting factors for the quality delivered by mobile video streaming services. As such, any increase in those two factors will directly impact end-user quality of experience, even if companies like Netflix are offering offline OTT video viewing as a workaround. After a bigger screen and lower data cost, faster loading came in third as possible triggers for watching more video on mobile, according to 2016 PwC research.

3. Cheaper mobile data plans will remove friction for use

It's hard to imagine that in 2016, even in a market as interconnected as Europe, the cost of mobile data can vary wildly. According to research by Tefficient earlier this year, the revenue per MB that operators made for mobile data was 15 times higher in The Netherlands compared to Finland.

Chart 3

(Data and graph by www.tefficient.com)

The effect that this cost of data has on use is perfectly illustrated in another graph from the same source:

Chart 4

In 2014-2015, Finland saw an increase of reasonably priced unlimited data plans, fueling a growth in data use and growth in operator revenue. Operators like DNA and Elisa in Finland and 3 in Sweden have shown that unlimited data with tiered pricing based on speed can greatly increase Average Revenue per User (ARPU). In 2017, the rest of the market is likely to respond. If we'll see the same exponential growth in data use in markets like Germany and The Netherlands is to be seen, but that things are ready for change is obvious. Assuming that the percentage of data used for mobile video remains stable, an increase in total mobile data use will increase the amount of video watched.

4. Smartphones are rapidly becoming users' "first screen"

Google has seen it happen in search, Ofcom found it in internet browsing and PwC found it in video: Smartphones and other mobile devices are - or are becoming - the preferred devices for many of our day-to-day activities.

Chart 5

(Graphs and data from PwC.com)

Younger generations are already massively consuming video content through mobile devices and it's not limited to short-form content like 5 minute YouTube clips: 62% of 18 to 24-year olds reported watching TV on their mobile devices. Over half of the total men interviewed in that age group watched most of that content live, with 39 percent of woman stating the same. This behavior fits a pattern that emerges if you read all four of PwC's Videoquake reports in succession: Even though cord-cutting isn't taking off like some expected, the segment of the market existing of cord-cutters and cord-nevers has grown YoY four years in a row now. When you look at Nielsen's quantitative data, it shows a massive uptick in use of smartphone and tablet video in 2016, compared to 2015. This continues a trend that was also visible in the 2014-2015 period:

Chart6

(data courtesy of Nielsen's comparable metrics reports, graph by Divitel)

The graph above is somewhat skewed by the presence of tablet video - which has a relatively small user base - and PC video - which saw a big decline in users over the last couple of years. It still shows the trend quite clearly: Mobile devices are eating up time we previously spent watching video on television.

5. Social Video use has skyrocketed in 2016

If you want to know how video will develop in the coming years, look at millennials. All the data points to a trend in which the youngest generation - mostly cord-nevers - shows us what older generations will do in the years to come. And if there's one thing 2016 has shown us, it's that trailing millennials are all about social video:

Chart7

These stats, sourced from Defymedia's recent 'Youth Video Diet' report, clearly show that generation Z (13-24 year olds) has fully embraced these new video distribution platforms. Furthermore, the hours per week they spend watching these videos is approaching that of free online video platforms like YouTube, Vine and Twitch. Together, the time spent on social and free video already eclipses the time spent on traditional cable- and satellite TV. As the majority of social video is consumed on mobile devices, further growth in this specific category will add to the overall growth of mobile video. It's also safe to assume that social video watching by itself might lead to an increase in other forms of mobile video consumption as end-users grow more and more accustomed to their mobile devices as a video player.

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How can Divitel help?

Now that usage patterns are switching, traditional cable operators, television networks and video content creators need to change their mindset. As many of these companies will have noticed by now, success on mobile isn't a given.

At Divitel we can help. Not only as an independent systems integrator that can build your IPTV, OTT or multiscreen service, but also by offering managed services (IPTV/OTT and DRM) and consultancy on all things video. With two decades worth of video experience under our belts, we know video through and through. Reach out to your Divitel contact or send an email to marketing@divitel.com for a no-strings conversation on the challenges and opportunities a market in flux offers you. We're happy to help!

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