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Report commissioned by DaCast LLC.

Authored by Anna Le Breton



The Small & Medium Businesses Market
For Paid Video Streaming Services

The viability and profitability of SMB market for Paid Online Video Platform
March 2014
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TABLE OF CONTENTS

INTRODUCTION 3

VIDEO STREAMING IS GROWING FAST AND BIG 4
MORE VIDEO STREAMED EVERY YEAR 4
MORE SCREENS, MORE STREAMING 4
CDNS ARE GROWING AS WELL 5

PAID STREAMING SERVICES FOR THE SMB MARKET 6
FREE VS. PAID 6
A FRAGMENTED MARKET 7
SMALLER EQUALS BIGGER 11

THE SMB MARKET: THE FUTURE OF STREAMING SERVICES 13
A TRUE OPPORTUNITY 13
A FUTURE GEOGRAPHICAL SHIFT 14
THE MOST PROFITABLE SEGMENTS OF TOMORROW 15

CHALLENGES FOR TOMORROW 17

CONCLUSION 18

ABOUT DACAST 19





3
THE SMB MARKET FOR PAID VIDEO STREAMING SERVICES


Introduction


Video streaming, which encompasses both pre-recorded video (commonly called video on-demand) and
live streaming, has been considerably growing over the past few years. Industry reports, white papers and
market studies are adamant about it.

Commonly thought and used for personal entertainment, video streaming has also become an essential tool
for businesses, non-profit organizations and other types of institutions. It is an effective way for small
businesses to promote themselves, for religious broadcasters to spread a spiritual message, for NGOs to get
peoples attention or for sports clubs to share their performance with their fans.

Responding to the demands growth for broadcasting services, online video platforms have multiplied and
diversified their offers. Broadcasters now have a choice between paid and free streaming services. Although
paid services are essentially perceived to be reserved to professional and experienced broadcasters, we can
observe a growing demand for premium (paid) services from Small and Medium Businesses (SMB).

This market then represents a new opportunity for the video platforms industry. Although this sector has
proved itself to be dynamic and growing, in particular in terms of traffic, finding a viable and profitable
economic model remains challenging.

In this paper we will discuss the growing demand for streaming services and particularly for paid-services
targeting the SMB market.


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Video Streaming is Growing Fast and Big

More Video Streamed Every Year

It is not a secret; thousands and thousands of videos are uploaded every day online. YouTube alone, reports
that 100 hours of video are uploaded on the site every minute and that 6 billion hours of video are watched
each month on YouTube. The video platform even adds that it is equivalent to almost an hour for every
person on Earth, and represents 50% more than last year.
i

Video streaming is growing and it growing fast and big.

According to Pew Internet report, the number of American adults watching online videos went up to 78%
while the number of people uploading videos doubled between 2008 and today, to go from 14% to 31%.
Note that 18% of those who uploaded videos had created or recorded them themselves.
ii


CISCO estimates that by 2017 it will take a person over 5 million years to watch the amount of video that
will cross global IP networks each month. Every second, nearly a million minutes of video content will cross
the network *+.

More Screens, More Streaming

A large part of the video consumption growth is related to the multiplication of devices on which video
content can be streamed. Streaming, which was once limited to computers, is now largely distributed on
mobile devices. Cisco reports that Global mobile data traffic grew 70% in 2012 and that Mobile video traffic
exceeded 50% for the first time that same year. The Networking equipment company also predicts that two
third of the world's mobile data traffic will be video by 2017.
iii


Video streaming is, however, not limited to computers and mobile devices: television is becoming a major
channel as well. A quick look at Amazons Best Sellers in Televisions & Video Products will confirm it: Google
Chromecast HDMI Streaming Media Player, Apple TV, and Roku 3 Streaming Media Player are the Top 3 best
sellers (as of November 2013).


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CDNs Are Growing As Well

Another major factor indicating the growth of video streaming is the growth of the Content Delivery (CDN)
industry itself. Indeed, the video portion represents a large part of CDNs activities.

Early this year, CISCO was reporting that CDNs will carry over half of Internet traffic in 2017, and that video
on-demand traffic will nearly triple by 2017 (equivalent to 6 billion DVDs per month)
iv
. Finally, it is estimated
that the video portion of the CDN market will reach about $1 billion by the end of 2015.
v













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Paid Streaming Services for the SMB Market

Free Vs. Paid

There are currently two types of model for video streaming on the market: free streaming (aka ad-supported
services) or paid services (ad-free services). A same company can carry both types of services.

