Dan Rayburn returns to the show to share his first impressions and expert analysis of the state of D2C (direct-to-consumer) video streaming services. It's still early, and not all the new services announced have launched. Yet, with significant M&A activity closed, and press briefings completed, there is a lot to discuss. In this engaging interview, you will get a better understanding of why the stakes are higher than ever for all streaming services, and what it means for anyone working in the video industry.
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TRANSCRIPTION (Note: This is machine generated and may have been lightly edited)
Dan Rayburn: 00:00 There's seven, eight years ago when we were all playing in this arena and trying to really figure out the business model today, this is big business. We have tens of billions of dollars at stake. This stuff has to work. It has to be right and there is a lot of pressure on these new conglomerates to make sure that the video workflows, they're building out work properly because it is truly the future of their business. And I think the great way to really drive that point home is just remember all the services that
Dan Rayburn: 00:25 launched say five years ago in the market. When the services came out, one, there was no investor day because investors didn't care what you were launching because at the time you weren't spending that much money and it was still a newish experience from a quality standpoint. Today, every single service that's launching is having an investor day where before the service is even out they're projecting to investors of when these services will become profitable. Talk about a shift in our industry.
Announcer: 00:53 The video insiders is the show that makes sense of all that is happening in the world of online video as seen through the eyes of a second generation codec nerd and a marketing guy who knows what I frames and macro blocks are. And here are your hosts Mark Donnigan and Dror Gill.
Mark Donnigan: 01:07 Welcome to another super exciting episode of the video insiders. We have Dan Rayburn with us again. Uh, this is part two. Yeah, it's amazing. And his first interview was one of the most popular ones on our podcast. We have to say it's the most downloaded and we have a lot to talk to talk about because since the last podcast episode where Dan was interviewed here on The Video Insiders, a lot has happened in the OTT space. I mean, really a lot. Yeah, a lot. So Dan, you know, welcome back to The Video Insiders. Thanks guys. Thanks for having me. You know me, I always have lots to talk about, so I love chatting about the industry. Well you do, you are an easy guest to host, that's for sure.
Dan Rayburn: 01:53 I've always got stuff to say, right? I have an opinion on everything, but uh, it's, it's an exciting time in the space. And since we last talked to your point, we've got, we've got Disney out, we've got Apple plus out, we've got some new announcements from, from NBC regarding Peacock. We've, got a lot going on in the industry right now. A lot of confusion as well though.
Dror Gill: 02:11 So let me ask you, when you, when you to watch some TV in the evening, can you really focus on the content or are you always looking for kind of artifacts, HDR levels? You know, stuff like that.
Dan Rayburn: 02:26 I really don't want to think about the business because I do so much of that when I am reviewing the services from a business or content standpoint, you know, to your, to your point in terms of yeah, I am constantly looking at bitrates. I am looking at, okay, what's coming through my router because I want to see what the maximum stream is that I'm getting from the Mandalorian. You know, I probably have 40 different streaming services here at home and I've got anywhere between 10 and 12 TV's set up. Just sort of a lab environment and plus all the iPads, iPhones, MacBooks, like it's ridiculous, like a Best Buy here. I'm not the average consumer obviously, but, uh, I think like the average consumer in many cases, we are all looking at where the content is. So I've got some friends who, huge Rick and Morty fans and the new Rick and Morty season is out and this and that.
Dan Rayburn: 03:10 And I said to him, you know, Hey, next year you're going to be able to stream this. And they're like, yeah, but I can't figure out where. Well, that's a great point. They can't figure out where, because where it's currently is and where it's currently at right now is going to be removed because AT&T has said that this is going to be exclusively under the new HBO Max brand. The average consumer isn't going to know that. So we're still going to have content fragmentation problems. So as a consumer, I think that's the biggest thing that we look at is just what content do we want to watch?
Mark Donnigan: 03:39 You bring up something really interesting Dan, and this is a huge hole that I see in reporting on all the new services. It seems like so much of the press is writing about, you know, this service killing the next service.
Dan Rayburn: 03:53 The problem is, look, the problem is the vast majority of people who are writing about our industry don't actually use the product.
Mark Donnigan: 04:00 Yeah. They don't have 12 TV set up in their house, you know, like you do.
Dan Rayburn: 04:03 They don't have one. All of these major platforms that are either telcos, carriers, wireless operators, content owners, distributors, whatever, whatever you want to call them, they're all creating brand new digital platforms for the future. And by that I mean this, when you think of what's taking place in the market right now with mergers, Viacom, CBS, Pluto, right, CBS All Access, CBS sports, CBS news, they are now all going to be converging and building out a new platform for all of these different products and services. That's one. Now throw in NBC sports, NBC news, Playmaker, Peacock, a, what do they also own? New England sports network. One of the other sports things. Throw all those guys in. That's now a brand new stack in the ecosystem. Now let's move on to AT&T. AT&T, Warner, Turner, HBO Max. That's now a whole system. Oh, and I forgot SKY when you're talking about NBC, you got to throw SKY in there too. So think about some of the largest companies that we have out there that are now creating a brand new stack end-to-end to fuel all these different new properties that they have. The biggest thing that you need there when you do that is what? Expertise,
Mark Donnigan: 05:22 there might be some cues here because of course news just came out literally a couple of days ago. Fox signed with AWS a a very large deal. Now, um, I was reading some analysis on this and you know, it's because 21st Century Fox when they were acquired by Disney, you know, so there was a split, right? So the studio was acquired by Disney and all of those technical services actually went with you know, 21st Century Fox and of course then being a part of Disney. And then with BAM, now you've got this huge, you know, service organization that's available. And then here was Fox, the TV studio, the sports, you know, the sports side of Fox that needed a complete, you know, service provider. And it appears that they have selected AWS for even more than just, you know, on demand instances. So it's even more than a data center play. Um, and, and so that would seem to give credence to what your saying that, you know, BAM is far more than just a streaming service that, you know, there's, there's a lot of technical expertise and services they're providing Disney.
Dan Rayburn: 06:36 Yeah, there's a huge amount and people, you know, really don't understand. I think a lot of people, even in our industry, don't understand what goes into all these services. Just the amount of beacons that are deployed, right. Just the amount of APIs you have to check. All the QoS and QoE reporting that has to come in and the analytics. And that's before you're doing any advertising. So anything advertising based obviously has more complexity tying into all the ad flows. And if you're doing live, okay, now you're talking about stream stitching for inserting ads into a live stream- that adds complexity. You have to think about latency and different ways to do chunked encoding. There's things you can tweak with HLS. There's just so much going on with these workflows and platforms that you really have to have that expertise. And some companies, you know think of Discovery, right?
Dan Rayburn: 07:19 We heard from Discovery six, seven months ago when they announced they were going to hire 200 people to build a new streaming department to run all of Discovery's properties. So in some cases you have companies like that go, we want to own this, we want to build it, we'll bring it in house and it'll take them some time to get to market with that expertise. But they'll get there. And then you have other companies like Fox here where they signed that deal with Amazon and you know what they're really using AWS for is a couple of different things on the Cloud Front side, it's to deliver Thursday night football. Amazon already does live football. They kicked off the Premier League a what, two days ago? Three days ago from when we're talking now. So Amazon obviously has expertise in live streaming. The Premier League went off well with no major hitches.
Dan Rayburn: 08:01 You did have some users complaining about latency, but that wasn't a problem Amazon was trying to fix just like we saw with the past Superbowl. That wasn't something where they were like, okay, we want to get latency to the same as broadcast. That was not the goal. So I don't see that as a problem. So they're using AWS for video workflows, editing and graphic storage, but also for this new product AWS calls Local Zone that puts cloud computing hardware closer to the edge and the edge is a broad term. Netflix has also signed on to be one of one of the first customers for this new AWS Local Zone service as well. So, it's super important, you know, we as consumers, we all want a good quality service and we expect it and now we're paying for it. So today this is big business. We have tens of billions of dollars at stake. This stuff has to work. It has to be right. And there is a lot of pressure on these new conglomerates to make sure that the video workflows, they're building out work properly because it is truly the future of their business.
Dror Gill: 08:58 We're done with experimenting. Now we need to show the money.
Dan Rayburn: 09:01 That's right. And you're spending a lot of money to do this. Look at how much money Disney's lost so far just on Hulu and then the acquisition of BAMTech. But they've already said to investors, here's one, we're going to make it back. Here's where we're going to become profitable. So you saw AT&T do that in their, in their HBO
Dan Rayburn: 09:17 Max day. And NBC just announced they're going to have an investor day in January for Peacock. We're in a different era.
Mark Donnigan: 09:22 Now for, you know, almost the first time, what is being done in engineering and R&D, can actually move a stock price. You know, meaning that the decisions that are made, whether that's technology choices, um, you know, codecs, certain stacks, architectures... If It doesn't work, like the stock is gonna move. And when the stock moves, it has the attention of everyone, you know, up until this point, you know? Yeah. The tech blogs, you know, would, would "dis a service" for an outage or for, you know, poor quality or you know, so yes it would get coverage but it never moved a stock price. You know? Or maybe there was a one day blip and you know, but, but basically it was kind of a non-event. Now that is no longer the case. Right?
