Online video is rapidly rising in importance and revenues, although claims that it will be the end of traditional television as we know it may be well over the top. One forecast estimates that the global online video market will be worth $37 billion in 2017, which is around 8% of total television and video revenues. It predicts that video services delivered online will account for 10% of total television and video revenues before the end of the decade. Perhaps more importantly, online video will increasingly redefine the television experience.
“It’s clear that online video today is worth much more than the digital cents and dimes of yore, and is attracting real, and growing, revenues,” writes Giles Cottle, a principal analyst at Informa Telecoms & Media, and author of the OTT Video Revenue Forecasts report.
He points out that this value is concentrated among a few players, with Apple, Google, Netflix and broadcasters, including Hulu, together accounting for about 70% of all online video revenue.
“The big change to the OTT revenue mix will come when operators start to offer not just low-cost online services, like Sky’s Now TV, but stand-alone online versions of their services that come close, in terms of content availability and price, to their core pay-TV services today. Even very modest take-up of these services will completely distort the online video market,” he suggests.
The United States accounts for around 75% of online video revenues today, but will drop to less than 60% in 2017, with the growth of services in Europe and Asia. Advertising will remain the largest revenue stream, ahead of subscriptions and transactions.
Another report, from the ABI Research OTT and Multi-screen Services Research Service, is slightly more conservative but still forecasts that over-the-top revenues will quadruple to $32 billion, up from an expected $8.2 billion in 2012.
“Connected CE and mobile devices continue to push consumer behavior towards newer forms of media distribution like OTT and multiscreen services,” commented Sam Rosen, the practice director at ABI Research. “Pay TV services will continue to thrive, by implementing multiscreen services and supporting OTT content. In the end we expect an amalgamation of services that complement each other for many consumers.”
The United Kingdom leads Europe in the adoption of both standalone over-the-top services as well as operator owned multiscreen or television everywhere services.
Over half of those with broadband are using pure over-the-top services, partly driven by adoption of the BBC iPlayer, and services like LoveFilm and Netflix. Pay-television operator services from Sky and Virgin have yet to catch up but are likely to see rapid growth. The Sky Go online offering already reaches over a quarter of the satellite television subscriber base.
As consumers become accustomed to the comparative freedom of online video, it will increasingly redefine the traditional television experience. As such, it will represent an essential offering for any provider of television or video services. What is less clear is the extent to which growth in online video revenue will be at the expense of traditional television income, or simply a shift in value.