The Evolution of Over-the-Top Video

1Executive Summary

TDG predicted some five years ago that by 2010 broadband would begin to make its way to mainstream home entertainment centers and, once that happened, the world of TV would be fundamentally and forever altered. Lo and behold, today, we are on the cusp of the age of Quantum Media — a time during which established media production, distribution and consumption models will undergo rapid disaggregation; a time defined by the rapid expansion of consumer control over when, where and how they engage media; a time when the longstanding dominance of PayTV operators will be increasingly challenged by a new wave of companies looking to go “over the top” (OTT) of incumbent set-top boxes and enable the delivery of web video directly to consumers.

While a bit futuristic, today’s consumers already have a number of ways to access online video on their TV screens. The majority of these platforms are vertically oriented or closed offerings that deliver a fixed set of content to the television, and the entire experience is owned by a single company (e.g., TiVo or Microsoft, via Xbox Live). This contrasts with horizontally-oriented or open platforms in which the web-to-TV video experience is not owned by a single company but rather is open to the wider world of online content providers.

Will OTT find an audience? Indeed, but the billion-dollar questions are how soon and to what extent it will diminish incumbent PayTV revenue. No doubt the market fundamentals for OTT services are aligning, given:

  • A growing dissatisfaction with the cost of pay-TV service;
  • Increased demand for greater flexibility when selecting specific TV service channels and features; and
  • Discernible interest in web-to-TV video services.

Such factors suggest a fertile environment for emerging OTT services. By 2011, TDG expects, more than 100 million households worldwide will have at least one Internet-connected TV, and the OTT movie rental market alone will reach almost $4 billion in gross revenue.

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