The premium service OTT market is set for growth in the UK, Dutch and German regions by 2017, according to a new study on behalf of Vindicia and Ooyala.

The study revealed that, while industry leaders are aware of the challenges when targeting the mass market with film and TV content, premium OTT technology continues to advance in Western markets. It also indicates that in addition to the subscription business model, there will be significant opportunities for content providers to increase monetization of video content, in the form of transactional services, ad-supported offerings and hybrid bundles.

Conducted by MTM and involving 30 OTT service providers in the UK, Dutch and German markets, the research revealed that despite a number of barriers to entry, industry participants expect to see steady growth of premium OTT service in all three European regions. In fact, the UK market is expected to grow from £110-130 million in 2013 to £390 million in 2017, while the Dutch market is expected to grow from €15-20 million in 2013 to €190 million in 2017. Industry participants expect to see slower growth in Germany, with the premium OTT market expected to increase from €30-35 million in 2013 to €117 million in 2017. Lower broadband penetration in Germany is a contributor to the region’s slower growth rate.

“The next three years will be a real turning point for the premium OTT market,” said Gene Hoffman, chief executive officer and chairman at Vindicia.

“Broadband penetration levels are rising, connected devices are becoming increasingly accessible and favorable regulations are being introduced, which is paving the way for OTT providers. The emergence of leading players, such as Netflix, is also fuelling competition and investment in premium OTT business models, while at the same time driving consumer awareness and adoption.”

According to premium OTT service providers, other barriers include exclusivity of access to high-quality, high-appeal content, consumer consciousness and cultural factors. Exclusivity in particular is a primary battlefield for mass-market services, with content licensing costs inflating as large OTT businesses, including Netflix and Amazon, invest in long-term, exclusive and global studio licensing deals. At the other end of the market, those building out niche subscription businesses will need access to high-value, high-volume specialist content.

With regards to consumer barriers, industry participants state that while awareness is growing, consumers are slowly migrating from free VOD services and pirated content to premium paid-for video content.

“OTT providers and new entrants face daunting challenges, however with the right approach and level of investment, the rewards will be substantial,” said Jay Fulcher, president and chief executive officer of Ooyala.

“Technology itself is becoming less and less of a barrier and as time goes on, we will start to see providers throw large amounts of money at OTT in a bid to differentiate themselves from the competition. Because of this, consumers will have higher expectations when it comes to user experience and quality of service, which will put significant pressure on providers to discover the most cutting edge technology. In effect, demand and innovation will go hand in hand.”

The full report can be downloaded here: