KEY POINTS
Mobile video continues its massive surge as users rapidly adopt tablets and smartphones as mainstream devices for video viewing. Tablets and smartphones now account for 15% of all online video hours watched.
All the top platforms have succeeded in drawing in viewers, including Netflix, YouTube, Hulu Plus, and Amazon Instant Video.
Content is still king. But the shift to mobile is also causing programming to shift and adapt to new viewing habits. Om smartphones viewers flock to YouTube, Web serials, comedy and music. On tablets, viewers enjoy TV shows optimized for cross-device binge-viewing.
Netflix pursued an iPad-first strategy to become a mobile video pioneer. Today, the ability to watch Netflix across devices facilitates binge-watching. A reported 23% of all Netflix subscribers say they have watched on smartphones, and 15% have done so on iPads.
YouTube channels command surprisingly large mobile audiences. Machinima, one of the most-watched YouTube channels in the world, sees almost 50% of its video views come from mobile.
Hulu, Amazon Instant Video, and Vimeo are racing to differentiate themselves as purveyors of premium video. Hulu's subscription service showcases up-to-date TV episodes, Amazon Instant Video offers free video streams to Amazon Prime customers, and Vimeo is a community for filmmakers.
Each service is taking a unique approach to both content and monetization. Mobile video continues to be one of the few areas of the mobile industry that monetizes reliably.
Summary
Mobile video viewing has experienced a steady rise, and content providers can be credited with two important accomplishments: rolling out a rapidly expanding library of programming that's available cross-device, and adapting this programming so that it's more enjoyable on mobile.
This strategy has convinced even more viewers to watch on mobile.
According to Nielsen, an average of about 50 million people in the U.S., or 16% of the entire population, watched video on their mobile phones each month during the second quarter of 2013, up from 37 million during the same quarter a year ago.
And those numbers don't even include tablet viewers.
While still not a majority, it is still incredible uptake for an activity that once seemed poorly suited to mobile devices.
On some video sites, like music video platform VEVO, mobile views have now reached parity with desktop views.
One of the unique features of Web video is the impressive amount of time spent on the activity: Nearly three hours a day across desktop and mobile video in the U.S. in 2012, according to Nielsen (an hour and 20 minutes of this viewing time happens on phones).
Netflix, YouTube, Hulu, Amazon Video, and specialized sites like Vimeo have all capitalized on, and propelled, the digital consumer's hankering for video content anywhere and everywhere.
To push all of their content to wider audiences and encourage increased viewing, each of these platforms has made a conscious effort to expand its mobile presence, with mobile sites and apps available across devices and platforms.
By providing robust content at relatively low prices and creating an expectation that video programming will be available wherever users are, the companies have also increased people's desire to cut the cord with pay TV.
In our last report on mobile video, we discussed the massive monetization potential for the format and its biggest drivers — the rollout of faster 4G LTE wireless networks, tablet proliferation, and a more mobile-centric, younger audience quickly adopting mobile viewing habits.
Now that mobile devices are ubiquitous in developed mobile markets, and video content is being pumped to all screens, we will take a deeper look at what content is succeeding and why.
We'll survey the advantages of each online video platform, the successful genres and channels within them, and how monetization varies on each of the sites. We'll pay particular attention to the content that does best on mobile.
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Digital And Mobile Video Uptake By The Numbers
First, let's take a look at the growth in mobile video viewing in 2013, as well as the demand for digital video content in general.
Video accounts for a massive percentage of all Internet traffic in North America. And, individually, popular platforms like Netflix drive an amazingly high percentage of all Internet traffic.
Here's some of the data for fixed broadband Internet connections (it only counts "downstream activity," meaning video that's downloaded or streamed, not uploaded):
Netflix, YouTube, Hulu, and Amazon Instant Video together made up well over half of all downstream fixed broadband Internet traffic in North America during the second half of 2013, according to new data from Sandvine.
Netflix accounts for the largest share of any single video platform, with 32% of downstream traffic.
YouTube drives 19% of the traffic.
On mobile, it's a different story.
YouTube leads, with 18% of traffic.
Netflix accounts for a 5% share of traffic.
The data is interesting on two counts: Not only does it show the heavy weight of YouTube and Netflix in terms of all Internet activity, but it also shows that at least in traffic terms, YouTube is much more mobile-dependent than Netflix.
But just how big is mobile in terms of total online video viewing?
Mobile's share of total video viewing time is climbing. In September, Ooyala found that tablet and smartphone video viewing accounted for a combined 15% share of time spent watching online video.
That's up from just a 8% share a year prior.
And, in a further indication that device screen size is not as much a limiting factor as it once was, smartphone and tablet video-viewing habits are converging.
Consumers are now watching more long-form video content on their comparatively smaller smartphone screens, just as they had previously done on tablets.
