OTT encompasses the distribution of video content “over-the-top” of traditional distribution technologies. OTT is the delivery of video content through fixed or mobile broadband internet connections instead of over the broadcast TV spectrum or dedicated cable, firbre or satellite networks.
OTT is increasingly the preferred method of choice for new players entering in to the broadcast TV and video delivery industry and is responsible for the rise and rise of companies like Netflix into global media power houses. Other notable tech giants in the OTT business include Google with its YouTube Services, Apple with its iTunes, Amazon and to an extent Facebook and Twitter. In 2019 Disney will also launch its own OTT services.
But what is it about OTT, that has reshaped the broadcast and video distribution industry? Flexibility. OTT offers consumers a lot of flexibility in terms of available volume of content, the range of service offerings into which the content can be packaged and the price points at which content consumers can be charged for providing them with OTT services.
It is now something of a cliché to say that technology has disrupted traditional broadcast television and filmed entertainment industry, but thanks to the internet and OTT, it has. In the process, the broadcast industry’s revenue model (the last mile distribution of television and video to the final consumer) has been transformed. The key to these changes and the emergence of retail content delivery revenue models, is the concept of video-on-demand (VOD) which allows consumers watch video and TV content when, where and how they want to. There are three principal business models through which VOD generates revenue for its providers.
Advertising Revenue Based Video-on-Demand (AVOD)
The AVOD revenue model allows consumers gain access to huge libraries of content. Under this arrangement content and other costs are offset by advertising revenues. There are no time limits on access to the content. YouTube, Facebook and Twitter are examples of platforms that offer this model.
Transaction Revenue Based Video-on-Demand (TVOD)
This is a time limit-based OTT revenue approach where the content consumer could either own or rent the content for a one-time fee. The video content can be downloaded and stored on the user’s hardware and viewed at any time during the rental period or life time ownership. A good example of an OTT provider that utilises this revenue model is Apple.
Subscription Revenue Based Video-on-Demand (SVOD)
Under the SVOD model, consumers pay a monthly fee to access content on the provider’s platform. The content is usually distributed via streaming and requires an active online connection. OTT providers in this category include Netflix and Amazon Prime. Netflix has also commenced a service that allows subscribers to download content on their hardware and watch offline.
By disrupting traditional linear television scheduling in which TV companies set the time of viewing, OTT has provided further flexibility with regards to the time, place and the mode through which audiences can consume content. This is something which traditional over-the-air, cable or satellite distribution cannot offer. These developments have changed the media industry’s costs and revenue models by making TV and video consumption a retail rather than a corporate business.
Though OTT is presently more of an evolution than a revolution, its pace of adoption of by content consumers is likely to quicken as global internet penetration rises and internet speeds increase. This process will also be supported by the army of content providers that are migrating from the amateur ranks into the professional ranks of content production as good quality video and TV content becomes a priceless commodity. OTTs unique ability to aid creativity in service packaging can only lead to additional revenue models which will further drive the industry’s growth and attract more players in time to come.