OTT services include any video running over an unmanaged broadband network, which also may be defined as video-on-demand and catch-up TV services offered by satellite broadcasters.

The broadcast landscape is seeing fundamental changes right now, whether HD or 3-D, of people wanting content on a myriad of different devices. OTT television could be one of the biggest changes of all and is potentially a huge market. “Our new report projects that global growth of OTT video services exceeded $1 billion in 2010 and will grow to $20 billion in 2014. Some of the case studies presented actually show how these services enhance the IPTV operator’s broadband revenue with relatively no or low investment for smaller operators and with various levels of capital expenditure for larger operators. Most of the results were based on updates of the early OTT trials determining how operators assessed the pros, cons and the ROI results,” says Jose Alvear, senior IPTV analyst, Multimedia Research Group.

Paul Erickson, senior analyst at IMS Research says 2011 could be a breakout year for OTT broadcasting. “The OTT video market is clearly growing and expanding, and 2011 will see a fair amount of expansion for the sector. CES in January showed a tremendous push by [consumer equipment] manufacturers, service providers and content owners towards OTT video delivery in some form or another,” he says. “With so many connected devices (TV, Blu-ray disc players, game consoles, tablets, and more) being launched and promoted this year and so many stakeholders promoting the concept and services, it is going to be a very big year for driving mainstream consumer acceptance of the whole OTT video concept, though we should remain aware that as a mainstream concept, OTT’s regional growth potential is predicated by broadband penetration and average speeds. 2011 will be a tremendous year for the collective OTT video market.”

Satellite Industry Impact

If the OTT television sector meets these growth predictions, satellite sector officials see a tremendous opportunity for this area. Tristan Leteurtre, CEO of Anevia, an IPTV and video-on-demand solutions vendor, says, “OTT is a big opportunity for satellite operators looking to extend their services without having to rely on complex partnerships with ISPs and telecom operators. For example, satellite operators can extend their bouquets to people who live in urban apartment complexes that do not allow individual satellite dishes. Satellite operators can also allow their satellite service subscribers the option to view programs while away from home on their PC or mobile phone. OTT television can also enable them to offer [video-on-demand] and catch-up services in addition to their live TV or kiosk offerings. With the right business model in place, OTT television should be more of an opportunity than a threat to the satellite industry.”

Alveer describes OTT television as a “once-in-a-lifetime opportunity” for satellite players. “About two years ago, many service providers (IPTV, cable and satellite) were scared of OTT, however, things have changed. At its core, OTT means getting TV over the Internet, so the popularity of OTT video shouldn’t be a surprise to anyone. This is consumer-driven behavior trickling upwards to content owners and service providers that need to react quickly to acquire and keep new customers. OTT video services are increasingly becoming a key differentiator for consumers.”

In terms of what satellite players need to do to make the most of the opportunity, Sam Rosen, senior analyst, ABI Research, says, “First, consider how to alter content agreements to ensure the rights to provide subscribers with their content anywhere and anytime possible. Second, determine what relationships are required to ensure quality of service for your consumers using your OTT services. Finally, look toward to the social interaction around programming online as a way to promote your premium content in a natural way which will have more authenticity and pull than your internal marketing efforts. Delivering new channels of programming on OTT with a high threshold for quality and making your overall service offering more interactive should help to reduce churn and increase ARPU.”

Technology

One of the limiting factors for OTT television previously had been the technology and its ability to provide a top-quality customer experience. Leteurtre says OTT television was born out of two important technical developments. “First, real-time, adaptive, bit-rate streaming technologies have now emerged on the market. This allows for continually adjusting picture quality in response to available bandwidth so that live video content is streamed seamlessly and without interruption. Only in this way can a reliable OTT television service be delivered over unmanaged networks,” he says. “Secondly, HTTP protocols can now be used for video streaming in place of the incumbent RTP/RTSP technology. HTTP minimizes the investment required by content providers and ensures compatibility with the growing variety of internet-connected and mobile devices. For example, HTTP makes it much easier to stream through firewalls and network address translation systems.” The technology now has moved on to enable high-quality OTT television services. “It’s now possible to stream high-quality video over an unmanaged network with over-the top solutions. This means that many new types of video players and servers from different content providers and device manufacturers are able to stream content to end users without the need for specific agreements with telcos,” he says.

Verimatrix CEO Tom Munro says in many of the request for proposals that the conditional access and interactive solutions vendor is taking part in, OTT is becoming an increasingly important element. “During 2010, almost everyone had some element of OTT or TV anywhere with it. It was seen as a critical component. It does not mean that operators were ready to roll out the service immediately, but they wanted to make sure their system was future-proof and expandable into that domain. They know their subscribers will add new devices and know they need to be able to reach those devices on whatever network they can. It is definitely a hot topic and a key part of the planning for any new system we have seen,” he says.

