Online video has experienced the Big-Bang, and as this universe expands, fragmentation ensues.    The fragmentation of the online video ecosystem was prominently discussed recently at OTTCON in Santa Clara.   We have lived through the somewhat recent Apple vs. Flash fracas as consumers, but if one is a programmer or content service provider, the permutations of options to cater to – across formats, containers, DRMs, devices, protocols, and operating systems is mind boggling.  Addressing this fragmentation is, therefore, becoming a business in itself.  Nowhere is this fragmentation more obvious than on the device front.  Netflix by some measures currently supports a growing ecosystem of more than 400 devices.  Brightcove presented a promo video that touts solutions to device fragmentation as a selling point.

While standards may seem a holy grail to address such fragmentation – and many such articles have crossed my desktop over the past couple of years, particularly in the context of emerging SmartTVs –  a look at HTML 5 is a good reality check.  While HTML 5 allows native browser play back of video, multiple video format options currently exist within HTML5, thereby requiring support for different formats by programmers.   Similarly, in the Android ecosystem, more than 300 different devices need to be supported across different versions of Android.

While for some, like Brightcove, this has created new business opportunities, for some other core, essential technology segments of our industry, this has caused a business revival.  I have spent a part of my career dealing with the nuts and bolts of the video business, such as codecs, encoding, and formats.  These are essential parts of the value chain that are technology intensive, tough businesses.  A few examples to illustrate how some of these segments are benefiting:

A couple years ago, an encoder company was weighing its options about continuing to run on fumes or shutter the business. Historically, the encoder business had not been one to stand on its own. In the early days of online media, Microsoft gave its encoders away and Real Networks could barely charge for theirs.  I suggested to this encoder company to continue as the aura of the golden age of video that we’re in was about to reach new industry segments.  Business grew and this company was recently acquired by a vertically integrated player, providing a good exit for a company that did not seem viable a few years earlier.

This outcome was driven by the urgency of publishers to address fragmentation creating a requirement for fast, efficient, cost effective, and flexible encoding solutions.  There are at least two or three similar examples within the encoder market itself.

The folks from another rising star in the encoding segment told me that they are at revenue of $25 million after 3-4 years in business.  While this does not seem much in comparison to the revenues of Internet services companies and startups in other segments, it dwarfs the revenues of what was once among the most pioneering and well known codec and encoder company, and my former employer, On2 Technologies. After 15 years of gravity bound and rather unpredictable revenues during which the company never achieved profitability, On2 sold to Google in early 2010 in what I think was a misstep at a time when the fragmentation within the industry would have been very kind to them.

A few other companies that I have spoken to in the codec and encoder space consider this fragmentation the biggest boon they could expect.  This is creating a pressing market demand or pull in what is otherwise a segment where technologies are generally pushed out and take a while to gain adoption.

Given that many such segments toil in the dark but are yet the critical life blood of the industry, the challenges of the expanding fragmented universe of our industry are creating well deserved opportunities.