OTT: OVER THE TOP
OF THE WORLD

Over the past five years, major players in the traditional broadcasting space, such as cable and satellite operators, have realized that the digital content provided by IPTV operators and OTT TV service providers accounts for as much as 10% of the market. In particular, the OTT TV service has shown significant growth over the past two years and is expected to grow further.

It’s hard to question the value proposition of OTT services, since they are spreading online at a steady rate. It means that any user can easily start consuming OTT content and services. Anyone connected to a digital screen can gain access to any digital content provided via an OTT application.

Thanks to OTT TV and video services, subscribers can now access a broad range of entertainment and news content regardless of their cable, fixed broadband or satellite connection. Service providers are already connecting to the OTT TV and video market by launching their TV and VoD services provided over the cable or through apps. IPTV, OTT TV, and OTT video services are redefining the television experience. What’s more important, it is becoming apparent that more and more telecommunication companies are expanding their presence on the TV and VoD markets.

On the one hand, households are abandoning traditional TV services in favor of video streaming on their smart devices; on the other hand, households are buying more and more streaming devices to watch online content not just on their phones and computers, but televisions as well.

Therefore, in spite of cable television and IPTV, consumers prefer paying more for access to more online content.

Today, media players enable users to use their broadband Internet access and their Wi-Fi connection for streaming OTT video content to their TV sets. Content providers, including broadcasting companies, are already providing access to online channels, where users can catch up with their favorite shows on the screen of their smartphones or tablets. As multi-screen technologies keep evolving, content providers and other players on the TV market offering OTT services can strengthen their cooperation to stimulate the consumption of OTT video services. This will allow everyone to start using new monetization strategies and leverage the advantages of the growing digital media market.

The predicted aggregate revenue from the worldwide OTT market will be over $105 billion by 2021. The highest growth rates will be located in Eastern Europe, the Middle East, and Africa. The most significant portion of the future revenue will come from the Asia-Pacific region. 

Of the predicted $105 billion the market will receive by 2021, almost $60 billion will be generated in the Asia-Pacific region. In Eastern Europe, OTT will earn over $16 billion, and in North American countries will earn over $52 billion.

According to the terminology of “typical” VOD, there are three models:

Advertising video on demand (AVOD).

Subscription video on demand (SVOD).

Where by subscriptions are serviced for a particular period and the option to pay for each piece of content watched (TVOD).

With SVOD convenience of use is key, and how the viewer finds and consumes content will have the decisive importance for increasing success and profits.

Offline viewing will also be important since it will serve situations in which streaming media is not an option or for those who live in regions with low bandwidth. Also important are contextual parameters surrounding content discovery. The content recommended to consumers will not be based only what their friends watching or what they have watched previously. Instead, when the best recommendations are accepted, other factors will also be considered for the consumer such as their mood and current activities.

Paid subscriptions (SVOD) will be the primary source of OTT revenue until 2018, but by 2021 the dominant position will be occupied by an advertising model (AVOD). The revenue between the two models over the course of the next five years will be distributed in the following manner: $46.13 billion for subscriptions and $49.46 billion for advertising. The driver for advertising revenue will be the penetration of TV broadcasts, and an increase in the number of videos watched on mobile platforms.

OTT services that allow users to view content on mobile devices are being actively developed in Asia right now. But in the long run, this segment will demonstrate more significant growth rates in the Middle East and Africa. In many developing countries mobile broadband internet access has greater distribution than wired connections. The main thing the AVOD model requires is innovation. Today this model does not generate enough revenue, although volumes are growing exponentially.

According to OVUM’s predictions, the number of subscribers to OTT services will exceed 558 million worldwide by 2022. The average increase in subscribers over the next five years will be 11.44%.