European Premium OTT Market Set for Rapid Growth by 2017

REDWOOD: A new pan-European study has revealed that despite a number of barriers to entry, industry participants expect to see steady growth of premium OTT services in the U.K., Dutch and German markets, with gains of 80 percent in the next three years.

Conducted by MTM, in partnership with Vindicia and Ooyala, the research revealed that, while industry leaders are aware of the challenges when targeting the mass market with film and TV content, premium OTT technology continues to advance in Western European markets. It also indicated that in addition to the subscription business model, there will be "significant opportunities" for content providers to increase monetization of video content, in the form of transactional services, ad-supported offerings and hybrid bundles.

The U.K. market is expected to grow from £110-130 million ($173.5 million to $205 million) in 2013 to £390 million ($615 million) in 2017, while the Dutch market is expected to grow from 15-20 million euros ($18.7 million to $25 million) in 2013 to 190 million euros ($237 milion) in 2017. Industry participants expect to see slower growth in Germany, with the premium OTT market expected to increase from 30-35 million euros ($37 million to $43.7 million) in 2013 to 117 million euros ($146 million) in 2017. Lower broadband penetration in Germany is a contributor to the region's slower growth rate.

"The next three years will be a real turning point for the premium OTT market," said Gene Hoffman, the CEO and chairman at Vindicia. "Broadband penetration levels are rising, connected devices are becoming increasingly accessible and favorable regulations are being introduced, which is paving the way for OTT providers. The emergence of leading players, such as Netflix, is also fueling competition and investment in premium OTT business models, while at the same time driving consumer awareness and adoption."

According to premium OTT service providers, other barriers include exclusivity of access to high-quality, high-appeal content, consumer consciousness and cultural factors. With regards to consumer barriers, industry participants state that while awareness is growing, consumers are slowly migrating from free VOD services and pirated content to premium paid-for video content.

"OTT providers and new entrants face daunting challenges, however with the right approach and level of investment, the rewards will be substantial," added Jay Fulcher, the president and CEO of Ooyala. "Technology itself is becoming less and less of a barrier and as time goes on, we will start to see providers throw large amounts of money at OTT in a bid to differentiate themselves from the competition. Because of this, consumers will have higher expectations when it comes to user experience and quality of service, which will put significant pressure on providers to discover the most cutting-edge technology. In effect, demand and innovation will go hand in hand."