Live sports online is becoming a big business, with each event seeming to set new records for online viewers. Unfortunately for service providers, live sports online are a nightmare scenario. And the penalty for failure can be steep, as the UK's Sky found out last week. Fortunately, we seem to be getting better at delivering the quality and scale required, though challenges still remain.

Service providers must be looking to the summer with dread, as millions gear up for what promises to be the biggest online soccer World Cup ever. In a recent survey conducted by YuMe, 54% say they intend to watch complete matches online and 46% say watching on multiple devices is important to them.

This is hardly anything new. Over half a million simultaneous viewers tuned in to Super Bowl XLVIII earlier this year and 850,000 concurrent users watched the USA vs. Canada mens' semi-final hockey match at the Sochi Winter Olympics. While these fall well short of TV viewing numbers, they are clearly heading in that direction.

In many ways, live sports online is a worst case scenario for a service provider. Their customers demand the highest quality picture so they can see the puck or ball accurately. At the same time, the bandwidth required to deliver a quality sports live stream is higher than just about every other video type. Finally, every person gets their own video stream, even though they're all watching the same thing. The more people that tune it, the higher the bandwidth consumed.

Delivering a quality video streaming experience under these constraints is about as tough as it gets. And failing to deliver can be expensive.

In the UK, Sky's Internet television service, Now TV, has been forced to issue refunds to sports fans. The company offers its live linear sports channels through Now TV for customers to rent access to for £9.99 ($16) a day and through its TV Everywhere product, Sky Go. Soccer fans tried to use the service to watch the final fixtures in the Premier League last week, but many were unable to get access to key games until they were almost over.

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The Sky example shows that the penalty for failure is steep. Consumers are very intolerant of any problems when watching live sports online.

For instance, Conviva Inc. found that if a streamer encounters buffering when watching a live sports stream, average viewing time plummets from 40 minutes to just one minute. However, Conviva also had some good news. The number of video views affected by buffering events is falling, from 39.3% in 2012 to 26.9% in 2013.

Broadband providers also have new tools at their disposal to help with the bandwidth crunch created by all those duplicated live streams. Transparent caching has been proving very effective in reducing the amount of video bandwidth consumed on broadband networks from on-demand streaming traffic.

In fact, Qwilt Inc. , a transparent cache provider, claims that its QB-Series Video Fabric Controller delivered more than 50% of the video traffic in the networks it was running in. At the same time, it was able to boost the video quality over 80%. Qwilt now says it can bring the same improvements to live as well as on-demand streams.

While tools to save bandwidth and improve quality of experience will help operators do a better job with live online sports delivery on their networks, other challenges remain. On the pay-TV side of the business, authentication continues to be a barrier for consumers. John Skipper, President of ESPN, speaking at SXSW 2014 said: "The process of authenticating is too clunky. I'm slightly frustrated and disappointed that it's taken as long as it has."

Other problems, such as enforcing sports blackouts/regional restriction and ad insertion, also need to be solved. Fox faced all these problems when it launched Fox Sports Go last year. Today the company delivers the live channels FS1 and 2, Fox Deportes, all the Regional Sports Networks and the local Fox affiliates through the iOS app.

The delivery of live sports online has a long way to go before it can support TV viewing numbers. However, one thing is certain: Each new sporting event will continue to push the boundaries of what is possible online.

— Colin Dixon, Founder & Principal Analyst, nScreenMedia