CONTENT STRATEGIES
By the numbers: the value and impact of over-the-top content
• IMS Research forecasts that paid-for OTT subscription services will generate a cumulative US$32 billion in revenues worldwide over the next five years, and will account for the majority of revenues when compared to pay-per-view video services. OTT service revenues will reach US$16.4 billion in 2016, it estimates in its new report Over-the-Top Video—Service Delivery & Business Models (2011). Households viewing just free videos accounted for 77% share of the total OTT market at the end of 2010, but that will decline to 69% by the end of 2016. Internet-based OTT service providers—broadcasters offering content online, DVD rental companies that have expanded into streaming services, and retailers that offer online video—will continue to generate the largest proportion of OTT service revenues, although their share is forecast to decline from 90% of worldwide OTT video revenues in 2010 to 69% in 2016. IMS says the North American VOD market generated $1.98 billion in revenues in 2010, while the European VOD market totalled $1.11 billion. The two regions combined comprise 46.1 million pay-TV subscriber homes that are using VOD services.
• Another new report, from Analysys Mason, says while OTT services will not displace traditional pay-TV services—cable, IPTV, pay-DTT or satellite—as the main provider of video services to primary TV sets in Europe, there will be much stronger growth for OTT services as a complementary, or secondary service, mostly on additional TV sets. It forecasts 14.6 million households in Europe will be using over-the-top services as a secondary TV service by 2016. The report, Pay TV in Europe: forecasts and analysis 2011–2016, says only 2.58 million households will be using an OTT service as a primary service for their main TV set in Europe in 2016, representing 1.4% of the 185.2 million pay-TV households.
• Today, downstream traffic from Netflix accounts for some 30% of all peak Internet traffic
in the US, according to network traffic solutions company Sandvine (see pie chart p.17). This month Netflix is expanding into 43 countries in Latin America and the Caribbean, and plans to launch in Europe starting in Spain next year. The company now claims over 24 million subscribers in the US making it the biggest pay-TV/video company surpassing Comcast.
• SNL Kagan analysts have estimated how much over-the-top substitution will erode multichannel subscriptions in the US, with 4.5 million households predicted to opt for Internet video instead of subscribing to a multichannel video package by the end of 2011.
• Strategy Analytics forecasts worldwide connnected TV device revenues will reach US$95 billion by 2015. It says connected TVs and other Internet-ready devices—such as set-top boxes and DVRs—will reach 2 billion units worldwide this year. And In-Stat says worldwide streaming media player—also known as OTT set-top boxes—unit shipments in 2011 will reach just over 3.6 million.
• Analysts at Gartner forecast that consumers worldwide will spend $2.1 trillion on all digital content, devices and services this year, rising to $2.8 trillion by 2015. OTT content will account for 10%, or $200 billion, of that $2.1 trillion total: Purchased, rented, streamed or downloaded video content, as well as pay-per-view and video-on-demand (VoD), and licensing fees from pay-TV services account for $100 billion; while PC and gaming software, digital music, digital books and mobile apps make up the other $100 billion. Gartner says that some 62%, or $1.2 trillion, will be spent by consumers on subscription-based services, which include fixed voice, mobile voice and data, broadband and pay-TV subscriptions. The remaining category, devices, accounts for 28% of consumer spend, or $600 billion.
month announced it will expand outside the US, initially in Japan, and according to reports during the summer has been in talks with companies interested in purchasing the venture including Google, Yahoo, Amazon, Microsoft and broadcast satellite service provider Dish Network. All the while, operators are developing
business models with the aim of tying together a mix of content and delivery media. Dish Network in April acquired DVD rental company Blockbuster to add
September 2011
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to its 2007 purchase of Sling Media which enables it to deliver online and mobile video to its subscribers. Indeed, established OTT services
increasingly have started to appear on other platforms worldwide: the BBC iPlayer has expanded from a Web-based service to pay-TV delivery including through BT’s IPTV offering Vision and Virgin Media’s cable service. In some regions OTT players are aiming to deliver broader offerings in
line with the services of IPTV and pay-TV players. In China, the video delivery specialist Kit Digital is working with the Shenzhen Media Group and 19 TV broad- casters and newspapers across the country on the China United Television (CUTV) project. The companies say this will be a new media platform that will offer OTT content on an IPTV-style basis to homes across the country. “With just one click viewers can watch
live TV programmes, video-on-demand or catch-up video on computers and mobile devices including Apple i-devices and Android handsets,” claims Kit Digital in its promotional material. In return, video is not the only kind of
content that telco service providers are eyeing up. In July 2010, Orange invested in a minority stake in the music stream- ing service Deezer which it plans to launch in the UK this month; and in July this year, Virgin Media signed a deal with Spotify to bundle that music streaming service with its triple-play subscriptions in the UK. Although Virgin Media has not yet launched its service or pricing details, the operator says it hopes to deliver Spotify at a discounted rate rela- tive to current offerings. But some analysts believe service
providers could be barking up the wrong tree. “I think that operators should be investing in application-oriented OTT plays, not content-oriented OTT plays,” says independent telecoms analyst Dean Bubley. “I really don’t know where Orange’s DailyMotion stake will take it, but I do know that it should have been an operator buying Skype, not Microsoft.” What’s more, in future operators will
face competition from other quarters including large retail companies. In April UK retail giant Tesco bought an 80% stake in Internet TV service Blinkbox, for “single-digit millions”. As well as being accessed through the Internet, the service is available on PS3 games consoles and in future on Internet-ready TVs from compa- nies including Samsung and Sony. IMS Research forecasts that retailers will grow their share of the OTT market, account- ing for 13% of worldwide OTT service revenues of US$16.4 billion in 2016. n
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