The Global OTT Market is set to explode in 2020 to touch a massive USD 120-125 Billion, owing to social isolation, estimates Zinnov
OTT Platforms are exploring hybrid monetization models of Subscription Video on Demand (SVOD), Advertising-based Video on Demand (AVOD), and Transactional Video on Demand (TVOD); Content Fragmentation continues as competition intensifies with newer OTT channels being launched
Bangalore, India, June 20, 2020: Zinnov, a leading global management and strategy consulting firm, shared the findings of its impact study on the Media OTT segment, in the shadow of COVID-19. As a part of this extensive study, Zinnov evaluated the impact of COVID-19 on the Global Media OTT space, the expected shifts in consumption patterns as well as key trends that will shape the space in the post-pandemic reality.
The global Media OTT space enjoyed an incredible bull run from 2012 to 2019, where the OTT market witnessed a ~23% growth. This period was defined by the rise of hybrid monetization models, intensified competition, razor-sharp focus on content and customer experience, and the entry of start-ups and unicorns. With over 300 OTT providers in the fray, the global OTT market grew to USD 85-90 Billion in 2019.
In 2020, owing to restrictions on travel, closure of theaters, cinemas, and live events, Subscription TV and OTT applications experienced a strong surge across geographies. In fact, the time spent on OTT applications such as Netflix, Amazon’s Prime Video has dramatically increased by more than 40% in the first quarter of 2020, compared to the same quarter in 2019. There has been a 30% increase in the number of hours spent on OTT platforms, while on average, there is a 3X increase in subscriptions across these players.
Netflix added 15+ Million paid subscribers in Q1 of 2020 alone, bringing its current number to 180+ Million subscribers. Amazon’s Prime Video witnessed an increase of more than 100% viewership for family content in April. A key shift in the OTT space in the wake of COVID-19 is the continuous refresh of the content catalog to attract and retain viewership, while also factoring in content security to avoid piracy. As a large percentage of this content consumption is being driven through online and mobile channels, the adoption of digital technologies such as automation and cloud will accelerate.
Zinnov analysis also reveals that the OTT space is in a state of flux, with large companies making acquisitions, new players entering the segment, newer services being offered, and consumers being saddled with a problem of plenty. Large media conglomerates such as Comcast, AT&T, and Disney have made acquisitions over the last 18 months, which has put a significant amount of debt on their balance sheets. Disney acquired Fox for USD 71 Billion, AT&T acquired Warner Bros., and Comcast acquired Sky. However, the revenues of all these conglomerates will be impacted as each of them has additional businesses such as theme parks, movie production, cable and consumer products, which have been severely affected owing to the pandemic. The revenue loss in some of these businesses will be significant, making it difficult to balance out and recover from the gains made in other businesses.
Zinnov’s analysis revealed that Disney’s multiple theme parks alone contribute upwards of 30% to their overall revenues, with 10+% of operating income. The company is already looking at raising debt, which can be managed effectively, given their strong balance sheet. Disney, during this time, has lost 1/3rd of its market capitalization, while Comcast has lost 1/5th. Comcast was able to fortify itself in part because a large part of its revenues come from its cable business, which will see an uptick as more consumers upgrade their Internet connections, owing to extended lockdowns around the world to contain the spread of the virus.
In recent times, the OTT space has become an overcrowded market, with at least 4 new applications being launched in the last 3 months alone. AT&T has launched its new OTT channel HBO Max from its Warner Media unit in the last week of May, Comcast plans to launch its in-house OTT channel – Peacock TV – in mid-July, etc.
Speaking about the Media OTT space, Sidhant Rastogi, Managing Partner, Zinnov, said, “The Media OTT space is in an interesting phase right now. In the near-term, we expect 4 major global trends to take off as we begin this new decade – OTT alliances between key players to achieve scale as they jostle for space in the overcrowded market; focus on building clear identity in the customers’ psyche to circumvent OTT fatigue; innovation in distribution owing to rising Subscriber Acquisition Costs (SAC) and churn management costs; and lastly, a resurgence in Advertising-based Video on Demand (AVOD) with targeted and interactive ad models.”
“Over the next 18-24 months, we expect a paradigm shift in the way OTT platforms will look to serve their customer base. Studios will accelerate their movie releases to streaming platforms, including live events such as concerts, sporting events, etc. Another major shift will be the demand towards live broadcasts to boost sales or to own their D2C services. OTT players with a clear focus on hyper-personalization, superior customer experience, and a large repository of content variety will fare better than others,” he added.
