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The global video streaming industry is on the rise, and it is set to grow even more in the next few years. By 2024, it is expected to bring in $325.4 billion in sales, and by 2028, that number will jump to $419.9 billion, growing at a steady rate of 6.58% each year. A big chunk of this growth will come from video ads, which are $191.3 billion in 2024 and are predicted to reach $252.0 by 2028. The United States will be a major player in this, contributing $140.7 billion and it reaches to $184.4 billion by 2028, around 4.4 billion people are expected to use streaming services, making up about 54.7% of the global population.
Well, that’s a lot of stats. But, if you are thinking about starting your own streaming service, there is a lot more to consider. From understanding market trends to setting up your platform with a video tech stack, it can be complex. Whether you are inspired by Netflix’s success or have your own unique idea, this guide will help you through the key steps. We will look at how to use AI to recommend content, leverage cloud technology for growth, and choose the best revenue model. Netflix, for example, has 222 million subscribers worldwide and dominates in the US and Canada with 75 million subscribers. With the streaming market booming, there is a big chance for you to make your mark. Let’s dive into what you need to know to get started.
Assuming the growth rate for revenue from video ads could vary by ±0.5% from a base rate of 6.58% (annual growth rate in). Using this variation, the growth rate for video ads in some possible years could be between 6.08% and 7.08%. We've projected a few years with this variation.
Further, with the US digital advertising industry hitting new records, its contribution to video advertising revenue also follows global patterns and experiencing ~7.0% YoY growth recently. Following this growth pattern, varying it by ±0.5% from the base growth rate of 7.0%, the growth rate for the US contribution could be between 6.5% and 7.5%.
This graph visualizes the growth of the global video streaming industry from 2024 to 2028, with the following features:
The video streaming market has seen explosive growth in recent years and continues to expand rapidly. More people are cutting the cord with traditional cable TV and opting for streaming services. This shift is driven by the convenience of watching content on-demand and the variety of options available. This market includes services that allow users to watch video content over the internet, such as Netflix, YouTube, Disney+, and Amazon Prime Video. The OTT streaming market in the US is booming. Starting an OTT (Over-The-Top) streaming business in the US can be highly profitable, but it is essential to understand the market landscape to position yourself effectively. Here’s a simple overview to help you get started.
1. Content is king: Unique and high-quality content is crucial. While established platforms have extensive libraries, there is a growing appetite for niche and original content. Think about what unique value or perspective you can offer, be it specific genres, exclusive shows, or curated collections.
2. Subscription models: Most successful OTT services use subscription models (SVOD), where users pay a monthly fee for access to all content. However, ad-supported models (AVOD) are gaining traction, especially for those who prefer free access with occasional ads.
3. Technological advances: With the rise of high definition (HD), 4K, and even 8K content, and advancements in streaming technology, viewers expect high-quality visuals and smooth playback. Investing in technology and user-friendly interfaces is crucial.
4. Personalization and AI: Consumers appreciate personalized recommendations and tailored content experiences. Using AI to analyze viewer preferences and suggest content can enhance user satisfaction and engagement.
Major players in the market include Netflix, Amazon Prime Video, Disney+, and Hulu. Each of these platforms offers exclusive content and original series to attract subscribers. Additionally, new competitors are emerging, often focusing on niche markets or specific genres to capture a segment of the audience. To stand out, focus on differentiating your service. This could mean specializing in a particular genre (e.g., documentaries, independent films), offering exclusive content, or creating a unique user experience.
The video streaming industry generates billions in revenue annually. Subscription-based models, where users pay a monthly fee for unlimited access, are popular. Advertising-based models, where users watch free content with ads, are also growing, particularly on platforms like YouTube.
Securing content rights and licenses is critical. Ensure you have the legal permissions to stream movies, TV shows, or other content. This involves negotiating contracts with content creators, distributors, or studios. Utilize data to understand viewer behavior, preferences, and engagement. This information helps in refining content offerings, marketing strategies, and overall user experience.
