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The evolving OTT media landscape

June 27, 2022

Young people using smart phones watching social media content online wearing face masks against coronavirus pandemic.

Jonathan Kriegel

CEO

According to the recently released “Global Entertainment and Media Outlook, 2022-2026” by PwC[i], over-the-top (OTT) video grew an additional 22.8% in 2021, pushing revenue to US$79.1 billion. However, the pace of OTT revenue growth will moderate from here; it is expected to grow at a 7.6% CAGR through 2026 to US$114.1 billion. Traditional TV, beset by competition from OTT streaming services, will see global revenue shrink at a -0.8% CAGR, from US$231 billion in 2021 to US$222.1 billion in 2026. While, cinemas, which are slowly reviving from the pandemic-driven shutdowns, won’t regain their 2019 revenue total of US$45.2 billion until 2023.

The report highlights how the entire industry is being reshaped by algorithmic search and recommendation engines that continue to shape content choices for billions of consumers worldwide. The report states, “There have always been variations in the ways different demographics and age groups consumed and engaged with media. But today’s differences are more accentuated as the behavioral shifts ushered in by the pandemic collide with the distinctive expectations and aspirations of the younger generation. The fault lines run through homes or even one living room. It’s commonplace to have four people of different ages from the same family on the same couch, immersed in four different E&M universes, all accessed via different devices. One might be on a games console or a virtual reality (VR) headset having a conversation, another flicking through short videos on the phone, a third streaming a movie on a tablet, and a fourth updating her social media page on a laptop.”

Per capita spending on entertainment and media, including broadband, is the highest in North America at US$2229, while it is the lowest in the Middle East & Africa region at US$82, according to Omdia. The spending is growing faster in emerging markets, with Turkey, Argentina, and India projected to grow ahead of the rest of the world until 2026. 

Graph

OTT video landscape

The U.S. remains the largest OTT video market, generating $29 billion across SVOD and transactional VOD (electronic sell-through and rentals) segments in 2021[ii]. China was in the second position, with OTT video revenue of $11.4 billion last year. While TVOD performed well in 2020 and ’21, SVOD will continue to account for the majority of revenue growth in the OTT segment. In the U.S., TVOD will experience a year of negative growth in 2022 — down 8% this year, to $6.13 billion. For total OTT video revenue, Latin America will double in size over the forecast period, from $2.5 billion in 2021 to $4.6 billion in 2026, despite being the smallest global region. Asia Pacific will be the second-fastest-growing market from 2021-26, followed by EMEA and North America.

Gaming landscape

Gaming is among the entertainment category experiencing the most significant growth. In 2021, total video games revenue (excluding esports) reached US$214.2bn, and it will rise at an 8.4% CAGR to US$321.1bn in 2026. In 2017, global video games made up a mere 6.1% of total Entertainment & Media spending. By 2026, they will account for 10.9% as gaming becomes more mainstream, especially with the growth in mobile and cloud gaming powered by 5G networks. Revenues will be bolstered by rapidly increasing investment in in-app advertising. China and the US accounted for around half of global gaming and esports revenues in 2021. Turkey will be the fastest-growing video games market between 2021 and 2026 (with a 24.1% CAGR), followed by Pakistan (21.9%) and India (18.3%). Gaming, with its immersive experiences and virtual items, is also paving the way for the metaverse and the next generation of digital advertising, entertainment, and brand experiences.

Mobile commerce landscape

The rapid rise of e-commerce, spurred by the ongoing pandemic, has also raised the importance of tying advertising investment to purchases and, as a result, shoppable advertising units. NBCUniversal, for instance, has developed NBCU Checkout, which allows viewers to purchase products without leaving its video player. In 2021, Alphabet’s YouTube announced ‘brand extensions,’ a new ad type for connected TV devices, which are the platform’s fastest-growing screen in terms of watch time. Brand extensions allow viewers to use TV remotes to send a notification to their smartphone containing a link to a product being advertised on the screen.

As part of its ongoing efforts to expand into e-commerce, Twitter today announced[iii] a new partnership with Shopify that will enable merchants to onboard themselves to Twitter’s Shopping Manager so that product catalogs and shopping interfaces are accessible via merchants’ Twitter profiles, with automated syncing from Shopify. This follows Twitter’s introduction of Product Drops, mobile storefronts, and Livestream shopping in recent months. Shopify says orders placed through partner integrations, like Twitter, quadrupled in the first quarter of 2022. When inventory is synced, merchants can use Twitter Shops and Shop Spotlight features to help customers discover their products on the social media platform and make purchases. Those transactions will take place on the merchant’s own website for now.

Payments and Content Bundles

Consumers have never had this degree of choice in entertainment and media content, and the price of access to content has been falling precipitously with increasing competition for eyeballs. And yet subscriber growth has been slowing down with subscription fatigue setting in among consumers. Making the sign-up experience seamless and convenient is becoming increasingly critical for any merchant in the app economy. Partnerships with mobile carriers to offer the native direct carrier billing payment option or bundling of services with mobile tariffs offer access to new paying consumers at lower acquisition costs.


[i] https://www.pwc.com/gx/en/industries/tmt/media/outlook.html

[ii] https://variety.com/2022/digital/news/us-subscription-vod-revenue-pwc-forecast-1235298797/

[iii] https://techcrunch.com/2022/06/22/twitter-partners-with-shopify-to-bring-merchants-products-to-twitter-shopping/

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