Dan Rayburn: 10:13 The bottom line is you have to think about profitability. And it's interesting that we're talking about this at a time when, if you think about Uber and WeWork, and some of these other services, what are investors clamoring for now? Profits, forget all this Amazon model of getting big, fast and burn as much money as possible. Thank God we seem to be getting out of that from a investment standpoint right now and in the streaming space, even more so also, look who's getting into the space? AT&T I think right now is the most heavily indebted US company right now. I mean it's insane how much debt that they have. So you also have companies, some of these that are already very deeply in debt that investors want to see anything new that they get into where they're spending billions of dollars to do it. They better turn a profit pretty quickly.
Dror Gill: 11:03 But, but uh, Dan, let's look at the other side of the coin. A company that has tons of money, um, in the, in the bank and now they need to find some creative ways to use it in order to get those profits, uh, coming in again. And of course we're talking about Apple. Um, after selling a, you know, so many devices and now they, they've realized that services would be a much larger part of their revenues moving forward. So they, they really in a, in a spending mode and uh, the real question is will they be successful in catching up to the existing services and competing with all this new stuff that is coming out?
Dan Rayburn: 11:47 Well, see I don't think they have to catch up though. That's the difference cause their, their business model is different. That's the other thing is people don't look at the business model of these services. You know, if you think about Apple services revenue, it was twelve and a half billion dollars, um, in the last quarter, which is pretty amazing. Their services business grew 13% year over year, so they're certainly doing a good job there. And Apple TV Plus, you know, the whole deal of that is just drive more usage on Apple's platform and services. But the unique thing with Apple of course is, well they own the hardware as we know, but they also own the OS. They own the browser, they own the store, they own the entire ecosystem. What does Netflix own? They don't own anything except content, right? So it's two different business models and everybody throws these, these folks in together and people go, Apple didn't have a successful launch.
Dan Rayburn: 12:38 Well they did. They weren't trying to license back catalog. They weren't trying to launch with a hundred shows. That wasn't the goal of their platform because they're driving revenue in different ways. So it's the same way right now that Roku doesn't make a lot of money on their hardware, their seeding it out in the market to obviously drive the advertising business and the Roku channel, you know, the platform business. And Amazon pushing out Amazon fire TVs is what, $20 on black Friday for those sticks. They're not making much money in that either. So I think it's always bad when you see all these services compared to one another in the media and this horrible term streaming war because it's not a war- hate that term. Uh, and a lot of these services are not competing with one another. They don't see each other as competition. Apple is not trying to do the same business model as a Netflix, nor do they need to because it's a different type of company.
Mark Donnigan: 13:31 It's excellent you brought up Roku. I'm looking at their Q3 numbers. They just came out like three weeks ago, um, or early November, I believe. And they're advertising revenue for the period was just under 180 million, 179.3 million. It was up 79% from the previous year's quarter, almost double and their device revenue was up 11% so that's good. But it was 81 million. So the point is their advertising was more than double their device revenue, you know, and their, and their numbers are showing on the advertising platform side, you know, just tremendous growth. And of course that's ultimately what they're really reporting around. I mean, yes, their device revenues are significant enough, you know, they're reporting that.
Dan Rayburn: 14:22 Yeah, they shifted their business model. Right. I mean Anthony was smart. Keep in mind, Anthony came out of, came out of Netflix, that's where the Roku was born. Yeah, it was incubated there. Initially. Right. And that's where they got some of the money from and, and they realized longterm, I'd say two things were really smart. In the beginning Roku realized Netflix realized they didn't want to be invested in any one hardware company because then they couldn't be Switzerland. They couldn't be neutral. So that was smart to diverse, diversify from the Roku investment that they have. But then Roku also realized, they were smart to realize the writing on the wall here, you're not going to compete longterm on the hardware side. Hardware pricing always gets pushed down and back then if you remember all the different devices, I mean at one point we had 20 different streaming players in the market.
Dan Rayburn: 15:03 It was ridiculous how many were out there. Even Vizio had one. Uh, but then really, I think what changed was when Amazon came into the market. Because we all know Amazon pushes pricing, pricing down on everything and we're, we're at a point soon of where I, I, this isn't official, Amazon hasn't told me this, but I will pretty much bet anything that at some point you're going to sign up for prime and you're going to get a stick for free because at $19 now on black Friday, this thing is getting close to being free. And if you're in the hardware business, do you want to be competing with Amazon on something like that? Absolutely not. So Roku realized that Roku had to become not a hardware device, but a platform. And the key thing there was obviously them getting their platform into smart TVs and especially a lot of smart TVs that are not the high end ones, not that TCL, doesn't make some good "high-ender" TVs.
Dan Rayburn: 15:54 But you know, the average Roku enabled TV that's being sold is probably $300. Hisense, TCL, some of the others. So they're getting more of them out there. And, and that's really what Roku has become is that platform and their, their latest acquisition of Dataxu. You know, that's interesting because that is a platform that basically will allow Roku advertisers to better plan and optimize their ad spend across TV and OTT providers. And, and that's really smart of Roku. Uh, because this is the future of the company. You're talking about a company that's doing over a billion dollars a year now, in 2019, if I remember that number correctly. So you have to think about how Roku can capture a larger share of the market because as well known as a brand that Roku is, they still have a very small percentage of total households in the U S when you look at the numbers of, they don't call it consumers anymore, devices.
Dan Rayburn: 16:55 Um, you know, which is good because like I have a bunch of devices in my house, but I'm one person. So they're growing, but that's something that they have to continue to do. Their monthly active users has to continue to go up. But yeah, Roku is in a really interesting spot in that regard. Their, their stock is incredible in terms of how much volatility it has in any given day or week. Sometimes. Uh, I think the Roku channel is an interesting thing where, you know, they go out and they're starting, they start offering content for free just like Tubi and Pluto and you know, IMDB TV by Amazon and that market is getting very crowded. And frankly, I don't quite understand that market because the content on those platforms is just so old and outdated. I really don't know who's clamoring to see Gilligan's Island.
Mark Donnigan: 17:37 Well, Dan, so how should services be measured, you know, from a QoS standpoint?
Dan Rayburn: 17:43 Uh, boy, that's a great question. Uh, I think first and foremost you have to look at what the methodology is. Methodology is the key for anything. So, you know, as an analyst, I don't frankly care about opinions so much. I care about data. I think companies should base how a service is doing, whether that's financially, whether it's technically, whether how it's scaling. They should base that on data because data can't be argued with really in most cases. Uh, so I, I think first and foremost is the methodology. And I think what you have to understand there is different companies have different ways of measuring performance. When I go out and do surveys to CDN customers on how they measure, some go, I care all about time to first frame or startup time. Others go, no, I only care about rebuffering. Some go, well, to me latency is most important.
Dan Rayburn: 18:25 Well, none of those are more important than the other. It depends on who the customer is. And what their business model is. So as an industry we have to continue to think about these services as, as isolated services as opposed to every throwing everybody in this group of, Oh, you're a video service, you should measure your video quality this way. Not necessarily. So I think methodology first and foremost is most important. I think sharing that methodology is key as well. Uh, but, but I think you should always value a service based on quality over quantity. And we hear that a lot. The opposite of that in the advertising side where everybody talks about how many ads were delivered. But the question I always then ask is to a brand, would you rather deliver fewer ads and have a better viewing experience or do you just care about how many ads you pushed out there?
Dan Rayburn: 19:16 And we have to think about that the same way on services that are not ad based. So I think what we obviously know from consumers from all these reports that we've seen, and frankly I don't think we need any more. I don't know why people keep pushing out more reports saying that if the video doesn't start up quickly, consumers are unhappy. Yeah, thanks. We know that. I think measuring quality has to first and foremost come down to what is the experience that you want a consumer to have with your content. That's the first thing. Once you define that experience, now how do you actually decide how to achieve that? Well, there's different ways to do that. We know that some of the basic ones are startup time. We know that customers get frustrated when something takes long to start. We also know rebuffering is a huge issue as well, which is obviously why we use adaptive bit rate encoding hopefully to relieve those issues.
Dan Rayburn: 20:03 But it's interesting when you look online you don't see a lot of complaints honestly around rebuffering you see more with just initial startup time, but the biggest complaint you see actually doesn't have to do with the video. It has to do with just getting to the video. So you're having all these other issues in the stack before it actually gets to delivering the video bits and those are the things that really have to be solved. Those are the things that really have to be scaled because scaling the video is not that hard for someone like Disney Plus. Disney Plus launches that day, let's say it was 10 million actual individual subscribers and let's say they were all watching at the same time, 10 million streams across the five CDNs that Disney was using. That's not a big deal at all. It's 2 million streams a CDN, that's nothing. That's not hard, so people always think it's the CDN.
Dan Rayburn: 20:56 I think when you're determining quality first and foremost you have to have a good understanding internally at your company, what you think good quality is to you for your service based on your business model, based on your consumers and also based on the type of device they're watching on is the vast majority of your content on mobile. And the reason I say that is as an example, when Quibi comes out next year, it's a hundred percent mobile focused. Do you think their methodology to measure quality should be the same as a Netflix? Because we know everything's going to be viewed on a small screen in short form content for Quibi. It's a different way to measure. I think there's lots of good services out there to help you measure there. There's, there's newer ones coming to the market in terms of what's being measured. You've got services that are measuring how well API's are doing versus how well streaming servers are doing versus ad servers and ad platforms and exchanges.
