Opportunities for SVoD in emerging markets

The growing investment in broadband infrastructure, with the improvement in network speed and performance, has opened up new opportunities to provide video over IP, not only in more advanced, developed economies but also in emerging markets, according to Pyramid Research.

OTT video is mostly advertising-funded across emerging markets, but paid models are gaining traction within hybrid business models, whereby services offer free content to expand the user base, but at the same time position premium transactional video on demand (TVoD) and subscription video on demand (SVoD) content to generate additional revenue. In recent years, OTT business models entirely relying on advertising revenue streams have become difficult to sustain, given the high cost of content.

Across emerging markets, Pyramid expects SVoD accounts will increase more than five-fold between 2014 and 2019; the proliferation in China of hybrid models combining AVoD and SVoD will be a major driver for growth. The cumulative paid OTT revenue from SVoD and TVoD services is projected to be as much as $18.8 billion for the 2015-2019 period, over 80 per cent of which will come from the emerging markets in Asia Pacific and Latin America. Among all emerging markets examined, China, Russia, Brazil and Mexico offer the most scale and growth potential over the next five years.

The opportunity to position SVoD and TVoD services successfully is stronger for local companies, provided that they have enough funding to invest in attractive content, and that they can deploy sustainable business models for paid content.

In spite of the growing importance of mobile, with increasing 4G take up, the bulk of OTT video usage will remain over fixed broadband networks, with WiFi representing a key enabler technology for nomadic usage on secondary screens.

In order to reinforce their market position, Pyramid recommend that pay-TV operators should consider aggregating third-party OTT services within the main service portfolio in addition to standalone OTT propositions.

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