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‘OTT Video in Emerging Markets: Monetization Strategies and 5-Year Revenue Opportunity,’ a Research Report by Pyramid Research, analyzes the revenue potential of the OTT video services across emerging markets in Africa and the Middle East, Asia Pacific, Central and Eastern Europe, and Latin America, identifying and mapping key OTT video players from local telcos and payTV providers to pure-play OTTs, and best practices for differentiation and OTT video monetization. The report provides 5-year projections for SVoD and TVoD accounts and revenue by region and for key countries including Brazil, China, Mexico, Russia, Saudi Arabia and South Africa. The analysis is built upon in-depth case studies of Netflix Latin America, Clarovideo, OSN Go, iRokoTV, Ivi Russia and LeTV.
The report is structured as follows:
• Section 1: OTT Video Market Trends and Monetization Strategies in Emerging Markets ̶ Challenges and opportunities for OTT service providers, positioning strategies for pay-TV operators and effective business models for OTT video provisioning.
• Section 2: SVoD and TVoD Demand and Revenue Outlook Across Emerging Markets ̶ Overview of forecast assumptions and covered countries and regions, review of SVoD accounts and paid OTT video revenue per region.
• Section 3: OTT Video Opportunity, Competitive Landscape and Keys to Success in Latin America; including region-level market overview and trends as well as deep-dive analysis of the region’s largest markets Brazil and Mexico and key players Netflix Latin America and Clarovideo.
• Section 4: OTT Video Opportunity, Competitive Landscape and Keys to Success in Africa and the Middle East; including region-level market overview and trends as well as deep-dive analysis of Saudi Arabia and South Africa and key players OSN Go and iRokoTV.
• Section 5: OTT Video Opportunity, Competitive Landscape and Keys to Success in Central and Eastern Europe; including region-level market overview and trends as well as deep-dive analysis of the region’s largest market Russia and a key player Ivi Russia.
• Section 6: OTT Video Opportunity, Competitive Landscape and Keys to Success in Emerging Asia Pacific; including region-level market overview and trends as well as deep-dive analysis of the region’s largest market China and a key player LeTV.
• Section 7: Key Takeaways and Strategic Recommendations for OTT Video Service Providers.
• 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.
• 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, we expect 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 US$18.8bn for the 2015-2019 period, over 80% 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, all pay-TV operators should consider aggregating third-party OTT services within the main service portfolio in addition to standalone OTT propositions.
The ‘OTT Video in Emerging Markets: Monetization Strategies and Five-Year Revenue Opportunity’ report comprises market sizing and demand analysis and trend analysis for OTT video services across emerging markets as well as detailed case studies. Insights and data are derived through a mix of desk-based secondary research, primary research as well as quantitative modeling for sizing market opportunity.
Pyramid’s methodology for OTT video market sizing and demand analysis combines secondary and primary research, with international benchmarking and quantitative modeling in order to present a complete picture of the socio-demographic, competitive and demand trends affecting the adoption of OTT video services across emerging markets. Primary research involves in-depth interviews with market players, and the secondary research effort includes obtaining relevant data and intelligence through publicly available sources, regulatory authority publications, trade associations, specialist databases and company financial reports, presentations and press releases.
• The “OTT Video in Emerging Markets: Monetization Strategies and Five-Year Revenue Opportunity” report provides a comprehensive examination the nascent OTT video market opportunity to help executives make informed investment decisions, develop effective partnerships and optimize return on investment.
• This report provides a five-year forecast of SVoD accounts and SVoD and TVoD revenues by region and for key countries across emerging regions to enable executives effectively position their companies for emerging trends in demand for OTT video and growth opportunities.
• The report incorporates in-depth overview of key challenges and business model trends in the OTT video market across emerging markets and best practices for monetizing OTT video for stakeholders to develop competitive strategies as well as differentiation.
