According to the report, subscription video on demand (SVoD) services such as Netflix were available to 1.3% of emerging market households in 2014, with a user base of 19.4 million. This number is expected to grow to 6.4% by the end of 2019, increasing the user base to 102.7 million. This shows the extent to which OTT video has grown not only in developed regions but also in emerging markets, both as an alternative and as a complement to established free-to-air (FTA) and pay-TV platforms.
Daniele Tricarico, senior analyst at Pyramid Research, said: “In recent years, OTT business models entirely relying on advertising revenue streams have become difficult to sustain, given the high cost of content. In many emerging markets, we are witnessing the emergence of hybrid models, whereby services offer free content to expand the user base, but at the same time position premium SVoD and transactional video on demand (TVoD) services to generate additional revenue.”
Emerging Asia Pacific and Latin America accounted for 90% of paid OTT revenue in emerging markets in 2014, with Latin America being the only emerging market region where Netflix operates. The two regions will only drop marginal shares in the next five years, still making up 86% of the total in 2019.
“In China the proliferation of hybrid models combining advertising-funded video on demand (AVoD) and SVoD will be a major driver for growth,” said Tricarico. “4G, fiber broadband and e-commerce will support growth of OTT, but content regulation may hamper evolution in the near term. As the paid OTT opportunity strengthens in China, the regional Asia Pacific market will pick up from 2015-2016 onward.”
In Africa and the Middle East, as more paid services emerge and AVoD services increasingly position SVoD for premium content, Pyramid Research expects the total paid OTT revenue (SVoD and TVoD) to expand in the next five years to represent 7% of the regional pay-TV revenue.
In Central and Eastern Europe, the impact of SVoD has been so far very limited, with TVoD more common. However, “SVoD adoption will pick up in the forecast period as the leading providers seek to monetise from the pervasiveness of online video through both TVoD and SVoD,” Tricarico added. According to the report, paid OTT revenue will grow to represent 5% of pay-TV in the region in 2019.