An OTT Forecast That's Not So Grim

While distributors continue to say that over-the-top video is not much of a factor today, most seem to be aware that it could be. That’s certainly the case for ad agency research firm MagnaGlobal, which earlier this month modified its on demand forecasts to account for OTT product offerings. But don’t think that means it scaled its forecast back.

 

The firm believes that OTT will contribute to “a continuous expansion of the market for multichannel video services, as new video packages (the combination of programming, features and pricing) could vary meaningfully from today’s offerings, and thus may attract new segments of subscribers).” In other words, this is where the TV Everywhere model could really make a difference. Satellite faces the bigger erosion risk since its platform doesn’t incorporate HSD, but that could change with Internet reselling agreements. Magna expects OTT subs to rise from virtually zero today to 8.5mln by ’16 (6.9% of HHs) and 27.3mln in ’20 (21.3% of HHs).

 

Incorporating those OTT expectations, Magna raised its DVR sub forecast to 60.7mln HHs by year-end ’16, up from 36.7mln as of the end of 2Q10. VOD, which it redefines to includes OTT services, will reach 70.3mln up from 50.1mln in 2Q10. One forecast that was revised slightly downward is long-term Internet access, with Magna now expecting 99.3mln HHs to be online in ’16 (98.3mln with broadband) given modestly reduced expectations in HH growth rates.

 

Something else that goes against general OTT expectations is that Magna doesn’t see cost-cutting as a driver of the technology. Instead, it believes higher-incomes homes will rely on OTT instead of conventional multichannel services because of the fast (and more expensive) broadband services required.

 

“Assuming a) consumers care about high resolution video from their primary viewing experiences and b) most households want the option to view more than one TV set at the same time, cost-conscious households will be limited to accessing OTT through lower resolution—and thus complementary—video services over today’s web-based, library-focused services,” Magna said in its most recent On Demand forecast. OTT services are a replacement for only a small number of pay TV subscribers, it concludes. Consumers willing to go with a low-resolution service with only 1 stream in a home at a time are most likely non-pay TV subs already, Magna said.