Ad-supported services have built their economic model around ads that will be played for a few seconds
before the viewer can access the content. In this system, it is not the broadcaster that remunerates the
video platform but the ad networks. The more videos are watched, the more revenues the streaming
provider gets. This is the system developed by YouTube for instance.

Non-professionals who do not have any budget to allocate to broadcasting generally seek that type of
service. These broadcasters often want wide distribution and do not mind their content to be associated
with ads (on which they do not have control over). The player is branded by the company providing
streaming services and cannot be customized. The content providers usually give up their copyrights (or part
of their rights) to the profit of the video platform used.

On the other hand paid online video platforms (OVPs) provide more complete offers to professionals or
amateurs willing to allocate a budget to broadcasting. In this model, the broadcasters directly remunerate
the video platform. Streaming providers generally sells their services as a plan based on bandwidth or
viewing hours and storage. Depending on the level of plan, the broadcaster can get access to a number of
features, including branding, customization, analytics, chat and commenting features, password protection
and security features. Some paid OVP also provide monetization options (this is the case for DaCast, for
instance).

Usually, broadcasters who are willing to pay for streaming do not want there content to be associated with
ads. They also want to be able to integrate their own logo in the player without showing the service
providers brand (white label player). Keeping control and full ownership on their content is also essential to
them. In this case, video streaming is used as a professional tool.

Today, paid services are not only reserved to professional broadcasters or companies with a large budget.
Prices have considerably dropped and premium-streaming services are now accessible to institutions with
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smaller budgets such as schools, amateur sport clubs or houses of worships, without cutting off on the
features available.










A Fragmented Market

The Small and Medium Businesses market is by definition very large but fragmented. They are many
segments, and even niches, for streaming services that need to be approached differently as they do not
necessarily have the same needs, both in terms of volumes and features. Indeed, for some, broadcasting
represents an essential part of their activity, while for others it is a nice to have addition. Some will use it
as a source of revenue, monetizing their content thanks to a paywall, while others will offer it for free as a
public service. The use can also be internal (i.e. internal video intended for employees, or educational video
for students) or external (i.e. promotional campaign, movies, etc.).

The SMB market for streaming services is, hence, quite complicated to define, since needs and usage can go
from one extreme to another. The only true common denominators are the followings:
- They are organizations (or individual entrepreneurs) using streaming services for their professional needs,
(rather than individual using videos as a social tool).
- Their needs are small to medium and they do not broadcast mainstream content.
- Their budget is small to medium.

The main segments composing that market were established thanks to a study realized on DaCast LLCs
clientele. These segments are the following: faith and spirituality, sports, media, government, school and
education, event production, marketing and communication, entertainment and business promotion.
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The definition, needs and characteristics of each segment are given in the table below:
Faith

This segment includes both houses of worship and other spiritually
oriented organizations. Religious or spiritual broadcasters typically use
online streaming to broadcast church services for their parishioners and/or
spread their spiritual message to a larger audience (i.e. churches, temples
and spiritual websites). They value support, as most of them do not have
prior streaming experience.

Sports

This category encompasses online classes, games and sport events, as well
as online TVs focusing on sports only. Sports broadcasters usually
appreciate the opportunity to monetize their stream through pay-per-view
and use online broadcasting to reach sports followers anywhere in the
world. Niche sports such as ultimate Frisbee, combat sport like boxing or
university sport departments are the typical sport online broadcaster.

Media


This includes TV stations, radio stations, magazines and news websites
(other than sports only). It can be local TV/radio stations adding online
broadcasting to their panel or online only TV/radio programming. They
tend to broadcast 24/7, both live and pre-recorded content, and monetize
their stream through subscription fees or advertisement.



Government


This is a fast growing segment including all types of administrative divisions
(state, district, city and town). They use online streaming to enhance
transparency and support democratic participation. Their streams are
mostly free and published on governmental websites.

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Schools &
Education

This category regroups all streams published for educational purposes.
Broadcasters are schools, colleges, universities and any type of educational
program/training provided by an institution or an individual (i.e.
instructional videos). It excludes college athletics departments as those are
considered pertaining to the sport segment.