Dan Rayburn: 21:43 And then you think of their traditional stuff that's been out there in terms of telcos and carriers, last mile providers, how they're doing transit providers. When you put all that together, it gives you a much better holistic view of what QoS looks like across the internet from end to end, from glass to delivery. Uh, but we still have a ways to go in terms of really showcasing that. And unfortunately none of these companies after the fact ever share any sort of methodology and they don't ever share any kind of numbers. You know, I worked on those Superbowl was CBS this year and I can't talk to the, you know, the numbers. I know, but you know, it's too bad. CBS doesn't put out from their Conviva dashboard and Mux and all the other services being used here was the rebuffering rate because you know what, it was really, really, really low. Like why not put that out? It shows a great quality service.
Mark Donnigan: 22:32 You made a good point earlier that it's very interesting that now, all these big companies are actually staging investor days, or investor conferences around their services, which is like has never happened previously. I wonder if this methodology is going to begin to make it in, you know, to some of the public disclosures, you know, in some way?
Dan Rayburn: 22:55 Sounds great. But, come on, if you deal with investors, you know that you start talking even bit rate calculations with them and they can't figure it out. Right? I mean, so no, investors aren't worried about that stuff. They don't understand it. Um, I mean it's amazing how many people just just on LinkedIn alone, let alone the media, was comparing the success of Disney Plus based on the metric of when Netflix launched and it just, it boggles your mind, right? Because I stuck up on LinkedIn just real quickly, and this is all factual information you can easily look up, which you know, the media doesn't want to do. The year Netflix launched, there was only 34 million iPhones in the market. That's it. Now, smart TVs didn't exist at all. And two years later, in 2012, only 12 million were connected to the internet. And at the end of the first year of Netflix, Apple had sold 7.5 million tablets. So now you're going to compare Disney Plus launching in an era with over a billion iPhones alone and I don't know how many Apple iPads, smart TVs, and you're going to compare that and go, we've now deemed this a success because it's beaten something that launched nine years earlier. Yeah. The methodology is flawed, and forget bandwidth. I mean bandwidth back then compared to now. It's night and day.
Mark Donnigan: 24:22 I was there. I was there in 2007 we were just launching VUDU and you know, on a dedicated set top box because that was the way that we could bring a guaranteed experience to the home. You know, it wasn't because, you know, VUDU wanted to be in the hardware business. Uh, and ultimately, you know, the company of course pivoted, you know, to an app on devices. But um, I can, I can remember having to think that that the average broadband capacity in the US in most markets was around two megabits.
Dan Rayburn: 24:57 It was a different time, comparing something that long ago. But here's the biggest thing. The media doesn't write for accuracy like we talked about before. They write for one thing, headlines. So the moment you say this kills Netflix and this crushes Netflix or this did better than Netflix, what happens? People click on it because everybody's heard of Netflix. Cause the only way these guys make money is page views. So that's a whole different discussion. We're not going to get into, cause that's a whole different podcast. But the entire model for news on the internet is broken. And has been broken for years. When, it's based on just here's how many page views you have. So let's cram out more articles that are 800 words or less instead of actually telling us.
Mark Donnigan: 25:38 So I think it's a interesting, you know, to talk about devices and since we are talking a little bit about history now, you know, there was a time where it was really critical that you got your service on a device and I'm kind of, you know, using "air quotes" there. Um, because if you were on a device that was widely sold, then you, you know, you had, um, you had an ecosystem you're a part of now with SDKs and API APIs and, and it's far more ubiquitous, you know, HTML5 apps and things like that, you know, with the app stores being clearly defined. Um, you know, basically you need to be in the, uh, Apple app store. You know, you need to be in the Google, uh, store, you know, for Android. Um, you need to be on about half a dozen connected TV platforms and then Roku and you've covered like 99% of the market. Right. Um, so what's your perspective of, you know, even like Nvidia launching, you know, the, Shield TV.
Dan Rayburn: 26:43 And you know, just the role of devices. What are you, um, uh, you know, what are you seeing there? Well, you know, I think over time devices play less of an important role. And the only reason I say that is to your point, it's really about the platform now and it's about ecosystems and people pick certain devices or services because I'm already in the Apple ecosystem already. And the Android ecosystem, I already have a, you know, an Xbox one. Typically people who have an Xbox one is they're not going to then go out and buy a PS4 just because of a new service. So what we've seen over the years is no longer have services launched with exclusives on platforms. Like we saw when HBO Now launched, it was only available for the first 90 days on Apple TV. That's actually a disservice to the service.
Dan Rayburn: 27:28 It's getting in fewer people's hands. So I think the devices we have in the market, I don't see that changing at all. Right. I think you have the major devices between Xbox, PlayStation, Chromecast, Apple TV, Roku, Amazon. Uh, who am I missing? Those are the seven major ones. I look at something like the Shield TV, which now has two new models from Nvidia, which I've, I've tested and played with. Yeah, it's a good device cause it's super fast. And the fact that it's built on Android, you know, you, you can go in there and you can install a Plex server on it, which works really well. It's a great device for Plex media server. Uh, but who's the video really targeting with the device? It's $200.
Dror Gill: 28:09 People who like a nice design. I mean look at the shield TV. It's a cylinder shape. It looks exactly like the Roku Sound Bridge come to think of it.
Dan Rayburn: 28:18 So the lower end model does, that's the one that's $149, the $199 model, which has storage in it and two USB ports. The original one you're talking about has no USB port, so you can't add additional storage, which is kind of a problem. Uh, you know, $200. Your really targeting the person who wants to build something at home. The enthusiasts, right? That's who you're targeting. I think that's great. Like there's nothing wrong with that, but I, you know, I questioned like, is that Nvidia's core business? No, it's not. But since they're making the chip inside, I get it. Their cost to produce that hardware is probably much cheaper than others because they're not paying for the chips since they own it. Um, but I don't think the hardware changes going forward. I, I do think we've seen an amazing amount of progress with smart TVs over the last five or six years.
Dan Rayburn: 29:04 They actually work. Um, if you remember five or six years ago, you never wanted to launch an app on your smart TV cause you didn't know how long it would take a load. Now they work really well. They're pretty seamless. I mean, the new LG device that I just got the remote's really well thought out. It's smart. Uh, it's clean and simple. There's not a lot of bloatware on it. That's the other thing is a lot of these smart TVs used to have so much bloatware, especially Samsung, they've gotten much better at reducing that with removing what used to be mandatory ads. So I think the smart TV has gotten much better there. And I think for a lot of people that continues to be a device that grows down the line because it's all integrated into one. And that's also part of the, the reason Amazon came out with the cube and now the second generation cube, you know, really cool device that is voice-based and will automatically, when you say turn on Hulu, will know how to change your input know how to turn on your TV. It can also control your lights. We're starting to see more streaming services on these platforms that are being combined into the connected home.
Dror Gill: 30:05 Right. And you see this with a, with Nvidia shield TV, right? It connects to your, uh, um, uh, nest to the Phillips Hue, to Netgear, all of that.
Dan Rayburn: 30:14 I think that that's the future where some of this is going is they're no longer these companies and platforms and no longer looking at streaming services as an isolated service. It's one of multiple services in your house. It provides entertainment or lighting or something of that nature. And the Cube is a really cool device. I've spent a lot of time with the Cube. Um, we recently at the NAB streaming summit in October, we had one of the executives on stage doing a fireside chat with me. Really talking about the technology that went into it. And audio is really hard and I don't think people understand in the audio side just how hard it is to do things on the voice side and actually have it work on the back end and have it worked quickly and in real time. Uh, I would say right now Amazon is by far leading the market when it comes to the technology that they have for voice enabled applications. And you see that with the Cube, especially from first gen, the second gen, and on black Friday the price was down to $90. What do you think is going to be next year? Right. It's probably going to be 70 bucks, you know, just keep dropping. So yeah, I think that's pretty neat to see in our industry, just how streaming is now thought of as a one of many things in the home that we're using for entertainment. Yeah.
Dror Gill: 31:24 And, and people are using voice actually they got used to talking to their devices?
Dan Rayburn: 31:28 Well, from what we're hearing and the data we've been given.
Dan Rayburn: 31:30 Hulu at the show said that uh, people who were using voice to find content tied into Amazon's products were watching 40% more Hulu and it makes sense because people know how to use their voice and they know what to say. When you're doing a search in, um, one of these services, do you put in the title? If the title is not perfect, what you put in, do you still get the right results? Many times? No. Whereas with your voice, it's much more natural in terms of how you're going to search for content.
Dror Gill: 32:00 The LG remote, you mentioned earlier, it has like a single button. Then you talk to the remote and it automatically searches on all the applications that you haven't stalled on the TV and finds the content very simple.
