The growth of subscription OTT services has been driving the changing trends in the pay TV landscape. OTT video services have attracted hundreds of millions of subscribers worldwide, causing pressure on traditional pay TV operators. This OTT growth trend is expected to continue, reaching a subscriber base of 400 million in 2018, according to ABI Research.
OTT video services offer less expensive alternatives and no long-term contract features compared to existing Pay-TV offerings that are driving an increasing number of pay TV customers to switch to these OTT services.
“vMVPD services offer live TV packages as low as $10 and customized packages are attracting cost-sensitive customers,” said Khin Sandi Lynn, industry analyst at ABI Research. “Pay TV operators recognize the consumer demand for vMVPD services and are trying to expand their OTT offering by providing more content choice to compete against other subscription OTT services such as Netflix.”
Despite the low cost of basic vMVPD packages, the availability of live sports packages and customization features contribute the higher ARPU compared to other subscription OTT services. Hulu and YouTube launched live streaming packages in 2017 creating more competition in the vMVPD market.
“As competition intensifies, content and quality of service are crucial to win the OTT war,” concluded Lynn. ABI Research forecasts that OTT video services will put more pressure on traditional pay TV services especially in the developed markets with high broadband and pay TV penetration. The worldwide OTT video market is expected to grow at CAGR 10% to generate $51.4 billion in 2022.