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Starting an IP Video Distribution Service for Movies and TV?

TV, movies, and other content are included in this article since there is likely to be minimal differentiation in future content that is distributed VOD (Video On Demand is IP Internet plus satellite channel content). For information on content and distribution convergence, see the Accenture® article (PDF): Over-the-Top TV Content Distribution Differentiating in an Omniplatform Paradigm.

Running your own distribution service may mean that you and your team are responsible for operating the Web distribution server, operating programs for advertising monetization, processing credit cards, monitoring the server and network to make sure you are delivering quality, and understanding IP delivery and advertising in countries around the world. This takes a lot of knowledge of the technical and geographical aspects of IP distribution, and it's all heavy. You can lighten your load some by paying the server host, fees for managing the server, etc.

To do this profitably, having your own service also means having a lot of business and advertising savvy. Many of these services start and fail. There are few success stories despite the demand for good content in this venue.

Cloud TV and movie distribution are the latest market thrusts, and cloud is just one technical form of movie and TV content distribution.

Entering the cloud

What is the mysterious "Cloud?" The Cloud can mean anything the purveyor wants it to, and has roots in the use of cloud-like drawings illustrating the Internet. But it really means a specific type of server use.

Cloud computing and Cloud TV share characteristics. Cloud computing services generally refer to sharing resources on a server through virtualization, which means virtual partitioning and sharing of the server, and this can include software as a service (SaaS). "Virtual" means the server is a virtual partition of the server hardware and environment, rather than a single physical entity.

Through virtualization, the user can license just a portion of the hardware and software, such as the operating system, RAM, CPU time, server software time, and bandwidth, and not have to pay for a server or the software he uses. Usually you can also run software that you license or create yourself.

What is true for TV and movie distribution is that you will likely only license a virtualized server, and then individually license the software for the amount of usage you plan. For example, this is true for running the Wowza™ server on Amazon AWS®.

The advantages of cloud distribution can be:

  • Access to a higher number of software applications
  • Software applications are always up to date - maybe
  • Software and server maintenance may be done by the host provider, sharing the expense between many organizations
  • Local hardware expense purchase and upkeep are mostly eliminated (You don't run your own server from your garage)
  • The larger part of IT departments are eliminated
  • Security of stored data and access is usually excellent, and may be maintained by the service provider

An example of cloud based software is The Adobe™ Creative Cloud, which provides a consistent and integrated environment from using cloud based content production software on your own computer, to the Adobe Media Server used to distribute your video. (The Media Server license is separate.) The Adobe Creative Cloud license starts at $50.00 (May 2013) (up to 2 machines), and offers team licenses for $80.00. In Adobe's version, the actual software resides on your computer and requires a once-a-month Internet validation, in contrast to others that reside on the cloud server.

The disadvantage of cloud usage, because it uses shared resources, is: During peak load times, shared resources (CPU time, RAM, bandwidth) can become overloaded, making the server slow or unavailable, stopping the show, and data in transit (like form or purchase information submitted around the holidays) can be lost. Another disadvantage is that if your computer or device isn't connected to the Internet, you can't use the software (doesn't apply to Adobe).

The Amazon AWS Elastic Cloud server, which is available to users large and small, is reportedly used by Netflix. Amazon's implementation, with Wowza server, seems to be much less affected by peak load times. (A larger cache size on the client device, and larger packets, help alleviate slowing, but this usually isn't under your control.) Amazon's pricing scheme is elastic, so you pay for what you use, rather than buying a huge service for peak times that you don't use. If you are doing Pay Per View video distribution, Amazon/Wowza rates are OK. For ad supported videos, this probably won't work well.

Some newer "shared" cloud offerings from Internet hosts, such as Cloud Web now offer dedicated resources, so you don't have to worry about peak time shortages... unless you haven't purchases a large enough plan. Having root access for configuring programs is essential to video hosting, unless the support group will do it for you, and this service is not common on less expensive shared hosting plans.

The number of hops across the Internet that a URL request has to make, directly affects the video reception. Too many hops equals delays and "rebuffering." To avoid this, Content Distribution Networks (CDNs) are used. CDNs are much higher tier bandwidth networks that connect major distribution points. At these distribution points, the server and its content may be replicated, or just "caching of content." CDNs eliminate the hops. In the US, CDNs usually have a minimum of 3 servers. There may be 16 or more worldwide.

On Amazon AWS, you control which distribution points you use. If you are on a small server which doesn't have a CDN offering, you can extend your reach with Cloudflare, or a similar service.

