“There is a plethora of business models being implemented to find an ideal monetization method for OTT,” according to IMS Research. A development sparked by the diverse interest in the OTT market from major CE suppliers, pay-TV operators, leading internet portal companies, DVD rental companies, and large CE retailers.

The company forecasts that pay OTT subscription services will generate a cumulative $32 billion (€22.5 billion) in revenues over the next five years, accounting for the majority of the market each year when compared to pay-per services that enable users to rent or purchase videos on an ad-hoc basis.

In a new study, Over-the-Top Video – Service Delivery & Business Models – 2011 edition, IMS Research examines service providers’ strategies across the globe and forecasts OTT uptake and revenues for 10 countries and six regions. Anna Hunt, report author and principal analyst, commented in a statement, “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 company forecasts 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. Nevertheless, OTT market revenues are forecast to grow by a compounded annual growth rate of 32% over the next five years. Hunt states, “Some of the main drivers behind OTT revenue growth are 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 are some of the vital factors that will shape the market through the end of the decade.”

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 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. The segment where OTT is delivered into the home via connected CE devices, such as connected TV sets, Blu-ray Disc players, and game consoles, is forecast to see the most growth. Revenues generated from OTT transactions initiated via these devices are forecast to account for 25% of world revenues in 2016, up from 9.3% in 2010.