Section 1: OTT Video Market Trends and Monetization Strategies in Emerging Markets 10 Definitions: OTT video pricing models Definitions: OTT service providers Definitions: Content provision in the connected era Challenges and Opportunities for OTT Service Providers Content Procurement Piracy and Payments The Role of Legacy Broadband and the Mobile Opportunity Positioning Strategies for Pay-TV Operators Monetizing OTT Video
Section 2: SVoD and TVoD Demand and Revenue Outlook Across Emerging Markets 23 Key Forecast Assumptions Regions and Countries Covered Emerging Markets: SVoD Accounts by Region SVoD Penetration of Households Paid OTT Video Revenue Forecast by Region Comparative Review of Paid OTT Video Revenue and Pay-TV Revenue
Section 3: OTT Video Market Opportunity, Competitive Landscape and Keys to Success in Latin America 30 OTT Video Market Overview SVoD Accounts Forecast Paid OTT Video Revenue Forecast Key Market Trends Mexico: OTT Video Market Overview Mexico: Paid OTT Video Accounts and Revenue Forecast
Mexico: Key Market Trends Brazil: OTT Video Market Overview Paid OTT Video Accounts and Revenue Forecast Brazil: Key Market Trends Case studies: Netflix LATAM: Content and Partnerships and Business Outlook Clarovideo: Content and Partnerships and Business Outlook
Section 4: OTT Video Market Opportunity, Competitive Landscape and Keys to Success in Africa and the Middle East 47 OTT Video Market Overview SVoD Accounts Forecast Paid OTT Video Revenue Forecast Key Market Trends South Africa: OTT Video Market Overview Paid OTT Video Accounts and Revenue Forecast Key Market Trends Saudi Arabia: OTT Video Market Overview Paid OTT Video Accounts and Revenue Forecast Key Market Trends Case studies: OSN Go: Content and Partnerships and Business Outlook iRokoTV: Content and Partnerships and Business Outlook
Section 5: OTT Video Market Opportunity, Competitive Landscape and Keys to Success in Central and Eastern Europe 64 OTT Video Market Overview SVoD Accounts Forecast Paid OTT Video Revenue Forecast Key Market Trends South Africa: OTT Video Market Overview Paid OTT Video Accounts and Revenue Forecast Russia: OTT Video Market Overview
IVI Russia: Content and partnerships and business outlook
Section 6: OTT Video Market Opportunity, Competitive Landscape and Keys to Success in Emerging Asia Pacific 75 OTT Video Market Overview SVoD Accounts Forecast Paid OTT Video Revenue Forecast Key Market Trends South Africa: OTT Video Market Overview Paid OTT Video Accounts and Revenue Forecast Key Market Trends China: OTT Video Market Overview Paid OTT Video Accounts and Revenue Forecast Key Market Trends Case study: LeTV: Content and Partnerships and Business Outlook Section 7: Key Takeaways and Strategic Recommendations for OTT Video Service Providers 86
Appendices 91 Companies mentioned Definitions Sources and related research About Pyramid Research
Challenges and Opportunities for OTT Service Providers in Emerging Markets
There are plenty of opportunities in the OTT video space for emerging market providers, but success will depend primarily on the right mix of content and user experience.
The strength of the OTT video opportunity varies across markets depending on many factors, such as broadband networks, online and offline windowing systems, regulatory frameworks and other local factors, such as the extent of piracy and credit card penetration. However, an attractive and relevant content offer is a prerequisite to any successful paid video service, either delivered via established pay-TV platforms or OTT: The potential to derive value from locally relevant VoD , as well as from linear content, alongside the potential to provide superior user experience across multiple devices, are the critical factors to the success of OTT video.
Given the abundance of free content on the Internet, the monetization of OTT video, either via subscription or transactional models, is a major challenge across all markets. It is an even greater challenge in emerging markets where consumers’ disposable income for entertainment services is lower.
Challenges Opportunities
Content • Cost of content • Access to content • Windowing systems
• Original content • Linear content and catch up TV • Personalization, user experience
Positioning Strategies for Pay-TV Operators: The Need for OTT Engagement
Most pay-TV operators see OTT investment as inevitable given the trend toward moving services to the cloud and the open Internet and the customer expectation to access content on any connected device. Evidence from developed markets shows that video consumption on devices other than TV sets is growing fast. At the same time, consumer habits are rapidly shifting, with the youth segment increasingly consuming more on demand content than linear TV.
Rather than a competitive threat that can cannibalize pay-TV businesses, OTT is emerging as an alternative video delivery platform that allows pay-TV operators to penetrate into new segments (lower income households/ non-pay-TV households) and to deploy lighter and more flexible business models for video services.
To meet the demand for multiple viewing platforms, and target “on-net” as well as “off-net” customers, pay-TV operators are increasingly complementing their pay-TV and TV Everywhere services for existing subscribers with pure OTT services open to all broadband users. OTT video has therefore become integral to the strategy of pay-TV operators and for telcos offering IPTV services. Telefonica, for example, has created a next-generation video platform, the Global Video Platform (GVP), which allows subscribers to access video content either through premium services such as managed IPTV, through hybrid DTH and cable STBs or through open OTT networks.
For pay-TV operators, the OTT impact at least in revenue terms is so far limited, but a futureproofed media strategy will require OTT engagement beyond second screen/TV Everywhere.
PREMIUM PAY-TV (IPTV)
Best broadband brings best TV experience
HYBRID TV (DTH/CATV) Satellite TV meets the
Internet
OTT (PLAY) Telefonica's
Service for the pure OTT arena
GVP
EXHIBIT 12: TELEFONICA, UNIFIED MULTI-TECHNOLOGY GLOBAL VIDEO DELIVERY PLATFORM (GVP)
EXHIBIT 11: OTT/VOD GROWING USAGE, UK BENCHMARK
38% of 18-34 years old state they already watch more on-
demand than linear TV
17.5% of 18-34 years old are likely to subscribe to either Netflix or Lovefilm (Amazon) in the near
future
The share of VoD requests coming from tablets increased from 3% to 12% between 2011 and 2012. Over half of tablet owners use their device for
Black indicates countries/regions excluded from the analysis. Red and green capture regions covered. Green indicates countries examined in detail. *For this report, Turkey and Israel have not been included in AME coverage. ** Emerging countries in APAC exclude Australia, Brunei, Hong Kong, Japan, Macau, New Zealand, Singapore, South Korea and Taiwan.