Subscription-based Video on Demand (SVOD): In this model, users pay a regular fee, either monthly or annually, to access a library of content. This is similar to subscribing to a magazine but for movies and TV shows. Technically, the platform uses a Content Management System (CMS) to organize and display videos, a Payment Processing System to handle regular charges, and User Accounts to control access based on payment status. Streaming Technology ensures videos play smoothly by adjusting quality according to the user's internet speed.
Transactional Video on Demand (TVOD): TVOD allows users to pay for each movie or show individually, just like renting a DVD. The platform uses Pay-Per-View Technology to charge users each time they watch content, while Content Protection (DRM) safeguards against piracy. A Content Delivery Network (CDN) helps deliver videos quickly and reliably, and Analytics track user purchases to understand popular content.
Advertising-based Video on Demand (AVOD): This model offers free content but includes advertisements. The platform uses Ad Insertion Technology to place ads within the video stream, managed by an Ad Server that controls when and where ads appear. User Data Analysis helps target relevant ads based on viewing habits, and Streaming Infrastructure ensures both videos and ads play smoothly.
Hybrid model: The hybrid model combines elements from different monetization strategies, such as offering free content with ads and premium content through subscriptions. It requires a Flexible CMS to manage various types of content access, a Complex Payment System to handle different revenue streams, and Advanced Analytics to integrate data from subscriptions, rentals, and ads. It also uses DRM and Ad Technology to protect premium content while integrating ads into free offerings.
Freemium model: In the freemium model, users can access basic content for free but must pay for additional features or premium content. The platform uses Content Segmentation to differentiate between free and paid content, Upgrade Mechanisms to facilitate easy transitions from free to paid options, and Access Control to manage what users can view based on their subscription level. Personalization algorithms recommend premium content based on user preferences.
Microtransactions: The microtransaction model is a way of generating revenue by allowing users to make small, individual purchases within a service or platform. Instead of paying a large amount all at once, users can buy small extras or upgrades as needed. For example, in a streaming service, this could mean paying a little extra to access premium content or special features beyond what's included in a basic subscription. This model provides users with more flexibility and control over their spending, while businesses benefit from the potential for frequent, smaller payments that can add up over time.
When considering the cost of developing an OTT platform, it is important to understand the differences between a basic and a custom solution.
The development typically costs between $10,000 and $50,000. This budget covers the creation of a standard platform with essential features such as a content management system (CMS), basic user interface design, video streaming capabilities, and essential backend infrastructure. This setup is ideal for startups or smaller projects aiming to offer streaming services with standard functionality.
For startups or smaller projects, this setup is a good choice as it provides essential features without breaking the bank. Often, this kind of setup is available as a white-label solution or a template from third-party providers, which can save time and reduce costs.
Example: Rocketlane TV (A business OTT platform for professionals)
Let's take a look at Rocketlane TV to understand how this works in practice. Rocketlane, a customer onboarding SaaS company, and a FastPix customer created an owned media platform (OTT) that is like ‘Netflix for ecosystem-led growth’ Rocketlane TV. This initiative keeps their community engaged and ensures sustained audience growth.
When investing in a custom Over-the-Top (OTT) platform, the costs can vary widely, ranging from $50,000 to several million dollars. This cost depends on how complex and advanced you want the platform to be. Here’s a breakdown of what influences the cost:
You can estimate that the total cost for video infrastructure, like really!
Taking a scenario to estimate, let’s take an average video length of 2 hours and 20 minutes (140 mins), with 250 uploads or streams per month. That’s 140 mins x 250 videos.
Also expecting about 500,000 views per month, with viewers watching almost 75% of each video at 1080p (Full HD) resolution. The total cost that sums up, would be near around $50,000 – which you can expect for a custom OTT platform with extensive features.
The costs are broken down as follows: Smart Video Encoding would cost $1,120. Storage would cost $94.50, and streaming would cost $47,251.70. Adding these costs together, the total estimated expense is $48,466.20.
To try out and check your own cost estimations, you can visit FastPix pricing page.
When considering development costs, it is important to weigh not only the hourly rates but also the potential trade-offs in quality, communication, and efficiency.
