The shift to digital and OTT distribution is accelerating among consumers, particularly as content providers increasingly warm up to these channels and make premium content available on demand.
Over-the-top (OTT) video is on fire — with growth in excess of 50 percent last year alone, according to new research from ABI Research. Companies such as Netflix, Hulu, Apple and Amazon helped drive the market past $8 billion in 2012.
Currently, the three largest OTT markets are North America, Europe and Asia-Pacific. The continued spread of connected consumer electronics, Internet-enabled TVs and increasingly mobile devices, like tablets, are expected to push the market past $20 billion by 2015.
“The shift to digital and OTT distribution is accelerating, particularly as content providers increasingly warm up to these channels,” said Michael Inouye, senior analyst for ABI Research, a market intelligence company specializing in technology.
“While pay TV services are still afforded many advantages, we are approaching the proverbial fork in the road when content owners will decide if they continue down the same path or forge ahead, shaking up the primary means of media distribution as we’ve known it.”
The dynamics around revenue generation continue to change and currently vary by region (e.g. subscriptions more significant in North America than Europe or Asia-Pacific). In time, however, ABI expects a greater diffusion of revenue across the various business models.
For instance, in 2012, 58 percent of OTT video revenue came from subscription service, but the firm anticipates this share to fall to less than 32 percent by 2018. In large part this is driven by a continual shift in consumer demand towards newer forms of digital content distribution.
“While we still see great value and strength in the pay TV sector we are also starting to see the pieces that will accelerate change fall into place,” said Sam Rosen, ABI’s practice director.
“Whether it’s Netflix expanding to international markets or ABC and CBS enhancing catch-up services the building blocks that will restructure the how, when, and where consumers view content are starting to give shape to a new media future,” he said. “This future, however, isn’t devoid of traditional media nor is it a matter of new channels necessarily winning, but rather a redistribution of wealth within the value chain.”
These findings are part of ABI Research’s OTT and Multi-screen Services Research Service.