From the perspective of the traditional TV operators, OTT is a threat to their business model. For telecommunication providers, on the other hand, the technology offers huge opportunities. The new study "Over-the-top Video "´ First to Scale Wins," by strategic consultancy Arthur D. Little, summarizes the markets current development and how companies should act to succeed going forward.
As of now the Over-The Top (OTT) Players´ annual share of the 468bn US Dollar global film market is a feeble 2 to 3bn. However, the online home entertainment business is currently displaying some of the strongest growth in the media industry while the sales of classic media such as DVD and CDs have been declining for years.
Up to this point the business was mostly dominated by Pay-TV, Video-on-Demand and DVD-rentals. Now new competitors like Maxdome, Lovefilm and Netflix Dynamik are entering this market as OTT-Players who offer their streaming services for a monthly fee without having network infrastructure of their own. In the US they already have 50 million subscribers and continue to grow strongly.
Karim Taga, global leader of ADL´s TIME Practice: "The industry faces a long and hurtful switch from expensive analogue to digital media. At the same time the prices for OTT will remain low for quite a while as all players are trying to gain market share by being cheap."
Taga also concludes that big players will find it not so easy to dominate the global OTT business due to complex national film and distribution rights: "The complexity of rights management offers national players many niches but they should now be looking at forms of cooperation." There are basically two forms of cooperation: the merger of bigger competitors to prevent new, smaller competitors from entering the market, or the cooperation between rights owners and companies with many customers. Both scenarios basically evolve around economies of scale: "The critical success factor for cooperation", says Taga, "will be implementing the right company structures and the right partner mix. Telecommunications providers, cable operators and TV broadcasters should all take a close look at the market, the options, and the pros and cons of each scenario."
The complete study is ready for download under www.adl.com/OTTVideo