6 Streaming Companies That Are Cutting Bitrates and Why

This was supposed to be the year that the streaming video war truly kicked off. Netflix (NASDAQ:NFLX) would see its early lead and industry dominance put to the test in a serious way. Challengers like Amazon’s (NASDAQ:AMZN) Amazon Prime Video have been around for years, but last fall, big competition arrived in the form of Disney’s (NYSE:DIS) Disney+ and Apple’s (NASDAQ:AAPL) Apple TV+. Cable companies and networks are also joining the fray.

6 Streaming Companies That Are Cutting Bitrates and Why

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The big selling point for most video streaming services is content. That’s why there have been huge bidding wars over popular TV shows like “The Office.” Also important to many viewers is video quality: 4K and HDR video is a big selling point, now that virtually all new TVs support 4K.

So why have Netflix and other streaming video companies announced they are reducing video quality in Europe? 

The coronavirus from China.

With employees increasingly asked to work from home, there are fears the internet infrastructure won’t be able to keep up. Streaming video can account for over 60% of downstream internet traffic, so it’s the obvious place to start. Cutting the bitrate means lower quality, but reduced bandwidth use so the services can continue streaming.

Here are six video streaming companies that have cut their video quality in response to the coronavirus pandemic.

Streaming Companies to Watch Now

Netflix was the first to go public with a plan to reduce bandwidth. On March 19, a spokesperson told The Verge: “Netflix has decided to begin reducing bit rates across all our streams in Europe for 30 days … We estimate that this will reduce Netflix traffic on European networks by around 25 percent while also ensuring a good quality service for our members.”

Meanwhile, Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) YouTube is also making concessions to video quality. On March 20, the company told Reuters: “We are making a commitment to temporarily switch all traffic in the EU to standard definition by default.”

On March 20, Amazon joined the list of video streaming companies committing to reducing their bandwidth usage in Europe. The company sent a statement to TechCrunch explaining the move:

“We support the need for careful management of telecom services to ensure they can handle the increased internet demand with so many people now at home full-time due to COVID-19. Prime Video is working with local authorities and Internet Service Providers where needed to help mitigate any network congestion, including in Europe where we’ve already begun the effort to reduce streaming bitrates whilst maintaining a quality streaming experience for our customers.” 

Key competitor Apple’s new video streaming service currently shows only original content. With no library of older broadcast television content, that has given the company the advantage of being able to promote shows that are 4K and HDR by default. However, Apple has also chosen to support the initiative to reduce bandwidth in Europe.

Reports suggest that Apple is being particularly aggressive, resulting in a noticeable degradation in video quality.

On the other hand, relative newcomer Disney+ was one of the most hotly anticipated video streaming launches of 2019. For the first six months, Disney was focused on North America, but in March the service was scheduled to hit the European market.

It’s another new video streaming service — especially one that is expected to be wildly popular — that could be problematic at this time. As a result, on March 21, Disney announced it is delaying its Disney+ launch in France. Other European countries will still get it on march 24 as planned, but the company will cut video bit rates by 25% to reduce the impact.

Finally, on March 22, Facebook (NASDAQ:FB) committed to downgrading video streaming quality on its platforms in the European market. A spokesperson told Reuters: “To help alleviate any potential network congestion, we will temporarily reduce bit rates for videos on Facebook and Instagram in Europe.

What About the U.S.?

Naturally, Americans are wondering if reduced bit-rate video streaming is coming to the U.S. as well. 

With cities locking down, kids are home and bored. With social distancing in effect, streaming video is one of the few activities available. You can bet that’s increasing the load on ISPs’ infrastructure. In addition, many companies are pivoting to having employees work from home, adding to internet bandwidth demands with video conferencing solutions.

Most streaming video companies like Netflix haven’t confirmed any plans to take action yet, but they are monitoring the situation in North America. On March 24, YouTube announced it was limiting video quality worldwide for the next month, so this may be the start. If we start seeing evidence of internet traffic congestion in the U.S., expect to see all your 4K videos looking a little blockier than usual. But at least you’ll still be able to keep binge-watching.

Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.  As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2020/03/6-streaming-companies-that-are-cutting-bitrates-and-why/.

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