Huge Growth in OTT Still No Threat To Satellite – Yet
April 12, 2013
The Over-The-Top (OTT) video market is now worth over $8 billion, according to the latest research by ABI Research. Major markets such as America, Europe, and Asia-Pacific have experienced year-on-year growth in excess of 50 percent in 2012. Is the strong growth in this market ultimately going to impact the satellite market? Michael Inouye, senior analyst at ABI Research, says the company’s current position is that these services are more of a complement than a threat.
“OTT services look more like a complement and do more to augment a pay-TV service than replace it. This is not to say there aren’t cord-cutters, but currently it’s very difficult to impossible to replicate the same bundle of services offered by pay-TV operators, satellite included,” he said. “In addition, despite the strong growth in 2012 OTT revenue (and forecasted) it still pales in comparison to the pay-TV market which stood at over $237 billion in 2012, compared to just over $8 billion for OTT.”
Inouye said he does not expect to see an erosion in DTH subscribers as a result of what is happening in OTT. He believes DTH operator subscriber numbers are likely to be more impacted by other pay-TV and FTA offers, rather than OTT.
The report highlighted three main findings: the strong overall growth in the market; an increasing diversity in the mix of business models; and a rising importance of mobile devices. “All of these points stem from drivers like the continual expansion of fixed and mobile broadband services (this includes number of subscribers and increasingly robust services) and general changes to consumer behavior (e.g. consumers’ penchant for tablets). So in that regard, there isn’t a great deal of surprise from the general trends in the market; however some of the actions/potential actions by broadcasters like CBS and ABC are somewhat surprising,” Inouye added.
While the OTT market is clearly going from strength to strength, it also represents another growth opportunity for satellite pay-TV operators. BSkyB, through its Now TV offer, is already capitalizing on the opportunities in the OTT market. According to Inouye, the balance of power continues to rest with the major pay-TV operators.
“Right now the revenue and hence the purchasing power to secure rights to content still rests with the pay-TV operators and at least within the five-year forecasting window we do not see that changing. It is possible new channel lineup negotiations and services from content holders could shake things up, as it were, but again we’re likely looking out further than the five-year horizon before these radically change the content landscape. Satellite operators might also lead the market with UltraHD content, which in time could also offer some levels of differentiation,” Inouye said.
However, at some point in the future, OTT may compete more with pay-TV offers such as satellite. “There might well come a time when we pass that critical point where OTT revenues start to compete with traditional pay-TV services, but the question then becomes when does OTT simply become pay-TV? Unless consumers dramatically change their demand for content the revenue opportunity for video will always be there as well. If OTT were to ‘revolutionize’ the pay-TV market it will likely be in ways we’re seeing today: e.g. more flexible multiscreen/TV everywhere services, more pay-TV choices, unique content windowing opportunities, etc,” said Inouye.
OTT service offerings are also likely to be better suited in some markets than others. “OTT is already showing strong promise in Western Europe but other regions are expected to make significant gains as well. Due to the fixed broadband base and current OTT market trends, we view North America, Asia Pacific, and Europe as the three regions with the most market potential. There are naturally some unique market elements, like government activity, that could strongly shape the market trajectory,” he said.
