Broadband TV, Connected and Over-The-Top (OTT) TV Revenue to Rise to $3 billion by 2014

written by: Richard Kastelein

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Published on Thursday, 17 March 2011 17:40

A new report from Research and Markets focussing on Broadband TV, Connected and Over-The-Top TV, has the current market - though still at an early stage - forecast to receive a significant boost in the next few years, stimulated by the increasing number of installed web-enabled video devices.

• OTT revenue is expected to rise to nearly 3 billion in 2014.
• If advertising initially seems to be the most favourable monetization model, when the market develops further, the OTT market will adopt some of the business models inherited by the traditional pay-TV sector.
• Revenues and business models will be analyzed through case studies and market forecasts.

The video content industry is undergoing an enormous transformation due to the explosion of the Internet, which has grown much faster than other media, together with mutations in user behaviour and equipment. The technology which makes video content creation and access possible is also evolving quickly and the video entertainment sector is committed to adapting to its transformation.

This situation reflects the emerging interest in web-based video services on TV sets, which may generate new revenue streams to complement existing business for the entire industry.

The report estimates that total revenue from the delivery of Internet video to the TV in Western Europe will amount to almost 340 million by the end of this year, with 2/3 generated from advertising and 1/3 from pay services (subscription and pay-per-programme). Even though the current market is still at a nascent stage, it is forecast to receive a significant boost in the next few years, stimulated by predicted major OTT service announcements in almost every country in 2012-2013 and by the increasing number of installed web-enabled video devices.

For these reasons, OTT revenue is expected to rise to almost 3 billion in 2014, with an annual growth rate of 110%. In 2014, the market for OTT video services in Europe will be dominated by pay revenue. Indeed, advertising-based services will lose weight proportionally compared to transactional- and subscription-based services, falling from 69% of total OTT revenue in 2011 to 40% in 2014.

Advertising initially seems to be the most favourable monetization model, especially due to consumers' usual reluctance to pay for online video services because of their common expectation to enjoy free content on the web. However, when the market develops further, OTT TV will not be able to survive on the revenue generated from advertising alone and it will start to adopt some of the business models inherited from the traditional pay-TV sector (pay-per-view and/or subscription) more directly, to finance it in a more stable way.

In the digital home, the demand of consumers to access online content to complement the TV experience is growing, especially in younger generations, as the variety of applications and major web brands becomes available on most CE platforms.

In the last few months, people's awareness of connected CE devices has gradually intensified, mostly because of an impressive industry push. Users are becoming more and more receptive as Internet connections develop into a standard feature of many ordinary technological gadgets, such as (apart from TV sets) high-definition movie players and video game consoles.

Internet connection on TV sets makes it easy for broadcasters, content creators and third-party service providers to deliver TV content and correlated services to users on a mass scale through new paths via IP protocol, gaining from the expansion of the web sector.

While broadband connectivity is becoming common in most developed countries, the time has now arrived for television to enter the online environment, proposing enhanced video offers to TV viewers, together with new interactive and highly personalized services.

Broadcast and broadband video content are indeed converging significantly and over-the-top (OTT) video services can play a significant role in the expansion of this new Internet-connected TV market.

Disruptive business models are only just beginning to appear and the battle which involves TV market players is going to be fierce.

If a definitive protagonist still has to emerge from all the players involved, an undeniable winner is certainly the viewer, who has the opportunity to take advantage of a range of new content, via a set of connectable devices with a plethora of amazingly attractive tools.