Updated, Wednesday, October 4, 2017, 5:56 a.m. PT
The size of the over-the-top (OTT) market — defined as “the use of apps to stream video content via the internet to a video screen” — is more than half of U.S. households while about 1.6 million households subscribe to what are known as virtual multichannel video programming distributors (VMVPDs), said Beth Rockwood, VP, portfolio research & chief of staff at Turner, at Tuesday’s conference on all things OTT hosted by the Advertising Research Foundation (ARF) in New York City.
“The term over-the-top (OTT) is used to cover a multitude of things, and it means very different things to different people,” said Rockwood, stressing the interest in OTT across a large number of enterprises, including front-end developers, advertisers, marketers and research companies.
“Over-the top is the use of apps to stream video content via the internet to a video screen, which could be a television screen, a computer or a mobile device. There are a multitude of pieces involved, including subscription video on demand (SVOD), TV Everywhere, the virtual MVPDs (or digital MVPDs or skinny bundles) and Smart TV. We’ve got boxes, we’ve got sticks, and within each one of those are a number of companies that are all TV.”
But that number is rapidly growing and what role OTT will eventually play in the overall television landscape is anyone’s guess. That’s why so many companies are offering OTT apps, such as DirecTV Now, Hulu Plus’ live streaming app, PlayStation Vue, Sling, Turner, YouTube TV and more.
“The most exciting thing about all of this is it offers a tremendous amount of opportunity,” said Rockwood in her opening keynote. “We are on our way to IPTV (Internet Protocol Television), and all of this is a step in that direction. But all of this is still relatively new, leading to a rapid development of so many different elements.”
Nielsen only started measuring VMPVDs in February. Consensus points to OTT services contributing to expected loss among pay-TV providers.
“Some people speculate that these VMPVDs will entirely make up for the decline in pay-TV households, but we are not seeing that yet,” said Rockwood. “But it is attracting audiences that I think are less likely to be involved with the traditional MVPD offerings, and the prospect of reaching out to people who are cord-nevers is also extremely appealing.”
The high penetration of broadcast, more quality content, more affordable smart TVs and over-the-top sticks and boxes, and the big choice in advertising models are some of the key reasons why what seemed foreign just a few years ago is becoming more common with every passing television season.
“There is kind of something for everyone out there,” said Rockwood. “There is unlimited choice in terms of content and there is also a level of convenience. Plus, having a new streaming device, more available content and more quality content leads to a better overall experience. That all translates into the expected growth of OTT.”
Looking at the pay-TV universe versus the broadband universe, broadband users have risen from 88.6 million viewers in second quarter 2015 compared to 94.6 million for pay TV, to 94.1 million in second quarter 2017 compared to 92.6 million for pay TV. That’s a rise of 6 percent for broadband, concurrent with a 2 percent loss for pay TV.
“Pay TV is obviously still very important to us, but you certainly cannot ignore the rapidly expanding OTT universe,” said Rockwood. “We expect that pay TV will continue to decline and connected TV and over-the-top will continue to grow, and we will make sure we have broad coverage for our audiences. In today’s media landscape, you can never be too prepared.”