Event
Production

There are companies (sometimes individuals) offering services such as
filming, providing a venue, organizing events (corporate conferences,
conventions, weddings, concerts, etc.). They have AV technicians and are
usually quite knowledgeable. Streaming live events is their area of focus (as
opposed to videos on-demand).

Marketing
&
Communication

They are small advertisement agencies, ad networks and public relation
firms. They use videos as advertising or promoting tools for their clients.
Their main interest lies in on-demand videos.

Entertainment

This category regroups content producers such as film productions,
festivals of all types, live theaters, music bands, bars and clubs, etc. They
seek streaming services that offer both live and on-demand. Video is one of
their main channels to reach their audience.

Business

They are all types of businesses mainly using video streaming as a way to
promote their business. They value ad-free white label options and tend to
use Video On-Demand rather than live streams.

Others

Any type of broadcaster that does not fit any of the previous categories but
still pertains to the SMB market because of its size, budget and needs.

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Note that another segment was identified while studying DaCasts clientele: web services. This category
was set aside, as it is constituted of resellers. Resellers build their systems around Dacasts and resell it to
their customers. We do not have data on the end-users here.

In order to illustrate how fragmented that market is, here is DaCasts clientele repartition, both in terms of
volume and in terms of revenues:

CLIENTS REPARTITION Broadcasters Revenues
Faith 25% 21%
Business 12% 9%
Sports 11% 14%
Media 9% 18%
School and Education 9% 9%
Web Services 9% 7%
Event Production 8% 6%
Entertainment 6% 6%
Other 6% 6%
Marketing and Communication 3% 3%
Government 1% 2%


We observe that Faith clearly represents the largest segment. Indeed, the Faith segment counts for 25%
of all DaCasts paying broadcasters. This segment is also the largest source of revenues since it is responsible
for 21% of DaCasts revenues. However, Media corresponds to only 9% of DaCasts broadcasters, but
makes up to 18% of DaCasts total revenue. It is then an interesting segment as their streaming needs are
higher. Sports is the third largest segment, both in terms of broadcasters (11%) and revenues (14%).

Also, note that Media, Government and Sports in that order are the three leading segments were
the broadcasters spend the most for streaming services. These are also the segments where the
broadcasters will be likely considered as medium businesses rather than small. The Faith segment on
the other end is mainly composed of small administrations, since the broadcasters percentage is higher
than the revenue percentage. The other segments are more homogenous as broadcasters percentages are
equal or almost equal to the revenue percentages.
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Smaller Equals Bigger

DaCasts basic pricing is mainly based on three monthly plans: Starter, Plus, and Pro. Pay as You Go options
are also available. Subscriptions and revenues are distributed as described in the table below.

PLANS Starter Plus Pro PYG
Subscriptions 69% 8% 6% 17%
Revenues 43% 12% 18% 27%


It appears that Starter plans representing 69% of the total number of plans are the main source of
income (43%), demonstrating that there is a real demand for affordable and small streaming plans. Not only
is the demand strong, but it also allows DaCast to realize a very large part of its sales. Plus plans and Pay as
You Go, which are both a step above the Starter plans, represent together another 39% of DaCasts
revenues, confirming the true value of the SMB market.


Geographic repartition for monthly plans
1

REGION Starter Plus Pro Total
North America 85% 8% 6% 100%
Europe 82% 10% 8% 100%
Australia & NZ 67% 19% 14% 100%
Latin America 69% 13% 18% 100%
Asia 75% 20% 5% 100%
Africa 69% 20% 11% 100%
WORLD 83% 10% 7% 100%


It is also interesting to note that North America is the region with the highest proportion of broadcasters on
a Starter plan: 85% of North American broadcasters who subscribed to a plan with DaCast chose a Starter
plan.


1
Pay as You Go plans are excluded
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The proportion of Starter plans is slightly lower in the other regions of the world although it remains
considerably higher than any other plan. The lowest proportion of Starter plan recorded is in Australia and
New Zealand, and still scores as high as 69%.

This confirms, again, the demand for small plans.




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The SMB Market: The Future of Streaming Services


Our research shows that the worldwide SMB market for streaming services should represent $600 million by
the end of 2014, $1.7 billion by the end of 2016 and $3.4 billion by 2018. Note that Faith and Sports will
remain the most important segments, both in terms of units and revenues.

