Over-the-Top Content (OTT) - An Introduction
The term Over-the-Top (OTT) means delivery of audio and video streaming content to the users through the internet without subscribing to a traditional satellite services provider. Some of the OTT video streaming platforms include Netflix, Amazon Prime, Hulu, etc.; audio streaming services like Apple Music and Spotify; and messaging platforms such as Facebook, Skype, WeChat, and WhatsApp.
OTT streaming platforms are perceived as a threat to the satellite broadcasting industry as the increased adoption of linear OTT services is driving cord-cutting. According to eMarketer, 55.1 million people in the United States will no longer watch traditional pay TV by 2022.
Why this Shift?
Although it doesn’t come as a surprise, a majority of OTT users are millennials and Generation Z - also known as post-millennials. The demographic cohort following the millennials is they are bigger consumers of technology especially in terms of smartphone usage. As per Parks Associates’ OTT Video Market Tracker, over 85% of millennials in the US broadband households subscribe to at least one OTT video service.
According to Business Wire, the total number of OTT users will reach 915 million by 2023, most of whom will be subscribing to at least one SVoD (subscription-based video-on-demand) service. The gradual surge in the consumption of over-the-top content can largely be attributed to the following factors:
- Unlimited audio and video streaming content
- Affordable cost, flexible pricing models either based on pay-as-you-go, freemium (limited access to free content) or subscription
- Delivered on-the-go over a vast spectrum of devices such as smartphones, tablets, desktops, smart TVs, wearable devices, and set-top boxes
- OTT services can be easily subscribed and unsubscribed
- Access to original video content such as web series and latest movies
- Content-on-demand available rather than waiting for a show or movie to air on TV
Bare Essential Components of an OTT Platform
Encoders: Software encoders are used to produce adaptive bitrate (ABR) streams in formats such as MPEG, ready to be distributed on the web or mobile.
Content Delivery Network (CDN): Video content is delivered to the users through a Content Delivery Network (CDN), which is a network of web servers. You can either choose to buy a CDN from a third-party or build your own.
Content Management System (CMS): A Content Management System is used to streamline workflows and help manage users, their subscriptions, payment gateways, monetization models including ads, content publications, and syndication.
Digital Rights Management (DRM): DRM is a digital licensing system that is used for the prevention of piracy. DRM ensures that the content is stored and transmitted in an encrypted format so that only authorized users can access the content.
Recommendation Engine and Analytics Engine: An analytics engine is used in an OTT platform to get a 360-degree view of customer behaviors. This analytics data is further used by a recommendation engine to suggest users what to watch next.
Role of Data in OTT Services
As OTT streaming platforms increasingly dominate the media & entertainment industry, the role of data is rapidly transforming from being important to becoming vital. Streaming has already emerged as the primary revenue driver for both music and video, making data analytics an essential component for success.
The significance of data in today’s world of television cannot be ignored, as consumers have access to an increasing amount of content which is delivered through data-based decisions.
In a highly competitive OTT video platform landscape, skillful utilization of data is critical for success, which requires the extensive deployment of technologies such as AI, machine learning, automation, and IoT. A potent mixture of these nascent technologies enables OTT platform players to achieve the best outcomes with algorithms. Although humans will always remain in the driver’s seat, handling an enormous amount of data is best left for the machines to handle.
Another recent trend in the OTT video streaming arena has been the adoption of the Internet of Things (IoT). In a scenario where OTT video platform players are competing with each other to expand their subscriber base, connecting IoT with OTT and allowing shareability of data between the IoT devices and OTT services has some attractive potential.
The user-generated data such as location, habit patterns, and activities can provide better insights into the video streaming services providers for enhancing user experience (UX). This will usher in the evolution of intelligent TV platforms that deliver personalized viewing experiences with more refinement, leading to an increase in content consumption.
Global OTT Market Scenario
As we swiftly head towards OTT 2.0, the global OTT market is seeing explosive growth especially in the US, with new players like Disney, Apple, and Warner Media joining the bandwagon.
According to the latest Global Entertainment and Media Outlook report, released by PwC, which looks at how the new entrants will challenge the dominance of major OTT streaming platforms such as Netflix and Amazon, the global OTT market would be worth $72.8 billion by 2023. The report further says that the global OTT market will hit a tipping point in 2021. The firm also predicts in the same report that the pay TV industry would continue to decline in the US with its revenue dipping by 2.9% compound annual growth rate (CAGR) to reach $81.8 billion in 2023.
Here are a Few Statistics Related to the Global OTT Market
- According to Digiday, there are over 200 over-the-top content providers in the US
- As per the Video Advertising Bureau (VBA), there are over 820 million connected video devices in the US
- 71% of internet users use OTT services in the US (Source: VBA)
- According to the latest report by Adweek, the top five OTT video streaming platforms by a number of subscribers are:
- Amazon Prime
- HBO Now
- As per eMarketer, as of 2019, there are 182 million OTT platform users in the US, that’s more than half of the country’s population
Looking Over-the-Top: Trends that Will Shape the Future of OTT Video Streaming
In 2019, the journey towards 5G network adoption has already begun. It is expected that 5G will disrupt the ways in which we consume content in the near future, which global OTT operators are well aware of. Users will be able to live-stream 4K videos smoothly on a 5G network which will offer 100-times the speed of a 4G network. More bandwidth will reduce latency and foster the adoption of AR/VR in OTT.
While content especially original content, will still remain king, what is expected to drastically change is the content distribution system. The relationship between OTT services providers and network operators will become closer through mergers and acquisitions. Low barriers to entry and exit, such as the option to ‘cancel anytime’, are expected to further drive the global OTT market growth and intensify competition, pushing down the monthly subscription prices.