Online television and video is worth $25 billion a year. Although this only represents around 5% of the total television and video industry, it is growing by more than 20% annually. North America dominates the market and five main players account for over half of all revenues, although this is opening up opportunities for a new set of programme producers.
A report from the Boston Consulting Group considers the impact of ‘over the top’ distribution on video production. It says its impact also affects what consumer expect in terms of choice, flexibility and navigation, and the competitive context in which incumbents and upstarts now operate.
“The biggest impact of the OTT market on the television and film industries is the removal of barriers — strategic, economic, and national — to the distribution of video content,” said John Rose, a senior partner at BCG and a co-author of the report. “The demand for quality video content from consumers, and the number and variety of new services that OTT enables for meeting this need, is both increasing the market value of content and destabilizing the roles and market values of linear networks and traditional aggregators.”
The report notes that advertising and subscription supported services have materially disrupted the industry. Of more than 500 services assesed, the majority operate with these business models and have captured more than 80% of revenues.
Five global players account for nearly half of the revenues: YouTube, Netflix, Facebook, Amazon and Hulu. They are also well positioned to capture future market growth.
The North America market currently represents more than half of global online television and video revenues, at $14.3 billion a year, followed by Europe at $5.3 billion and Asia at $3.9 billion.
The authors say: “It now seems arcane to imagine a world in which facilities-based content distribution — domestic or global — is an asset of significant value”.
This perhaps underestimates the value of established television and video distribution businesses, which are developing their own online television and video services.
The market assessment includes what it defines as digital multichannel programming distributors, such as Sling TV, PlayStation Vue, Viaplay and NOW TV, but does not attribute value to the multiscreen services of cable, satellite and telco television platforms.
Nearly a billion dollars a year are being earned by a new generation of producers, with ‘pro-am’ YouTube stars like PewDiePie apparently earning $12 million a year. Yet this is still marginal compared to the overall value of the audiovisual production industry.
The report forecasts that online viewing will account for more than 30% of all video consumption globally, a figure that may seem extraordinary to some.
The authors say it is hard to conclude that the impact of over the top distribution on video production systems is not positive, although not as positive in every area as everyone might like.
They say: “The removal of barriers to distribution and the resulting explosion in new — and new kinds of — content, as well as new ways of viewing it, are all boons for consumers.”
While there are legitimate concerns about the potential impact of globalized programming on local culture, these may be partially counterbalanced by the ability of anyone anywhere to become a content producer and showcase his or her local culture on a global stage.
The report concludes that the output of a billion content creators — representing all manner of backgrounds, societies, cultures, and points of view in a way that was unimaginable 20 years ago — cannot be ignored.
That is certainly an optimistic assessment. Alternatively, one might observe that Netflix, which is spending $5 billion a year on programming, is becoming a major production studio in its own right. Meanwhile, the phenomenal success of individuals such as Felix Kjellberg, otherwise known as PewDiePie, is exceptional.
The Future of Television: The Impact of OTT on Video Production Around the World is published by the Boston Consulting Group.