Dan Rayburn: 32:12 Also, if you don't want to do that, the pointer system's very simple. If you don't instead want to have to type stuff in, they give you flexible options, which I like as consumers, we will all want options and I think options are good. The downside to options obviously is too much choice, too much confusion, not sure what the business model is. And that's why a lot of consumers are going to jump amongst these services in 2020 because when you can try them for a week or 30 days, why wouldn't you?
Mark Donnigan: 32:38 Well, Dan, I know you were telling us before we started recording about something really exciting you're doing at the NAB show, um, around devices. So, um, why don't you tell us, you know, what you got planned.
Dan Rayburn: 32:52 Yeah. So this, this is pretty cool. Um, and we're going to have some, we're going to have some information on the website up pretty soon and you'll see me announce it sort of everywhere.
Dan Rayburn: 32:59 But one of the problems I've always seen at conferences talking about our industry is we're all there talking about video, but nobody is showing it. We're talking about devices, but nobody's getting hands on with them. Nobody can see these platforms in action. And the three of us on the phone, we eat, sleep and breathe this industry. So we see all this stuff. We use all this stuff, but we're not the average consumer. We're not the average industry participant. So my idea here was the NAB show is, is the largest collection of people in the video world. Maybe not all streaming, obviously a lot of traditional broadcast, but those are the people we actually have to educate even more than people in our industry. So what we're going to do in April is for anybody who walked into the North hall lobby, if you remember, there wasn't really much in the North hall lobby.
Dan Rayburn: 33:45 There's some little booths and some other things. Well, we're going to take over the North hall lobby and we're going to call it the streaming experience. And we're building out 12 living room style, uh, seating with large screen TVs. And every single TV in all 12 locations is going to be XBox, PS4, Apple TV, Chromecast, Roku, uh, what did I forget? It's basically gonna be every hardware device in the market today of the seven that we talked about earlier. And then on each one of those, there's going to be 50 different OTT platforms that you can test and these will be pay services, these will be AVOD services, these will be authenticated services. Think like a CBS sports or something like that. And any attendee to the NAB show can walk right in and say, you know, I really wanted to see what Netflix, HDR looks like here compared to you know, Amazon HDR or I want to see what bundling of content looks like.
Dan Rayburn: 34:41 I want to see what UI and UX is compared to these services. I want to see how the ad supported services are doing pre-roll. I want to see what live sporting personalization looks like. I want to actually test an Amazon Cube and see how good it is in terms of understanding voice recognition. So we're calling it the streaming experience. We're going to have it out for three days. It's going to be a place where people can also just come to get questions answered about these platforms. I'm going to personally have my folks manning every single one of the stations. Uh, and in addition we're going to be giving away every single piece of hardware that we are installing during the event. We're going to be giving that away after. So, it's about $10,000 in gear, not including the TVs, which those are rentals, but everything else, uh, that we're buying, we're going to be giving away.
Dan Rayburn: 35:33 So you're going to be able to get into some amazing raffles, some really good gear. And then in addition to that, we are also going to have a location in the middle of that area. The streaming pavilion, Oh, sorry. Streaming experience where you're going to be able to also test these streaming services on phones and tablets. Oh, that is awesome. And because we have to bring that experience in as well we can't only think large screen and if all works out, hopefully we might even have 5G demos. So these services working across 5G. So think of every service in the market, you know, all the live linear services, the on demand services, the free services, the authenticated services. I basically challenged people to come to the streaming experience and find a service that we don't have on on those devices and we'll have, we will have services from other countries.
Dan Rayburn: 36:26 It's not just going to be the US I won't have everything. Obviously there's, there's some of these services that only work based on certain geo-fencing and certain locations. But we also already have some OTT providers who were saying, Hey, we're going to give you special accounts so that the services work for you as a demo even if it's not available in that region. So we have a lot of OTT companies that are working with us. We've got some that are partnering with us on a sponsorship level to really promote the service. And the other thing we're going to do is for the companies that really wants some feedback, we're going to have a, an attendee who comes up and let's say they use Hulu's service for a couple minutes and then they walk away before they walk away. We're going to say, Hey, fill out this quick card that has five questions on it.
Dan Rayburn: 37:09 Would you buy this feature functionality? And then we're going to dump all that data back to the OTT platforms. Because now they're going to collect thousands, hopefully of real world feedback from customers who are using the service or thinking about using the service. So we want this to become a focal point for the show where people can come and just talk about these services, see them, compare them, test them. Win Some of this product, uh, get your questions answered. And then also use it as a way to collect data for the industry to share with the platform providers what is actually taking place. So I don't know of any other show that's doing it. It's something that I've been wanting to do for quite some time at this size and scale. And when you have the NAB behind it and once they start promoting it and we've got dedicated bandwidth for it.
Dan Rayburn: 37:55 So we're making sure the experience is really good and I'm curating the entire thing so I am going to make sure everything works beforehand. We're there days in advance, I've already bought all the devices for the, for the event for months prior, right were we had them like it's about 2,600 accounts you have to set up across all the devices. It's a big undertaking. This is, this is serious, but it's going to be a good as we're calling it experience. So whether you're in the advertising market and you want to see what ads look like or you're in the compression business and you want to look at artifacting from one service to another, you want to look at 4K and lighting and HDR. You want to come. I think UI and UX is super important. So all those people that come to the NAB show that are doing design or creative UI and UX will come compare how they work and work between mobile and larger screen. So really whatever industry you're in and the NAB gets a lot of different people from different verticals and industries and regions of the world, this is going to be relevant to you in some way, shape or form and you're going to be able to see it free of charge.
Dror Gill: 38:59 This really sounds amazing Dan. It's kind of a combination of a, of a playground that everybody wants to play with and also a way to experience, uh, all of this tests, right? And, and the way to experience a lot of things that you don't have access to because nobody can buy all of that gear and get access to all of those services at the same time. So you can really come in and experiment and see video quality as you said, UX, advertising, integration, everything. And also be able to talk to people who are, who are experts in this and can walk you through it. And the fact that you're feeding back the information and the comments from, uh, from the visitors, you know, back to the services is, is really a great service to the industry because then you can finally get those comments and uh, and information back.
Dan Rayburn: 39:49 And we're also going to share it with the industry as a whole. We're definitely going to share here are some of the highlights we've seen from what consumers have been saying. And the other way I'm looking at this too is it educates two other portions of the market that are really important. It educates the media because now it's going to happen is when somebody wants to do an interview with Hulu who speaking at the show and you know, wants to talk about the platform. Somebody from Hulu is going to be able to walk them to the streaming experience and actually show it to them, which means hopefully they actually get the coverage accurate. So it's really important that the media sees the stuff. And second, the other market that we have at the show is investors. There's a lot of investors at the NAB show, institutional investors, and they don't get to see this stuff.
Dan Rayburn: 40:29 So when they're making predictions about stock and about revenue and loss and capex and OPEX and all these other things that they use to determine success or failure of companies, the best way to do that is to actually see the product in action. So now you're also going to have investors who are going to be able to get hands on with this stuff even from a high level, which is going to benefit them. So I think overall it just benefits the industry. It benefits the platform providers, the consumers, the media, the investors. Those are really the five vertical markets that I'm trying to target.
Dror Gill: 40:57 We need something like this. Um, you know, as an installation permanently somewhere.
Dan Rayburn: 41:02 Yeah, maybe. I mean, I'm doing this with the NAB and that's, that's the exclusive, you know, group I'm working with now. I'm certainly not going to bring this to other conferences, but this is something that you're going to see now moving forward at NAB show in Vegas for sure. New York is much more difficult to do this only because of unions, some other, some other rules around that. But, uh, in Vegas, this is, you know, this is DnaB also planting a stake in the ground going, listen, you know, last year you walked into the North hall lobby and it was still so much of a focus on broadcast and traditional TV. Well, users are in for a, you know, wake up when they walk in this time and go, wow, what is all this streaming stuff?
Mark Donnigan: 41:38 This is an amazing service that you're providing Dan. Uh, and we're gonna promote it and encourage everyone, uh, you know, our customers and those that are in, you know, in our sphere of influence, uh, to check it out, you know, really, cause this is, this is amazing.
Dan Rayburn: 41:52 I'm excited for it. It's a lot of work and it's a huge undertaking. It is a lot of work. Yeah. It scares me at times. Just cause to do it right. It's, it's a lot of work. Um, but I'm going to have a good, I'm going to have a good team. I'm going to be flying in some, uh, some of my buddies from the special operations community who are, who are tech guys and they're, they're going to come help me in the booth and whatnot. And, uh, it's, it's going to be a good three days. Well,
Mark Donnigan: 42:18 Dan, uh, this is, uh, you've been yet another amazing interview. Thank you so much for coming on the video insiders.
Dan Rayburn: 42:26 Thank you for having me again. As you know, I can talk all day about this stuff. So it's a good thing you have to edit this down into something shorter.
Mark Donnigan: 42:30 The next time we have you on, uh, I think, uh, will time, the timing will be good with some new, uh, things you have going.
Dan Rayburn: 42:41 There'll be some other new things in the new year that I can't talk about now, but yeah, yeah. The, the, the idea of wanting to inform the market more and providing more resources for the community. That's, that's something that's coming up.
