The demand for video content in multiple formats (SD and HD), in multiple modes (VoD, linear and time-shift) and on multiple devices has emerged strongly in the past three to four years. OTT video has grown globally both as an alternative and as a complement to established pay-TV platforms. The growing investment in broadband infrastructure has at the same time opened up new opportunities to provide video over IP, not only in more advanced, developed economies but also in emerging markets. As a result, OTT video has become a truly global trend.
Pyramid Research believes that OTT video services are set for significant growth worldwide and that in the long term there is a significant opportunity for pay-TV operators, telecom operators and other providers to profit from such services. For pay-TV operators, OTT video has become an important alternative to the established cable TV, DTH and IPTV platforms. OTT is so prominent that today the majority of pay-TV and telecom operators have an OTT strategy in place. The strength of the OTT video opportunity will vary depending on contextual factors, which must be weighted by different regions and countries globally.
In order to assess the strength of the OTT video opportunity in each market, Pyramid Research has developed especially for this study the proprietary OTT Video Market Attractiveness Index. The Index shows an overall level of market attractiveness that can be easily used to pinpoint how any market across the world fares on a variety of issues, from broadband infrastructure to pay-TV market dynamics, content licensing and regulatory frameworks.
The index is a composite of a total of three subindexes - OTT Readiness, OTT Intensity and Local Factors - that incorporate 11 country-level indicators ranging from broadband-connected households to pay-TV revenue and ease of doing business. The Index rankings amalgamate the scores of the three subindexes. The diversity of data used to construct the Index makes it possible to identify which markets globally can be most appealing to OTT providers, and to understand the socioeconomic strengths and weaknesses that boost or burden the OTT opportunity in each. The index results are grouped around a number of key themes, which are discussed and analyzed in order to explain how the OTT video opportunity is taking shape across different global markets.
The OTT Video Market Attractiveness Index and this Report are aimed at all companies - pay-TV operators, telecoms, pure play OTTs and investors - interested in identifying and assessing opportunities to deploy OTT video services.
The Report is structured in four main parts:
- Section 1 explains the methodology used in the Index, with a look at the countries covered, the composition of the index, the data sources used, the index scores and category distribution, as well as the subindex and indicator breakdown.
- Section 2 is a strategic analysis of the results of the OTT Video Market Attractiveness Index. The analysis focuses on four key themes emerging from the results of the OTT Readiness, OTT
Intensity and Local Factors subindexes:
- The importance of addressing large broadband markets to build scalable businesses.
- The factors guiding the formation of online video audiences.
- The drivers behind the revenue opportunity in different markets.
- The role of content licensing and regulatory frameworks in the viability and success of OTT initiatives.
Section 3 is a strategic analysis of the emerging-markets results of the OTT Video Market Attractiveness Index. This section is a deep dive into the key drivers behind the uptake of OTT video services in emerging markets. As in the case of the global results section, this analysis focuses on a number of key themes. These are, on the supply side, the size of the broadband market and the performance of broadband networks, and on the demand side, the size and growth potential of the pay-TV markets and the demand for content on connected devices and second screens. Finally, this section discusses the role of 4G mobile broadband and the impact of mobility on the uptake of OTT video in emerging markets.
Section 4 provides key takeaways of the Index rankings. Among the points discussed, this section highlights the importance of addressing large broadband and pay-TV markets and focusing on the markets, countries and regions where the most attractive online video audiences are forming. It then discusses the revenue opportunity, as it varies depending on market maturity, the potential to derive value from premium content and the availability of superfast broadband and 4G. Finally, country-level content and regulatory frameworks are discussed as key enablers of OTT video.
The hlights and the implications of the Index results include:
- Large markets - primarily China, Russia, Mexico and Brazil among emerging markets, and the US and Japan among developed markets - will provide the most attractive opportunities for OTTs.
- Across all markets, emerging and developed, it is the larger broadband and pay-TV markets that offer the greatest digital audiences and the best opportunities for OTTs. China will remain by far the largest OTT video market globally in user terms, although in the foreseeable future the US will maintain its global leadership in revenue terms.
- Whereas emerging markets will take the largest share of legal and illegal online video audiences, mature markets will retain the largest share of OTT revenue.