Regions and Countries Covered
The report covers the emerging markets across Latin America (LATAM), Africa and the Middle East* (AME); Central and Eastern Europe (CEE), and Asia Pacific (APAC)**. In-depth country level analysis and forecast is provided for the following countries:
Mexico, Brazil, South Africa, Saudi Arabia, Russia and China.
EXHIBIT 21: SHARE OF PAID OTT SVOD/TVOD REVENUE, BRAZIL, MEXICO AND REST OF LATAM
20%
25%
30%
35%
40%
45%
50%
2013 2014 2015 2016 2017 2018 2019
Brazil Mexico Rest of LatAm
Mexico and Brazil combined accounted for 53% of LATAM OTT SVoD/TVoD video revenue in 2014, in line with their share of regional pay-TV revenue (52%). However, differently from pay-TV where Brazil is by far the largest market in LATAM generating almost twice the revenue of Mexico, in OTT video, Mexico leads the regional market with a 32% revenue share.
The second largest broadband market in the region and the closest to the U.S., Mexico is ahead of the curve in LATAM in OTT video. In the next two years, as OTT video gains traction in Brazil and in the rest of the region, primarily in Colombia, Argentina and Chile, in spite of sustained OTT growth, Mexico will lose its leading position. We expect Brazil to experience stronger growth and surpass Mexico in revenue terms in 2016, as OTT video will complement traditional pay-TV platforms, exploiting unaddressed demand for video services.
For the later part of the forecast (2017-2019), we expect further traction coming from markets beyond Mexico and Brazil (rest of region), especially from sizeable markets, such as Venezuela and Peru, which have suffered from comparatively lower broadband penetration and poorer network performance to date.
Brazil will surpass Mexico to become the largest OTT video market in 2016, and the contribution of the rest of the countries in the region will increase as the market beyond the two largest countries picks up.
OTT Video Market Attractiveness Index: Worldwide Country Rankings, Market Drivers and Positioning Strategies In order to assess the strength of the OTT video opportunity across 60+ countries worldwide, Pyramid Research has developed the proprietary OTT Video Market Attractiveness Index. The Report includes a discussion of the methodology behind the OTT Video Market Attractiveness Index, a strategic analysis of the results of the Index, a closer look at the results pertaining to emerging markets, and a section listing the key takeaways of the Index findings, including issues such as regulatory frameworks, market maturity, the role of superfast broadband and the revenue opportunity.
Fixed Communications Forecast
Forecasts updated quarterly The Fixed Communications Forecast quantifies fixed voice, broadband by technology and IPTV adoption and service revenue trends, at the residential, corporate and total market levels. It tracks demand and projects future growth for 101 countries worldwide and is available at the country, regional and global levels.
Pay-TV Forecast
Forecasts updated bi-annually (twice a year) The Pay-TV Forecasts are designed to provide competitive intelligence on the pay-TV and mobile TV dynamics for 60 countries as well as regionally and globally. They track demand patterns for free and pay-TV services over terrestrial, satellite and mobile platforms worldwide, providing market share information at both the technology and operator levels as well as five-year adoption and revenue projections.
LTE Business Models: Best Practices in Network Deployment, Positioning and Service Pricing Built around five detailed country case studies of markets where LTE networks have been launched, this Research Report examines LTE spectrum allocation and availability, network deployment considerations, product and pricing strategies and LTE adoption trends as well as drivers for market growth. Highlighting what works and what doesn't - based on the experience of commercial operators - this report uncovers the pain points and the keys to success for LTE service providers worldwide.
ADVISING LEADERS IN THE GLOBAL COMMUNICATIONS INDUSTRIES ON EMERGING MARKETS AND SERVICES OPPORTUNITIES
Pyramid Research (www.pyramidresearch.com) offers practical solutions to the complex demands our clients face in the global communications industry. Its analysis is uniquely positioned at the intersection of emerging markets, emerging technologies and emerging business models, powered by the bottom-up methodology of our market Forecasts for more than 100 countries — a distinction that has remained unmatched for more than 25 years.
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Our highly structured analysis closely examines the performance, technology trends, macroeconomic and regulatory environment, of service providers and equipment vendors in each of the more than 100 countries we cover. Using a bottom-up approach, we size market demand across services and countries, and conduct end-user surveys to validate adoption trends and anticipate shifts in demand. Our commitment to intensive, direct interviewing of regulatory authorities, service providers and manufacturers — complemented with end-user data — ensures the most reliable portrait of every market we examine.
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