Verimatrix has embraced OTT television in terms of its product. “We support the HTTP Live Streaming protocol, which is part of the iOS 4 and is central to streaming video support on the iPhone, iPad and Apple TV, and we are supporting a number of other devices which are incorporating that same protocol,” Munro says. “We have implemented a linkage between that protocol and our key server for security purposes, so you can have a pay-TV service that delivers video to devices like the iPad and the iPhone through a single headend. In the Apple application store, you can download our Verimatrix ViewRight Live application and view that first-hand. We are extending that out to reach Android devices, other set-top box devices and connected TVs. Beyond that, we have incorporated our MultiRights engine, which allows us to address devices that have a native DRM, like Marlin or Microsoft Playready, for example. We can incorporate those into our headend and be able to address the wide range of devices that a consumer may bring to a pay-TV network.”

There are also standards issues which need to be overcome. “We definitely see HTTP Live Streaming as a dark horse. Although there are no formal industry standards bodies behind it, it is definitely becoming a very readily accepted protocol, compared with the more proprietary adaptive rate streaming protocols,” says Munro. “Certainly, the Apple devices have created a real pull for it. We see this is as a very strong trend. There is a bit of a standards battle going on among the various competing ideas. We are part of the UltraViolet initiative, which aims to create standard formats for video downloads, including interoperable digital rights management regimes. They are trying to reduce the complexity of delivering those videos, but implementation is in the early stages.”

New Models Emerge

OTT television will lead to different business models emerging and a new environment for broadcasters and services providers. “OTT will help lead video services to a more competitive environment in which à la carte purchases coexist with bundles. The ability of content producers to reach their core audiences directly or through multiple aggregators will put some price pressure on content and will help sort valuable content from also-run programs,” says Rosen. “Independent content producers will be able to effectively target and monetize niche audiences. In addition to subscription, pay-per view and traditional ad models, new forms of product promotion and premium sponsored content will expand the media universe. Advertising should be able to extract more revenue per user by being both targeted and interactive.”

For the broadcaster or content owner, OTT will give them an opportunity to leverage the Internet, Leteurtre says, “as solutions supporting adaptive bit-rate and HTTP streaming frees them from the constraints of unmanaged IP networks and allows them to deliver quality services that consumers will be willing to pay for. For example, we believe that there is a huge opportunity for local content owners to extend out beyond their market by offering OTT ethnic TV services. OTT is also a way for cable and satellite providers to add a mobile TV service without needing to invest in their own fixed or mobile infrastructure,” he says.

However, traditional pay-TV is not going to go away overnight, as the OTT service still has many obstacles to overcome, Erickson says. “First, it is contingent upon broadband availability and at least a certain amount of speed, particularly in the case of HD. Second, there is still a substantial amount of content available via traditional means (linear, physical media, traditional pay-TV video on demand) that is not fully available via OTT means. Though this gap will decrease over time, it will remain there for at least a couple of years. Third, the popular theme of cord-cutting devastating the pay-TV sector has been talked about with some amount of overexuberance. The research out there so far does not seem to support more than a small increase in actual cord-cutting that hasn’t involved household budget-related decisions in this current economic state,” he says.

Alveer adds, “I think the landscape will change so that consumers will get an increasing level of their TV from a variety of OTT services and devices. Already, consumers have a dizzying number of options for watching TV on-demand: broadcaster websites, Hulu, Blockbuster, iTunes, Amazon and many more. OTT television services will become more commonplace.” The success of Hulu is an indicator that things are changing. “For revenue generating, look no further than Hulu, which said it was on track to make $240 million in advertising for 2010. The most interesting thing is that viewers can tell Hulu which commercials they like or hate, so that more relevant ads are targeted to them later. Having these targeted and (short) commercial breaks are key to a good user experience. Also, look for service providers to provide tiers of service for OTT television, much like they do with linear TV channels,” he says.

YouView Looks to Change U.K.

Based on the success of Hulu, Richard Halton, CEO of U.K.-based YouView, is confident that the service provider can make a strong impact in the country when it launches services in early 2012. “We are excited to be able to bring a subscription-free service that seamlessly combines digital TV channels with the last seven day’s catch-up and brings on-demand services and interactive applications straight to the living room TV of homes across the United Kingdom through their broadband connection. We believe that our TV-centric user-friendly experience will open up a world of new services to consumers,” he says.

Halton sees YouView and similar services as the next evolution of TV. “YouView will unlock the big screen in the living room, where people consume most of their media, to all sorts of content providers by reducing the cost of being able to broadcast. This will open up new opportunities for those previously unable to build audiences. Content providers will control how they interact with viewers, own their relationship with them and choose their own business models. In short, it represents an amazing opportunity to access viewers while content producers retain control and ownership of their shows,” he says.

OTT television is growing and potentially can shake up the video market still further. For the satellite sector, it is a double-edged sword. More content is good, and savvy pay-TV operators can use OTT services as a way of cementing strong positions. However, OTT television also brings more competition and different players into play.