Non-cloud hosting services

A Virtual Private Server with a CDN connection, is a good or sometimes better alternative resource for small companies that want to distribute video and want to assure delivery speed. They offer a virtual partition of a server, but provide dedicated resources, and you purchase the amount that you need. Some, like Amazon, are "elastic," meaning if you use more, you pay more, but it expands automatically, so you don't have to buy a huge service full time.

Services like provide hosting with CDN network distribution, with elastic pricing, specifically for media streaming, starting at around $50.00 a month. Rackspace® partners with the Akamai® CDN for streaming content distribution.

If you want to monetize your videos with ads, without trying to find advertisers yourself, YouTube® offers this service, and no hosting fees. There are many partners who will work with you, offering services such as inexpensive advertising to get you an audience.

For those who can use ad networks, Long Tail Video® (Bits on the Run) provides both the server and the ad support. Bits on the Run is also elastic, in that you pay for what you use.

Next: Going on your own

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Going on your own

Starting small

It depends on what you want to do. If you are not doing Pay Per View (PPV) or ads, you have easy choices: YouTube, Vimeo®, or just use HTML5 streaming on your own server if you have the bandwidth. You can link from your Web page to any of these. HTML5 streaming requires nothing more than uploading the file to your server, just like a Web page, and making sure your server is set to recognize MP4 or other video formats.

If you want to offer a sizeable choice of videos, you can install applications like ClipBucket or Vidiscript, which are free. These provide an interface for people to find your videos by categories, etc., and are streaming servers. On Apache™/Linux systems, you will need to install FFMPEG and MOD H264 on your server. This requires root access, which is not common on shared servers, so your server host technical support will have to do it for you. You can also just have PHPmotion, or another company install a video sharing server script for you.

If you are on a limited storage and limited bandwidth plan, be prepared for a huge increase in bandwidth. A two hour video file is 16 GB. Your videos might only be 30 sec. to 10 minutes, but these still take a lot of bandwidth. Unlimited plans do have their limits. Most are set up to serve pages from Web sites, not videos. Sending video files will take most of the RAM and CPU time on these shared servers, so you may be asked to leave. It is best to find a server that advertises that it permits video.

If you simply want to monetize your content with ads or a small fee, YouTube is a good choice, and Vimeo now offers that service. Ads run at the beginning.

Going bigger

If you want to run half-hour to 2 hour programs or movies, you will need a much bigger platform than shared hosting. A standard half hour program runs 22 minutes, and allows you to insert commercials at several points.

It takes a whopping amount of CPU time, RAM, storage, and bandwidth, to operate a server sending video. For example, Adobe Media Server recommends 8 GB of RAM, to handle the max load of 50 simultaneous requests, and the dedicated resources available on smaller hosted servers starts at only 256 MB of RAM, and goes up in price very quickly from there. If you exceed the 50 simultaneous requests, you have to start another server (may require additional software licensing), which isn't something you typically do on small hosting services.

Compression is very important for reducing bandwidth. The h.264 format, in an MP4 container, is currently the best video compression codec, and is available in most video production software. If you don't have video production software, you may want to use Sorenson Squeeze® or Kompressor, or one of several services on the Web.

So as you scale upward, you are probably better off going to a service that does all of the server scaling for you. For example, Amazon with Wowza Media Server, can be set up to automatically scale up the number of servers as demand increases.

The professional servers you might use, which can be used on any platform that can take the load, include Wowza, Microsoft MediaRoom, and Adobe Media Server. They all work for movie distribution and IP TV. Ericsson® recently purchased Microsoft MediaRoom from Microsoft, to use as the base for their immense global telecom service (video to mobile and other devices). These servers use adaptive bitrates, so they can adapt to a lower picture quality (resolution) if network bandwidth slows, and can select the correct bitrate for any device.

Some of the services mentioned next in "Going Full Tilt," such as Ooyala™, also offer services for midrange video distribution, and aren't just for the really big guys.

Going Full Tilt

Various services include an all you could want menu of service offerings, and are used by major companies for multimedia CDN content distribution. They do the complete server management, can do content management, and support ads. These include Ooyla™, BrightCove®/BrightCove Video Cloud, LimeLight Networks®, Akamai®, EdgeCast®, and others. These are top of the line services, and can be rather costly.

Some of the services mentioned here, such as Ooyala, offer services for midrange video distribution, and aren't just for the really big guys.

Movie Stream Productions has no financial association with any of the companies mentioned in these pages.

To follow developments in the field, you might want to follow the International Cloud TV Broadcasters Alliance, Disruptive Open Cloud TV Force, Producer's Network, and Over the Top VIDEO.

