OTT Moves Into Mass Adoption As it Crosses Several Major Milestones; Now Comes the Complicated Part

A string of studies and analyses this month say that OTT services are hitting critical mass, becoming adopted in several key ways by a majority of U.S. households. With this shift, it’s more important than ever for publishers to figure out where they fit in, and how they create strategies for success in both building audiences and paying for everything with smart monetization strategies.

But first, the numbers:

  • The share of homes with an SVOD subscription has crossed 50 percent, according to Nielsen data analyzed by Pivotal Research Group. A previous studio suggested that milestone was passed in 2014, but regardless, services such as Netflix have clearly arrived en masse. Live viewing of TV continues to drop as SVOD and other technologies expand the options viewers have for when and on what device they watch a show.
  • At least 52 percent of U.S. households have at least one TV connected to the Internet, according to the NPD Group (a broader study suggested the number might be as much as 56 percent). Most typically, that Internet connection is mediated through a game console such as a Sony PlayStation 4 or Microsoft Xbox One, but the study found the average household had three media-streaming devices connected to the Internet. And Nielsen reports video usage through those devices was up 100 percent just in the last half of last year.
  • And not only do more people have an SVOD subscription, and have Internet-connected TVs, a Vindicia study found that more than half of respondents would upgrade their subscriptions they have to a higher, ad-free tier of service.

This string of studies suggests burgeoning consumer openness to services and experiences that can be smarter, richer and more targeted than traditional TV ever has been able to provide.

The next step is a bit more complicated for publishers. The Vindicia study found that many OTT users would be open to buying their way out of having to watch ads, by subscribing to an ad-free premium service tier.

I’m guessing that would be true for one or two top channels, but I’m also guessing that won’t extend to 15 or 20 more beyond that (never mind the hundreds of others with apps on the iTunes Store and Roku). We’ll probably see something that looks familiar, much as we already have many traditional pay-TV customers who buy premium subscriptions to, say, HBO and Showtime on top of their basic package of ad-supported services.

For OTT publishers, this means they’ll have to create a sophisticated monetization strategy that uses big data and selectively targets high-value ads to specific viewers.

It also means ensuring the user experience is a good one, because users will easily be able to choose other OTT channels and drop the apps that don’t provide a good experience with a carefully modulated advertising or other revenue component. Now, with OTT moving beyond the testing stage into broad adoption, it’s going to be very interesting. Innovate everywhere, and learn quickly.