OTT video market to be worth $37BN by 2017

Joseph O'Halloran | 15-11-2012

Whether people are cord-cutting, cord-shaving or cord-coupling, one thing is clear: the OTT market is ramping and is set to be worth $37 billion by 2017, according to new research from Informa Telecoms & Media.

The analyst believes that there is no doomsday scenario where traditional pay-TV falls over the cliff as the likes of Netflix and LOVEFiLM gain interaction, but that there will be a very viable OTT market characterised by three clear revenue streams, namely advertising, subscriptions and transactions.

Informa predicts that by 2017 the split among advertising, subscriptions and transactions will be similar to the splits in 2012, with subscriptions growing slightly at the expense of the other two formats. In terms of share, Informa believes that advertising will peak in 2015, at 55% of all revenue, before dropping sharply in 2017 to 50%. Informa expects that beyond 2017 the revenue mix will adjust to something similar to what we see with TV today, with advertising and subscriptions taking similar amounts of revenue on a global scale.

Drilling deeper, Inform expects a major shift in the geographical split of OTT revenues, but less of a shift in the business-model mix. The US currently accounts for over three-quarters of revenues, but that figure will likely drop to less than 60% in 2017 as Europe and Asia grow more quickly.

However, painting the bigger picture, Informa notes that growth of OTT subscription revenues is hugely dependent on traditional TV operators, that is whether they launch their own stand-alone OTT services and how they react to other services in the market. Furthermore, even if realised, the $37 billion of revenues would still likely represent less than a tenth of the expected total video revenues. It further observes that in 2017 advertising will still be a larger revenue-generator than subscriptions, thus highlighting the continued immaturity of the OTT-video market.

In a call to action to operators, Informa advises that from an advertising perspective, two of the most crucial things that service providers must get right over the next five years are monetising content on devices beyond the PC, and monetising live content. It warns that not doing so will have serious revenue implications.