Security and piracy

The professional servers support important functions needed for professional distribution, such as DVR and DRM. DRM (Digital Rights Management) inserts codes into your content to prevent unauthorized use. DRM systems are typically defeated by pirates after a few months, but it protects new content from piracy.

Piracy may or may not be a concern. Piracy in the US is typically limited to those who aren't going to pay to watch your program anyway. It's common among hacker groups and college students. Availability and price are the reasons pirates steal videos. If the amount is above $2.00, piracy may occur. But your main audience is not going to go to pirate sites - they will go to the better sites and pay. These studies are supported by Netflix analysis, which shows when a show goes to Netflix, piracy numbers go down. If your content is displayed anywhere in a theater, on TV, or on computer, then pirates can simply record what is on the screen. You have to live life by simply making sure that piracy doesn't get out of control.

Various hosting services that you may use offer some security capabilities. These include:

  • SSL: HTTPS connections encrypt the data so that it can't be deciphered. This may slow the data transfer rate slightly, but is worth it when security is a concern.
  • Streaming (rather than download): SSL Streaming packets are small and aren't saved on the client computer. There are exceptions. However, the ability to search scenes forward and back in the video may depend on downloading the file using RTMP transfer.
  • HTTP cache headers: These are set in server configuration (not the meta tags on HTML pages) and instruct the client computer how long to hold information in the local cache.
  • Secret word: When videos are initiated, the code sends an encrypted secret word to the server. The server knows the secret word. If the secret words match, it sends the movie.
  • Tokens: A single use token allows the client device to see the content. This, taken together with the IP Address and the secret word, all together in a code connecting the client and server, make sure that no other device can capture the URL string and watch the content, now or later. After timing has permitted sufficient time to watch the movie, the token is no longer good.
  • Secure passwords that would be very difficult to guess or use a mechanized hacking assault against, and hardening the server file structure to thwart hackers, are essential to security.

Content Management

The primary things that will get your content watched is advertising and on site content management. If people can't find your content, then it effectively isn't there. So every distribution site needs a Content Management System (CMS) for bringing the content onto the site, inserting meta tags within it for cataloging and locating, and displaying the content by an organizational scheme: Genre, New, Classic, Search, etc. There should be some scheme for featuring new videos so that people see them - that is one form of advertising.

Next: What is the marketplace landscape?





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What is the marketplace landscape?

I don't know that we have a clearly defined distribution marketplace yet for Online movies and TV. Various online services use their own servers, or commercially available services. There is, and probably will remain, little differentiation between content types (shorts, long form, movies, TV programs), other than just the way these services label themselves in their market niche. Some of these distribution mechanisms are distributing only to portable devices, while some distribute to all Internet connected devices.

I suspect the distribution hosting/service providers will continue to fall into several camps for the near future:

  • Content and DVR services to mobile users.
  • Independents hosting their own or other's content, and using smaller servers, and possibly distributing to all types of connected devices. These include companies like CloudWeb, RackSpace, and GlowHost. Amazon AWS with Wowza is another service within reach of both small and large companies.
  • Those who distribute through Roku®, YouTube®, Vimeo®, Boxee® with DVR, and other services.
  • Those who distribute through XBox®, WII®, PlayStation®, Apple products, and other game platforms.
  • Hulu with new content and DVR type service, and Netflix, Redbox®, FIos®, and Amazon Prime® type distributors.
  • Large operators who go to services like Ooyala, BrightCove, Limelight, and Akamai (Rackspace), which provide hosting, custom services, on CDN networks.
  • Cable and other content services, who use their own proprietary networks for distribution to their customers (Verizon with FIos, Charter On Demand®, etc.)
  • Content aggregators who find and provide content to major online services, such as to Apple®, Blockbuster®, CinemaNow™, Hulu®, Vudu™, XBox, Netflix®, etc.

Competitive Differentiators

Is there a competitive advantage between major suppliers of content and smaller Independents?

Major content distributors such as the major television networks, cable channels like HBO, content creators like Universal and Disney, and cable and satellite operators, have giant systems that are very expensive to run, content costs in the double-digit millions to create, and distribution costs are high. They are locked in to their business model by contracts that define the advertising and distribution relationships they have. They have hardware that doesn't support IP distribution very well, if at all. But they have enormous market reach, huge advertising revenue, and an audience and advertisers who aren't going to change very quickly away from that model. Changing to IP distribution will be difficult and very costly, and take many years.

