There was a time when “cord-cutting” was a phenomenon so exotic that it seemed only to affect those who were already leading edge — the ones who had grown up with a cable or satellite television service. No longer.
It’s now official: cord-cutting is a thing, and it’s affecting the cable industry in a very real way — even if a few don’t want to admit it yet. Last year alone saw an unprecedented 4.9 million people cutting the cord in the U.S. Now, 20.8% of the U.S. population does not have a traditional TV subscription.
That’s a lot of cord-cutters. But where are they headed?
Enter, over-the-top (OTT) video streaming. OTT is a method of delivering content via the internet without requiring users to subscribe to traditional cable or satellite pay-TV services.
It’s an approach that enables viewers to access multiple forms of content, like live and on-demand programming, through smart TVs, smartphones, and other connected devices — all using one subscription service at a time!
Netflix for dramas; Hulu for sitcoms; Curiosity Stream for documentaries… you get the idea! The personal taste may vary, but all of these services allow viewers to choose what they want, and when.
Traditionally, content owners sell their rights to distributors such as cable and satellite TV companies. These are then in charge of getting the content (films, series, sports broadcasts, etc.) out there into people’s living rooms. But this leads to a couple of challenges.
For content owners, it’s hard to get through the tight grips of the cable and satellite TV industry. And for content providers, it’s hard to keep up with what all their customers want — both from a personalization point of view as well as in terms of content availability!
For the viewers, things aren't too rosy either. Various restrictions are put in place: they have to pay for a whole bunch of channels that maybe aren’t interesting enough; they have to arrange their viewing schedules around the broadcasting times; and finally, if by any chance viewers happen to miss an episode of their favorite show for whatever reason – too bad! Not much could be done about it.
OTT services changed all of this.
The OTT revolution began in the early 2000s, with the advent of online video platforms such as YouTube. They enabled users to upload and watch videos on demand at any time — usually for free. Since then, other services emerged that allowed people to pay for content directly from the rights owners: Hulu, HBO Max, Amazon Prime Video, and Netflix.
OTT services provide consumers with a more personalized viewing experience, and it’s easy to see why: viewers can watch "whatever", "whenever", "wherever" they want to watch it. That was the whole idea behind the video on demand (VoD), which is the most popular form of OTT content delivery method along with live streaming. Viewers no longer have to wait for their favorite TV shows — instead, entire seasons are at their fingertips to binge-watch!
Today's generation doesn't like commitments or restrictions in anything, let alone entertainment consumption habits. Millennials and Gen Z want to access the content on their own terms and the device of their choosing. OTT platforms are giving them exactly that!
OTT subscriptions are cheaper than cable, and the payoff is a lot greater! For less money every month (the average monthly subscription for Netflix in the U.S. costs $9.99), viewers get access to thousands of movies and TV shows without any advertisements or commercial breaks — something you won’t find on traditional cable channels.
So, how exactly do these platforms work? To understand that, we first need to look at the differences between them and traditional TV providers.
The main difference is in the way content is delivered to viewers’ homes — or devices (since many people who use online services don't have TVs).
While cable companies send out signals via satellite dishes and wires before reaching your screen with linear TV channels, streaming services transmit digital video directly over an internet connection using video delivery protocols like HTTP Live Streaming (HLS) or Dynamic Adaptive Streaming over HTTP (MPEG-DASH). This allows them to provide content, like movies or TV shows, on demand. Unlike linear TVs, these delivery protocols can upscale or downscale video quality based on the end-user's device or network conditions.
This also leads to their second difference. For content providers, the lean architecture of online video delivery eliminates any additional delivery costs while providing more control and an evolved viewing experience to the users. Also, unlike cable companies which typically use their own set-top boxes (STBs) to deliver content at home, OTT content can be accessed through most modern devices.
The third difference is the way these platforms make money: by subscription fees (like Prime Video), transactional charges (like Udemy), advertisements (like YouTube), or a unique combination of them! For example, Hulu offers ad-supported content while Netflix does not. Similarly, YouTube operates mostly on ad revenues while also having a premium tier with no ads.
And lastly, both content providers and viewers enjoy unprecedented flexibility. For instance, Netflix has licensing agreements with different content owners to carry their on-demand programming at a global level. Similarly, HBO Max is only available in certain regions, but soon it will be launched across the world! The viewers, on the other hand, can subscribe or unsubscribe to any service instantly. They can also do away with fixed formats such as "prime times" altogether.
With so many options out there today — from free streaming platforms like YouTube or Twitch TV (live streaming platform) that rely heavily on ads for revenue; subscription-based models such as Disney+ or Hulu; pay per view (PPV) or Transactional Video on Demand (TVoD), where viewers pay upfront costs to watch certain events live online without any ongoing fees afterward – how do we categorize all these OTT services?
Well... quite easily! Let’s take a look at some of the most popular types:
It includes services like Netflix, Hulu Plus, and Amazon Prime Video where viewers have access to all content for one flat monthly fee. There are also ad-supported versions, such as Sony Crackle or Tubi TV.
This is when users “own” particular pieces of media by paying upfront costs before viewing them on demand without any fees afterward. Think iTunes purchases or renting movies from Redbox kiosks in convenience stores! The transactional video market has grown significantly over time. It’s because consumers often prefer these models due to their flexibility and convenience factor.
