Over-the-top (OTT) TV subscription revenues will generate cumulative global revenues of USD 32bn over the next five years, accounting for the majority of the market each year when compared to pay-per-view services that enable users to rent or purchase videos on an ad-hoc basis, according to a new report from IMS Research.

There is a plethora of business models being implemented by different market players in order to find an ideal "magnetisation method" for OTT TV, according to the research firm, as a result of diverse interest in the market from major CE suppliers, pay-TV operators, leading Internet portal companies, DVD rental companies, and large CE retailers.

“Advertising-funded services and free videos make up an overwhelming share of online video traffic today, and this won’t change dramatically over the next five years," said Anna Hunt, report author and principal analyst at IMS Research. "But we will start to see some significant growth in pay-OTT transactions and revenues as more market leaders in pay-TV, media and CE invest in exploring strategies for effective OTT video service delivery.”

The report estimates that homes viewing only free OTT videos accounted for 77% of the total OTT market at the end of 2010, and predicts that this will decline to 69% by the end of 2016. Nevertheless, OTT TV market revenues are expected to grow by a compound annual growth rate (CAGR) of 32% over the next five years.

“Some of the main drivers behind OTT revenue growth are service providers and content providers’ willingness to explore new paradigms," added Ms Hunt. "Support for multiple devices and platforms, widespread partnerships and acquisitions, and global expansion of successful services are some of the vital factors that will shape the market through the end of the decade.”
 
Internet-based OTT service providers (consisting mainly of broadcasters offering content online, DVD rental companies that have expanded into streaming services, and retailers that offer online video rentals and purchasing) are expected to generate the largest share of OTT service revenues, although this segment’s share is forecast to decline from 90% of worldwide OTT video revenues in 2010 to 69% in 2016.

The segment where OTT is delivered into the home via connected CE devices, such as connected TV sets, Blu-ray Disc players, and game consoles, is projected to see the most growth: revenues generated from OTT transactions initiated via these devices are forecast to account for 25% of world revenues in 2016, up from 9.3% in 2010.

Source: IPTV News