i3 - September/October 2017 - 42

By Gary Arlen

C S PAC E

In Deals and Data,
OTT Reaching Dominance

hen two Wall Street analyses, each painting rosy outlooks
for over-the-top video (OTT) emerge along with deals
involving Sony, Amazon, Hulu and even a cable package,
something is brewing. Stir in consumer use data, and the internet
video world is bubbling with excitement.
Morningstar Inc., the investment
research firm, predicts that Amazon
Prime will have more customers than
cable and satellite TV providers by
the end of next year. True, not all of
Prime's customers use the video service.
However, citing the rapid decline of
cable subscribers (down by more than
a million households during this year's
spring quarter alone), Morningstar
expects that the Amazon Prime audience (about 80 million homes) will surpass the cable/satellite household count
(now below 90 million). Morningstar
also pointed out that Amazon's new
marketing tactics are taking Prime into
more "lower-income American households," when the price is right.
A few days later, Barclays Capital
predicted that linear pay TV systems
(cable and satellite) will lose 31 million
customers within the next 10 years.
That's about one-third of their customer
base. Barclays' equity researchers,
42

SEPTEMBER/OCTOBER 2017

citing the "shifting viewing experience" -
especially among young audiences - said
that eventually "OTT models will become
indistinguishable from legacy media."
The media industry also is in the midst
of an OTT frenzy. Perhaps the most
astounding was a deal between the
National Cable TV Cooperative (NCTC)
and Sony Interactive Entertainment,
which will make the PlayStation Vue OTT
service available to more than nine million
cable homes. NCTC acts as a purchasing
agent for more than 850 small and
medium-sized local cable systems. Vue,
which was positioned as a "cable alternative," is now a feature of the cable

broadband operations, offering up to 100
channels such as ESPN, CNN, Fox News,
TNT and Discovery as well as local channels. Just prior to the Vue deal, NCTC
signed to distribute Fubo TV, which offers
60 live channels via OTT. And Hulu added
HBO and Cinemax to its programming
lineup and signed on with Amazon, which
will offer Hulu live OTT service on Amazon
Fire TV and Amazon Fire TV Stick.
Meanwhile, Parks
Associates found more
Eventually OTT
than half of U.S. broadmodels, especially
among young audi- band homes watch interences, will become net video through their TV
indistinguishable
from legacy media. sets. Even more dramatically, 72 percent of homes
without a pay TV subscription buy at least
one OTT video service. Along similar lines,
Leichtman Research Group's Emerging
Video Services survey agreed that 72 percent
of homes without pay TV buy a subscription
video on-demand service, compared to
62 percent of homes that subscribe to pay
TV. LRG tallied 64 percent of U.S. homes
as subscribers to Netflix, Amazon Prime,
Hulu and/or similar SVOD feeds, up from
47 percent two years earlier. More than
half now use at least two OTT services.
Along with these bullish reports, ad
agency Zenith Media's Online Video
Forecasts 2017 July report found viewers
spend more than 47 minutes per day
watching online videos, more than half of
it on mobile devices. Zenith expects that by
2019, nearly three-quarters of online viewing will be on mobile devices. It expects
that online ad spending will "flip" next
year, with $18 billion going to mobile video
versus $15 billion to legacy platforms.
As the Barclays report concluded, "the
viewing experience is shifting" meaning
that it's "tough to imagine a world where
all of the 200+ cable networks in existence
today remain viable." The OTT ecosystem
is accelerating its role as a replacement
for linear TV even faster than expected.

MEDIA REPORTS ALIGN: OVER-THE-TOP VIDEO IS ON THE RISE

⅓ LESS

Cable and satellite
customers within
the next 10 years.

47 MINUTES

Time spent watching
online videos, more
than half on mobile
devices

72 %

Homes without a pay
TV subscription that
buy at least one OTT
video service

18 BILLION

Online ad spending
expected for mobile
video versus $15 billion
to legacy platforms
I T I S I N N O VAT I O N

Getty Images/iStockphoto

Business

i3 - September/October 2017

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