The growth of the over-the-top OTT video entertainment industry was previously a primary concern of the American pay-TV sector, as more and more consumers chose to abandon the traditional high-cost cable and satellite TV services. Now this transition has become a worldwide phenomena.
A new market study finds that 84% of American households subscribe to some form of pay-TV service. While the reported number of pay-TV subscribers has been fairly flat over the past four years, occupied housing in the U.S. market has grown. Consequently, penetration of pay-TV among residential households has waned from its peak in 2010 following the digital TV transition. Among TV households that do not currently subscribe to a pay-TV service, only 6% plan to subscribe.
The total over-the-top (OTT) video revenue in Europe was up 51 percent in 2013 reaching $3.2 billion and is expected to grow a further 43 percent this year, according to the latest market study by Strategy Analytics. They predict that the majority of this new growth will occur within the online SVOD and ad-supported video business models.
According to Nielsen’s latest cross platform report the number of homes watching broadcast television (using an antenna) increased from 11.62 million in Q1 2014 to 12.02 million in Q2 2014. Over the last year, the number has increased by over 1 million. Most of that growth is coming from households that also have broadband. What’s the key market driver? Pay-TV has become a high-priced luxury purchase for many Americans.
Programmatic TV advertising is still in its infancy due to limited buyer and seller adoption and lack of standardization of technology and infrastructure. Though it accounts for less than 1% of all TV ad spending, some predict it could be a multi-billion dollar industry within 12 to 24 months, according to eMarketer.
The high price of cable pay-TV packages in the United States is justified in part by the huge number of channels they include. This model operates under a system where popular channels are bundled with a host of less popular ones. The new alternative is a low-cost on-demand OTT video subscription service, such as Netflix or Hulu.
Compared to sell-thru and rental, subscription is a relatively new business model within the home entertainment sector of Western Europe. But this is not keeping it from dominating consumer home entertainment spending. By 2018, consumer spending will account for 54% of OTT video revenue, of which SVOD will comprise of 74% of the consumer spending category.