The growth of OTT is impacting markets and players

by Jacques BAJON

Now more than ever, the television sector must adapt as the market transitions to OTT. The pay-TV and free-to-air sectors are both affected, and OTT services have already launched. The race to reach critical size as fast as possible has already started as competition from the internet giants intensifies and global services from major US groups launch.

The television market is slowing down

Traditional TV access networks – terrestrial and cable – are still losing ground (-2.9% and -0.8% of TV households respectively between 2018 and 2019) to satellite (+1.1%) in the southern hemisphere and to IPTV (+10.8%) in the northern hemisphere. The number of TV subscribers is under pressure in mature markets. Linear TV viewing time is trending downwards (-18 minutes a day worldwide between 2014 and 2018).

TV revenues are still growing but at a slower pace. While the US market has already been contracting for five years, the major European markets are now also showing signs of slowing.

By 2023, the pay-TV market is expected to start dropping and fall below its 2019 level. Advertising revenues are likely to post average growth of 1.4% per year.

TV revenue growing only slightly worldwide

Change in TV revenue by source, 2015-2023

Source : IDATE DigiWorld in "World TV and video market"

US players are driving concentration of the sector

There have been various acquisitions and mergers between major media groups (production, publishing, distribution), especially in the United States where the biggest media groups are already concentrated. Comcast alone, which also includes the Sky group, accounts for 21% for the turnover generated by the 20 leading global players.

Evolving consumption patterns are forcing traditional players to increase their market power, by moving up in the value chain towards producing content and owning rights, for example.

The European industry seems to be too fragmented to be able to compete. Unable to sign similar deals, European players are responding by entering into agreements on a national scale (e.g. BritBox, Salto, LovesTV, 7TV, Stievie) or international scale (e.g. European Broadcaster Exchange, the Alliance and Nordic 12).

American players' hegemony continues

World’s top 20 TV/video companies in 2018, by revenue

Source : IDATE DigiWorld in "World TV and video market"

Media sector driving OTT growth

Growth of linear TV and OTT revenue between 2015 and 2023

Source : IDATE DigiWorld in "World TV and video market"

Media groups, the battle for SVOD

OTT video revenues are growing fast (+19.3% in 2019), driven by the success of SVOD and ad-funded free video platforms. The OTT market is expected to continue growing and account for a quarter of the total audiovisual market in 2023, versus 17.6% in 2019.

OTT is driving growth in the TV/video market

25% OTT’s share of total TV/video

Netflix and Amazon Prime Video have established themselves as the SVOD leaders nearly everywhere. Although offerings from local TV groups offer some competition, they are struggling. However, the global launch of services from Disney and WarnerMedia could disrupt the balance of power in the coming years. The growth of this sector obviously appeals to traditional media groups, but also to internet and telecom leaders. They may have different goals, but they share a common trajectory: the leverage of OTT.

SVOD market competition

Media, Internet and telecoms companies each have different goals

Source : IDATE DigiWorld in "Pay-TV markets and players"

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