Dror Gill: 42:51 Great. So thanks again. Thanks again for joining us today.
Dan Rayburn: 42:54 Thank you guys.
Announcer: 42:55 Thank you for listening to The Video Insiders podcast. A production of Beamr Imaging, Ltd. To begin using Beamr's codecs today, go to beamr.com/free to receive up to 100 hours of no cost HEVC and H.264 transcoding every month.
Dan Rayburn: 00:00 There's seven, eight years ago when we were all playing in this arena and trying to really figure out the business model today, this is big business. We have tens of billions of dollars at stake. This stuff has to work. It has to be right and there is a lot of pressure on these new conglomerates to make sure that the video workflows, they're building out work properly because it is truly the future of their business. And I think the great way to really drive that point home is just remember all the services that
Dan Rayburn: 00:25 launched say five years ago in the market. When the services came out, one, there was no investor day because investors didn't care what you were launching because at the time you weren't spending that much money and it was still a newish experience from a quality standpoint. Today, every single service that's launching is having an investor day where before the service is even out they're projecting to investors of when these services will become profitable. Talk about a shift in our industry.
Announcer: 00:53 The video insiders is the show that makes sense of all that is happening in the world of online video as seen through the eyes of a second generation codec nerd and a marketing guy who knows what I frames and macro blocks are. And here are your hosts Mark Donnigan and Dror Gill.
Mark Donnigan: 01:07 Welcome to another super exciting episode of the video insiders. We have Dan Rayburn with us again. Uh, this is part two. Yeah, it's amazing. And his first interview was one of the most popular ones on our podcast. We have to say it's the most downloaded and we have a lot to talk to talk about because since the last podcast episode where Dan was interviewed here on The Video Insiders, a lot has happened in the OTT space. I mean, really a lot. Yeah, a lot. So Dan, you know, welcome back to The Video Insiders. Thanks guys. Thanks for having me. You know me, I always have lots to talk about, so I love chatting about the industry. Well you do, you are an easy guest to host, that's for sure.
Dan Rayburn: 01:53 I've always got stuff to say, right? I have an opinion on everything, but uh, it's, it's an exciting time in the space. And since we last talked to your point, we've got, we've got Disney out, we've got Apple plus out, we've got some new announcements from, from NBC regarding Peacock. We've, got a lot going on in the industry right now. A lot of confusion as well though.
Dror Gill: 02:11 So let me ask you, when you, when you to watch some TV in the evening, can you really focus on the content or are you always looking for kind of artifacts, HDR levels? You know, stuff like that.
Dan Rayburn: 02:26 I really don't want to think about the business because I do so much of that when I am reviewing the services from a business or content standpoint, you know, to your, to your point in terms of yeah, I am constantly looking at bitrates. I am looking at, okay, what's coming through my router because I want to see what the maximum stream is that I'm getting from the Mandalorian. You know, I probably have 40 different streaming services here at home and I've got anywhere between 10 and 12 TV's set up. Just sort of a lab environment and plus all the iPads, iPhones, MacBooks, like it's ridiculous, like a Best Buy here. I'm not the average consumer obviously, but, uh, I think like the average consumer in many cases, we are all looking at where the content is. So I've got some friends who, huge Rick and Morty fans and the new Rick and Morty season is out and this and that.
Dan Rayburn: 03:10 And I said to him, you know, Hey, next year you're going to be able to stream this. And they're like, yeah, but I can't figure out where. Well, that's a great point. They can't figure out where, because where it's currently is and where it's currently at right now is going to be removed because AT&T has said that this is going to be exclusively under the new HBO Max brand. The average consumer isn't going to know that. So we're still going to have content fragmentation problems. So as a consumer, I think that's the biggest thing that we look at is just what content do we want to watch?
Mark Donnigan: 03:39 You bring up something really interesting Dan, and this is a huge hole that I see in reporting on all the new services. It seems like so much of the press is writing about, you know, this service killing the next service.
Dan Rayburn: 03:53 The problem is, look, the problem is the vast majority of people who are writing about our industry don't actually use the product.
Mark Donnigan: 04:00 Yeah. They don't have 12 TV set up in their house, you know, like you do.
Dan Rayburn: 04:03 They don't have one. All of these major platforms that are either telcos, carriers, wireless operators, content owners, distributors, whatever, whatever you want to call them, they're all creating brand new digital platforms for the future. And by that I mean this, when you think of what's taking place in the market right now with mergers, Viacom, CBS, Pluto, right, CBS All Access, CBS sports, CBS news, they are now all going to be converging and building out a new platform for all of these different products and services. That's one. Now throw in NBC sports, NBC news, Playmaker, Peacock, a, what do they also own? New England sports network. One of the other sports things. Throw all those guys in. That's now a brand new stack in the ecosystem. Now let's move on to AT&T. AT&T, Warner, Turner, HBO Max. That's now a whole system. Oh, and I forgot SKY when you're talking about NBC, you got to throw SKY in there too. So think about some of the largest companies that we have out there that are now creating a brand new stack end-to-end to fuel all these different new properties that they have. The biggest thing that you need there when you do that is what? Expertise,
Mark Donnigan: 05:22 there might be some cues here because of course news just came out literally a couple of days ago. Fox signed with AWS a a very large deal. Now, um, I was reading some analysis on this and you know, it's because 21st Century Fox when they were acquired by Disney, you know, so there was a split, right? So the studio was acquired by Disney and all of those technical services actually went with you know, 21st Century Fox and of course then being a part of Disney. And then with BAM, now you've got this huge, you know, service organization that's available. And then here was Fox, the TV studio, the sports, you know, the sports side of Fox that needed a complete, you know, service provider. And it appears that they have selected AWS for even more than just, you know, on demand instances. So it's even more than a data center play. Um, and, and so that would seem to give credence to what your saying that, you know, BAM is far more than just a streaming service that, you know, there's, there's a lot of technical expertise and services they're providing Disney.
Dan Rayburn: 06:36 Yeah, there's a huge amount and people, you know, really don't understand. I think a lot of people, even in our industry, don't understand what goes into all these services. Just the amount of beacons that are deployed, right. Just the amount of APIs you have to check. All the QoS and QoE reporting that has to come in and the analytics. And that's before you're doing any advertising. So anything advertising based obviously has more complexity tying into all the ad flows. And if you're doing live, okay, now you're talking about stream stitching for inserting ads into a live stream- that adds complexity. You have to think about latency and different ways to do chunked encoding. There's things you can tweak with HLS. There's just so much going on with these workflows and platforms that you really have to have that expertise. And some companies, you know think of Discovery, right?
Dan Rayburn: 07:19 We heard from Discovery six, seven months ago when they announced they were going to hire 200 people to build a new streaming department to run all of Discovery's properties. So in some cases you have companies like that go, we want to own this, we want to build it, we'll bring it in house and it'll take them some time to get to market with that expertise. But they'll get there. And then you have other companies like Fox here where they signed that deal with Amazon and you know what they're really using AWS for is a couple of different things on the Cloud Front side, it's to deliver Thursday night football. Amazon already does live football. They kicked off the Premier League a what, two days ago? Three days ago from when we're talking now. So Amazon obviously has expertise in live streaming. The Premier League went off well with no major hitches.
Dan Rayburn: 08:01 You did have some users complaining about latency, but that wasn't a problem Amazon was trying to fix just like we saw with the past Superbowl. That wasn't something where they were like, okay, we want to get latency to the same as broadcast. That was not the goal. So I don't see that as a problem. So they're using AWS for video workflows, editing and graphic storage, but also for this new product AWS calls Local Zone that puts cloud computing hardware closer to the edge and the edge is a broad term. Netflix has also signed on to be one of one of the first customers for this new AWS Local Zone service as well. So, it's super important, you know, we as consumers, we all want a good quality service and we expect it and now we're paying for it. So today this is big business. We have tens of billions of dollars at stake. This stuff has to work. It has to be right. And there is a lot of pressure on these new conglomerates to make sure that the video workflows, they're building out work properly because it is truly the future of their business.
Dror Gill: 08:58 We're done with experimenting. Now we need to show the money.
Dan Rayburn: 09:01 That's right. And you're spending a lot of money to do this. Look at how much money Disney's lost so far just on Hulu and then the acquisition of BAMTech. But they've already said to investors, here's one, we're going to make it back. Here's where we're going to become profitable. So you saw AT&T do that in their, in their HBO
Dan Rayburn: 09:17 Max day. And NBC just announced they're going to have an investor day in January for Peacock. We're in a different era.
Mark Donnigan: 09:22 Now for, you know, almost the first time, what is being done in engineering and R&D, can actually move a stock price. You know, meaning that the decisions that are made, whether that's technology choices, um, you know, codecs, certain stacks, architectures... If It doesn't work, like the stock is gonna move. And when the stock moves, it has the attention of everyone, you know, up until this point, you know? Yeah. The tech blogs, you know, would, would "dis a service" for an outage or for, you know, poor quality or you know, so yes it would get coverage but it never moved a stock price. You know? Or maybe there was a one day blip and you know, but, but basically it was kind of a non-event. Now that is no longer the case. Right?
