Verizon's upLynk Acquisition is a Bellwether for the OTT Model

When Verizon Media Services recently announced its acquisition of upLynk, a start-up founded in 2010, reports pegged the deal at $75 million—quite a premium to pick up a small video services company with only a dozen employees. Industry-watchers say the move is a bellwether for the over-the-top (OTT) business model, erecting what is essentially a flashing “watch this space” sign when it comes to service providers gaining control over unmanaged digital distribution, and finding new monetization options.

On the surface level, upLynk, which handles the uploading and encoding of TV Everywhere to multiple devices, is expected to enhance Verizon’s competencies in digital distribution for live events, linear television and video-on-demand. Its differentiator is its ability to use a single adaptive video format across all devices, delivered in a cloud model so that customers can pay as they go. Thus, upLynk in theory simplifies encoding, storage, playback, ad insertion and analytics to eliminate complexity and enable more agile video workflows for TV Everywhere and OTT.

Some say the move is a big signifier. “Verizon sees that we are at an inflection point for OTT video delivery replacing traditional TV broadcasting,” said Azuki Systems CEO Cheng Wu, in a blog. “In other words, the same Internet revolution that took over our desktops and mobile phones is now heading towards broadcast video and linear services. OTT video is in high demand, but we are only seeing the very tip of the iceberg. The excitement is not just about OTT, but the convergence of a cloud/Internet-based solution with single-step prep for all media, adapted to a number of premium applications.”

TDG analyst Colin Dixon pointed out that upLynk powers the Watch Disney apps, including the affiliate-driven Watch ABC. But he also noted that the company’s cloud-based, pay-as-you-go approach to TV Everywhere support has benefits for content owners of all sizes — and it’s an important aspect for OTT and local broadcasters alike, which often don’t have access to the same economic resources available to larger media distributors.

"Rather than asking customers for upfront commitments, upLynk only asks them to pay for the resources they actually use," he said in an analyst brief. "This has a number of benefits for customers. For very small providers, up-front commitments can be too pricey. upLynk lets them start small. For all customers, it can be very difficult to predict how much bandwidth will be needed. Particularly in the case of local affiliates, if a big news story breaks there can be a huge spike in usage. Rather than commit to a large bandwidth requirement to cover these unpredictable spikes in demand, upLynk's model scales up only when needed."

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He added that Verizon's heft will conversely be good for upLynk: "Bringing together upLynk's cost effective encoding and streaming solution with Verizon Media Services should allow the solution to scale up to a national footprint and the largest of content providers."

Taken in total, the acquisition could go far in terms of taking content into the all-IP, accessible-anywhere world.

“Verizon’s upLynk’s purchase is an important step in our journey to the OTT highway,” Wu said. But he warned that more work needs to be done in order to roll out TV Everywhere offerings in a managed fashion.

“The full benefits of this evolution in video delivery will be realized only when service providers can deploy complete solutions that include the ability to control entitlements for dynamic service provisioning, capture real-time analytics for stream control, and embed manifest manipulation for customization and personalization,” he said. “That, in a nutshell, is the beacon that is so attractive to service providers like Verizon – OTT video delivery normalized across all networks and device types with a common UX, to extend their brand to any content consumption - anywhere, anytime.”

The additional requirements for revolutionizing TV consumption include A/V pipe virtualization over all network and device types, service virtualization to enhance the viewing experiences and add monetization options, and bandwidth management advances.

“We live in an era of proliferation of connected devices,” Wu said. “No longer will TV viewing be chained to our home living room over a specially-designed cable, but will be free to roam over any device and network, including mobile…How can the requirement for individual personalization coexist with the need for massive scale? This can be solved with “manifest manipulation” – the ability to control and customize the video stream and service without the burdensome requirement to be in-line with the content itself.”

He added that a successful OTT solution must include normalizing standards, such as HLS and MPEG-DASH, as canonical schema for video service delivery to any device.

“They bring along common encryption to protect premium content as well as common content preparation and packaging schemes,” Wu added. “Normalized standards plus an implementation that is compatible with existing back-office components is required to create a managed service that both coexists with, and augments existing offerings.”