US OTT market to reach $8BN by 2018
DetailsMichelle Clancy | 15 July 2015
The US market for over-the-top (OTT) video will continue to grow strongly during the next few years, research from Vindicia and Ooyala has revealed.
By 2018, the market will exceed $8 billion in revenue, driven by new market entrants and growing consumer demand says the report.
The study adds that continued growth will be as a result of three factors: significant investment; a proliferation of services, primarily Netflix; and intense competition. Consumer demand for premium OTT services is likely to increase as the range and quality of services improves and as viewing continues to shift towards non-linear services.
"While large MVPDs own large portions of OTT audience today, industry experts predict 15-20 specialist services will grab subscribers' attention," said Caitlin Spaan, vice president of marketing at Ooyala. "For these niche providers, there's tremendous fan-base potential in providing entertainment focused on sports, personal hobbies, kids' entertainment, indie, specialised film and television, and expatriate or multicultural programming."
The research also found that prices for premium offerings are set to increase, both from existing providers and new entrants. This is already proving to be true with Netflix's $11.99 per month family plan and HBO's $14.99 per month plan.
Also, broadcasters are responding to the rapid growth of OTT in various ways, seeking to retain control of their content and brands in the premium OTT market and launching services of their own. Similarly, pay-TV providers are pursuing various strategies, bringing OTT offerings onto their platforms and launching new OTT products and services to defend their existing services and capitalise on growing consumer demand.
"More than 40% of US TV households subscribed to at least one premium OTT service at the end of 2014 and our research validates that we'll continue to see strong growth in the years to come," said Bryta Schulz, senior vice president of marketing at Vindicia. "Bundling premium content with existing membership subscriptions is just one of the opportunities that will help providers increase revenue and differentiate their product offerings, especially as OTT providers seek access to new customer bases and MVPDs look to court cord-cutters and the cord-nevers."
As the market develops, a small number of major providers are likely to dominate the mass market, with many households subscribing to multiple offerings – a pay-TV bundle, a mass-market OTT service, and various niche offerings. Content, price, flexibility and ease-of-use will remain key differentiators, the research concluded.