Series such as Netflix’ House of Cards are driving OTT traffic to big screens.
Traditional pay TV providers are struggling to cope with the rapid growth of OTT TV services such as Netflix and Amazon Prime. This increased competition is forcing them to consider unbundling their packages to create competitive, stripped down offerings without the costly premium sports channels.
This is the conclusion of a report from UK-based Juniper Research, which indicated that the number of subscribers to OTT TV services will increase from 92.1 million in 2014 to 332.2 million globally by 2019. Although the North American market will remain strong and continue to dominate the field in terms of premium content production, the OTT growth will fan out around the world with the Far East in particular catching up through rapidly increased production of local programming there.
Smart TVs are a key factor
An important driver of online video worldwide is the rapidly increasing rising transmission of OTT content to connected TVs, which enables a corresponding growth in consumption of long-form video on OTT subscription services on the larger screens.
This trend is being reinforced by the rapidly increasing use of low cost small devices such as the Google's Chromecast and Amazon’s Fire TV Stick dongles. Adding to those devices are game consoles and set top boxes which provide preloaded OTT services. Juniper Research, in its latest research, Mobile and Online TV & Video: OTT, IPTV and Connected Markets 2015-2019, suggests that traditional TV providers will continue to see pressure from both small, low-cost OTT boxes and new program content from the larger players like Netflix.
LG Smart TV
By contrast smart TVs are currently suffering through poor operating systems and user interfaces, as well as limited upgradeability. In addition, some TV buyers wonder about the value of having the OTT device built into a TV set with a life of five to seven years. Some set buyers may question the life of the technology built into the smart TVs and how viewing needs might change over that time frame.
Competition push back
Existing pay TV operators have responded by offering cheaper bundles comprising just TV shows and movies, pitched directly against the likes of Netflix. But this is causing tension from premium sports channels like ESPN and Fox Sports, which are not happy at the loss of exposure as their channels are stripped out from the base bundles. Not only would the sport channels lose subscription revenue, as they receive payment for all cable/satellite subscribers, whether or not those subscribers watch sports, but with smaller audiences, prices these channels could charge for commercials would be under pressure to lower.
The point is that the sports networks became dominant in North America primarily from being ubiquitous in virtually every TV package. Viewers could not opt out of paying the typical premium $5.00 to $7.00 month sports channel fees. Now those programmers could lose viewers and revenue if they are treated as premium offerings confined to top tier customers.
ESPN indicated last month that Verizon's lower priced more flexible FiOS TV packages may break contracts that prevent carriers from inserting ESPN and ESPN2 into a separate sports package.
The key is mobile usage
While OTT is now making an impact on the big screen, it will enjoy its most rapid growth on mobile devices, according to another Juniper Research report, Mobile Data Offload & Onload: Wi-Fi, Small Cell & Network Strategies 2015-2019. The research forecasts that video traffic over smartphones will increase by nearly 8 times between 2014 and 2019. This figure is higher than some estimates, but corresponds roughly with Ericsson’s forecast in its most recent Mobility Report, which suggested that the total mobile video traffic in the next six years will be around 17 times higher than that of the previous six years.
Mobile TV viewing will be a key driver to both new competition for viewers and an increase in mobile traffic.
The research counted accumulated mobile data traffic for video at 25 exabytes during 2009-2014 and predicted it would rise to 440 exabytes over the period 2015-2020. Total mobile data traffic would climb from 70 exabytes to 860 exabytes over the same period, so Ericsson reckons video will account for just over 52% by 2020 compared with 36% in 2014.
Juniper Research attributed anticipated mobile video growth to the roll out of higher capacity 4G/LTE networks coupled with HD video usage. Ericsson suggested the increased number of video-enabled devices and larger screens as major factors, alongside increasing suitable online content, such as news, adverts, and social media. Also significant was the increasing video sharing via popular social sites, along with a continuing trend away from browsers to apps as the means of accessing the services on smartphones and tablets.
Indeed Ericsson found Facebook’s app alone accounted for approaching 20% of all mobile traffic in developed markets, for example 16% in the USA.
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