Competition for viewers in different venues is getting serious. Goldman Sachs estimates that 17% of the 18-to-49-year-old demographic simply stopped watching broadcast TV in winter 2012-2013, according to the New York Times. That's huge. Another example, ABC television is trying to give Aereo a run for its money, by broadcasting live over IP to New York and Philadelphia customers for six weeks. At least, that's the spin the press puts on it, and the press is a whore for headlines. But at the end of that six week period, they will only be able to offer the IP service to those who subscribe to cable services. Undoubtedly offering this service full time would destroy cable and hurt their contracts with cable. Other providers, like HBO, have followed a similar course. How ABC plans to use live streaming and the cloud to challenge Aereo. You can't turn this ship on a dime.

In contrast, Independent producers who aren't enamored of the movie and television studio systems, currently have huge opportunities in IP distribution. They can create new forms of content, create what they want, and find an audience for it on the Internet. Content creation costs are relatively small, and distribution costs are relatively small. The costs of digital production and distribution are relatively small. There are few legacy contracts to lock them into expensive agreements. But what they generally don't have is the creative research and talent to create a competitive product, nor the money to do even small productions.

The primary differentiators between broadcasters, theaters, and IP distribution are:

  • Targeted advertising: While networks broadcast to every listener, at huge cost to advertisers, except for regional switching over cable, IP allows ads to be targeted by relevance to a known viewer, at a much smaller cost. This is very cost-effective advertising, and can much more easily be measured for running campaigns.
  • Convenient viewing: The viewers can view any content at the time and place of their choice, even on their smart phones. Broadcasters and cable channels can have a similar advantage of providing new monetized (pay or ad) content to Hulu and other DVR services, for convenient viewing, but so far have been reluctant to change to new venues.
  • Broadcast provides a viewing experience at a habitual or socialized time, giving people something to look forward to regularly (weekly), and enabling 40% of those who like to use the second screen (with social media) to communicate during broadcasts. IP does not have regular or synchronized viewing. IP is an independent experience, not socialized. Structure and socialization are often an important parts of the structure of people's life.
  • Theaters similarly operate a socialized experience, giving people an evening out every couple of weeks, which is important to the structure of some people's lives. It is an experience to look forward to, and Hollywood rarely disappoints with the viewing experience.
  • The picture quality from broadcast to IP delivery varies considerably, with cable doing a relatively poor job, the Dish satellite network doing the best job, and IP delivery anywhere in that spectrum. The IP standard is 16:9, 30fps, 1080p x 720 resolution. 1280 is also common. But to conserve bandwidth for IP, picture clarity and color are often downgraded. Most of the time, 720p or above has minimal impact on viewing pleasure.
  • While Independents can use IP distribution without difficulty now, major broadcasters and cable providers would not be able to convert en mass to IP delivery due to bandwidth limitations, equipment limitations, contracts, and business models at this time.
  • When major broadcasters and cable providers do get into the IP market in a big way, they will likely squash most Independents with their mass, money, and vast resources. Independents will have to compete for space, advertising dollars, and high priced advertising space to advertise their programs. We already see that in advertising in Google for movies.

Independents have very low overhead and can create productions sometimes at a fraction of the cost. But what independents are going to find is several costly things:

The public has no interest in mediocre content. To interest a paying public, the content has to be new and of high story and production quality.

You will not get an audience, without some form of advertising. Advertising is the primary way people find you. Advertising movies on Google Adwords, standard, now starts at $3.00 to 7.00 per click. Impression advertising is different.) At a conversion rate of no higher than 1 to 5, it will cost more to advertise in this way than you can possibly make. Note that to monetize your content on YouTube, you can find advertising partners who will advertise for as little as .04. You can advertise YouTube online video on Google Adwords through the Adwords online video campaign section at much better rates. It will cost an average of at least 4 cents per ad view, and at a click rate of 1%, it will cost you around 40 cents per click. You can't include inline advertising to offset costs. There is no way to recoup that 40 cent expense.

Subscription models are not viable, sustainable, business models. Even Hulu struggles. There are already way too many distributors, like Netflix and Rebox and Amazon Prime, and FIos... providing old or mediocre content. But there is a huge market for new, quality content, at Pay Per View prices.

Creating new, quality story and production, content is the holy grail. TV broadcast already does a great job of entertaining with dramas - that is their ball field. They go through a huge number of pilots to find an audience winner. It is a difficult and very expensive struggle to come up with content that is new and unique. Broadcasters and studios have a long history of doing this well - they have the advantage. Independents will find this necessary and financially challenging (or they won't get viewers).

