The Future of OTT

Level3 Just released their third annual report titled OTT Video Services, where they asked a wide array of industry experts about the future of OTT. The report posed a variety of questions about the OTT industry to 486 ‘media industry professionals,’ who were 70% from the US with the rest scattered in the rest of the world. These kind of exercises are not surveys and you can’t attach any statistical significance to the results. But since the respondents are in the industry I don’t know if there is any better way to understand where the industry thinks OTT is headed.

The most interesting finding (and the one that spawned a few headlines) is that 70% of the respondents think that OTT viewership will bypass traditional television viewership no later than 2022. That is an amazing prediction considering the huge difference today between TV and OTT viewing. While this year it’s expected that about two-thirds of US homes will watch at least one OTT broadcast per month, total OTT usage this year is expected to deliver only about 20% of the total hours spent by adults watching video content.

I can understand why Level3 would sponsor this report each year. The bandwidth required to support an OTT industry that grows from 20% of all of the hours spent watching video up to 50% is going to stress networks everywhere. About a quarter of respondents thought that OTT content would grow year-over-year as much as 25%, with almost half of the respondents thinking that growth rate would be between 30% and 50% per year.

This growth represents huge bandwidth growth on the backbone networks that Level3 operates as well as on all of the local networks that ISPs use to support residential customers. If you think your broadband slows down now in the evening, wait just a few years where there will be a lot more video on your local network.

The experts did foresee some major challenges for the OTT industry. Their biggest concern was the ability of local ISP networks to deliver a high-quality signal to customers. This concern was partially due to a concern that customers would not have enough bandwidth, but also represented concerns about the backbone networks and the interface between OTT providers and ISPs. It was disagreements between OTT players and the ISPs that prompted the last FCC to get serious about network neutrality. And since it looks like network neutrality will be scrapped that concern is back on the burner.

They are also concerned that the OTT industry might try to follow the path of traditional TV and begin inserting too many ads. The experts see ads as one of the major factors today driving people from traditional programming to OTT programming.

Another concern of the OTT industry is the ability of OTT companies to acquire desired programming. There are still some popular cable networks that none of the OTT providers have been able to purchase. There is particular concern about the ability to acquire regional sports networks, something that is a major draw for a significant proportion of customers. And there is concern about acquiring local network feeds and today the few OTT providers largely show content from a few major urban markets.

In looking towards the future, there are a number of OTT providers keeping an eye on acquiring virtual reality content, although none of the OTT services carries such content yet today. Of a higher priority to most OTT providers was the ability to beef up their networks in order to support both higher frame rates (HFR) and high-dynamic ranges (HDR) and most providers are working towards supporting both options. These technologies can improve delivery of sports content today and will situate OTT providers to offer VR content in the future.

There is also a lot of interest in OTT providers to be able to carry more live events other than sports content. They know that there is high customer demand for watching live events like the Emmys and other award shows, live concerts and other live content.

There is also a lot of interest from OTT providers that carry live network feeds (traditional cable channels shown linearly) to also be able to offer a library of video-on-demand content, in the same manner as Netflix. I’ve been a subscriber to Sling TV for a while and some of their network now offers a lot of VOD content on the service.

It’s going to be an interesting industry to watch. There are around 100 OTT services available in the US today, but only about half a dozen of them have any significant number of customers. I note that even though industry insiders foresee huge growth for the sector, that’s only going to happen if the OTT providers can find a way to offer what people want to watch.