Home Opinions VOD And OTT: Global Trends In Pay TV

VOD And OTT: Global Trends In Pay TV

Share on

TV has been transformed by the Internet. As more content is delivered online, the line between linear television, video on demand (VOD) and over the top content (OTT) continues to blur. For viewers, it’s a win-win situation as they can increasingly watch the content they love on their own terms – on the screen of their choice. For pay-TV providers, the explosive growth of OTT and VOD creates both opportunities and challenges. On one hand, they have a variety of new channels and content to distribute to ever more screens. But on the other, they have to retain customers in an increasingly fragmented market.

Consumers today have an unrelenting appetite for VOD and OTT content. According to international research consultancy MTM, 73 percent of pay-TV providers currently offer VOD services. This figure rises to 100 percent in North America and 88 percent in Europe – but, interestingly, falls to 61 percent in Asia Pacific and 45 percent in Latin America.

Over the past decade, the reach of linear TV has remained relatively stable year-on-year – at an average of 3 hours 36 minutes per day, according toThinkbox, the marketing body for the UK TV industry. As television technology gets more diverse, viewing habits have evolved. UK viewers now watch 81 percent of broadcasters’ content as linear TV – with the rest viewed on-demand, either through a video recorder or, increasingly, through catch-up services.

The same trend can be seen on a reduced scale when we look at OTT-only services. MTM found that 26 percent of pay-TV operators currently offer OTT-only services, such as Sky’s Now TV and DISH’s Sling TV. This figure rises to 40 percent in North America and 30 percent in Europe – but, once again, falls in emerging markets: to 26 percent in Asia Pacific and seven percent in Latin America.

Although OTT-only services bring significant value to users, providers need to ensure their delivery is scalable and cost effective. Today OTT packages are broadly an entry-level play to draw in subscribers that would not have otherwise signed up to pay-TV. But not all providers currently have the scale to provide a pure OTT play so this is a trend that seems reserved for the larger players. However, smaller service providers can achieve similar advantages by deploying an all-inclusive, cloud-based TV-as-a-service model.

But by switching on OTT, are operators likely to consider switching off broadcast? Not at all. Or at least not for a very long time. There are still a huge number of channels with time-sensitive programming and live events, and they are retaining a solid share of their audiences. However, there are some “mid-to-long tail” channels that would be more profitable if delivered as OTT. This is because, thanks to two-way connectivity, providers have a better idea who is watching. This gives operators the opportunity to sell advertising at a higher rate than over broadcast where there is less viewer information available. OTT also helps providers optimise channel delivery costs and enables on-demand delivery of specialty content.

Overall, the figures show that OTT, alongside VOD, is becoming the new industry standard as pay-TV providers adapt to new customer expectations. With internet video traffic set to reach 80 percent of all consumer traffic by 2019, it would take one person over five million years to watch all the video crossing IP networks every month. This startling statistic helps explain why more pay-TV operators have started offering OTT and VOD services – and why it also makes sense for them to converge multiple content sources into one place.

This new reality raises a number of questions for service providers. To help answer these, NAGRA, in partnership with MTM has launched the Pay-TV Innovation Forum, which will examine, among other topics, the role of OTT and its impact on the pay-TV industry. It also aims to reveal the primary drivers of change and the opportunities for pay-TV providers. The Forum involves a series of surveys, data analysis and in-depth interviews with providers across various international markets, with the results shared throughout 2016 in a white paper and webinar series.

As we know, the Internet has a unique ability to suddenly increase the pace of change. Embracing this shift now can benefit every player in the TV ecosystem. With more content available from a wider range of sources, the viewer gets more choice, convenience and control. And by adopting key trends such as OTT and VOD, pay-TV providers are winning too by delivering more value at a lower cost to their subscribers. With the shift to internet delivery, providers have the opportunity to better segment the market, build their user base, reach a new set of advertisers and offer their customers a more diverse service than ever before.

For more information on the Pay TV Innovation Forum, click here


Share on