Dan Rayburn: 10:13 The bottom line is you have to think about profitability. And it's interesting that we're talking about this at a time when, if you think about Uber and WeWork, and some of these other services, what are investors clamoring for now? Profits, forget all this Amazon model of getting big, fast and burn as much money as possible. Thank God we seem to be getting out of that from a investment standpoint right now and in the streaming space, even more so also, look who's getting into the space? AT&T I think right now is the most heavily indebted US company right now. I mean it's insane how much debt that they have. So you also have companies, some of these that are already very deeply in debt that investors want to see anything new that they get into where they're spending billions of dollars to do it. They better turn a profit pretty quickly.
Dror Gill: 11:03 But, but uh, Dan, let's look at the other side of the coin. A company that has tons of money, um, in the, in the bank and now they need to find some creative ways to use it in order to get those profits, uh, coming in again. And of course we're talking about Apple. Um, after selling a, you know, so many devices and now they, they've realized that services would be a much larger part of their revenues moving forward. So they, they really in a, in a spending mode and uh, the real question is will they be successful in catching up to the existing services and competing with all this new stuff that is coming out?
Dan Rayburn: 11:47 Well, see I don't think they have to catch up though. That's the difference cause their, their business model is different. That's the other thing is people don't look at the business model of these services. You know, if you think about Apple services revenue, it was twelve and a half billion dollars, um, in the last quarter, which is pretty amazing. Their services business grew 13% year over year, so they're certainly doing a good job there. And Apple TV Plus, you know, the whole deal of that is just drive more usage on Apple's platform and services. But the unique thing with Apple of course is, well they own the hardware as we know, but they also own the OS. They own the browser, they own the store, they own the entire ecosystem. What does Netflix own? They don't own anything except content, right? So it's two different business models and everybody throws these, these folks in together and people go, Apple didn't have a successful launch.
Dan Rayburn: 12:38 Well they did. They weren't trying to license back catalog. They weren't trying to launch with a hundred shows. That wasn't the goal of their platform because they're driving revenue in different ways. So it's the same way right now that Roku doesn't make a lot of money on their hardware, their seeding it out in the market to obviously drive the advertising business and the Roku channel, you know, the platform business. And Amazon pushing out Amazon fire TVs is what, $20 on black Friday for those sticks. They're not making much money in that either. So I think it's always bad when you see all these services compared to one another in the media and this horrible term streaming war because it's not a war- hate that term. Uh, and a lot of these services are not competing with one another. They don't see each other as competition. Apple is not trying to do the same business model as a Netflix, nor do they need to because it's a different type of company.
Mark Donnigan: 13:31 It's excellent you brought up Roku. I'm looking at their Q3 numbers. They just came out like three weeks ago, um, or early November, I believe. And they're advertising revenue for the period was just under 180 million, 179.3 million. It was up 79% from the previous year's quarter, almost double and their device revenue was up 11% so that's good. But it was 81 million. So the point is their advertising was more than double their device revenue, you know, and their, and their numbers are showing on the advertising platform side, you know, just tremendous growth. And of course that's ultimately what they're really reporting around. I mean, yes, their device revenues are significant enough, you know, they're reporting that.
Dan Rayburn: 14:22 Yeah, they shifted their business model. Right. I mean Anthony was smart. Keep in mind, Anthony came out of, came out of Netflix, that's where the Roku was born. Yeah, it was incubated there. Initially. Right. And that's where they got some of the money from and, and they realized longterm, I'd say two things were really smart. In the beginning Roku realized Netflix realized they didn't want to be invested in any one hardware company because then they couldn't be Switzerland. They couldn't be neutral. So that was smart to diverse, diversify from the Roku investment that they have. But then Roku also realized, they were smart to realize the writing on the wall here, you're not going to compete longterm on the hardware side. Hardware pricing always gets pushed down and back then if you remember all the different devices, I mean at one point we had 20 different streaming players in the market.
Dan Rayburn: 15:03 It was ridiculous how many were out there. Even Vizio had one. Uh, but then really, I think what changed was when Amazon came into the market. Because we all know Amazon pushes pricing, pricing down on everything and we're, we're at a point soon of where I, I, this isn't official, Amazon hasn't told me this, but I will pretty much bet anything that at some point you're going to sign up for prime and you're going to get a stick for free because at $19 now on black Friday, this thing is getting close to being free. And if you're in the hardware business, do you want to be competing with Amazon on something like that? Absolutely not. So Roku realized that Roku had to become not a hardware device, but a platform. And the key thing there was obviously them getting their platform into smart TVs and especially a lot of smart TVs that are not the high end ones, not that TCL, doesn't make some good "high-ender" TVs.
Dan Rayburn: 15:54 But you know, the average Roku enabled TV that's being sold is probably $300. Hisense, TCL, some of the others. So they're getting more of them out there. And, and that's really what Roku has become is that platform and their, their latest acquisition of Dataxu. You know, that's interesting because that is a platform that basically will allow Roku advertisers to better plan and optimize their ad spend across TV and OTT providers. And, and that's really smart of Roku. Uh, because this is the future of the company. You're talking about a company that's doing over a billion dollars a year now, in 2019, if I remember that number correctly. So you have to think about how Roku can capture a larger share of the market because as well known as a brand that Roku is, they still have a very small percentage of total households in the U S when you look at the numbers of, they don't call it consumers anymore, devices.
Dan Rayburn: 16:55 Um, you know, which is good because like I have a bunch of devices in my house, but I'm one person. So they're growing, but that's something that they have to continue to do. Their monthly active users has to continue to go up. But yeah, Roku is in a really interesting spot in that regard. Their, their stock is incredible in terms of how much volatility it has in any given day or week. Sometimes. Uh, I think the Roku channel is an interesting thing where, you know, they go out and they're starting, they start offering content for free just like Tubi and Pluto and you know, IMDB TV by Amazon and that market is getting very crowded. And frankly, I don't quite understand that market because the content on those platforms is just so old and outdated. I really don't know who's clamoring to see Gilligan's Island.
Mark Donnigan: 17:37 Well, Dan, so how should services be measured, you know, from a QoS standpoint?
Dan Rayburn: 17:43 Uh, boy, that's a great question. Uh, I think first and foremost you have to look at what the methodology is. Methodology is the key for anything. So, you know, as an analyst, I don't frankly care about opinions so much. I care about data. I think companies should base how a service is doing, whether that's financially, whether it's technically, whether how it's scaling. They should base that on data because data can't be argued with really in most cases. Uh, so I, I think first and foremost is the methodology. And I think what you have to understand there is different companies have different ways of measuring performance. When I go out and do surveys to CDN customers on how they measure, some go, I care all about time to first frame or startup time. Others go, no, I only care about rebuffering. Some go, well, to me latency is most important.
Dan Rayburn: 18:25 Well, none of those are more important than the other. It depends on who the customer is. And what their business model is. So as an industry we have to continue to think about these services as, as isolated services as opposed to every throwing everybody in this group of, Oh, you're a video service, you should measure your video quality this way. Not necessarily. So I think methodology first and foremost is most important. I think sharing that methodology is key as well. Uh, but, but I think you should always value a service based on quality over quantity. And we hear that a lot. The opposite of that in the advertising side where everybody talks about how many ads were delivered. But the question I always then ask is to a brand, would you rather deliver fewer ads and have a better viewing experience or do you just care about how many ads you pushed out there?
Dan Rayburn: 19:16 And we have to think about that the same way on services that are not ad based. So I think what we obviously know from consumers from all these reports that we've seen, and frankly I don't think we need any more. I don't know why people keep pushing out more reports saying that if the video doesn't start up quickly, consumers are unhappy. Yeah, thanks. We know that. I think measuring quality has to first and foremost come down to what is the experience that you want a consumer to have with your content. That's the first thing. Once you define that experience, now how do you actually decide how to achieve that? Well, there's different ways to do that. We know that some of the basic ones are startup time. We know that customers get frustrated when something takes long to start. We also know rebuffering is a huge issue as well, which is obviously why we use adaptive bit rate encoding hopefully to relieve those issues.
Dan Rayburn: 20:03 But it's interesting when you look online you don't see a lot of complaints honestly around rebuffering you see more with just initial startup time, but the biggest complaint you see actually doesn't have to do with the video. It has to do with just getting to the video. So you're having all these other issues in the stack before it actually gets to delivering the video bits and those are the things that really have to be solved. Those are the things that really have to be scaled because scaling the video is not that hard for someone like Disney Plus. Disney Plus launches that day, let's say it was 10 million actual individual subscribers and let's say they were all watching at the same time, 10 million streams across the five CDNs that Disney was using. That's not a big deal at all. It's 2 million streams a CDN, that's nothing. That's not hard, so people always think it's the CDN.
Dan Rayburn: 20:56 I think when you're determining quality first and foremost you have to have a good understanding internally at your company, what you think good quality is to you for your service based on your business model, based on your consumers and also based on the type of device they're watching on is the vast majority of your content on mobile. And the reason I say that is as an example, when Quibi comes out next year, it's a hundred percent mobile focused. Do you think their methodology to measure quality should be the same as a Netflix? Because we know everything's going to be viewed on a small screen in short form content for Quibi. It's a different way to measure. I think there's lots of good services out there to help you measure there. There's, there's newer ones coming to the market in terms of what's being measured. You've got services that are measuring how well API's are doing versus how well streaming servers are doing versus ad servers and ad platforms and exchanges.
