Netflix, Amazon help drive North American OTT revenues above $10B

Subscription video on demand (SVOD) providers, led by Amazon and Netflix, make up nearly half of over-the-top revenues in North America and are driving a market that will likely top $10.7 billion this year alone, a new report by Strategy Analytics says.

Revenues for SVOD alone will reach $5.1 billion in 2014, or 48 percent of total OTT revenue in the region. And while revenue for all OTT services (like YouTube, online sports venues such as MLB.com, etc.) will double between 2013 and 2019--reaching $18 billion--SVOD services alone will grow 116 percent in the same period, from $4.1 billion to $8.8 billion.

Despite this continued jump in popularity, OTT has not caught up with DVD sales--yet.

"By the end of this year there'll be about 54 million subscriptions to over-the-top video services such as Netflix, Hulu and MLB.com," said Michael Goodman, director, digital media for Strategy Analytics, and author of the report. "In five years this will reach about 69 million--at which point OTT revenues will have overtaken DVDs."

Over-the-top is generally used to refer to services (particularly video) delivered over the Internet by various providers. Strategy Analytics' definition excludes services delivered by satellite and cable operators, most of which are working out ways to deliver a more integrated TV Everywhere experience to their subscribers that includes viewing TV series and movies online.

Other segments of the OTT market will see solid numbers, too, Strategy Analytics says. Retail sales of online video--purchasing a video online and either downloading or storing in the cloud, a la Amazon's Instant Video service--will reach $1.4 billion in 2014, growing 13 percent over last year. Rentals online will grow to $681 million, or 21 percent.

Furthermore, subscribers are willing to spend a bit more on their online content. On average, they'll spend close to $29 a month on OTT services this year, 18 percent more than they did last year. If the numbers hold true, by 2019 broadband users will average more than $43 per month on OTT.

Advertising will see respectable growth this year, accounting for the second largest percentage of OTT revenues at 33 percent, or $3.6 billion. Note that this doesn't account for digital advertising around other forms of online content.

North America's OTT revenue is interesting in comparison to that of other regions. A recent report from Digital TV Research noted that SVOD revenue in Asia-Pacific was just $1.27 billion in 2013, and total OTT revenue hit $2.68 billion. However, overall OTT revenue in that region is projected to reach $10.19 billion in the next six years according to their study, slowly closing in on North America's numbers.

Strategy Analytics' forecast comes after a June study released by PriceWaterhouseCoopers. That report predicts that revenues from SVOD services will grow to $10.1 billion by 2018.

Both reports are fairly rosy, but SVOD and pure-play OTT services face pressure from different areas. The aforementioned TV Everywhere may make a dent in OTT revenues as pay-TV providers catch up with their own competing offerings. And only Netflix and YouTube have really seen massive success in the OTT arena, as first-to-market leaders in their respective online video models (SVOD vs. ad-supported streaming). Other providers, like Yahoo and Hulu, have stumbled along the OTT path as they try to find a model that works for them.

Strategy Analytics OTT revenue

Strategy Analytics OTT growth

For more:
- see the release

Related articles:
Asia-Pacific OTT TV revenues set to surge by 2020, reaching $10B
Online streaming poised to top movie theater revenues at $14B
Adobe study: TV Everywhere users up 157 percent in Q1…not counting Olympics

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