By Srinivasan KA, Co-Founder, TV tech business Amagi
OTT adoption is exploding. According to comScore, half of households are streaming content like Hulu and Netflix through their TVs. They are watching, on average, nearly two hours of programming daily. As consumer’s embrace Internet-enabled content, the rate of change in the OTT category – from technology to regulation – was truly dizzying in 2017. And with more change on the horizon, what can we expect this year?
Here are three likely developments.
1. More traditional broadcasters will get into OTT.
OTT services have always ruffled feathers within the traditional broadcasting industry. But as linear TV subscriber numbers continue to fall, in 2018, more broadcasters and content companies will begin to experiment with OTT services themselves. Ultimately, if you can’t beat them, you join them.
Driven by the expansion of OTT — think Hulu and Amazon Prime — into live content, over 50% of broadcasting executives think that OTT will surpass linear TV by 2020. As consumer preferences evolve towards these digital services, traditional broadcasters are set to invest millions into developing digital apps and offerings that standalone and extend their linear programming. Others will even develop new programming exclusively for these services. This doesn’t mean that traditional broadcast will evaporate, of course. Rather, providers — such as Spectrum — are launching their own competitive offerings. The challenge this creates for consumers, however, is greater app and service fragmentation which can hurt the OTT market, overall, down the road.
2. Net neutrality will change OTT.
Net neutrality is poised to have an impact on OTT content providers and services. Granted, given how popular major streaming offerings are – Netflix alone has over 100 million subscribers – it is unlikely that they will face significant obstacles as broadband providers need them to drive demand. However, the same cannot be said for more niche streaming service providers or start-ups in the space. These companies simply do not have the capital or brand recognition advantages that Netflix and other big players have. Net neutrality will largely impact them, exacerbating fears over throttling and other potential consequences from the rollback.
Unfortunately, even with larger players like Comcast and Disney entering the arena, this will likely stagnate OTT innovation and could have a direct impact on the prices consumers pay, in particular. In the long-term, this means any small or mid-sized streaming service will truly have to fight to survive.
3. OTT will be the new M&A epicenter.
By 2021, the OTT market will be worth a stunning $64 billion . The category is only becoming more expensive to enter as consumer preferences trend in its direction. Costs for programming, building services, infrastructure — everything is going up. As a result, the industry is poised to see a deluge of consolidation in 2018 as big players look to buy their way into the space. Many will simply scoop up smaller, up-and-coming startups that might be afraid of their ability to navigate Net Neutrality, while others will invest in more established players.
Disney has already kicked this off a bit early, with its attempted move to double its share of Hulu through an acquisition of 20th Century Fox. But this is only the beginning. As more consumers expect their content to be available at anytime, anywhere, and aren’t shy to trade-in one service for another if the experience is better, expect a flurry of M&A activity in the New Year. TV providers conquered cable, but now they must be prepared to fight to conquer the internet.
More change is coming for the OTT category in 2018. And that’s the key thread here: “more.” More competition, yet more consolidation. And Net Neutrality will drive some of that. More is the mantra for the New Year. And while the OTT space is still very young, we are likely to see an unprecedented level of maturation in 2018, as a result.
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