OTT stands for “over-the-top” and refers to the productized practice of streaming content to customers directly over the web. It represents the future of entertainment — one that is already unfolding.
In this blog, we’ll explore the platforms, opportunities, and challenges that are driving modern online entertainment. We’ll discuss topics like:
- The role of OTT in the modern media industry
- The technologies and growth strategies responsible for its success
- The relationship between OTT and in-app advertising
- The driving cultural factors behind “cord cutting”
But first, it’s important to more clearly define these services and their role in the modern media landscape.
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What is OTT?
An “over-the-top” media service is any online content provider that offers streaming media as a standalone product. The term is commonly applied to video-on-demand platforms, but also refers to audio streaming, messaging services, or internet-based voice calling solutions.
OTT services circumvent traditional media distribution channels such as telecommunications networks or cable television providers. As long as you have access to an internet connection — either locally or through a mobile network — you can access the complete service at your leisure.
OTT services are typically monetized via paid subscriptions, but there are exceptions. For example, some OTT platforms might offer in-app purchases or advertising.
Why use OTT?
With over 50% of North Americans maintaining Netflix subscriptions, it’s clear consumers love OTT content. Here are just a few reasons why the format is more appealing than traditional alternatives:
- High-value content at low cost: Streaming services are widely considered a cost-effective alternative to traditional cable packages. A premium Netflix subscription is currently $17.99, while the basic plan costs just $8.99. That’s a reasonable fee even if you only intend to watch a fraction of its offered content.
- Original content: In recent years, OTT providers like Netflix and Amazon Prime have begun producing original content that is exclusively available through their service. Platforms like HBO Max and Disney+ also have exclusive streaming licenses for previously televised content.
- Compatibility with multiple devices: For years, watching cable television required a television set. Today, we can watch OTT content from a broad range of devices. Any account holder can enjoy the same OTT experience from a gaming console, smartphone, tablet, or smart TV.
How is OTT content delivered?
Thanks to its internet-based delivery system, OTT platforms bypass third-party networks that traditionally managed online content. The only things customers need are an internet connection and a compatible hardware device.
- Mobile devices: Smartphones and tablets can download OTT apps from a supported digital storefront.
- Personal computers: Most computers support OTT content viewing through desktop-based apps or web browsers.
- Smart TVs: The latest TV models often include pre-installed OTT apps, or provide users with an option to download them.
- Digital media players: Third-party devices like the Apple TV support a range of OTT solutions. Many modern video game consoles also include the ability to download and run OTT apps.
What types of content are suitable for OTT solutions?
While the OTT conversation largely revolves around video-on-demand, the technology actually covers a broad range of web-based content:
- Video: Video streaming is the most-widely recognized version of OTT media services. Popular platforms include subscription platforms like Netflix, paid storefronts like iTunes, and ad-based services like YouTube.
- Audio: Audio streaming is also possible through OTT solutions. Popular examples include internet radio stations and podcasts.
- Messaging: OTT-based instant messaging services connect users directly through internet connections, bypassing mobile SMS networks. Facebook, Google, Skype, WeChat, and many other brands have versions of these services. Most are capable of replacing or integrating with smartphone text messaging features.
- VOIP: Voice calling platforms such as Skype and WeChat that operate using internet protocols are considered OTT services. In some instances, these services can integrate with mobile phone networks to enhance certain features.
Is OTT replacing traditional media distribution?
Most OTT services are associated with “cord-cutting” — the practice of canceling TV or phone subscriptions to focus on web-based alternatives. While cord-cutting has certainly increased OTT consumer adoption, that doesn’t mean traditional networks will disappear entirely. Our 2021 consumer research indicates that 73% of users default to streaming over cable or similar options. 80% of these consumers told us they spend two hours per day streaming. Their appetite for streaming options remains strong: 55% of respondents say they signed up for a new streaming service in the last year, and 60% are considering taking on another subscription now.
Want to dig deeper into the streaming preferences of modern consumers? Check out our blog article on how streaming brands can win with mobile game advertising.
What are the biggest OTT opportunities?
OTT technology has immense potential. Video streaming services are on the rise globally, with North America representing the most mature markets at a 51% adoption rate. Europe and Asia-Pacific are seeing impressive growth as brands like Netflix expand internationally.
Beyond global adoption rates, major opportunities exist in non-entertainment markets. One recent survey determined that 50% of OTT subscribers pay for educational content, usually in the form of instructional streaming platforms. Streams that emphasize children’s programming or health-based content might hold immense potential.
OTT platforms should also consider the benefits of tiered monetization. While most solutions are subscription-based, subscribers are also open to in-app purchases. Casting a wide net when it comes to monetization methods could help OTT solutions grow in the years ahead.
Performance marketing has proven to be an especially successful method of attracting subscribers to OTT platforms in a way that is scalable and predictable for marketers.
Over-the-top media services have been with us for years, but they clearly have room to grow. Increased diversification and competition suggest the market is healthy and growing, and many opportunities remain untapped. Whether you’re following up-and-coming platforms or enjoying the latest Netflix Original series, OTT clearly represents the future of media. It’s an exciting time to be a part of it.