Geographic Expansion Propels OTT on CE Devices

Monday, November 7th, 2011
IMS Research logo

The use of CE devices in the consumption of OTT video content is increasing rapidly as service providers seek new revenues opportunities, attempt to reach new consumer groups, and look for ways to differentiate their offerings. IMS Research forecasts that in 2016, connected CE devices in the home will account for 27% of all OTT video transactions, up from 6% in 2010. One of the key drivers behind this growth is the geographic expansion of OTT service providers such as Netflix and Amazon.

Companies effective in establishing partnerships with CE suppliers and increasing global usage of their apps on connected CE devices are quickly becoming leaders in the OTT market. Anna Hunt, author of the recently published study “Over-the-Top Video – Service Delivery & Business Models – 2011 edition,” states, “Netflix’s aggressive pursuit of increasing the geographic reach of its OTT service illustrates to the need for OTT service providers to expand their serviceable target market if they want to grow revenues.” Many domestic markets are quickly becoming flooded with OTT service options. In addition, pay-TV operators are aggressive in addressing the rise of OTT offerings by expanding on-demand portfolios, focusing on original content and offering Internet-based video services. IMS Research forecasts that by the end of 2016, over 133 million TV households worldwide will be accessing OTT content via their pay-TV set-top box.

Hunt adds, “OTT service providers will need to be flexible with their strategies once they expand into new markets, considering market dynamics such as broadband availability, competition and content licensing.” For example, Netflix library of content in Latin America is quite limited in comparison to its portfolio in the US, yet this market is ripe for growth in digital and OTT entertainment services. Although Internet bandwidth and quality of service limitations are still an issue in many Latin American territories, especially outside major metropolitan areas, penetration of connected CE devices and PCs is growing rapidly. IMS Research forecast a compounded annual growth rate of 88% in OTT transactions via connected in-home CE devices in Latin America from 2011 to 2016. On the other hand, Netflix success in the UK and Ireland will depend heavily on their content portfolio, coming up again established OTT providers such as Amazon’s LOVEFiLM and Tesco’s Blinkbox.