The US OTT video business will keep sizzling over the next few years as consumer demand continues to grow and more service and content providers jump into the market, according to a new study.
Specifically, the study, conducted by research firm MTM for Ooyala Inc. and Vindicia, projects that annual OTT market revenues will more than double from $4 billion in 2014 to well over $8 billion in 2018. It also predicts that service and content providers will keep spending more and more on content as they seek to stand out in an increasingly crowded, fragmented market.
Based on interviews and seminars with senior executives at 45 industry players, the study cites three main factors for the continuing growth in OTT. These factors include a significant investment in the OTT video delivery infrastructure, the proliferation of new, cloud-based online video services and intensifying competition among service and content providers in response to mounting consumer demand for à la carte offerings.
In addition, the study sees as many as 15 to 20 new specialist or niche services popping up over the next couple of years, including offerings dedicated to sports, personal hobbies, kids' entertainment, independent films and TV, and expatriate or multicultural programming. Further, the study sees prices for OTT services steadily rising over the next few years, both from such large, established providers as Netflix Inc. (Nasdaq: NFLX) and Hulu LLC and new market entrants.
"More than 40% of US 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," said Bryta Schulz, SVP of marketing for Vindicia. "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 [multichannel video programming distributors] look to court cord cutters and the cord shavers."
The study findings come at a time when both conventional service providers and content providers are taking the OTT plunge in a big way. In just the past two weeks, for instance, Comcast Corp. (Nasdaq: CMCSA, CMCSK), Showtime Networks Inc. and A&E Networks have all introduced major new online offerings while Home Box Office Inc. (HBO) has expanded distribution of its new HBO Now service to Amazon.com Inc. (Nasdaq: AMZN), Google (Nasdaq: GOOG) Chromecast and Android mobile devices. (See Comcast 'Stream' Joins OTT Flood and Showtime Launches, AMC Tests OTT Services .)
The findings also come as Netflix continues its steady expansion both in the US and throughout the rest of the world. In the latest development this week, the online video king reported stronger than expected subscriber and revenue growth in the second quarter, adding 3.3 million customers overall (including 900,000 in the US). The company, which now has almost 66 million subscribers worldwide, expects to pick up nearly another 3.6 million customers in the third quarter as it continues its relentless march across the globe.
— Alan Breznick, Cable/Video Practice Leader, Light Reading