OTT (over-the-top) is the practice of delivering video and other media over the internet, bypassing cable, broadband and satellite platforms. The term is usually applied to video-on-demand streaming services like Netflix, Disney+, Prime Video, Hulu and more. OTT content can be accessed through a computer, a mobile phone, or through a smart-TV or a conventional TV connected with an OTT streaming device, like Apple TV, Chromecast, Amazon Fire or even a video game console like a PlayStation or Xbox.
As of 2019, 182 million people in the US were expected to have at least one OTT subscription. That represents 64% of all US internet users. There are several underlying factors that continue to influence the inevitable process of “over-the-top” media’s enormous popularization. These factors will play a major factor in the future development of film and television internet streaming.
The first is the ease-of-use. For a growing number, the idea of instant gratification by clicking on your favorite movie or show is enough to utilize many of the “over-the-top” services such as Netflix or HBOGo to access the content. It’s become effortless to access “over-the-top” services thanks to devices such as Chromecast, Roku, Amazon Fire Stick, and the ubiquity of smart TV. And if you’re commuting or travelling you can keep watching your favourite movies and TV shows on your smartphone and maintain a consistent experience across devices.
The second factor is freedom of choice. “Over-the-top” video service providers have allowed consumers the freedom of choice in entertainment and in many cases at a fraction of the cost over traditional cable or satellite TV. Consumers who abandon traditional TV providers for OTT services are referred to as “cord-cutters.” These savvy consumers have utilized “over-the-top” services to diminish the need to rely on cable or satellite for entertainment. There’s now another younger segment of video consumers called cord-nevers: people who have never paid for satellite or cable TV, but instead went directly for OTT services. Cord Nevers account for 9% of US TV viewers, and not surprisingly, half of those are millennials.
The third factor is the growing quality of the original content published by OTT platforms. Netflix, Amazon Prime or Disney+ all have been consistently publishing new films and series for their platforms and retaining exclusive streaming rights for other content. Netflix has taken this strategy to the point of developing original content locally in other countries where they have a presence, beyond the US. Dark, in Germany, or Las chicas del cable, in Spain, are both examples of this strategy.
What’s the future of over-the-top content, TV, and video?
Many cable providers will continue to serve a high functioning role in the current media landscape. The US is the more mature OTT market, with around 50% of the population having at least one OTT service subscription. In other markets like the EU and Asia-Pacific, there’s still room for growth. In mature markets like the US and the UK, OTT services are increasingly being bundled with cable and internet access packages, as OTT providers compete with each other for market share. These kinds of partnerships are designed to create a more attractive offer and reduce customer churn as market growth stalls.
Entertainment content is just the spearhead of OTT media. There are OTT services like Uscreen, with more than 1 million subscribers, where educational and fitness content largely surpass entertainment in popularity. This means that there could be largely untapped opportunities for growth in other content besides entertainment and that smaller, specialized OTT content services could still be relevant in a world dominated by Netflix and Amazon Prime.
However, the role of specialized OTT providers could be hurt by the subscription fatigue of having too many options to choose from and too many subscriptions to manage. According to research by Deloitte, there are now more than 300 OTT providers in the US alone. These market fragmentation keeps content piracy relevant, as people look online to download exclusive content not available in their subscriptions. And it may possibly lead to a concentration of offers, or bundling of different, complementary OTT services.
Some providers, such as DirecTV are trying to stay ahead of the game by launching a live television streaming service. Live streaming television has quickly become the next wave of “over-the-top” media. While providers like Hulu and Netflix have laid the groundwork for streaming television and film content, providers such as DirecTVNow, YouTube TV, and Sling TV have opted to deliver “over-the-top” services in the form of live television. Other “over-the-top” live television streamers include PlayStation Vue as well as a live TV offering now from Hulu.
How soon until Netflix throws their hat in the live streaming television ring? Right now they own such a large percentage of the market share there is no consumer demand for them to evolve their services into this.
Digital media is unique in the sense that it’s constantly evolving and at a pace that’s faster than many can keep up with at times. Consumer expectations are a big driver of the evolution of digital media.
OTT monetization
Subscriptions are the dominant monetization format in the OTT market. But there are other monetization options that are gaining traction lately.
One is in-app purchases. These could be additional content or other products related to the content. For example, you could browse and shop clothing items used in a movie or TV series.
Advertisement is another monetization option that can become more relevant as traditional TV loses market share and free-to-watch OTT services gain relevance. OTT advertisement It’s on the path to becoming a 50$ billion market by 2020, but ad fraud could slow down its growth, as 19% of OTT advertisements are invalid. For comparison, TV ad spend in the US is 69$ million dollars in 2019, and it’s expected to start declining slightly after 2020.
How OTT began
In the early days of Netflix and Hulu video streaming, networks gave their older shows to the provider and it seemed to pay off as the networks got greater exposure to their programming. This was in hopes that people would see a show on Netflix and be eager to watch new episodes on live television. However, many people became content to wait until it showed up on Netflix. Even if this meant waiting a year for a show to appear on Netflix. This strategy paid dividends for Netflix and as of 2017, they are reporting more than 93 million subscribers around the world.
This is when the networks themselves realized that there is a market for their own personal streaming services. With that HBOGO was born and shortly after that CBS All Access and others were launched. What does this mean for Netflix, Hulu and Amazon Prime Video? Well, they have been producing their own content and at a rapid pace to keep subscribers’ feeds fresh and updated. Netflix has essentially created its own network inside the platform with an enormously high volume of comedy, television type shows and feature films.
Common OTT Questions
Is “over-the-top” digital media just one service?
There are three main categories for “over-the-top” media services. The first one being the most common. Subscription-based services include on-demand streaming content such as Netflix, Hulu, Amazon Prime video, etc. as well as the live television providers such as DirectTV NOW and Sling TV.
The second form of “over-the-top” media is actually free. That’s called free and ad-supported services. The most notable of these free services is Crackle, but there are many others.
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Lastly, we have the Transactional services. These are services such as Vimeo, iTunes, GooglePlay etc. where you make one-time purchases “over-the-top” to either rent or buy your media. You select individual pieces of film or television instead of subscribing.
Is the OTT market becoming saturated?
This is a two-part answer. In many ways, it’s not saturated yet because there are still plenty of television and film watchers who do not choose “over-the-top” media as their primary means of delivering content into their homes. There is a lot of market share left to seize. However, for the time being, unless more people convert to “over-the-top” media, the market will become flooded with more providers than consumers who are willing to pay. You must stand out in what is becoming a very crowded field that is only going to get more congested as the years continue on.
What is the “over-the-top” growth potential?
The “over-the-top” market has the earning potential to grow past the $158 billion marks by the year 2025. The growth is partially estimated by the anticipated number of cord-cutters who will choose to ditch the cable company in favor of subscription-based service providers that give them a more flexible range of viewing options.
The increasing offer of broadband internet access in developing markets like Brazil or India represents new opportunities for OTT growth. For example, Netflix saw growth figures of 700% in India in 2019, thanks in part to a mobile-only plan that fits the country’s internet usage pattern.
