How people enjoy and consume entertainment has changed dramatically as a result of the ubiquitous nature of high speed internet and the ever-connected world. Rather than watching TV, the modern consumer games, surfs the web, watches video online and engages with social media across a range of devices such as smartphones, tablets, games consoles, PCs, and smart TVs. Consumers find plenty of entertaining content directly on the internet – known as OTT or Over-The-Top – rather than through their cable provider or on the air.
Some people have even cut the cord entirely and only consume content online. Cord-cutters were once considered to be the younger and more technologically-advanced millennials. As more and more providers are delivering OTT content along easier-to-use platforms, OTT is generating more and more recurring revenue. The convergence of technology allows for customers to decide which content they like and pay for only the content they want to consume.
The Trend of Cutting the Cord Continues
Experian Marketing Services estimate 7.3% of US households (8.6 million homes) are considered cord-cutters today. This means they have high speed internet but not cable or satellite television. This number is up on the 4.5% of households from 2010.
Cable and satellite providers must move quickly to provide their customers the options they need in entertainment to maintain their top-line revenue. The situation is rough: in Q2 2015, providers of cable and satellite lost over half a million customers. It’s predicted that around a third of cable customers would move over to OTT services within the next 10 years. Not everyone is going to cut their cord – some of them will consume both cable and stream content. Providers looking to push top-line growth forward need to have an infrastructure that allows them to handle large scale recurring revenue from traditional and OTT content.
OTT Content Providers Create Compelling Offers
Consumers are driven to cut the cord by more than just wanting to get out of paying expensive cable bills. Many consumers are sick of paying their large bills for a lot of channels they don’t want or need, but online television wouldn’t have become a thing without a viable alternative. It took technology, such as reliable internet, streaming technology, viewing platforms, sources of engaging content, and successful monetization of pay-as-you-consume programming converging together.
Consumers have several ways to source media:
- Traditional cable media, such as Showtime, HHBO, ESPN and Starz offer content through premium subscriptions through their dedicated mobile apps and “channels” on Smart TVs.
- Content creators can monetize their content by making it available through pay-per-season or pay-per-episode models with established Transactional Video on Demand (TVOD) marketplaces like Amazon Instant Video, iTunes, Google Play, and VUDU.
- Subscription Video on Demand (SVOD) providers like Netflix, Hulu, and Amazon Prime operate online solely without ever being on cable. Consumers can enjoy as much content as they want for monthly fees. The services became more popular by creating original content such as the original programs on Amazon and “Orange is the New Black” on Netflix.
Web Platforms Make Consuming OTT Services Easier
Major internet players created platforms for the organization and consumption of content, from user-generated videos on YouTube to free streaming channels and offering content through pay models. The success is due to the combination of video content and an easy-to-use platform. The three major players in the game are Google through Android TV (for smart TVs), Google Play, and YouTube; Apple through Apple TV and iTunes; and Amazon through Amazon Instant Video, Amazon Prime, and Amazon Fire. Innovations that improve ease of use for these OTT platforms, such as the voice search options in Amazon Fire, encourage consumers to make the switch to OTT services.
Network Providers Replace Lost Revenue Through Innovation
Opposite the web platforms are, of course, the companies that control internet connections – particularly the cable and mobile communications providers like ATT, Verizon, and Comcast. Many of these providers offer cable TV alongside high-speed internet and mobile internet plans. They are losing cable customers and are trying to replace this recurring revenue through the increase in demand for internet services through mobile devices.
The ironic thing is that network providers were an integral part of the technology needed for the rise of OTT services. Without any cost-effective and high-speed internet connectivity delivering high quality streams, no one would be willing to watch OTT video. Many of these companies are heading towards the future and aiming to innovate brand new recurring revenue streams outside of just simple data plans and connectivity. Some companies are looking at interesting approaches such as:
- T-Mobile introduced their “Binge On” service allowing customers to stream an unlimited amount of content from OTT partners such as Hulu and Netflix without it consuming their data usage.
- Verizon has generated $800 through IoT revenue and expects additional growth in the future from OTT and IoT services
The upcoming future of IoT and OTT services will see an increase in consumer choice and the innovation of fantastic technologies. Having better choices with television is just one of many benefits to be seen. People are connecting around the world through video chat services such as Skype and FaceTime, and these are both prime examples of what OTT can do. Businesses have also embraced VoIP for their telecommunications needs. The marketplace has practically an unlimited amount of opportunity for a company with a great idea for OTT and the resources necessary to make the most out of the recurring revenue streams that will be created by them.