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IMS Research: Pay OTT service to generate $32 billion over next five years

Pay over-the-top (OTT) subscription services will generate a cumulative $32 billion in revenues over the next five years, accounting for the majority of the market each year compared to pay-per services that let users to rent or purchase videos on an ad-hoc basis according to a new forecast from IMS Research.

A new IMS Research study, “Over-the-Top Video – Service Delivery & Business Models – 2011 edition,” forecasts that homes viewing only free OTT videos accounted for 77 percent share of the total OTT market at the end of 2010, and this will decline to 69 percent by the end of 2016. Nevertheless, OTT market revenues are forecast to grow by a compounded annual growth rate of 32 percent over the next five years.

“Advertising-funded services and free videos make up an overwhelming share of online video traffic today, and this won’t change dramatically over the next five years,” says Anna Hunt, report author and principal analyst. “But we will start to see some significant growth in pay-OTT transactions and revenues as more market leaders in pay-TV, media and CE invest in exploring strategies for effective OTT video service delivery.”

Internet-based OTT service providers, consisting mainly of broadcasters offering content online, DVD rental companies that have expanded into streaming services, and retailers that offer online video rentals and purchasing, will generate the largest share of OTT service revenues, although this segment’s share is forecast to decline from 90 percent of world OTT video revenues in 2010 to 69 percent in 2016, according to IMS Research.

The segment where OTT is delivered into the home via connected CE devices, such as connected TV sets, Blu-ray Disc players and game consoles, is forecast to see the most growth. Revenues generated from OTT transactions initiated via these devices are forecast to account for 25 percent of world revenues in 2016, up from 9.3 percent in 2010, says IMS Research.