How fast will the U.S. market for over-the-top (OTT) video service grow, what’s driving growth and what will the market look like in three years? Forty-five leading providers of entertainment content and services weigh in on these topics in a market research report released today, July 14, by research firm MTM and sponsored by enterprise-grade subscription-billing specialist Vindicia and video and advertising analytics provider Ooyala.
Surveying senior OTT industry execs from the likes of BBC Worldwide, DIRECTV, Fox, Lionsgate, Sony Pictures Entertainment, Starz, Verizon and others regarding market predictions and indicators Vindicia and Ooyala found that they expect the U.S. market for OTT video will continue to grow strongly over the course of the next few years as investment rises, services proliferate and market competiton intensifies.
Ooyala predicts that U.S. OTT market revenues will exceed $8 billion by 2018 as consumer demand continues to grow and new companies enter the market, according to a press release announcing the release of the report, entitled “The Future of Premium OTT Services in the U.S.”
A small group of major providers, Netflix at the top of the list, is likely to dominate the mass market for OTT content and services, the researchers said. Furthermore, they expect many U.S. households subscribe or will subscribe to multiple offerings: a pay-TV bundle and a mass-market OTT service as well as one or more niche offerings. The breadth and depth of content, price and flexibility and ease of use will continue to be key differentiators for consumers.
Niche OTT Video Subscriptions
Highlights of the report include:
- Premium OTT revenues are expected to grow from $4bn in 2014 to between $8-12bn in 2018, with Netflix remaining the largest single mass-market provider. Niche services, complementing more generalist pay-TV or OTT offerings, are also expected to proliferate – industry participants envisage 15-20 specialist OTT providers acquiring 100,000 or more paying subscribers by 2018, with many more attracting smaller numbers of subscribers.
- There is a strong consensus that Netflix will remain the largest single premium OTT provider in the USA, although industry participants expects its share to decline from 85% of the market in 2014 to around 50% in 2018, as other providers gain traction.
- Industry executives expect pay-TV and premium OTT to converge into a single market, with OTT distribution deals and more flexible, lower-priced packages attracting younger adults and millennials to take up services from traditional MVPDs.
“While large MVPDs own large portions of [the] OTT audience today, industry experts predict 15-20 specialist services will grab subscribers’ attention. For these niche providers, there’s tremendous fan-base potential in providing entertainment focused on sports, personal hobbies, kids’ entertainment, indie, specialized film and television, and expatriate or multicultural programming,” commented Ooyala VP of marketing Caitlin Spaan.
- Prices for premium offerings are set to increase, both from existing providers and new entrants. This is already proving to be true with Netflix’s $11.99 per month family plan and HBO’s $14.99 per month plan.
- Broadcasters are responding to the rapid growth of OTT in various ways, seeking to retain control of their content and brands in the premium OTT market and launching services of their own. Similarly, pay-TV providers are pursuing various strategies, bringing OTT offerings onto their platforms and launching new OTT products and services to defend their existing services and capitalize on growing consumer demand.
“More than 40 percent of U.S. TV households subscribed to at least one premium OTT service at the end of 2014, and our research validates that we’ll continue to see strong growth in the years to come,” added Vindicia SVP of marketing Bryta Schulz.
“Bundling premium content with existing membership subscriptions is just one of the opportunities that will help providers increase revenue and differentiate their product offerings, especially as OTT providers seek access to new customer bases and MVPDs look to court cord cutters and the cord nevers.”