In the USA, developers charge $150 per hour, which totals around $210,000 for a project requiring 1400 hours. This high rate often reflects premium quality, better communication, and ease of working in the same time zone.
In contrast, developers in India cost $25 per hour, totaling around $35,000 for the same number of hours. Although significantly cheaper, there might be challenges related to time zone differences and varying quality standards.
Ukrainian developers fall in between at $40 per hour, with a total cost of $49,000. They might offer a balance of cost and quality but could still face some challenges with communication and time zone differences. The choice often depends on the project's complexity, the need for high-quality results, and how critical time zone alignment is.
In modern development projects, the choice of frontend technologies plays a critical role in delivering a seamless and engaging user experience.
Integrating these frontend frameworks with cloud platforms like Microsoft Azure can further elevate your project. Azure offer scalable infrastructure solutions that support seamless deployment and management of applications.
On the backend, the selection of technologies significantly impacts performance and scalability.
Content availability impacts both the cost and attractiveness of your offering. Licensed content, which involves renting or purchasing material from distributors, can be expensive but provides high-quality, ready-to-use material. This approach can attract subscribers quickly since the content is often familiar or popular. Alternatively, self-created content requires an initial investment in terms of time and resources to produce original material, but it allows for greater control and potentially higher long-term revenue. Creating unique content can help establish a brand identity and might offer licensing opportunities to other platforms, generating additional revenue streams. Depending on your strategy, investing in high-quality content can significantly affect user engagement and subscription rates.
To stand out in the competitive streaming market, it is essential to define a specific niche for your service. Consider targeting audiences with unique preferences, such as:
Education: The online tutoring market is expected to reach $132.21 billion by 2024, making it a promising niche for an ed-tech streaming startup.
Fitness: With the fitness app market projected to grow to $15.96 billion by 2026, a streaming service focused on workout videos and fitness content can attract a dedicated audience.
Entertainment: The entertainment video streaming platform market is poised to reach $184.27 billion by 2027, with platforms like Netflix boasting 182 million subscribers worldwide.
Infotainment: Combining entertainment with educational content can create a unique offering, as exemplified by platforms like Discovery+.
Cybersports: The Esports market is estimated to reach $1.5 billion by 2023, making it a potential niche for a streaming service dedicated to gaming content.
When designing a custom OTT platform, targeting demographics with high streaming service adoption is essential for success. For instance, Nielsen reports that 73% of Millennials and 63% of Gen Z in the US rely on streaming services as their primary means of watching TV. This indicates a significant opportunity to cater audience that prefers the convenience and personalization of streaming over traditional TV.
Understanding and targeting these specific audiences can help differentiate your service from others. It allows you to build a unique platform that meets the needs of groups, making it more appealing to users who are looking for content that aligns with their interests. This approach not only helps in creating a loyal user base but also positions your platform as a go-to destination for specialized content.
Statistical insights also suggest that niche content can drive user retention and attract specific audience segments. For example, research from Statista shows that niche content categories like anime have experienced substantial growth, with anime streaming services seeing a rise in viewership by 50% over recent years. By focusing on such content, you can differentiate your platform and build a dedicated user base.
Starting a streaming business in the US presents a substantial opportunity for financial growth due to the increasing demand and expansive market potential. To capitalize on this, it is crucial to focus on several key areas: understanding your target audience, securing premium content, and investing in robust technology infrastructure.
FastPix provides the technical infrastructure needed to support this venture, offering advanced features like scalable storage, high-performance content delivery networks (CDNs), and seamless adaptive streaming. We can efficiently manage and store large volumes of content, ensuring that your platform can grow with increasing demand. Our high-performance multi-CDN networks minimize latency and provide fast, reliable access to your content globally, enhancing the user experience by reducing buffering and interruptions.
Additionally, FastPix’s seamless adaptive streaming technology ensures that your content is delivered in the best possible quality, regardless of the viewer’s internet speed or device. This adaptability is crucial for maintaining a smooth viewing experience, which is a key factor in user satisfaction and retention.
Getting started with building your OTT service along these technological edges will allow you to stay competitive in a crowded market, attract and retain viewers, and position your streaming service for long-term success.
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