These are services like YouTube where advertisers pay money based on how many people see an advertisement while watching videos online. But subscriptions may also be available for an improved viewing experience.
Commonly used in sports events like boxing matches, which are charged through cable providers with one flat fee regardless of whether viewers want to view the whole event or just a part of it being broadcasted live! The interesting thing about TVoD nowadays is that they're starting to offer much more than merely sporting events: concerts, movie premieres, courses, and even novelty show such as “Fight Night” are available to purchase using this method!
This is the most popular format. In fact, many of the services mentioned above are actually hybrid (inclining more towards the respective model they’re a part of). A hybrid model combines both paid subscriptions with free streaming service offerings. The customers can decide which type fits their needs the best. For example, YouTube Premium has a subscription option for $11.99 per month or you can watch videos without paying anything at all by seeing ads during the playback time.
Now, that you understand various models of OTT services, let us examine what impact these spinning wheels are having on the media industry.
The media industry is in a state of flux as it undergoes the most significant transformation in decades — and at the center of this revolution are OTT video streaming services.
To give you a perspective, YouTube has 2.6 billion monthly active users across the globe – that’s one-third of the global population for you! The platform’s viewers also watch over a billion hours of videos every day. And this is just one of the many OTT video platforms out there.
In other words, everyone’s video consumption habits are changing drastically. They no longer passively watch TV. Now, they actively seek content that suits their tastes and interests.
The emergence of OTT services has sparked a dramatic shift in the way people consume media. This is the chief reason why an increasing number of people are moving to OTT streaming services now.
But how exactly is this affecting the media & entertainment industry? Let’s find out.
Traditional TV channels are a thing of the past for younger viewers. It seems this younger generation simply has no time for the old ways. 90% of 18–24-year-olds prefer streaming their favorite content on an OTT service. Also, 16–24-year-olds only spend an average of 53 minutes a day watching traditional broadcast TV, a drastic drop of two-thirds over the past decade. This is seven times shorter watch time for traditional TV as compared to people aged 65 years and above.
Nowadays instead of cutting their cords entirely from cable TVs, cord-cutters have turned their attention to a new trend called “cord shaving” or “skinny bundles.” This involves keeping cable TV connections but reducing packages down by selecting just those channels that they watch regularly.
Another popular alternative is known as the "cord never" option: people who prefer not using any of these services at all because most content is available online anyway! A survey revealed that over 20% of millennials have never had a cable TV subscription.
Over-the-top video consumption has grown rapidly over the past few years due in part to its convenience factor — viewers can access content anywhere, anytime on any device via an internet connection without being tied down.
For instance, the average Netflix subscriber spends more than 3.2 hours per day streaming content on their devices. This has led to a decline in traditional media consumption. Instead, viewers opt for OTT platforms like Hulu and HBO Max since they're easier to navigate through menus without having so many channels thrown at them all once!
Media companies are being forced into this transition whether or not they like it.
If cable providers don’t adapt quickly enough, there will be no place left for them because consumers would’ve already moved to advanced video platforms. For instance, people now prefer using search engines like Google where everything is available instantly within seconds rather than waiting for minutes or even hours for a typical TV broadcast!
Big names like Disney, NBCUniversal, and others have already begun to take notice. They’ve started investing heavily in OTT platforms for their content distribution strategies as well by creating streaming services of their own. Prime examples include ESPN+ (ESPN), Disney+ (Disney) and NOW (Sky).
This means we'll see a lot of interesting developments taking place in the OTT market, producing high-quality and original programming over time. It will also mean less reliance on advertising revenues from cable networks since they're no longer needed. Instead, it should be focused elsewhere – namely subscription models based upon consumers' willingness to pay for access.
There is a growing demand for niche content amongst viewers and OTT platforms have stepped up their game in response. The increasing popularity of specialized streaming services like Crunchyroll (anime), Shudder (horror movies), etc., has led some experts predicting that these will eventually become more popular than general-purpose ones such as Hulu or Amazon Prime Video.
This could mean trouble down the road if traditional TV networks don’t get on board soon enough with similar offerings before they lose out entirely!
As a content creator, publisher, or distribution network, it’s important to understand just how significant this shift will be.
OTT media services are here and they're going to up the ante in the future. So, rather than going against the force, it makes more sense to flow with the wave and leverage these platforms for your content distribution strategy.
This ongoing broadcasting overhaul could be your perfect break to create your own OTT platform and deliver content right to your audience’s digital doorsteps.
Even if you're a small-scale publisher, it's now easy to create your own OTT streaming service with OTT solutions providers like Teyuto. All you need to do is drag and drop to create your own feature-intensive OTT channel. If you're inclined more towards a highly customized service and develop a completely unique set of services, Teyuto helps you with white-label OTT app development.
So, what are you waiting for? It’s the time to get started with your own OTT video platform!
Reach out to a leading OTT provider like Teyuto and begin your revolutionary journey toward building a successful digital media business. There’s also an ongoing free trial to let you experience Teyuto’s powerful platform firsthand.
Stay on top of the trends. Start your OTT journey today!