Smartphone users spent 53% of their video viewing time on video sessions lasting 10 minutes or longer in the second quarter of 2013, up from 44% in the fourth quarter of 2012.
Tablet users spent the same 53% percent of their video viewing time on sessions of 10 minutes or longer.
Further, Ooyala also found smartphone viewers spent 38% of their time on sessions lasting at least 30 minutes, meaning they are watching "premium content," including TV shows and movies.
These numbers help explain why total pay TV subscriptions in the U.S. have been trending down over the past few years.
It has not only become common to watch online and mobile video, but the nature of that viewing, in terms of what users watch and for how long, directly competes with what's available on cable and network TV.
The big-name online streaming companies, including Netflix, YouTube, Hulu, Amazon Instant, and others have quickly developed a vast video library that rivals offerings on the long-standing TV cable networks.
The Biggest Streaming Video Players
Each of the online video properties discussed above has grown into a successful digital and mobile video platform, but each has done so by using a different strategy.
Netflix and YouTube have pulled far ahead of the pack.
Netflix — The Destination For Home Binge-Watching
Netflix first introduced "Watch Instantly," their video streaming service, for desktops in 2008.
Two years later, Netflix deployed its first app for mobile streaming. The original Netflix app was made available in the iTunes store in April 2010, and was specifically designed for the iPad.
iPhone and Apple TV-compatible apps came later that year.
Since then, Netflix has created apps for Android, Windows Phone, Kindle Fire, Nook, Google Chromecast, and a host of smart TVs and game consoles.
Netflix is available across all of these devices starting at an $8 monthly subscription fee, and Netflix users can access their accounts on as many devices as they please. For Netflix, mobile has been a key part of its strategy to be as sticky a video platform as possible, in order to retain existing users and draw in new ones.
Users adopted Netflix's mobile phone apps quickly. According to a survey of over-the-top (OTT) TV users conducted by Nielsen, the percentage of Netflix subscribers who stream from their smartphones has more than doubled in the last year, from 11% in 2012 to 23% in 2013.
The survey returned similar results for subscribers streaming from the iPad or other kinds of tablets. This means that a considerable percentage of Netflix's estimated subscriber base of nearly 40 million are ignoring their TV and instead grabbing their iPad or iPhone to stream movies and TV shows from their Netflix accounts.
Netflix's iPad-first mobile strategy was a savvy move that led to a mutually beneficial partnership:
Netflix was one of the first apps to be showcased on the popular iPad, which made the app virtually synonymous with tablet-based video consumption.
The iPad benefited from Netflix users' realization that the iPads were ideal personal video consumption devices. Tablet use peaks in the evening hours and weekends, when households historically have gathered around TV sets.
The iPad and other tablets made it easier for video audiences to engage in binge-watching, compulsive browsing, and other habits characteristic of the new online video era. Tablets make it possible to browse and watch video privately wherever you are in the home, without getting in the way of other people's activities.
Content-wise, Netflix continues to add new titles to both movies and TV and has even ventured into producing more than 10 original TV series.
The company has also worked with multiple stand-up comedians to produce exclusive comedy specials.
Netflix currently offers about 60,000 individual TV show episodes and movies via its streaming service.
While the content library has expanded immensely since Watch Instantly first surfaced, Netflix has recently tweaked its functionality in two strategic ways so that video viewership overall keeps growing as well.
In 2012, Netflix instituted a "Post-Play" feature that shortens credits and automatically queues up the next episode in a series, while also offering up to three alternative videos for users to choose. This nudges viewers toward the binge-watching sessions characteristic of streaming habits.
Binge-watching has reportedly been especially pronounced for Netflix's original programming.
This isn't usually noted, but binge-watching and mobile work very well together. Binge-watching is often a solitary activity. Blowing through multiple episodes of TV in one sitting tends to be something that people do compulsively, to indulge their personal content preferences. Tablets mean that one can do it at night, perhaps wearing headphones, without keeping other members of the household awake.
The other major change to Neflix's functionality was the introduction this year of user profiles.
This allows a maximum of six people sharing a joint account to manage their own separate content queue. The service tracks each user's place in the the last few TV episodes or movies watched under their profile. This allows Netflix to develop a more personalized algorithm and target viewing recommendations more accurately, which will help keep users tuned in.
Crucially, each user profile is remembered across devices, allowing users to shut off their set-top boxes or desktop PCs and then pick right back up on the tablet or smartphone.
YouTube Channels — Increasingly Like TV Channels
YouTube was the pioneering platform for digital video content, and has maintained its position at the top.
On desktop PCs, the digital video audience for Google sites, which includes YouTube, remains more than twice the size of its nearest competitor, Facebook, which is at 165 million unique monthly visitors.
