We here at Trouvus are constantly monitoring the market, looking for new trends to capitalize on, both for ourselves and our clients. One interesting area for media service providers and video platforms over the next few years will be the growth of the over the top television (OTT) market in emerging economies. This presents both challenges and opportunities for players in this space; that is, media service providers and their content and technology partners. Opportunities flow directly from the growth of the industry. Challenges are likely to arise as this growth attracts new players and more competition. Therefore, existing players need an edge in order to remain competitive–and new technology is providing this edge.
A new report by London-based Pyramid Research has outlined significant growth for OTT in emerging economies, especially those in Asia. Revenue from OTT in emerging markets is expected to grow from US $14 billion in 2015 to $18.8 billion by 2019.
In its report, Pyramid Research finds that access to OTT video is set to grow to 6.4% of households (102.7 million) in emerging markets by Q4 2019. These markets comprise Asia-Pacific, Africa, Latin America, Central and Eastern Europe and the Middle East. According to this report, 1.3% of emerging market households had access to subscription video on demand in 2014, comprising a user base of 19.4 million.
Latin America and Asia Pacific currently hold the lion’s share of revenue of OTT in emerging markets at 90%. However, as access to OTT in China increases, these regions could see their share of revenue drop to 86% in 2019.
Hybrid Revenue Model
Increasing costs associated with content license rights (think Netflix and Amazon Prime) have pushed players in emerging markets to make use of ad-based OTT platforms combined with SVOD (subscription video on demand) and TVOD (transactional video on demand). Pyramid predicts that SVOD and TVOD will grow to account for 7% of regional pay-TV revenue over the next five years in these markets. Senior Pyramid Research Analyst Daniel Tricarico explains the revenue model as such: “We are witnessing the emergence of hybrid [business] models, whereby services offer free content to expand the user base. At the same time position premium SVOD and transactional VOD services to generate additional revenue.”
Challenges to Remain Relevant and Attractive
The OTT market is growing both in terms of revenue and content. And while the latter may be good for service providers, the former is not necessarily beneficial. Users are now bombarded with an overwhelming amount of content from more and more sources. The challenge for service providers is to help viewers quickly find content that they like so that they stay on the service provider’s site rather than go to a competitor. Fortunately, new technologies have emerged which enable service providers to identify and offer content that their audiences are likely to find attractive.
New Methods and Technologies to Increase Revenue Now Available (Trouvus Recommendation Engine)
While the proliferation of broadband technology and improvements in network speed have expanded access to OTT in emerging markets and made it easier, new technology is also helping service providers increase revenue. For example, recommendation systems, such as those provided by Trouvus, enable service providers to generate additional revenue by various means. Under a transaction-based model, recommender systems can induce viewers to watch–and, therefore, purchase–additional content by offering alluring content recommendations precisely tuned to these viewers’ tastes. A subscription model usually use a hybrid approach. Free content is offered for expanding the user base, and premium content is held back to encourage subscription buy-ins. Premium content offered to an individual tailored to her personal tastes is more likely to interest that user than a generalized offering. Thanks to this strategy, the personalized content bolster subscriptions and, subsequently, revenue.
The OTT market is growing dramatically in emerging economies, especially in Asia and Latin America. It presents increased revenue opportunities for players in this arena: service providers and their partners. However, this field is likely to become more competitive as the number of players and amount of content increases. In order to gain competitive advantage, service providers need to engage the users by providing content that matches user interest. Recommender systems offer a highly effective means of aligning content offerings with user interest.