OTT set to grow but will disrupt existing businesses

The value of the global OTT video business is set to grow to about US$15 billion (€12 billion) by 2016 form US$2-3 billion today, potentially benefiting telcos and rights owners but threatening established pay TV operators and broadcasters, according to a report by Arthur D Little.

The authors of Over-the-top Video: “First to Scale Wins” argue that OTT could threaten to disintermediate traditional broadcasters and accelerate the decline in physical media sales.

Arthur D Little argues that OTT video will grow to equal the size of today’s in-store video rental market by 2016. However, it says, OTT distribution of films has not so far compensated for the decline in revenue from physical media as VOD prices in the US and France, for example, are on average four to nine times less than for DVDs. The industry is also suffering from “value destruction” within individual segments as DVD prices continue to decline and the premium from Blu-ray fails to make up the difference.

According to the report, OTT growth is still relatively slow due to rights being negotiated on a piecemeal basis and OTT providers still being unable to compete with established pay TV companies with large subscriber bases. This is leading to more intense competition for streaming rights and OTT providers such as Netflix investing more in original content to gain exclusive rights.

National players, meanwhile, have an opportunity to secure scale in OTT since they will always put a higher value on national rights than global OTT players can and can tie OTT in with existing pay TV offerings, according to the report.