WELLINGBOROUGH, UK – Over-the-top (OTT) video subscription services will generate a cumulative $32 billion over the next five years, exceeding revenues from ad-hoc video rental and purchase services, according to a new report from IMS Research.

With interest in the OTT market from consumer-electronics suppliers, pay-TV operators, Internet portal companies, DVD rental companies and large CE retailers, a number of business models are now being tested. The IMS Research study examines service providers’ strategies across the globe and forecasts OTT uptake and revenues for 10 countries and 6 regions.

Anna Hunt, report author and principal analyst, comments, “Advertising-funded services and free videos make up an overwhelming share of online video traffic today, and this won’t change dramatically over the next five years. But we will start to see some significant growth in pay-OTT transactions and revenues as more market leaders in pay-TV, media and CE invest in exploring strategies for effective OTT video service delivery.”

Fastest Growth From Connected CE Devices
IMS Research forecasts that OTT market revenues will grow 32 percent per year over the next five years. As revenues rise, the percentage of homes viewing only free OTT videos – 77 percent of the total at the end of 2010 – will decline to 69 percent by the end of 2016.

Hunt states, “Some of the main drivers behind OTT revenue growth are service providers and content providers’ willingness to explore new paradigms. Support for multiple devices and platforms, widespread partnerships and acquisitions, and global expansion of successful services are some of the vital factors that will shape the market through the end of the decade.”

Internet-based OTT service providers, consisting mainly of broadcasters offering content online, DVD rental companies that have expanded into streaming services, and retailers that offer online video rentals and purchasing, will generate the largest share of OTT service revenues, although this segment’s share is forecast to decline from 90 percent of world OTT video revenues in 2010 to 69 percent in 2016. Delivery of OTT video via connected CE devices, such as connected TV sets, Blu-ray Disc players, and game consoles, is forecast to see the most growth. Revenues generated from OTT transactions initiated via these devices are forecast to account for 25 percent of world revenues in 2016, up from 9.3 percent in 2010.