July 30, 2015 | Authored by: Vindicia Team
OTT content growing rapidly in emerging markets
Over-the-top content is growing fast thanks in part to the rapid development of the Internet and digital technology. In the U.S., OTT is not a new capability. However, in emerging markets around the world, OTT is a possible reality.
According to a recent Pyramid Research report, cumulative OTT revenue from subscription video on-demand and television video on-demand will reach nearly $19 billion between 2015 and 2019, with 80 percent of the volume coming from the emerging markets in Asia-Pacific and in Latin America. Across emerging markets in general, Pyramid Research says SVoD accounts will increase more than five-fold between 2014 and 2019.
Among all the emerging markets evaluated, China, Russia, Brazil and Mexico offered the most scale and growth potential over the next five years, the study added.
Internet bolstering OTT and VoD
As broadcasting capabilities in developed countries continues to grow and innovate, similar growth in emerging markets - whose broadband infrastructure is quickly improving - will likely follow. Development in network speed, performance and security have opened up new doors in both established and emerging economic landscapes across the globe to provide streaming video content over the Web. While advertising is helping fund current OTT and video on-demand services, subscription-based models are quickly gaining traction and providing an alternative revenue stream for providers.
These paid models are growing in popularity within hybrid business models, the study found. These services offer free content with limited advertising, but also offer premium services and the chance to subscribe to avoid video ads. In the past, OTT content providers that have relied completely on advertising struggled due to the high price of content.
Subscription-based services growing
Since advertising hasn't been able to sustain OTT and VoD content, subscription-based services are growing in popularity. In fact, citing separate Pyramid data, Home Media Magazine reported OTT video is projected to grow to 6.4 percent of emerging market households, or close to 103 million in total, by the end of 2019. In 2014, SVoD services were available to just 1.3 percent of emerging market households, with a user base of 19.4 million.
Popular subscription-based VoD provider Netflix plans to operate in 200 countries by 2017, Home Media Magazine added. The total paid OTT revenue is expected to represent 7 percent of regional pay-TV revenue in the next five years due to rising licensing costs for content. As a result, emerging markets are turning to ad- and subscription based OTT video platforms.
"We are witnessing the emergence of hybrid [business] models, whereby services offer free content to expand the user base," Daniele Tricarico, senior analyst at Pyramid Research, said in a statement. "But at the same time position premium SVOD and transactional VOD services to generate additional revenue."
While mobile technology is growing in importance, it looks as if Wi-Fi will remain a primary driver for OTT growth in both emerging and developed economies, especially as broadband infrastructure continues to develop and grow to meet fluid consumer needs.
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