Dan Rayburn: 21:43 And then you think of their traditional stuff that's been out there in terms of telcos and carriers, last mile providers, how they're doing transit providers. When you put all that together, it gives you a much better holistic view of what QoS looks like across the internet from end to end, from glass to delivery. Uh, but we still have a ways to go in terms of really showcasing that. And unfortunately none of these companies after the fact ever share any sort of methodology and they don't ever share any kind of numbers. You know, I worked on those Superbowl was CBS this year and I can't talk to the, you know, the numbers. I know, but you know, it's too bad. CBS doesn't put out from their Conviva dashboard and Mux and all the other services being used here was the rebuffering rate because you know what, it was really, really, really low. Like why not put that out? It shows a great quality service.
Mark Donnigan: 22:32 You made a good point earlier that it's very interesting that now, all these big companies are actually staging investor days, or investor conferences around their services, which is like has never happened previously. I wonder if this methodology is going to begin to make it in, you know, to some of the public disclosures, you know, in some way?
Dan Rayburn: 22:55 Sounds great. But, come on, if you deal with investors, you know that you start talking even bit rate calculations with them and they can't figure it out. Right? I mean, so no, investors aren't worried about that stuff. They don't understand it. Um, I mean it's amazing how many people just just on LinkedIn alone, let alone the media, was comparing the success of Disney Plus based on the metric of when Netflix launched and it just, it boggles your mind, right? Because I stuck up on LinkedIn just real quickly, and this is all factual information you can easily look up, which you know, the media doesn't want to do. The year Netflix launched, there was only 34 million iPhones in the market. That's it. Now, smart TVs didn't exist at all. And two years later, in 2012, only 12 million were connected to the internet. And at the end of the first year of Netflix, Apple had sold 7.5 million tablets. So now you're going to compare Disney Plus launching in an era with over a billion iPhones alone and I don't know how many Apple iPads, smart TVs, and you're going to compare that and go, we've now deemed this a success because it's beaten something that launched nine years earlier. Yeah. The methodology is flawed, and forget bandwidth. I mean bandwidth back then compared to now. It's night and day.
Mark Donnigan: 24:22 I was there. I was there in 2007 we were just launching VUDU and you know, on a dedicated set top box because that was the way that we could bring a guaranteed experience to the home. You know, it wasn't because, you know, VUDU wanted to be in the hardware business. Uh, and ultimately, you know, the company of course pivoted, you know, to an app on devices. But um, I can, I can remember having to think that that the average broadband capacity in the US in most markets was around two megabits.
Dan Rayburn: 24:57 It was a different time, comparing something that long ago. But here's the biggest thing. The media doesn't write for accuracy like we talked about before. They write for one thing, headlines. So the moment you say this kills Netflix and this crushes Netflix or this did better than Netflix, what happens? People click on it because everybody's heard of Netflix. Cause the only way these guys make money is page views. So that's a whole different discussion. We're not going to get into, cause that's a whole different podcast. But the entire model for news on the internet is broken. And has been broken for years. When, it's based on just here's how many page views you have. So let's cram out more articles that are 800 words or less instead of actually telling us.
Mark Donnigan: 25:38 So I think it's a interesting, you know, to talk about devices and since we are talking a little bit about history now, you know, there was a time where it was really critical that you got your service on a device and I'm kind of, you know, using "air quotes" there. Um, because if you were on a device that was widely sold, then you, you know, you had, um, you had an ecosystem you're a part of now with SDKs and API APIs and, and it's far more ubiquitous, you know, HTML5 apps and things like that, you know, with the app stores being clearly defined. Um, you know, basically you need to be in the, uh, Apple app store. You know, you need to be in the Google, uh, store, you know, for Android. Um, you need to be on about half a dozen connected TV platforms and then Roku and you've covered like 99% of the market. Right. Um, so what's your perspective of, you know, even like Nvidia launching, you know, the, Shield TV.
Dan Rayburn: 26:43 And you know, just the role of devices. What are you, um, uh, you know, what are you seeing there? Well, you know, I think over time devices play less of an important role. And the only reason I say that is to your point, it's really about the platform now and it's about ecosystems and people pick certain devices or services because I'm already in the Apple ecosystem already. And the Android ecosystem, I already have a, you know, an Xbox one. Typically people who have an Xbox one is they're not going to then go out and buy a PS4 just because of a new service. So what we've seen over the years is no longer have services launched with exclusives on platforms. Like we saw when HBO Now launched, it was only available for the first 90 days on Apple TV. That's actually a disservice to the service.
Dan Rayburn: 27:28 It's getting in fewer people's hands. So I think the devices we have in the market, I don't see that changing at all. Right. I think you have the major devices between Xbox, PlayStation, Chromecast, Apple TV, Roku, Amazon. Uh, who am I missing? Those are the seven major ones. I look at something like the Shield TV, which now has two new models from Nvidia, which I've, I've tested and played with. Yeah, it's a good device cause it's super fast. And the fact that it's built on Android, you know, you, you can go in there and you can install a Plex server on it, which works really well. It's a great device for Plex media server. Uh, but who's the video really targeting with the device? It's $200.
Dror Gill: 28:09 People who like a nice design. I mean look at the shield TV. It's a cylinder shape. It looks exactly like the Roku Sound Bridge come to think of it.
Dan Rayburn: 28:18 So the lower end model does, that's the one that's $149, the $199 model, which has storage in it and two USB ports. The original one you're talking about has no USB port, so you can't add additional storage, which is kind of a problem. Uh, you know, $200. Your really targeting the person who wants to build something at home. The enthusiasts, right? That's who you're targeting. I think that's great. Like there's nothing wrong with that, but I, you know, I questioned like, is that Nvidia's core business? No, it's not. But since they're making the chip inside, I get it. Their cost to produce that hardware is probably much cheaper than others because they're not paying for the chips since they own it. Um, but I don't think the hardware changes going forward. I, I do think we've seen an amazing amount of progress with smart TVs over the last five or six years.
Dan Rayburn: 29:04 They actually work. Um, if you remember five or six years ago, you never wanted to launch an app on your smart TV cause you didn't know how long it would take a load. Now they work really well. They're pretty seamless. I mean, the new LG device that I just got the remote's really well thought out. It's smart. Uh, it's clean and simple. There's not a lot of bloatware on it. That's the other thing is a lot of these smart TVs used to have so much bloatware, especially Samsung, they've gotten much better at reducing that with removing what used to be mandatory ads. So I think the smart TV has gotten much better there. And I think for a lot of people that continues to be a device that grows down the line because it's all integrated into one. And that's also part of the, the reason Amazon came out with the cube and now the second generation cube, you know, really cool device that is voice-based and will automatically, when you say turn on Hulu, will know how to change your input know how to turn on your TV. It can also control your lights. We're starting to see more streaming services on these platforms that are being combined into the connected home.
Dror Gill: 30:05 Right. And you see this with a, with Nvidia shield TV, right? It connects to your, uh, um, uh, nest to the Phillips Hue, to Netgear, all of that.
Dan Rayburn: 30:14 I think that that's the future where some of this is going is they're no longer these companies and platforms and no longer looking at streaming services as an isolated service. It's one of multiple services in your house. It provides entertainment or lighting or something of that nature. And the Cube is a really cool device. I've spent a lot of time with the Cube. Um, we recently at the NAB streaming summit in October, we had one of the executives on stage doing a fireside chat with me. Really talking about the technology that went into it. And audio is really hard and I don't think people understand in the audio side just how hard it is to do things on the voice side and actually have it work on the back end and have it worked quickly and in real time. Uh, I would say right now Amazon is by far leading the market when it comes to the technology that they have for voice enabled applications. And you see that with the Cube, especially from first gen, the second gen, and on black Friday the price was down to $90. What do you think is going to be next year? Right. It's probably going to be 70 bucks, you know, just keep dropping. So yeah, I think that's pretty neat to see in our industry, just how streaming is now thought of as a one of many things in the home that we're using for entertainment. Yeah.
Dror Gill: 31:24 And, and people are using voice actually they got used to talking to their devices?
Dan Rayburn: 31:28 Well, from what we're hearing and the data we've been given.
Dan Rayburn: 31:30 Hulu at the show said that uh, people who were using voice to find content tied into Amazon's products were watching 40% more Hulu and it makes sense because people know how to use their voice and they know what to say. When you're doing a search in, um, one of these services, do you put in the title? If the title is not perfect, what you put in, do you still get the right results? Many times? No. Whereas with your voice, it's much more natural in terms of how you're going to search for content.
Dror Gill: 32:00 The LG remote, you mentioned earlier, it has like a single button. Then you talk to the remote and it automatically searches on all the applications that you haven't stalled on the TV and finds the content very simple.
Dan Rayburn: 32:12 Also, if you don't want to do that, the pointer system's very simple. If you don't instead want to have to type stuff in, they give you flexible options, which I like as consumers, we will all want options and I think options are good. The downside to options obviously is too much choice, too much confusion, not sure what the business model is. And that's why a lot of consumers are going to jump amongst these services in 2020 because when you can try them for a week or 30 days, why wouldn't you?