Now, YouTube has gone mobile. In its most recent earnings call, Google claimed that 40% of YouTube's overall traffic comes from mobile. Compare that to just 25% last year and a paltry 6% only two years ago.
It's the payoff for the prescient creation of a mobile-specific engineering team in 2007 before mobile video viewership had really even taken off.
Unlike Netflix, YouTube primarily monetizes its content from advertisements rather than subscription revenue. This is not a bad position to be in, currently.
New comScore data shows that online video ads have been more effective than traditional TV ads by some measures, and that online video ad volume will soar 169% during 2013, according to Macquarie Equity Research.
On mobile, though, the biggest video ad opportunity lies in earned media, or brand-financed or brand-inspired videos that aren't necessarily advertisements per se, but fun or compelling enough to be passed around spontaneously by YouTube audiences and gain brands the exposure they crave.
Paying for these videos is often cheaper than full mobile video ad buys and there's already a vast amount of user-generated content available on YouTube for brands to partner with. Promotional content could include anything from product placements, to brand-produced viral videos and sponsored Web video series.
Some of the most successful content on YouTube is created for "channels" that YouTube users can subscribe to, meaning that new content pops up automatically on their YouTube feeds. Some of these channels are hugely popular, with millions of subscribers accessing YouTube to see the latest content.
Viewers treat newly uploaded content much like they would a new episode of a TV show in prime time: They watch it as soon as it's available.
Select YouTube channels attract well over 10 million viewers a month.
Based on comScore's online video rankings, YouTube's VEVO channel alone ranked in the top 5 online video properties in the U.S. during October, with almost 50 million unique viewers.
VEVO is a music video platform and a joint venture between Google and two of the top global recording companies, Sony and Universal Music Group. Sony and Universal license their music to Google to gain exposure for music videos on YouTube, and attract high-end advertisers.
VEVO also has its own dedicated smartphone and tablet apps, as well as an app for smart TVs. In June, VEVO announced its mobile and TV app audience had exploded 184% year-over-year. Already, one half of VEVO's audience accesses on mobile.
This make sense. Music videos are typically between 3 and 5 minutes long, a perfect length for on-the-go smartphone watching.
The online video rankings from comScore also break down the top partner YouTube channels, which are mostly multi-channel networks (MCNs).
MCNs host a number of individual YouTube channels, and ultimately scrape a portion of ad revenue off the top of the ad money earned by each individual channel.
MCNs help the individual channels improve their production quality, grow their audience, sell ads, and boost the CPMs (cost per-thousand impressions) on those ads.
Since they often operate an extensive network of channels, it's common for MCNs to cross-promote channel videos.
MCNs also work directly with premier brands to boost their "earned media," or branded YouTube videos that spontaneously go viral thanks to online sharing. For example, Fullscreen, one of the top-ranked MCNs, collaborates with Ford and Pepsi to create branded campaigns with the help of top individual channels.
Throughout 2013, around 20 different individual channels and MCNs cracked the monthly top 10 for audience size, but some only broke into the top spots for a month or two.
In other words, channel viewership is highly volatile and changes dramatically on a month-to-month basis.
There are a few potential explanations for this. First, the YouTube channel network is incredibly fragmented. According to social media analytics firm Social Bakers, there are over 2.5 million registered YouTube channels. Even if MCNs group together some of them, that is still a huge number of channels to choose from.
Second, an individual channel might only need one or two videos to go viral in order to crack comScore's 10 to 12 million unique viewer threshold to reach the top 10 in any given month.
Take the rankings from September 2013: NBC Entertainment cracked the top 10 for the first and only time during the year, generating close to 30 million unique viewers on the strength of two videos from the "Late Night with Jimmy Fallon" program.
We decided to look at only those channels that were among the top 10 for two consecutive months or more during 2013.
Because they're not widely known outside the world of YouTube fans, we've included mini-profiles of each below.
VEVO: a music video platform, described above in more detail, created by two of the major recording companies.
Fullscreen: an MCN that provides content creators, brands, and other artists a platform to grow their audiences. Fullscreen oversees more than 5,000 channels primarily hosting comedy videos, music-related videos, and pop culture news videos.
Maker Studios: an MCN that acts as producer and distributor of online content for individual creators on YouTube and also syndicates older TV programming. Maker handles content for over 1,000 YouTube channels with categories for men, women, and families.
Warner Music: a music video platform for Warner Music Group artists.
ZEFR: a software platform for brand and content management on YouTube. ZEFR's BrandID product allows media companies to publish on YouTube then analyzes brand metrics from the YouTube content.
The Orchard: an MCN that is a distribution platform for independent music and film artists from around the world. The Orchard's channel genres include music, movies, and sports.
