OTT revenue to grow by 28% per year, says PwC

Revenue generated by over-the-top (OTT) video streaming services is set to grow at an annual rate of 28.1%, according to PricewaterHouseCoopers research.

The PwC Global Entertainment and Media Outlook 2014-2018 report claims that OTT and digital music streaming are two of the fastest growing market sub-segments and that the growth of ‘24/7 access’ and micro-transactions suggest that flexible business models, offering “more choices and better experiences” are the key to monetising the digital consumer.

The study predicts that internet TV advertising will double its share of total TV advertising revenue in the next five years from 2.2% in 2013 to 4.5% in 2018. Internet TV ad revenue from traditional broadcasters will grow from US$3.7billion in 2013 to US$9.7 billion in 2018, said PwC.

“Traditional broadcasters still dominate and are adapting to the Internet video opportunity, creating a significant new revenue stream despite competition from Internet rivals,” according to the study.

The report also claimed that electronic home video revenue will exceed physical home video revenue – the sale and rental of DVDs and Blu-ray discs – in 2018. Globally, the total combined revenue from OTT and streaming services and broadcasters’ VOD services is tipped by PwC to grow at a compound annual growth rate of 19.9%.

“The bedrock of a strategy fit for the digital age is the digital mindset: getting ever closer to the customer – across the entire organisation, and in everything it does,” said Marcel Fenez, PwC’s global leader, entertainment and media. “We now see that mindset embedded in many entertainment and media companies.

“But the industry needs to get even closer to the consumer and adopt more flexible business models. To do this, companies must exhibit three behaviours: forging trust with consumers; creating the confidence to move with speed and agility; and empowering innovation. This will be an important step in monetising the digital consumer.”

Overall, PwC said that total entertainment and media spend on digital services is forecast to grow at a 12.2% compound annual growth rate between 2013 and 2018 and account for 65% of global entertainment and media spending growth.
However, spending on digitally delivered content will account for just 17% of total consumer spending in 2018 (excluding spend on internet access), compared to 33% of total advertising spending.