The over the top (OTT) online video industry looks like it has cracked the problem of making financial return on ostensibly cheap content according to a new report by IMS Research.

Indeed the analyst notes that diverse interest in the OTT market from major CE suppliers, pay-TV operators, leading Internet portal companies, DVD rental companies, and large CE retailers, have resulted in a plethora of business models being implemented to find an ideal monetisation method.

The result, IMS Research predicts in its Over-the-Top Video – Service Delivery & Business Models report, will be a cumulative $32 billion in revenues over the next five years from pay OTT subscription services

IMS Research forecasts a huge shift into pay OTT driven by service providers and content providers’ willingness to explore new paradigms. Support for multiple devices and platforms, widespread partnerships and acquisitions, and global expansion of successful services will also provide positive business outcomes for the OTT arena.

Explained Anna Hunt, report author and principal analyst: “Advertising-funded services and free videos make up an overwhelming share of online video traffic today, and this won’t change dramatically over the next five years. But we will start to see some significant growth in pay-OTT transactions and revenues as more market leaders in pay-TV, media and CE invest in exploring strategies for effective OTT video service delivery.”

The analyst forecasts that OTT market revenues are to grow by a compounded annual growth rate of 32% over the next five years. It calculates that homes viewing only free OTT videos accounted for 77% share of the total OTT market at the end of 2010, and this will decline to 69% by the end of 2016. Internet-based OTT service providers, consisting mainly of broadcasters offering content online, DVD rental companies that have expanded into streaming services, and retailers that offer online video rentals and purchasing, will likely generate the largest share of OTT service revenues, although this segment’s share is forecast to decline from 90% of world OTT video revenues in 2010 to 69% in 2016.

Most growth is predicted where OTT is delivered into the home via connected CE devices, such as connected TV sets, Blu-ray Disc players, and game consoles. IMS Research expects revenues generated from OTT transactions initiated via these devices to account for a quarter of world revenues in 2016, up from 9.3% in 2010.

Joseph O'Halloran | 24-06-2011