What’s Driving the OTT industry?

By Bryan Hill, Director of Marketing & Business Development, Digital Media, Interxion


20 December 2018

Over the past few years we’ve watched live streaming grow significantly in popularity – and in 2019 (and beyond), we can only expect this to continue. In fact, the global video streaming market is expected to reach $82 billion by 2023.

As the rise of online streaming services continues to alter the media habits of consumers worldwide (already 61 percent of young adults in the U.S. primarily use online streaming to watch TV), we will only see more of the digital media industry moving toward greater streaming options. As part of this continued growth, I expect four major shifts within the market in 2019.

1. A Battle Will Commence in OTT

Over the past few years, we’ve seen tech giants such as Netflix, Amazon/Twitch, Facebook and Google dominate traditional broadcasters when it comes to the digital distribution of content to consumers. As a result, we’ve witnessed a great deal of consolidation within the industry as traditional broadcasters try to keep up. For example, AT&T acquired Time WarnerDisney acquired 21st Century Fox, and Comcast purchased Sky for $39 billion just within the past few months.

What these moves tell us is that everyone is gearing up for a battle of distributing content to consumers directly. In 2019 we will see pre-announced new direct-to-consumer streaming services from both Disney (with Disney+ and potentially international Hulu) and AT&T. With these new entrants delivering content directly to consumers, the OTT landscape is about to change. I expect we will see about eight or nine giant players fight each other for mindshare in this space in the end.

Moreover, the industry will become an increasingly challenging environment for small content providers and those unable to scale, unless they deliver a niche content options – such as Perform Group, which with DAZN has made a big impact in the streaming of sports, including an eight-year $1bn boxing deal alone. The only way these smaller content providers will make it out alive is if they can provide an offering that is in high demand. This means offering not only must-have content, but also delivering a high-quality product that always works.

2. New Ad Models Will Enter the OTT Scene

Just as traditional broadcasters must make money, today’s new OTT players need to as well. However, because OTT providers like Netflix don’t serve traditional advertisements and have set new consumer expectations to not tolerate them, I expect that we’ll begin to see new and different advertisement models being experimented with in efforts to create extra monetary value.

What will these new ad models look like? I think we’ll see a lot more product placement within series and live television, as well as sponsored channels and content. These models will likely vary across different services or even user-to-user, and after months of experimentation, I think the end result will be a complex hybrid model based on different types of users and content.

3. Gaming Moves to the Cloud

Similar to how they’ve come to watch TV and movies, consumers now expect video games to be available on demand and accessible from any screen. To meet these demands, I believe the future of gaming will take place in the cloud. Companies like Microsoft, Google, and EA all made cloud gaming announcements in October 2018 alone, with Project xCloudProject Stream and Project Atlas, respectively, to join existing services from Sony Playstation NownVidia and Blade’s Shadow. I expect all major gaming companies to follow suit.

However, unlike streaming TV and movies, video games – with their graphically-rich content that requires real-time interaction between player and the game – will pose some big challenges for gaming companies, particularly related to latency and quality. In order to succeed they’ll have to guarantee prime customer experiences without any graphic distortion or game input delay.

4. OTT Meets Personalization

From a user perspective, consumers are likely blissfully unaware that their OTT experiences are starting to be tailored to their unique viewing habits – a font size, menu adjustment or color update to their user interface here, a recommended programming prompt there. However, as we continue to shift to an OTT world, I expect to see the micro-personalization of these experiences become even more critical.

Think about it, these small details can completely alter a viewer’s experience. If you finish watching “Making a Murderer” and are recommended to watch “Curious George” next, you probably will shut off the service, as this program is completely irrelevant to you. But, if you’re prompted to watch “Inside the Mind of a Serial Killer,” you may continue watching for another three hours. These small details can make the difference between getting users to consume more content and losing them altogether.

The Road Ahead

When it comes to delivering more of these streaming services, it becomes all about meeting user expectations and providing exceptional experiences. To ensure this, content providers will need to process data in real time, with low latency. Data centres like Interxion’s are positioned at the crux of these trends, as our facilities provide interconnection to the cloud and connectivity providers that will help meet the industry’s needs.

To learn more about how Interxion can help your digital media company thrive in the age of streaming, click here.