August 3, 2022
Nearly 80% of U.S. consumers were using a video streaming service in 2021, up 25% in the last five years alone, boosted in large part by pandemic lockdowns that forced people to look for sources of in-home entertainment.
Consumers turned to OTT media services en masse. So what is an OTT? OTT stands for “over-the-top” media service and it is any online content provider that offers streaming media as a standalone product. OTT gets its name from the fact that the service is delivered “over the top” of another platform.
The largest and best-known OTT media service is Netflix (Tii:NFLX), but OTT also applies to audio streaming, messaging services or internet-based voice calling products as well. It is a huge investment category that includes all the companies whose services circumvent traditional media distribution channels such as telecom networks or cable television providers.
These platforms are accessed through an internet connection so you can login to the service through a local connection or a mobile network whenever you’d like. They are most often subscription based, but some OTTs monetize their services through in-app purchases or advertising.
Netflix is the largest OTT by far, but competitors like Amazon’s (Tii:AMZN) Amazon Prime Video , Disney’s (Tii:DIS) Disney+ service, Hulu, which is also owned by Disney, Apple’s (Tii:AAPL) Apple TV+ and ESPN+, which is owned jointly by Disney and Hearst Communications, all compete for viewers on digital platforms. Retail investors of Rakuten (Tii:RKUNF), which offers Rakuten TV, receive perks on TiiCKER simply for owning shares of the company.
Not all OTTs are video streamers. Spotify is a music streaming OTT while messaging services like Signal, WhatsApp, owned by Meta (Tii:META) and Telegram are texting OTTs. Skype, owned by Microsoft (Tii:MSFT) and WhatsApp are voice and video OTTs too. Microsoft’s Xbox and Sony’s (Tii:SNE) Playstation video gaming platforms act as OTTs, offering subscription services to their own products, but also letting users connect to other streaming services like Netflix.
Though Netflix has seen its subscriber base shrink in recent quarters, the market for OTTs in general is exploding. The number of Netflix streaming subscribers in the U.S. topped 70 million for the first time in early 2020. According to a report published by Research Dive, the global OTT market is anticipated to generate a revenue of $438.5 billion by 2026. OTTs are especially popular among young adults. OTT streaming services are the primary way 60% of young adults are watching television.
More OTTs are coming online everyday, many with deep-pocketed corporate backers. Paramount+, owned by Paramount Global (Tii:PARA), Peacock, owned by NBCUniversal (which is in tern owned by Comcast (Tii:CMCSA), and HBO Max, owned by Warner Bros. Discovery (Tii:WBD) all offer streaming services.
It’s unclear whether the decline in Netflix subscribers is simply a blip before it starts to take off again or if surging inflation is forcing consumers to cut back on subscription services. But OTTs are a sector worth watching as more people turn to streaming services.
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