32% annual growth rate for OTT subscriptions
By Robert Briel

The over-the-top video market is no longer about the volume of transactions. Most companies offering OTT content are motivated to explore new strategic paradigms to monetise their services, which will drive service revenues in the world OTT market at an average compounded annual growth rate of 32% through 2016, reaching $16.4 billion (€11.3 billion), forecasts IMS Research.

OTT subscriptions, such as ones offered by Netflix Watch Instantly and Hulu Plus, are forecast by IMS Research to account for the majority share of world OTT service revenues over the next five years and were estimated at $1.9 billion in 2010. Pay-per-view transaction revenues are expected to grow at a faster pace though, as many more retailers enter the OTT market with digital rental and purchase services in an effort to recoup declining revenues from physical media sales.

Anna Hunt, CE principal analyst at IMS Research, said in a statement, “Netflix’s recently announced expansion into Spain and throughout Latin America illustrates the type of strategic initiatives we can expect from leading local OTT service providers as they aim to expand their serviceable market. New deals for Spanish and Portuguese language content create a potential for Netflix to expand its market reach to the vast population of the whole Latin American region, as well as millions of Spanish speakers living in the US.” Low monthly prices and all-you-can-eat subscriptions are common OTT offerings, thus methods of expanding the customer base are very important for providers.

No-one has yet found the magic formula for monetizing free OTT services, and market leaders such as Google, Yahoo! and Microsoft are eager to convert millions of their free OTT viewers into paying customers. Hunt added “Potential acquisition of Hulu is exciting news for these companies. Mergers with and sales of successful OTT services are going to become more common as Internet giants and large retailers seek to establish a global pay-OTT presence and compete with the likes of Netflix. We’re already seeing some of this with Amazon’s Lovefilm acquisition and the recent move by UK’s Tesco to acquire Blinkbox.”

IMS Research projects that retailers will grow their share of the OTT market, accounting for 13% of world OTT service revenues in 2016.