OTT’s Impact on Telecom Providers is Real

In 2019, the size of the global over-the-top market was valued at $56 billion. From 2020 through 2027, growth in that market is expected to hit 18.6%. This means OTT streaming services revenue will have more than tripled in 10 years (since 2017). This is not to mention other applications of OTT, like voice over IP or internet text communication.

With these figures in mind, it’s safe to say OTT is a disruptor, and telecom providers such as cable TV and traditional voice systems have been understandably concerned. These providers need to act quickly to keep up, and many have already started pivoting in response to these new technologies and the boundless opportunities they create.

Shifting User Base

Ever since Netflix transitioned to a streaming model, viewers of premium video content have been flocking to OTT platforms. The appeal was obvious -- unlimited, on-demand viewing for a low monthly cost -- much lower than cable TV. No waiting, no cumbersome media like DVDs, and no limits on viewing.

Once internet speeds got fast enough, live broadcasting of video content was added to the OTT landscape, and a movement of “cord-cutters” sprung up. Quickly, cable TV alternatives such as Sling TV and FuboTV were implemented, and cable TV providers had little recourse but to watch customers leave.

This hasn’t ended. In fact, millennials are cutting the cord at an alarming rate. 90% of that age group says they prefer accessing TV over the internet. So far in 2021, AT&T has lost over a million customers, while Disney+ gained over 54 million. Clearly, the entertainment landscape has shifted.

Revenue Offsets

When viewers opt for OTT services, it’s not necessarily a threat to traditional telecom providers. After all, not everyone who utilizes OTT services stops using cable TV. Still, plenty do -- and this negatively affects revenue.

A study by the Symbiosis Institute of Telecom Management found that at least some of that lost revenue could be offset by increased usage of systems provided by some telecom providers. After all, streaming services need an internet backbone to connect to users, and users need that same infrastructure to watch. So, for a company like Comcast, internet revenue rises while cable TV takes a hit.

How Are Telecom Providers Pivoting?

It would be a no-brainer for telecom companies who run the infrastructure that allows OTT platforms to thrive to block these competitors, leaving them without a way to reach users. But to date, this hasn’t happened.

Instead, telecom providers have adopted an “if you can’t beat ‘em, join ‘em” mentality, launching their own OTT services to supplement traditional cable TV. Most TV providers now provide some sort of OTT on-demand service, and bundling that service with the internet, VoIP, and even home security systems has proven valuable for customers and providers alike.

This hasn’t stemmed the tide of OTT -- it seems it’s only bolstered it. Now major content creation players such as Disney, ESPN, CBS, NBC, ABC, and Paramount have launched their own platforms. They join Amazon, Netflix, HULU, Sling TV, and a host of other OTT platforms in offering a variety of premium and exclusive content users can consume anywhere, on any platform.

As mentioned above, this means telecom companies that provide internet infrastructure are seeing the fruits of this trend behind the scenes, partnering with OTT providers to provide the way for OTT streaming services to exist.

OTT Will Continue to Disrupt

It’s safe to say that OTT platforms are a permanent addition to the entertainment and communication landscape.  These services will continue to disrupt the status quo until the day when they’ve become the norm -- and that day is coming fast if it isn’t here already.

If you’re looking to add your voice to the chorus of OTT streaming services, now is definitely the time. Contact MAZ systems today for help getting started.