Rumblefish: a music licensing company that has had a longstanding partnership with YouTube, but that also recently created Friendly Music, a platform to license music for individual YouTube users to use in their videos.
UMG: the official YouTube channel for Universal Music Group artists.
BroadbandTV: an MCN that produces and distributes content for a number of individual creators. BroadbandTV owns two primary networks, Viso and TGN. Viso hosts multiple channels that produce content about music, games, comedy, and tech. TGN caters primarily to gamers.
Machinima: an MCN aimed at gamers that hosts original content, first-hand gameplay videos, and gaming publisher content.
SonyBMG: the official YouTube channel for artists on Sony Music's Legacy Recording.
The prevalence of MCNs focusing on comedy, music, and gaming content confirms that YouTube is a great platform for easily digestible, relatively short video programming.
Globally, according to VidStatsX, Machinima boasts some of the highest numbers for video views over time.
According to Machinima's own site, the channel brings in over 200 million unique viewers per month worldwide.
That massive user base digests about 2.4 billion Machinima video views per month. And importantly, 1.1 billion of those views are from mobile devices.
Machinima is able to corral its audience members by offering apps and web options across almost every device, platform, and even on social platforms like Facebook, Twitter, and Google+.
Hulu, Amazon Instant Video, And Vimeo Further Propel Mobile Video Viewing
Hulu and Amazon Instant Video have subscription models similar to Netflix but decidedly trail Netflix in user uptake. Vimeo, which follows the YouTube model, is also behind its competitor, with far fewer monthly unique visitors. Nonetheless, each of these platforms has been growing at a rapid rate, attracting users in unique ways, and further expanding the options for digital and mobile video viewing.
Hulu
Hulu is essentially the VEVO of TV. It was conceived as a joint venture of the NBC, Fox, and ABC TV networks in order to capture an audience that was quickly moving away from TV and over to online platforms.
Hulu's revenue model is similar to YouTube's ad-driven model.
But with its subscription channel, Hulu Plus, Hulu adds a Netflix dimension by offering premium, up-to-date TV content behind a pay wall.
Users can tune in the next morning to watch the previous night's newest episode.
Giving the Hulu subscription model a further edge, mobile device viewing is limited to users with a Hulu Plus subscription, which costs around $8 per month. The app is available for subscribers on nearly every smartphone and tablet device.
Hulu Plus surpassed 4 million subscribers in the fourth quarter of this year, and, according to the company, mobile accounted for about 15% of videos watched on Hulu Plus.
Interestingly, Hulu recently made some of its content available for free on mobile, but these are simply short clips and not full episodes or movies. The content also only works in a Web browser, and not the Hulu Plus app.
Amazon Instant Video
One of Amazon Instant Video's biggest draws is that the video service is thrown in as a value-add when prospective customers sign up for the Amazon Prime service, which centers on e-commerce perks like free shipping and no minimum order sizes.
Amazon Prime is about $79.99 annually, making Instant Video a little under $7 per month, excluding other subscription benefits.
For now, Amazon Instant Video is only available on a limited number of mobile devices — the Kindle Fire and the iPad, iPhone, and iPod. It is not yet available on Android products.
Amazon typically does not disclose absolute numbers for its products or services, but estimates for total Amazon Prime subscribers are around 16.7 million, which would flow through to the overall Amazon Instant Video audience. According to Nielsen, about 13% of the U.S. population subscribes to the video service, up from 7% a year earlier. That's a larger proportion than Hulu Plus.
Vimeo
Vimeo has the lowest profile of these three fast-growing platforms, with only about 70 million monthly unique visitors on the ad-supported network, less than half as many monthly visitors as YouTube. It has established itself as a platform for amateur and professional filmmakers to share original content like short films, commercials, music videos, and professional presentations amongst each other and to the public.
Even though it is a smaller platform, Vimeo has made a conscious effort for compatibility across devices and mobile platforms. There is no solid report on Vimeo's mobile users or traffic. But if it's any indication of the platform's mobile-centric strategy, Vimeo completely revamped its iOS app in time for the launch of the updated iOS 7, with a key new feature allowing Vimeo members to upload videos to their accounts straight from their iPhone or iPad.
THE BOTTOM LINE
Tablets and smartphones now account for 15% of all online video hours watched.
On smartphones viewers flock to YouTube, Web serials, comedy, gaming, and music videos. On tablets, viewers enjoy TV shows optimized for cross-device binge-watching.
Netflix pursued an iPad-first strategy to become a mobile video pioneer. Today, 23% of all Netflix subscribers say they have watched on smartphones, and 15% have done so on iPads.
Machinima, one of the most-watched YouTube channels in the world, sees almost 50% of its video views come from mobile.
Hulu, Amazon Instant Video, and Vimeo are racing to differentiate themselves as purveyors of premium video.
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