OTT video revenue to generate $10.7bn in 2014

Furthermore the report by research and consulting firm Strategy Analytics predicted OTT video revenues would overtake those of DVD within five years.

Consumer use of subscription VOD services like Netflix and Hulu will be the biggest driver in OTT video revenue growth of 21% this year, the report said.

Subscription VOD revenues in particular will grow 26% in 2014 to $5.1bn, accounting for 48% of total OTT video revenues. OTT refers to film and television content delivered over the internet, rather than via a cable or satellite company.

Revenues from retail (download-to-own) will grow 13% to $1.4bn (13% of total projected OTT revenue in 2014) while renting (streaming and temporary downloads) will grow 21% to $681m (6% of revenue).

The report said advertising based around OTT content such as video ads will account for the remaining 33% of revenues in 2014, growing by 17% to $3.6bn.

Revenues from the OTT video sector are forecast to double from 2013-2019 and reach $18bn. That number encompasses $8.8bn in subscription revenues, $1.9bn in retail sales, $980m in rentals and $6.4bn in advertising revenue.

“Subscription services are the lifeblood of the OTT video industry,” said Michael Goodman, director of digital media for Strategy Analytics. “An extensive library of TV shows and movies – with just enough blockbuster titles – at an affordable price has proved a compelling cocktail for consumers.

“Barring a totally unexpected collapse, Netflix has won the battle for supremacy in this sector, accounting for about three-quarters of subscription video revenue in North America. With its momentum only growing, the other services, such as Hulu, HBO Go, YouTube and Amazon, are left to fight over the scraps.”

The report went on to say the average North American broadband user will spend almost $29 on OTT services in 2014, up 18% from 2013. By 2019, this will have increased by 78% from 2013 levels to $43.51.

“It’s amazing to think people spent almost half as much on internet film/TV content last year, such a new industry, as they did on DVDs – a format that’s been around for 20 years,” said Goodman.

“By the end of this year there’ll be about 54m subscriptions to over-the-top video services such as Netflix, Hulu and MLB.com. In five years this will reach about 6m – at which point OTT revenues will have overtaken DVDs.”