The SMBs value for streaming services (geographic repartition):


A True Opportunity

The SMB market appears to be a true opportunity for online streaming service providers. Fast growing and
large, it represents an attractive market for investors. With dropping the price down both for providers
and broadcasters premium-streaming services are now accessible to smaller broadcasters. High speed
Internet, cheap hardware and free software have made broadcasting possible for businesses and
entrepreneurs with small budgets.

In the meantime, the growing demand for long-tail videos is making streaming media more attractive to
institutions such as houses of worships, sport clubs or event production companies. How long before having
its own channel becomes as essential to a business or an institution as having a website is today? For many,
it has already switched from nice to have to a must-have critical technology
vi
that a company or
organization needs in order to compete effectively on its market.

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Research shows that video is one of the best way if not the best way to conduct a message, retain an
individuals attention and get visibility on the market
vii
. In other words it is the most efficient way to
advertise and engage ones audience. Streaming video platforms represent therefore a very affordable and
effective advertising solution for small businesses and other organizations.

A Future Geographical Shift

The portion of the market that is already using streaming services is currently mainly located in North
America (United States and Canada). This is explained by different factors: development level, Internet
access, cultural behaviors, etc.

Indeed, the Internet penetration rate averages 79% in North America and the standard of living is considered
among the highest in the world. Church attendance is particularly high in the US and sport is very much
followed, whether amateur or professional. Consequently, many American churches or sport associations
engage in broadcasting. This also explains that these segments were highly represented in the result of the
study, especially since DaCast clientele is mainly located in the United States.

Today this trend is influencing other regions of the world as well. Europe, Australia and New Zealand are
engaging more and more in broadcasting although the process is still sometimes slowed by the lack of high
speed Internet in some areas of these regions. Internet access is definitely the major factor influencing the
growth of the demand for online streaming services.

We predict that streaming services demand will grow tremendously as more regions will get Internet access,
notably in South America, Asia and even Africa. Latin Americas Internet penetration - currently at 48% -
should reach 58% in 2016 and hit 65% by 2018. Similarly, Asias Internet penetration should run around 41%
in 2016 and up to 51% in 2018. Consequently, Asias
2
streaming needs should be exceeding those in North
America by the end of 2018.

DaCast already observed a net rise of demand coming from India. Information requests and subscriptions to
trial accounts were much higher in 2013 than in 2012. The growth is already noticeable although the actual
Internet penetration in India is only 12.6%, according to The World Bank's World Development Indicator
viii
.
However, if the number of contract subscribed by Indian broadcasters is also higher; the increase is not as
high as it is for prospects. The reason is the following: if Internet is spreading fast in India, the connection

2
China and North Korea excluded.
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speed is still quite low. Consequently, in some instances the prospect will try the service but wont always
have a satisfactory experience because of slow Internet connections. This issue is particularly true for those
located in rural India.

The Most Profitable Segments of Tomorrow

Our research shows that the worldwide SMB market for streaming services should represent $600 million by
the end of 2014, $1.7 billion by the end of 2016 and $3.4 billion by 2018.


The SMBs value for streaming services (segmented repartition):



Two of the three most profitable segments of today, should remain as the most profitable segments
throughout the period studied: faith and sport. The third should be Businesses and others according to this
study. This is due to two factors:

The use of video to promote ones business should dramatically increase over the next few years.
Indeed, thanks to online video platforms, video editing software and lower streaming cost, creating
and publish a promotional video is becoming accessible to everyone.

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The Business and Others category, regroups many different type of businesses. It is by definition
large and eclectic.

Some reservations should be expressed about the findings for the media segment. A conservative approach
was chosen while realizing this study. This led to take into consideration existing media only, while ignoring
the future media. Also, this segment should have included online radios and TVs as well. However, reliable
data could not be found on existing online-only media. Many online TVs and radios are created every day,
using streaming technologies. This segment should, then, actually be much larger than represented.





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Challenges for Tomorrow


Such an opportunity comes with its share of challenges.

