Hybrid OTT TV subscription services users to reach 273 mn in 2025: Juniper Research

Juniper Research has unveiled its whitepaper, ‘Tuning into the Future of Video Streaming’, which discusses how the business models of OTT TV and on-demand video will change, including a forecast for the number of users of ad-supported subscription VoD services in 2025.

The OTT industry is currently booming, and recent years have seen continual shifts in the video services landscape with explosive growth of OTT services. Whilst almost every other area of home entertainment spending has declined over the past five years, OTT video has seen significant revenue growth, as consumers continue to embrace it. Mirroring the trends in music consumption, audience desire for personalisation, targeted content, choice, and the ability to consume content when and where they want, has seen the popularity of video streaming soar, as the catch-all approach of traditional television and cable channels has struggled to satisfy the on-demand need for entertainment content.

Visual entertainment as a communal medium based around linear TV programming is losing its significance, as users can watch their favourite shows/videos streamed on-demand straight on smartphones, smart TVs, tablets, and laptops in full HD quality. This trend has been seen clearly in sports viewing. Traditionally used by TV networks as content to attract viewers to linear TV, the rise of OTT services has seen sports leagues adopt rights agreements with streaming services for live content and highlights packages; enabling viewers to consume content more flexibly and undermining the exclusivity of traditional TV services.

In contrast to many industries, the COVID-19 pandemic, and the various restrictions it has placed globally on people’s movement and ways of life, has added to the boom in OTT video services; enabling users to spend a greater amount of time accessing video content than ever before.

Key Market Trends & Overall Outlook

Increased Competition Leading to Innovation in Monetisation Models

As the demand for video streaming services has risen, the landscape has become more competitive, with new players entering the space and attempting to challenge the hegemony of the established industry leaders. The launch of Disney+ in November 2019 started a new era, where Netflix and Amazon Prime Video are facing increasing competition from significant new players in the industry. Apple has launched its own streaming service, Apple TV+, and AT&T’s WarnerMedia streaming service HBO Max was released in May 2020. In addition, there are also many smaller, niche-focused streaming services that have relatively recently entered the crowded arena, such as Crunchyroll, The Criterion Channel, and sports streaming services, such as DAZN.

Increased competition is driving innovation of OTT monetisation models. Traditionally, the monetisation models adopted in the space were predominantly the TVoD/PPV method used by Apple iTunes, Amazon Video, and Google Play, as viewers paid a one-time fee to watch content live, download it, or rent it, and the SVoD model utilised by services such as Netflix and Amazon Prime. Providers are increasingly turning towards AVoD, bundling and hybrid monetisation models as alternatives to open up increased revenue channels, and to counter possible subscription fatigue in this hugely competitive space.

Bundling Monetisation Models

Providers such as Disney+ already bundle their content together with ESPN, National Geographic, and other content producers. Other services, such as Amazon Prime and Apple TV, are positioning themselves as aggregators offering their platform subscribers the opportunity to add subscriptions to other streaming services, such as Starz and Showtime. Juniper Research expects to see this trend of bundling different subscription packages together to create channels to continue, with other big players acquiring or partnering with content providers to offer subscription packages.

Additionally, Juniper Research expects the bundling of services to increase, as alliances between MNOs and providers of video streaming services have grown over recent years, with OTT providers seeking to broaden the reach of content to capture a wider audience. MNO partnerships are driving growth, especially in Asia-Pacific and the developing markets of the Middle East and Africa. In 2017, T-Mobile started bundling Netflix for free for those on its family plan, and, in 2018, Netflix announced partnerships with Telefónica in Spain and Latin America, as well as KDDI in Japan.

Similar link-ups between OTT streaming services and MNOs have been evidenced, as the competition in the market pushes companies to seek additional sales channels. Disney+ and Verizon, a US telecoms giant, agreed a partnership that added the Disney+ Bundle that includes Hulu and ESPN+ for free to new Verizon customers that sign up for certain unlimited plans.

Hybrid & AVoD Monetisation Models

Juniper Research expects streaming service providers to also integrate hybrid monetisation models further into their business plans. The intense competition of the OTT streaming marketplace is motivating providers to seek alternative revenue channels, and the market is seeing greater experimentation with hybrid monetisation models, as providers combine ad-supported models with ‘premium’ ad-free subscription content.

Peacock, the streaming service owned and operated by NBCUniversal, a subsidiary of Comcast, was launched on July 15, 2020 and has adopted a hybrid monetisation approach. It has three tiers of service: Free, Premium, and Premium Plus. The Free tier has a section of the content of the upper two tiers and targets its users with advertising. The middle tier, Peacock Premium, also has advertising but provides the full library of content. The upper tier, Peacock Premium Plus, provides the full library without ads. In addition to its hybrid model, Peacock has also signed various distribution deals with Apple TV, Roku, and PlayStation 4, to provide additional exposure to its service. As of September 2020, it had over 15 million sign-ups.

The adoption of hybrid monetisation models involving elements of ad-supported content is something that looks likely to increase; opening up opportunities for a range of advertisers looking for exposure and moving their advertising budgets away from cable TV to the increasingly popular OTT sector.

It is questionable, particularly in North America and Western Europe, where consumers have become used to ad-free streaming services, if services offering ad-supported content can survive, but with more and more subscription services on the market, and potential ‘subscription fatigue’, Juniper Research predicts hybrid monetisation involving elements of ad-supported content to become commonplace. As more OTT services are launched, the fact that US consumers have an average of three subscription services, and are frustrated by the juggling of subscriptions, suggests that only a few can thrive. It seems therefore likely that a number of providers will look beyond the subscription-only, ad-free model to hybrid monetisation that offers a range of options to the consumer and a variety of revenue streams. Peacock’s Chairman, Matthew Strauss, spoke of the need to involve ad-supported content in their service, stating, “There was this belief in the industry that people did not want advertising or did not like advertising. That just is not true. Free, ad-supported content plays to our strength, and that has been where we focused.”