OTT video market bursts with potential

Michelle Gwee and Saahil Malik/Delta Partners
12 Oct 2015

The OTT video market is brimming with potential – particularly in emerging markets. Driven by factors such as smartphone and Internet adoption and based on both paid and ad-supported models, the emerging market opportunity is projected to reach approximately $12 billion by 2019.

Earlier this year, we explored three ways in which telcos in emerging markets can capture this opportunity — organic development, partnerships and M&As. In all three scenarios, it is arguably crucial to develop a compelling OTT video value proposition. How then can we ensure this is well-tailored to emerging markets?

The pervasiveness of piracy, partially driven by the relative absence of strict piracy laws and insufficient IP rights education. Torrenting is particularly rampant in emerging Asia with torrent websites often emerging among the top in traffic rankings.

Also, customers in emerging markets are difficult to reach and innovative marketing tactics are crucial to overcome this barrier.

It is challenging to strike quality content partnerships, as incumbent local cable/Direct-to-Home (DTH) players often already own premium local content or have exclusive distribution rights to such content. Consequently, new OTT video entrants may be left with aggregating second-tier content which is not compelling to many viewers.

Consumers are often hesitant to pay high (and recurring) amounts for content, especially since piracy seems like a viable alternative. For example, the average spend per Pay-TV account is approximately $4/month in emerging Asia Pacific versus the global average of ~$20/month. This makes it harder for OTT players to achieve sufficient scale, particularly without similar (or differentiated) premium content as that provided by Pay-TV operators.

Further, user experience is effected negatively by slower network speed. For instance, average broadband connection speeds in India and Indonesia (2.3, 2.2 Mbps respectively) are approximately half the global average (5.0 Mbps).

In order to develop a compelling OTT video proposition, several key success factors should be in place. Some of these are ‘table stakes’ or common to both emerging and developed markets (such as a good user interface and an effective windowing strategy). Beyond that, several key enablers or success factors are relevant to tackle the specific emerging market challenges:

Some players (telco and non-telco) have already recognised these challenges and are specifically incorporating some of the above enablers into their overall proposition.

Many of these propositions are differentiated either by service delivery or customer experience.

First, Digital Rights Management (DRM). To address the challenge of piracy, HOOQ has invested in robust DRM to protect content from unauthorised redistribution and enable better negotiation for exclusive content.

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