Few trends will be bigger in 2018 than the transformation of TV and video by over-the-top (OTT) technology and services. Netflix, Amazon Video, YouTube, and other online-only services will account for 18% of total paid and ad-supported TV and video revenues next year – and 60% of growth. In the world’s most advanced TV and video market, the US, OTT will take an astonishing 98% of growth. Here we present five Ovum predictions related to the movement’s most influential players: Facebook, Amazon, Apple, Google, and Netflix – or FAANG, for short.
FANG will account for 9% of total US TV & video revenue – and 64% of revenue growth
Figure 1: US, share of total TV & video revenue and revenue growth by platform, 2018
In the US, just four companies – Facebook, Amazon, Netflix, and Google (FANG) – will take nearly two-thirds of all new TV and video revenue in 2018. Their gains will be due partly to the saturation of traditional TV in the country, but also to their growing domination of the OTT video market. Amazon and Netflix will attract 69% of OTT subscription revenue, while Google and Facebook will corner 45% of OTT in-stream video advertising (also known as advertising-funded video on demand) spend.
Amazon will generate more revenue from OTT video than Netflix in the US in 2018
Figure 2: US, total OTT video revenues by platform, 2015- 18
Amazon’s growing array of ways to pay for video – subscriptions, digital rentals, electronic sell-through (EST), and bundles of third-party TV apps – will attract $5.8bn in video-related revenue in the US in 2018. Netflix’s subscription-only model will generate $5.3bn. Arguably, the e-commerce giant is “cheating,” as Ovum’s estimates count fees from Amazon’s ever-growing Prime bundle. But maybe that’s the point. Rules are meant to be broken and Amazon is the most daring offender.
#NetflixEverywhere still won’t be the No. 1 OTT video provider in 19 major markets
Figure 3: No. 1 OTT video provider by subscriptions by market, 2015- 18
Despite the hype, Netflix still won’t have won a majority of OTT video subscribers in at least 19 countries by the end of 2018. Its rivals share no single strategy in common, with various offerings from pay-TV operators, broadcasters, and local start-ups beating the US-based OTT video giant to the top spot. Key success factors will include first-mover advantage, exclusive local content, live programming, and more affordable pricing, especially in developing markets that differ greatly from the US.
Facebook Watch will go international in 2018, but its global impact will be minimal
Figure 4: Global AVOD revenue, by platform, 2018
Facebook entered the ad-supported video on demand (AVOD) market with the US launch of Facebook Watch in 2017. While we expect Watch to roll out internationally next year, Facebook’s share of global AVOD revenue will remain negligible in 2018. Facebook must attract compelling local content, refine its video ad experience, and offer more robust and reliable ad metrics before it can truly compete with YouTube and other premium AVOD platforms for consumer attention and advertiser spend.
Apple will launch a new premium OTT video offering, starting in the US
Figure 5: US, share of OTT video revenue by provider, 2015 and 2018
Once a pioneer of paid online video with its iTunes store, Apple will see its share of OTT video revenues in the US decline to less than 4% in 2018. The fall will be caused partly by Amazon closing in on the iPhone maker’s leading position in transactional video on-demand (TVOD), but mainly by the growing popularity of Netflix and Amazon Prime Video. We expect Apple to launch its own premium offering, perhaps with an Apple Music-like free promotion for users of its devices, starting in the US.
These predictions are drawn from Ovum’s 2018 Predictions: Consumer & Entertainment Services (subscription required) report. Access to the full report, underlying data, and analysts are available to clients of Ovum’s Knowledge Center research service. For more information, please click here.
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