Mark Donnigan: 32:38 Well, Dan, I know you were telling us before we started recording about something really exciting you're doing at the NAB show, um, around devices. So, um, why don't you tell us, you know, what you got planned.
Dan Rayburn: 32:52 Yeah. So this, this is pretty cool. Um, and we're going to have some, we're going to have some information on the website up pretty soon and you'll see me announce it sort of everywhere.
Dan Rayburn: 32:59 But one of the problems I've always seen at conferences talking about our industry is we're all there talking about video, but nobody is showing it. We're talking about devices, but nobody's getting hands on with them. Nobody can see these platforms in action. And the three of us on the phone, we eat, sleep and breathe this industry. So we see all this stuff. We use all this stuff, but we're not the average consumer. We're not the average industry participant. So my idea here was the NAB show is, is the largest collection of people in the video world. Maybe not all streaming, obviously a lot of traditional broadcast, but those are the people we actually have to educate even more than people in our industry. So what we're going to do in April is for anybody who walked into the North hall lobby, if you remember, there wasn't really much in the North hall lobby.
Dan Rayburn: 33:45 There's some little booths and some other things. Well, we're going to take over the North hall lobby and we're going to call it the streaming experience. And we're building out 12 living room style, uh, seating with large screen TVs. And every single TV in all 12 locations is going to be XBox, PS4, Apple TV, Chromecast, Roku, uh, what did I forget? It's basically gonna be every hardware device in the market today of the seven that we talked about earlier. And then on each one of those, there's going to be 50 different OTT platforms that you can test and these will be pay services, these will be AVOD services, these will be authenticated services. Think like a CBS sports or something like that. And any attendee to the NAB show can walk right in and say, you know, I really wanted to see what Netflix, HDR looks like here compared to you know, Amazon HDR or I want to see what bundling of content looks like.
Dan Rayburn: 34:41 I want to see what UI and UX is compared to these services. I want to see how the ad supported services are doing pre-roll. I want to see what live sporting personalization looks like. I want to actually test an Amazon Cube and see how good it is in terms of understanding voice recognition. So we're calling it the streaming experience. We're going to have it out for three days. It's going to be a place where people can also just come to get questions answered about these platforms. I'm going to personally have my folks manning every single one of the stations. Uh, and in addition we're going to be giving away every single piece of hardware that we are installing during the event. We're going to be giving that away after. So, it's about $10,000 in gear, not including the TVs, which those are rentals, but everything else, uh, that we're buying, we're going to be giving away.
Dan Rayburn: 35:33 So you're going to be able to get into some amazing raffles, some really good gear. And then in addition to that, we are also going to have a location in the middle of that area. The streaming pavilion, Oh, sorry. Streaming experience where you're going to be able to also test these streaming services on phones and tablets. Oh, that is awesome. And because we have to bring that experience in as well we can't only think large screen and if all works out, hopefully we might even have 5G demos. So these services working across 5G. So think of every service in the market, you know, all the live linear services, the on demand services, the free services, the authenticated services. I basically challenged people to come to the streaming experience and find a service that we don't have on on those devices and we'll have, we will have services from other countries.
Dan Rayburn: 36:26 It's not just going to be the US I won't have everything. Obviously there's, there's some of these services that only work based on certain geo-fencing and certain locations. But we also already have some OTT providers who were saying, Hey, we're going to give you special accounts so that the services work for you as a demo even if it's not available in that region. So we have a lot of OTT companies that are working with us. We've got some that are partnering with us on a sponsorship level to really promote the service. And the other thing we're going to do is for the companies that really wants some feedback, we're going to have a, an attendee who comes up and let's say they use Hulu's service for a couple minutes and then they walk away before they walk away. We're going to say, Hey, fill out this quick card that has five questions on it.
Dan Rayburn: 37:09 Would you buy this feature functionality? And then we're going to dump all that data back to the OTT platforms. Because now they're going to collect thousands, hopefully of real world feedback from customers who are using the service or thinking about using the service. So we want this to become a focal point for the show where people can come and just talk about these services, see them, compare them, test them. Win Some of this product, uh, get your questions answered. And then also use it as a way to collect data for the industry to share with the platform providers what is actually taking place. So I don't know of any other show that's doing it. It's something that I've been wanting to do for quite some time at this size and scale. And when you have the NAB behind it and once they start promoting it and we've got dedicated bandwidth for it.
Dan Rayburn: 37:55 So we're making sure the experience is really good and I'm curating the entire thing so I am going to make sure everything works beforehand. We're there days in advance, I've already bought all the devices for the, for the event for months prior, right were we had them like it's about 2,600 accounts you have to set up across all the devices. It's a big undertaking. This is, this is serious, but it's going to be a good as we're calling it experience. So whether you're in the advertising market and you want to see what ads look like or you're in the compression business and you want to look at artifacting from one service to another, you want to look at 4K and lighting and HDR. You want to come. I think UI and UX is super important. So all those people that come to the NAB show that are doing design or creative UI and UX will come compare how they work and work between mobile and larger screen. So really whatever industry you're in and the NAB gets a lot of different people from different verticals and industries and regions of the world, this is going to be relevant to you in some way, shape or form and you're going to be able to see it free of charge.
Dror Gill: 38:59 This really sounds amazing Dan. It's kind of a combination of a, of a playground that everybody wants to play with and also a way to experience, uh, all of this tests, right? And, and the way to experience a lot of things that you don't have access to because nobody can buy all of that gear and get access to all of those services at the same time. So you can really come in and experiment and see video quality as you said, UX, advertising, integration, everything. And also be able to talk to people who are, who are experts in this and can walk you through it. And the fact that you're feeding back the information and the comments from, uh, from the visitors, you know, back to the services is, is really a great service to the industry because then you can finally get those comments and uh, and information back.
Dan Rayburn: 39:49 And we're also going to share it with the industry as a whole. We're definitely going to share here are some of the highlights we've seen from what consumers have been saying. And the other way I'm looking at this too is it educates two other portions of the market that are really important. It educates the media because now it's going to happen is when somebody wants to do an interview with Hulu who speaking at the show and you know, wants to talk about the platform. Somebody from Hulu is going to be able to walk them to the streaming experience and actually show it to them, which means hopefully they actually get the coverage accurate. So it's really important that the media sees the stuff. And second, the other market that we have at the show is investors. There's a lot of investors at the NAB show, institutional investors, and they don't get to see this stuff.
Dan Rayburn: 40:29 So when they're making predictions about stock and about revenue and loss and capex and OPEX and all these other things that they use to determine success or failure of companies, the best way to do that is to actually see the product in action. So now you're also going to have investors who are going to be able to get hands on with this stuff even from a high level, which is going to benefit them. So I think overall it just benefits the industry. It benefits the platform providers, the consumers, the media, the investors. Those are really the five vertical markets that I'm trying to target.
Dror Gill: 40:57 We need something like this. Um, you know, as an installation permanently somewhere.
Dan Rayburn: 41:02 Yeah, maybe. I mean, I'm doing this with the NAB and that's, that's the exclusive, you know, group I'm working with now. I'm certainly not going to bring this to other conferences, but this is something that you're going to see now moving forward at NAB show in Vegas for sure. New York is much more difficult to do this only because of unions, some other, some other rules around that. But, uh, in Vegas, this is, you know, this is DnaB also planting a stake in the ground going, listen, you know, last year you walked into the North hall lobby and it was still so much of a focus on broadcast and traditional TV. Well, users are in for a, you know, wake up when they walk in this time and go, wow, what is all this streaming stuff?
Mark Donnigan: 41:38 This is an amazing service that you're providing Dan. Uh, and we're gonna promote it and encourage everyone, uh, you know, our customers and those that are in, you know, in our sphere of influence, uh, to check it out, you know, really, cause this is, this is amazing.
Dan Rayburn: 41:52 I'm excited for it. It's a lot of work and it's a huge undertaking. It is a lot of work. Yeah. It scares me at times. Just cause to do it right. It's, it's a lot of work. Um, but I'm going to have a good, I'm going to have a good team. I'm going to be flying in some, uh, some of my buddies from the special operations community who are, who are tech guys and they're, they're going to come help me in the booth and whatnot. And, uh, it's, it's going to be a good three days. Well,
Mark Donnigan: 42:18 Dan, uh, this is, uh, you've been yet another amazing interview. Thank you so much for coming on the video insiders.
Dan Rayburn: 42:26 Thank you for having me again. As you know, I can talk all day about this stuff. So it's a good thing you have to edit this down into something shorter.
Mark Donnigan: 42:30 The next time we have you on, uh, I think, uh, will time, the timing will be good with some new, uh, things you have going.
Dan Rayburn: 42:41 There'll be some other new things in the new year that I can't talk about now, but yeah, yeah. The, the, the idea of wanting to inform the market more and providing more resources for the community. That's, that's something that's coming up.
Dror Gill: 42:51 Great. So thanks again. Thanks again for joining us today.
Dan Rayburn: 42:54 Thank you guys.
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