- Dorian

Next: Reference, Legal

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Reference, Legal

Companies mentioned, or commonly mentioned on this Web site:

ABC is a name used by the American Broadcasting Company
Accenture™, its logo, and High Performance Delivered are trademarks of Accenture.
Adobe™ is a trademark of Adobe Systems Incorporated
AKAMAI® is a Registered Trademark of AKAMAI TECHNOLOGIES, INC.® is a Registered Trademark of, Inc.
AMAZON PRIME® is a Registered Service Mark of Amazon Technologies, Inc.
Apache™ and the Apache feather logo are trademarks of The Apache Software Foundation.
AWS® is Registered Servicemark of Amazon Technologies, Inc.
AOL® is a Registered Trademark of AOL Inc.
Apple® is a Registered Trademark of Apple Inc., registered in the U.S. and other countries.
BOXEE® is a Registered Word Mark of Boxee Inc.
BlackMagic® is a Registered Trademark of BLACKMAGIC DESIGN® PTY LTD
BLOCKBUSTER® is Registered Trademark of Blockbuster L.L.C.
BRIGHTCOVE® is a Registered Service Mark of Brightcove Inc.
Brightcove Video Clous is a Service Mark of Brightcove Inc.
Canon is a Registered Trademark of Canon Inc.
Charter On Demand® is a Registered Service Mark of Charter Communications Holding Company LLC
CINEMANOW™ is a trademark of BBY Solutions, Inc.
CloudWeb is a name used by Innovative Scaling Technologies Inc.
Comcast® is a Registered Trademark of Comcast Corporation
Disney is a business name of Disney Enterprises, Inc.
EDGECAST® is a Registered Service Mark of EdgeCast Networks, Inc.
Ericsson is the trademark or registered trademark of Telefonaktiebolaget LM Ericsson
Fandango℠ is a proprietary service mark of Fandango, Inc.
FIos® is a Registered Trademark of Verizon Trademark Service
HBO® is Registered Trademark of Home Box Office, Inc.
HULU® is Registered Trademark of HULU®, LLC.
iTunes® is a Registered Trademark of Apple®
Kompressor is a name used by Kandalu Software.
LIMELIGHT NETWORKS® is a Registered Trademark of Limelight Networks, Inc.
Linux is a name used by
LONGTAIL VIDEO® is a Registered Service Mark of LongTail Ad Solutions, Inc.
MEDIAROOM is a Registered Trademark and Service Mark of Microsoft Corporation
MGM (Metro Goldwyn Mayor) trademark is a logo with Leo the Lion
Moviefone® and® are Registered Service Marks of AOL Inc.
MOVIES.COM® is a Registered Trademark of Fandango, Inc.
MOVIEWEB® is a Registered Service Mark of MovieWeb, Inc.
NBC™, the NBC logo, and the NBC Peacock are trademarks of National Broadcasting Company, Inc.
NETFLIX® is a Registered Trademark of NETFLIX®, INC.
NIKON® is a Registered Trademark of Nikon Corporation
Ooyala™ is a trademark of Ooyala, Inc.
Panasonic® is a Registered Trademark of Panasonic Corporation
PlayStation® is a Registered Word Mark of Sony Corporation
RACKSPACE® is a Registered Service Mark of Rackspace US, Inc. DBA Rackspace Hosting
REDBOX® is a Registered Trademark of Redbox Automated Retail, LLC
RightsFlow® is a Registered Trademark of RightsFlow Inc.
ROKU® is a Registered Word Mark of Roku, Inc.
Sony® is a Registered Word Mark of Sony Corporation
SORENSON SQUEEZE® is a Registered Trademark of Sorenson Media, Inc.
Sundance Institute is not trademarked, but is used since 1981 by Sundance Institute, which hosts the Sundance Film Festival
Sundance Channel® is a Registered trademark of Sundance Enterprises, Inc.
TiVo® is a Registered trademark of TiVo Inc.
UNIVERSAL STUDIOS® is a Registered Service Mark of Universal City Studios LLC
VIMEO® is a Service Mark of VIMEO LLC
VUDU™ is a trademark of VUDU, Inc.
WII® is a Registered trademark of Nintendo of America Inc.
Wowza® and Wowza Media Systems™ are Registered Trademarks of WowzaTV LLC
XBOX® is Registered Trademark of Microsoft Corporation.
YouTube® is a Registered Trademark and Service Mark of Google, Inc.
VIACOM® is a Registered Service Mark of Viacom International Inc.
Any trademark not listed out of oversight is a Trademark or Registered Trademark of it's respective owner.

Mention of any business in this article, or lack of mention, is not intended to endorse, disparage, favor, or disfavor any business.

Movie names that are mentioned are not given reference citations. This is because numerous studios are involved in production, and they then assign distribution rights to multiple distributors, and these rights can be sold to other distributors. For production and distribution information on any movie mentioned, consult the Internet Movie Database, or other authoritative listing.

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