Research Report Charts the Rise and Challenges of OTT Video

Article Featured Image

TV Everywhere is a marketing slogan for producers and networks, and a rallying cry from audiences. Over-the-top (OTT) video services have the potential to deliver on that promise. Although this disruption may be seen as a threat to incumbent pay TV operators, a recent Streaming Media research report -- OTT Video: Coming to a Paid Channel Near You -- sponsored by Verimatrix indicates that OTT presents a growing opportunity to increase business, as indicated by responses from executives across sectors.

Majority of Execs Involved in OTT Video

For this report 758 media industry executives were surveyed for their views about the current state of OTT video and what they believe its future looks like. The greatest proportion of responses come from content providers and technology partners/vendors, making up 34 percent and 31 percent, respectively, of all respondents. Pay TV operators represent 6 percent of responses.

There is broad involvement in OTT among survey respondents, and they see definite growth in this area. More than two-thirds of respondents (68 percent) are currently involved in OTT delivery, with 21 percent saying that it makes up a substantial part -- more than a quarter -- of their business. Content providers and technology vendors lead that group, with 20 percent and 28 percent respectively saying that OTT is substantial portion of their current business.

By comparison, just 7 percent of pay TV operators report that OTT is currently a significant part of their business. However, 50 percent of pay TV operators predict that OTT will become substantial in 3 to 5 years, while 43 percent of all respondents say this.

Shaving, Rather Than Cutting, the Cord

There has been much hype around cord-cutting, yet the majority of respondents to this survey, 51 percent, predict outright cord-cutting will not be the choice of most consumers. Instead, they see growth in cord shaving, with consumers cutting back on their cable channel packages, supplementing them with OTT offerings.

A 19 percent minority say that consumers will choose to keep their full packages of pay TV channels, while also viewing OTT services. At the same time, a slightly larger minority of respondents, 23 percent, think consumers will cut the cable altogether, canceling pay TV subscriptions and going exclusively with OTT services like Hulu, Netflix, Amazon, and LoveFilm.

When it comes to types of OTT services there’s strong agreement that standalone/pure-play services dominate today, and will in 3 to 5 years: 42 percent of respondents say these services will predominate, while 27 percent say services that are part of an existing pay TV subscription will lead.

Consumers Will Pay for OTT

With regard to monetizing services, a majority of industry executives think consumers value OTT enough to pay for it directly, although they think payment models will shift from monthly subscriptions to pay-as-you-go models in the next five years. For now 54 percent say that monthly payment is the best model, but when asked about 5 years from now that percentage slips to 46 percent of respondents thinking it’s best. Pay-as-you-go models will become more prominent: 38 percent of executives say they will prevail in five years, while only 29 percent believe they do today.

In support of pay-as-you-go, one respondent says, “Viewers are choosing the program, and their money can go directly to the source -- producers and delivery providers -- eliminating the need for commercials.”

That said, 40 percent of respondents still believe in the advertising-supported model, with about the same number agreeing it will still be the most successful in five years.

Looking at what drives the business of OTT, nearly half of industry executives, 49 percent, think it will attract interest in programming lineups, bringing in new subscribers, while 38 percent think OTT will increase profitability. A third of respondents say OTT will help retain existing subscribers, and a third say it will enhance a business’s competitive profile.

Rights, Bandwidth, and Security Are Challenges

For all the potential advantages of OTT, rights management is an critical issue, with 48 percent of respondents saying that gaining content rights for multiple screens is the most significant business challenge. Pay TV operators are most concerned with this (nearly two-thirds agree), while 45 percent of content providers share this concern.

A slightly smaller number of respondents, 41 percent, say bandwidth caps are a challenge, and another 41 percent say that a lack of consumer awareness is a concern.

Securing OTT video is its own challenge, with organizations facing an array of changing standards that each support different types of devices and platforms. There is no single DRM solution that supports all the major mobile, desktop, and set-top devices.

Not surprisingly, then, one-third of respondents say they do not know what security technologies need to play a role in OTT security. This suggests the need for education about the implications of DRM for OTT video.

Streaming Covers
Free
for qualified subscribers
Subscribe Now Current Issue Past Issues
Related Articles

Infographic: Is Over-the-Top Video a Major Game Changer for Pay TV?

Get a visual summary of the key findings from Verimatrix and StreamingMedia.com's research report surveying over 750 industry executives.

Verimatrix Study: OTT Adoption Hurt by Broadband Limitations

A survey of media industry executives finds that content security is a major issue for OTT delivery, and that quality of service is an obstacle.

OTT Revenue Grew by 60 Percent in 2012, Says ABI Research

The worldwide OTT economy is over $8 billion, but it will expand greatly in the next few years.

The State of OTT Content Delivery 2013

Over-the-top delivery is shifting to more than just in-home content. Learn how the cloud, network DVRs, DASH, and DRM are combining to make TV Everywhere truly everywhere.