First, the market is geographically spread out, which implies that many different languages are involved. In
order to address that market, streaming service providers need to adapt their websites to their customers.
English is essential but might be insufficient for a true development. Language is not the only important
aspect when addressing a geographically large market; currencies accepted are also a crucial factor. The
Euro, the Pound and a few others may be essential in order to truly penetrate markets overseas.

Secondly, the very large majority of the broadcasters falling in this market are novices. They need support
and education. This can be provided through online video tutorials and documentation, live support chat,
phone, ticketing systems, etc. A simplified and user-friendly video platform is also an attractive if not
essential feature for these customers. Indeed, support can be costly for a streaming company, hence
reducing considerably margins. On this market benefits are made thanks to the large numbers of
subscriptions, as margins are already quite small due to low pricing. The platform must be conceived to
generate the lowest need for support possible. This can only be made possible thanks to an intuitive and
user-friendly video platform, and complete online documentation (walkthroughs, video tutorials, FAQ, users
community, etc.).

As mentioned earlier the SMB market is composed of various segments and each segments has different
needs. In order, to succeed in the SMB market, the number of customers must be high, which means
pleasing a wide range of customers. Many different options are thought by different type of customers. For
instance, sports broadcasters seek pay-per-view options, while online TVs prefer viewer subscription
options. The features requested are numerous and while some are not essential, they can still weight greatly
in a competitive environment.

Finally, the SMB market is quite sensitive to pricing. Keeping the costs low for both the streaming services
provider and the customer will lead to success in this market. This is true as long as the features sought by
broadcasters are available. Indeed, it is important to not forget that the SMB market for paid streaming
services remains, as long as free services do not offer as many features (unlikely for now). It is now up to the
streaming services providers to remain innovative and competitive.
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Conclusion

The SMB market represents a real opportunity for online video platforms: it is a wide and valuable market. It
became possible to smaller broadcasters to access online streaming services thanks to the bandwidth price
drop that has been happening since 2009. Therefore, today the competition does not limit itself to
bandwidth pricing. On the contrary, competition focuses on options provided and user experience.
Streaming providers do not sell a commodity (bandwidth) but a service, providing fully integrated solutions
(online video platforms).

In order to be successful on that market, an online video platform will need to demonstrate its capacity to
provide complete solutions to broadcasters at a competitive price. This is not an easy market to address but
it represents an opportunity that is still underexploited at this time.






















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About DaCast


DaCast is a Streaming as a Service video platform, delivering affordable, professional streaming services for
all. By leveraging the cloud, DaCast takes the headache out of video streaming, leaving content owners and
broadcasters to focus on what they do best. Trusted by over 35,000 broadcasters, DaCasts white label, all-
in-one video streaming platform allows content owners and broadcasters to be in total control of their
online video content. For additional information, visit www.dacast.com and follow @DaCastSF on Twitter.















CONTACT

DaCast LLC
31 Water st., San Francisco, CA 94133
San Francisco office: 855-896-9300
Paris office: +33-972-430-825
business@dacast.com
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ENDNOTES


i
YouTube Statistics, November 2013
http://www.youtube.com/yt/press/statistics.html

ii
Pew Research Centers Internet & American Life Project, Online Video 2013, October 10, 2013
http://pewinternet.org/~/media/Files/Reports/2013/PIP_Online%20Video%202013.pdf

iii
Cisco, Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 20122017, 2013
http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-
520862.html

iv
Cisco, Cisco Visual Networking Index: Forecast and Methodology, 20122017, 2013
http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-
481360_ns827_Networking_Solutions_White_Paper.html

v
Rayburn D., Video CDN Market Growth Slowing, But Should Reach $1B By 2015, January 15, 2013
http://blog.streamingmedia.com/2013/01/video-cdn-market-growth-slowing-but-should-reach-1b-by-
2015.html

vi
Ozer J., What is streaming?, Streaming Media Magazine, February 26, 2011
http://www.streamingmedia.com/Articles/Editorial/What-Is-.../What-is-Streaming-74052.aspx

vii
Video: The new ROI star of marketing (2013), Demand Gen Report, 2013
http://www.demandgenreport.com/industry-resources/white-papers/2174-rock-your-roi-with-video-
analytics.html#.UxqB3OddWv4

viii
Sen S., India to surpass US in Internet users soon, Business Today, December 5, 2013
http://businesstoday.intoday.in/story/india-to-surpass-us-in-internet-users-soon/1/201229.html



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