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Hastings plants idea of video cooperation in the minds of global MNOs

One of the main keynotes at the Mobile World Congress this week may seem a bit out of step with the all-encompassing 5G theme, but in bringing Reed Hastings of Netflix to that audience it puts together two things we know that go together – mobile and video.

Instead of just complaining about how video is eating their lunch, mobile operators perhaps want to actually find out what the fuss is all about and Hastings gave everyone a clue, but only if you read between the lines of his speech.

His first words were about Netflix just being at the beginning of a video revolution. He talked a lot about being global, and that is a big theme within the movie and TV industry – and we will give that some space below, but the key things is that Netflix is working with codecs and servers, ISP integration and CDNs to make video less of a strain on Mobile networks.

He said that in 5 to 10 years all video will go over the internet, and Netflix will be just one provider, and that his company is doing a lot of work with servers, codecs and systems so that this can be instantly enjoyed the planet over. So far so good.

“Today we have services down to 500 Kbps on a 4 or 5 inch screen,” he aid, then added, “We have it down to 300 kbps in the lab and we are working on getting that to 200 Kbps.”

Interestingly about 12 years ago when we first talked about QVGA sixed standard definition content, on phones which had 2 inch screens we were talking about 256 Kbps, and here we are again, talking about the same type of compression.

And that’s when the incredulity cuts in… if a movie or TV series on a phone can be cut down to that level, it would be fine to deliver it over an LTE network, never mind a 5G system. That would represent about 120 MegaBytes for a 60 minute TV program. With monthly data caps in the tens of gigabytes that means over around 5 hours a day of programming could be viewed inside a regular mobile data cap. And then we move to 5G.

We constantly hear about 5G needing to support UHD programming which is more like 120 Mbps on its new DVD format. To clarify that would mean in 8 seconds it would take up that 120 MBs of data Hastings is talking about delivering for a 1 hour program.

We have consistently made the point that hardly any mobiles have 4K screens, never mind UHD screens, and although that density may come, in the small screen format, it makes no sense to actually put 3840×2160 pixels on a 4 or 5 inch screen – the human eye would not be able to see the improvement. None of them yet have the luminance ratio or a sufficiently wide color gamut to show full UHD, and may never require these improvements.

The codec that Hastings is of course referring to is the new royalty free codec being developed by Alliance for Open Media made up of Amazon, Cisco, Google, Intel Corporation, Microsoft, Mozilla and of course Netflix, as the founder members. The first iteration is due out any day.

Of course, we are not suggesting that just because a smartphone may not get any benefit from having a UHD screen, that wireless networks shouldn’t be able to support UHD content – there will be a massive change in the type of traffic and the destination devices that wireless networks serve in the future.

But it shows the absurdity of lassoing all the millimeter wave spectrum on the planet for 5G cellular, when for video to phones, this just won’t be needed. Which is why our message about the rate of build out of this spectrum has always been that millimeter wave will come perhaps a decade or more after 5G networks are in place and 5G will appear just like LTE with some bells and whistles to handle IoT, running at about twice the speed of LTE, until it takes up that millimeter wave spectrum. It still makes sense for all the operators to line up this spectrum in advance, get it cleared and auctioned, but then build out little more than demonstration systems in a few metropolitan areas, and then dig in for the long haul, but consumers should not be fooled into thinking they will have UHD VR in a few years’ time. Think 2027.

Back to Hastings keynote. He said “We are just starting out, and we want the world’s best content to any screen, not just the TV, and certainly to include the mobile.” And he isolated the change to binge viewing being the main Netflix contribution

Back in October Netflix showed it was trying to make yet more money from this Binge phenomena, partnering with iPic Entertainment to show original Netflix content on its release day on Netflix, for people that want to see it on the big screen. This is a retrospective, but ask yourself this – If movie theaters can no longer fill their seats with freshly released movies, what else are they going to do but support binge “experiences,” as well as the trends towards showing live music, sports and theater on the big screen.

Hasting talked about how he was bringing this binge viewing to the entire world not just the US. “Take Narcos, it is produced by a French company, in Colombia, using a Brazilian actor and shown the world over,” and he promised more from Korea producers and Turkish producers – which will be taken by Netflix to global audiences.

This global issue is an important one for content. US movie studios embraced superheroes and CGI so that they did not have to rely on US screenwriters and actors to drag people to the cinema. In a ten year period Hollywood went from 80% of its revenues being made in the US to 80% of its revenues being made outside the US. It internationalized (simplified) its story lines, stopped making the bad guy a Russian or Chinese dictator (North Korean or English is now best or better still alien invaders), because otherwise there would be no sales in Russia or China.

Screenplay writers shifted “en masse” to US TV series and so did Hollywood actors. The result is that TV series now want a piece of this international piece and most plots are judged on how well they would go down with a global audience. Moral nuances, based on local moral codes just do not translate, and neither does humor, so those themes stay with the independents, for local distribution only.

But global themes do not only emerge in the US, and Netflix has shown its arm with this news about Korean storylines. Its weakness in Asia Pacific is well documented, and one of the ways the companies like Hooq and Viu have kept it at bay, are by signing exclusive deals with Korean content, which is most praised across the region. Clearly the Netflix reaction is to work with local producers to create some new Korean drama series, up to date and original, on the promise of bringing it to a much wider audience – not just Asia Pacific perhaps, but the entire world. That would be a great way for Netflix to solve its regional problem. We have a great idea for a series about bribery and corruption in the corridors of power, at the top of a major Korean chaebol. A story of intrigue and suspense that might bring down a government. It’s all set I this little known industrial empire called Samsung…

Moving on, Hasting says that mobile operators may like to experiment with new ways of selling mobile data by bundling low bit rate Netflix streams with their smartphone offerings. Now that provides a massive incentive for every video maker to get their video down to the same 200 Kbps level, as soon as possible.

Hasting intimated that video at one streaming rate would be a very different price to video at a different streaming rate, and that some MNOs would pioneer unlimited data, but with video at a lower speed (sound very like T-Mobile US’s Binge On). The closer that Netflix gets to an MNO, the more people will default to Netflix as their first OTT service. If Netflix has the power to pull this off, it really is, as Hasting said, just the beginning.

It is ironic that for years Netflix has been suggesting that nasty controlling ISPs should not be allowed to offer zero rating on their own video, because it would disadvantage innovators like Netflix. What he is really saying here is that he wants to take advantage of this and get MNOs the world over to say “You can have Netflix for free,” and not pay for any data, as long as you use the Netflix technology to compress video to a tiny fraction of what you are using today. That way all video is outside data caps, as long as it belongs to Netflix or the operator.

We have seen in the US at T-Mobile how rapidly this lets consumers throw off the constraint of data caps entirely. If you then add in the latest Netflix change to allow downloaded content, then you can see the shape of the long term Netflix strategy in partnership with MNOs the world over. Which brings us back to why Netflix was asked to speak at the conference in the first place.

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