Where OTT video is going, in 5 charts

Video is going over-the-top, which could be a boon or bust for many in the entertainment industry.

While still nascent, the OTT market is rapidly becoming cluttered with a variety of apps and services, from mass-market giants like Netflix to niche networks targeting specific audiences.

This, plus rising content costs — with more competition, it’s certainly a seller’s market — and more platforms to launch on, means the OTT race is nowhere close to the finish line.

To see which factors will play a role in how the OTT market develops, let’s go to the charts.

The OTT horserace is led by Netflix.

(Source: Hub Research / eMarketer)

Since the advent of television, only three major digital video platforms have become the go-to destinations for watching full-length films and TV shows: Netflix, Hulu and Amazon. But Netflix is the monster. In the U.S., among 16- to 64-year-olds, Netflix is the most popular video service to watch film and TV shows online, followed by Hulu and Amazon, according to a recent report from Hub Research.

Internationally, Netflix is even bigger. Hulu doesn’t exist outside of the U.S., and Amazon doesn’t operate anywhere else but the U.K. Netflix, meanwhile, wants to be in 200 countries by the end of 2017, part of an ambitious global expansion plan that includes a potential launch in China.

Yet, the field is getting crowded.

OTT Market Getting Crowded -- Ooyala

(Source: “Premium Prospects for OTT in the USA” study from MTM, Ooyala and Vindicia)

One of the reasons it’s incredibly difficult to compete with Netflix is purely content costs. Netflix has the resources to spend billions on content — both original and licensed. It spent $3 billion in 2014 and could spend as much as $5 billion in 2016, according to Janney analyst Tony Wible.

Of course, new competitors like HBO and Showtime, as well as existing competitors like Amazon and Hulu are not without their own resources, and all are gearing up to invest more money toward their respective OTT platforms. And then there are a growing number of niche OTT services targeted to specific audiences, each also seeking to gain some type of market share. These are a few of the reasons why analyst firm MTM expects Netflix’s overall market share to decline from 85 percent in 2014 to 50 percent in 2018.

Subscriptions have the buzz, but also a long way to go.

(Source: “Premium Prospects for OTT in the USA” study from MTM, Ooyala and Vindicia)

Subscriptions are the future of OTT: Netflix has used the model to top 65 million subscribers across the globe. But as a portion of the overall TV and video market, OTT subscriptions are still way behind. While it’s easy to look at the $81 billion TV and digital video advertising generated in 2014, subscriptions are still a bigger source of revenue overall when both pay-TV provider and network affiliate fees are taken into account. The overall TV and video market made an estimated $185 billion last year, and subscriptions were responsible for $104 billion.

Connected TVs will drive a big spike.

(Source: eMarketer)

According to eMarketer estimates, 191.4 million U.S. Internet users will “access the Internet” via a connected TV device by 2018. The research firm has a broad — and accurate — definition of connected TVs, including Web-enabled TV sets, streaming devices like Roku and Apple TV, gaming consoles and even “dumb” TVs connected to the net by laptops in the group. Per eMarketer’s projects, 58.2 percent of the U.S. population will be accessing the Web through such means by 2018. And it goes without saying that a vast majority of activity will be watching video.

With more connected TV devices in the market, monetization is also growing.

FreeWheel OTT Monetization -- Q1 2015

(Source: FreeWheel Video Monetization Report Q1 2015)

In the first quarter of 2015, 33 percent of monetization happened on connected devices other than desktops and laptops. While all devices saw strong growth, monetization was led by OTT devices, according to FreeWheel, an ad-serving company whose clients include major video providers such as AOL, Crackle, Fox, NBCUniversal, Viacom and Vevo. Here, FreeWheel defines OTT devices as most connected TV devices including Roku, Apple TV, Chromecast, gaming consoles and Web-connected TV sets. The company said it was the largest growth for OTT on its platform since it began tracking the metric.

Images via Netflix


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