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Report: OTT Video in Emerging Markets Growing

17 Feb, 2015 By: Erik Gruenwedel

With Netflix planning to operate in 200 countries by 2017, access to over-the-top video is projected to grow to 6.4% of emerging market households — or 102.7 million households — by the end of 2019, according to new data from Pyramid Research.

Emerging markets include Asia Pacific, Latin America, Africa, the Middle East, Central and Eastern Europe.

London-based Pyramid said subscription video on demand (SVOD) services were available to 1.3% of emerging market households in 2014, with a user base of 19.4 million. Asia Pacific and Latin America accounted for 90% of paid OTT revenue in emerging markets in 2014, with Latin America being the only emerging market region where Netflix currently operates.

Due to escalating costs associated with content license rights (thanks to Netflix and Amazon Prime), emerging markets are turning to ad-based OTT video platforms combined with transactional VOD.

“We are witnessing the emergence of hybrid [business] models, whereby services offer free content to expand the user base, but at the same time position premium SVOD and transactional VOD services to generate additional revenue,” Daniele Tricarico, senior analyst at Pyramid Research, said in a statement.

Indeed, the research firm expects the total paid OTT revenue (SVOD and transactional VOD) in emerging markets to expand in the next five years to represent 7% of the regional pay-TV revenue.

That said, the Asia Pacific and Latin America regions could see their percentage of paid OTT revenue slipping to 86% in 2019, due to the 800-pound gorilla: China. The proliferation of hybrid OTT models combining advertising-funded and SVOD will be major drivers for growth in the Communist country.

“4G, fiber broadband and e-commerce will support growth of OTT, but content regulation may hamper evolution in the near term. As the paid OTT opportunity strengthens in China, the regional Asia Pacific market will pick up from 2015 to 2016 onward,” Tricarico said.

Meanwhile, in Central and Eastern Europe, the impact of SVOD has been limited, with transactional VOD more common.

“SVOD adoption will pick up in the forecast period as the leading providers seek to monetize from the pervasiveness of online video through both transactional VOD and SVOD,” she said.

Pyramid projects paid OTT revenue will represent 5% of pay-TV in the region by 2019.

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