Earlier this week Vindicia (a leading enterprise subscription billing company) and Ooyala (a video streaming company) released the results of a study on the digital content and over-the-top (OTT) market in Europe through 2017. The commissioned study of 30 OTT service providers was carried out by MTM.
The study reveals that while there are certainly many challenges with content distribution, the OTT market is poised for huge growth in the next three years, especially in terms of how content providers are able to monetize video. As a result, advertising companies and subscription billing companies – like Vindicia – will have the opportunity to create innovative solutions.
Below, highlights from the study:
– Despite substantial investment, many OTT providers believe that broadband infrastructure remains a substantial barrier, even in some developed countries. This is particularly the case in Germany, where industry participants believe that poor broadband and a device ecosystem dominated by Android will hold back take-up and monetization during the next 3 years.
– For the majority of premium OTT services, there is a widespread belief that technology will become less of a barrier during the next few years, despite growing device fragmentation – however, industry participants believe that the largest services will continue to invest heavily, attempting to differentiate by offering customers more advanced product features and functionalities. This will set high consumer expectations for user experience and quality of service, so niche providers will need to find partners capable of keeping up with the pace of innovation.
– OTT providers believe that the most important supply-side barrier is – and will remain – exclusive access to high-quality, high-appeal video content. Exclusivity of content has become the primary battleground for mass-market services, but rights costs will continue to inflate, as OTT businesses such as Netflix and Amazon invest in long-term, exclusive licensing deals, as well as commissioning their own productions. Aggregation will remain critical, with only a few individual studios able to offer wide enough offerings to attract large numbers of subscribers. At the other end of the market, supplies of high-value, high-volume specialist content are scarce, making it difficult to build subscription businesses. Many content offerings are better suited to transactional or ad-supported models.
– Providers believe that consumer barriers to take up remain significant, even in advanced markets. Awareness and understanding take a long time to build, and many consumers are satisfied with substitute offerings such as free-to-air TV, PVRs, free VOD services (ad-supported and publically funded) and pirated content.
– Providers in every country believe that ‘buzz’ and word-of-mouth, driven by high levels of marketing support from multiple providers, will have an important role to play in supporting growth. Although premium OTT has become “a cultural phenomenon” in the UK, there is less ‘noise’ in the German market and, consequently, consumers seem less interested at present. However, this is widely expected to change in 2015, as competition intensifies.