- Given the low margins in the OTT video business, revenue growth will depend not only on a scalable business model but also on the ability to obtain and market premium content effectively.
- Mature markets, where subscription and transactional OTT services are more viable, will typically present a stronger revenue opportunity than many emerging markets, where advertising-funded services are more common.
- A key strength of OTT video lies in the opportunity it provides to target multiple markets that are linguistically uniform and culturally close, enabling OTTs to move beyond country borders and target regional and even global audiences.
- Digital content release windows, regulatory frameworks and other local factors such as the extent of piracy and OTT taxation all matter greatly to the success of OTT businesses.
- In developed markets, transactional VoD release windows are getting closer to the DVD release, making it more viable for OTTs to develop attractive video libraries and compete with other providers. In some emerging markets, stronger enforcement of anti-piracy legislation offers hope to legal providers.
Key questions answered
- In which markets are the prospects for OTT video services the strongest?
- Which factors make a market attractive to an OTT service?
- What are the key drivers behind the uptake of OTT video services in emerging markets?
- Which factors guide the formation of online video audiences?
- Should a new OTT player start small and build a scalable business or immediately address large broadband markets?
- What are the drivers behind the revenue opportunity in different markets?
- How important is the role of content licensing and regulatory frameworks in the viability and success of OTT initiatives?
- Fixed telecom network operators
- Mobile network operators
- OTT service providers
- Pay-TV operators
- Content providers and aggregators
- Device manufacturers
- App developers
Table of Contents
Table of contents
Table of exhibits
Companies and services mentioned
OTT Video Market Attractiveness Index and report scope
Definitions: OTT video, pricing models and service providers
Section 1: Methodology
1.1 Countries covered
1.2 Index composition
1.3 Data sources
1.4 Index scores and category distribution
1.5 Subindex and indicator breakdown
1.5.1 OTT Readiness
1.5.2 OTT Intensity
1.5.3 Local Factors
Section 2: Global Index rankings and implications
2.1 Global Index results
2.2 The significance of broadband market size
2.3 Drivers for the formation of online video audiences
2.4 The revenue opportunity of OTT video
2.5 The role of content and regulation
Section 3: Emerging Markets Index rankings and implications
3.1 Size of the broadband markets in emerging economies
3.2 The promise of network speeds for OTT video
3.3 Demand for OTT video and traditional pay-TV
3.4 Connected devices and second-screen content
3.5 Mobile video opportunities with 4G
Section 4: Key findings
List of Chart
Exhibit 1: Countries covered in the OTT Video Market Attractiveness Index
Exhibit 2: OTT Index composition
Exhibit 3: Global Index and Emerging Markets Index, top 10 positions
Exhibit 4: OTT video opportunity by broadband market size
Exhibit 5: Subindex rankings of the US, China, the UAE and Bolivia
Exhibit 6: OTT video opportunities by online video audience size
Exhibit 7: Size of optimal OTT video age group (25-39-year olds) in 10 of 11 largest markets, 2010
Exhibit 8: Market shares of VoD/OTT services by type in Russia and Mexico, 2013
Exhibit 9: OTT Intensity indicator scores of selected markets
Exhibit 10: Local Factors indicator scores of selected markets
Exhibit 11: Ten highest-ranked markets by broadband-connected households, 2013
Exhibit 12: Key broadband market opportunities for OTT video players, with 2013 broadband penetration rates and 2013-2018 revenue CAGRs
Exhibit 13: Average connection speeds in the 10 markets with the greatest number of broadband-connected households, 2013
Exhibit 14: The 15 markets with the fastest average connection speeds, 2Q 2013
Exhibit 15: FTTH/B penetration of households by region, 2013
Exhibit 16 High-speed broadband adoption (10Mbps+) as a percentage of total broadband connections
Exhibit 17: The 10 emerging markets with the highest pay-TV penetration rates, 2013
Exhibit 18: Key pay-TV market opportunities for OTT video players, with 2013 pay-TV penetration rates and 2013-2018 revenue CAGRs
Exhibit 19: PC penetration of population, 2013, 10 highest-ranked emerging markets
Exhibit 20: Tablet and smartphone penetration of population, 2012 and 2017, Argentina and globally
Exhibit 21: LTE subscriptions as a percentage of total mobile subscriptions, 2018
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