The Migration: Leaving the Data Center for the Public Cloud

The Migration: Leaving the Data Center for the Public Cloud

August 8, 2023 | 4 min read

Today, companies must continuously seek innovative ways to deliver superior customer experiences as the video industry landscape evolves. One trend recently gaining significant traction is the transition from owned infrastructure to cloud-based systems. This move is a game-changer for video operators and telecommunications companies (telcos) alike.

The cloud offers numerous advantages over traditional-owned infrastructure, especially regarding flexibility, scalability, and cost-effectiveness. It provides a platform for operators to respond to market trends and consumer demands swiftly. The initial capital expenditure of building and maintaining physical infrastructure gets mitigated with the cloud. This shift also offers scalability to meet peak demands without overprovisioning resources, resulting in cost and efficiency savings. 

Embracing the Cloud

This shift in consumer patterns is compelling broadcasters to change their distribution methods and user experience radically, necessitating a shift towards streaming and mobile and web-friendly experiences. Many broadcasters have pivoted their business models, such as by licensing content to streaming platforms, followed by the launch of broadcaster-owned streaming services. 

In this scenario, broadcasters can use modern, cloud-based architectures to bolster their digital efforts and meet the new market demands by using public cloud systems for storage, licensing, and distribution, even moving production and playout to the cloud.

Cloud technology enables broadcasters to forge new relationships with viewers, explore novel revenue models through content licensing, and reduce costs and operational complexity. This shift is not a matter of choice but of necessity to keep pace with the ever-evolving media consumption landscape.

Cloud migration has numerous drivers. Broadcasters need to pivot from the dwindling viewership of traditional broadcasting to a streaming-first model, necessitating a complete overhaul of their supply chains and infrastructures. The goal is to meet viewers where they are, transition to new business models, support the rollout of the latest digital terrestrial TV standards, and reduce costs associated with manual processes or maintaining traditional data centers.

These moves aren’t merely reactive; they’re proactive, creating opportunities for new monetization strategies and improving production capabilities. The industry pivot to the cloud heralds a new era of broadcasting, one that is more flexible, dynamic, and responsive to changes in viewer preferences and market trends.

Tackling Cost and Revenue Challenges head-on

Alongside the technological changes, another significant factor is prompting this shift: the balance between costs and revenues. The price of broadcast rights to sporting events and other critical drivers of viewership has skyrocketed, and talent costs have followed suit. For instance, ESPN’s acquisition of the rights to Formula One racing for 2023-2025 came with a price tag of $75-90 million per year, a staggering 1000% increase from its earlier agreement.

While these costs are mounting, the traditional broadcast and pay TV audience is shrinking. Research reveals that in Q1 2022, conventional broadcast and pay TV accounted for less than a third of consumers’ viewing time in the US. A decade ago, these formats made up 54% of viewing time.

This drop in traditional viewing has led to a corresponding rise in content consumption on other mobile platforms. Younger viewers are particularly significant in this shift, spending about two-thirds of their viewing time on platforms other than television. They consume a substantial portion of their content through subscription video-on-demand services, social channels, and YouTube.

As the industry adapts to these new demands, distribution models, pricing structures, and licensing deals are changing. While the easy-to-start/easy-to-stop subscription model has its advantages, it is not without its drawbacks. It can create fragmented user experiences and an unpredictable churn rate. However, it reflects consumers’ desire for fresh, tailored content offerings and the industry’s need to keep pace with this demand.

Examples of Companies Shifting to the Cloud

Following are a few examples of how video operators and telcos are leveraging the power of the cloud. As technology complexity meets operational imperatives and cost constraints, we will likely see more companies follow suit and shift from owned infrastructure to the cloud. This shift is a strategic investment, making companies more resilient, agile, and prepared for the future of video and telecommunication services.

Netflix: Netflix’s journey to the cloud began around 2008 when a database corruption led to a three-day service disruption. This event triggered a transformation that saw Netflix move away from a vertically scaled single data center model to a highly reliable, horizontally scalable, distributed system in the cloud. Leveraging the public cloud, Netflix can scale rapidly and handle the massive influx of users globally. This shift has also enabled Netflix to rapidly deploy features and ensure an optimized streaming experience for its users.

Disney+: Launched in 2019, Disney+ was built for the cloud. Leveraging a microservices architecture, Disney+ used cloud services to manage the massive streaming demand from millions of subscribers on the first day of the launch. This decision allowed Disney+ to manage its peak traffic effectively, update its service seamlessly, and expand rapidly to new regions.

AT&T and DirecTV: AT&T and DirecTV, while traditional telcos are recognizing the benefits of the cloud. With their migration to the cloud, they can streamline their service offerings and efficiently bring a variety of content to their customers. By leveraging cloud services like Microsoft Azure, these companies can swiftly adjust their resources to align with the fluctuating demand for various content types, whether live sports, series premieres, or video on demand.

Comcast: In recent years, Comcast has moved much of its applications and services to the cloud to facilitate rapid deployment and scalability. The company has also been using the cloud to gather and analyze customer data to provide more personalized experiences. The ability to quickly analyze vast amounts of data and act on insights has become a key differentiator for Comcast in a highly competitive market.

T-Mobile: T-Mobile has been leveraging the cloud to evolve its network architecture and deliver superior customer experiences. They recently announced their collaboration with Microsoft as a part of their “Cloud One” initiative to modernize their business by moving critical workloads to Azure. This transition allows T-Mobile to rapidly scale network services to meet customer needs and innovate quickly on new customer experiences.

Moving Forward in the Streaming Era

The journey to the cloud is not just a technological migration but a shift to a more viewer-centric, agile, and sustainable future for broadcasting.

Faced with growing constraints, media companies are liberating themselves from the data center and embracing the public cloud. They aim to meet viewers where they already are – streaming on their devices.

By migrating operations like distribution, storage, licensing, and even production to flexible, scalable cloud platforms, broadcasters gain an agile infrastructure for the digital era. They can swiftly launch streaming and web offerings to counter cord-cutting.

Through effortless content sharing, cloud technology empowers new viewer experiences, device delivery, and innovative business relationships. It eliminates the bloated costs of running proprietary data centers. It also enables updated, software-driven processes rather than manual legacy workflows. For organizations anchored to traditional broadcasting, the cloud supplies the oxygen and energy to power their evolution. It permits them to keep pace with the dizzying change in consumer behavior and explore emerging opportunities in streaming. Standing still means falling behind. By boldly migrating operations to the cloud, broadcasters can launch into a new media galaxy where cloud-powered streaming reigns supreme.

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