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.
My name is Meghan McAdams, and I’m the VP of National Brand Sales at Tapjoy. In this blog series, we’ll explore the platforms, opportunities, and challenges that are driving modern online entertainment. We’ll discuss topics like:
But first, it’s important to more clearly define these services and their role in the modern media landscape.
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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.
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:
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.
While the OTT conversation largely revolves around video-on-demand, the technology actually covers a broad range of web-based content:
Most OTT services are associated with “cord cutting” — the practice of cancelling 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. In fact, customers maintain traditional cable services alongside Netflix or Amazon Prime subscriptions.
It’s also worth remembering that OTT services are still fairly new, and could undergo significant changes as best practices are refined. For example, some experts believe OTT platforms could one day be bundled much like traditional cable packages. In fact, some cable companies offer OTT solutions like HBO Go as part of their premium subscriptions.
We no longer live in a world where Netflix is the only OTT game in town. Increased competition will be a major challenge for video OTT solutions in the years ahead:
We’re currently witnessing a new wave of diversification across OTT markets, creating new opportunities and challenges. Recent studies suggest 50% of OTT customers are experiencing “subscription fatigue” from engaging with so many platforms. In time, this could prompt customers to become more selective with their managed subscriptions. Meanwhile, the growth of large-scale platforms like Disney+ could impact the prospects for smaller, niche services.
Despite these challenges, 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, 20% of subscribers also made in-app purchases in 2018. 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 suggests 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.