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The challenges and considerations of OTT

The challenges and considerations of OTT
  • United Kingdom
  • Technology, Media and Telecoms - Disruptive Technology
  • Technology, Media and Telecoms - Media

10-07-2019

Part 3 of 4

Despite its advantages, OTT systems do face challenges, and these become particularly apparent when moving from the concept to implementation. As mentioned in the above section OTT services are almost considered as low/free of charge services.

The core question is whether OTT ever going to make money? And if it is, who will profit from it?

In particular, we have found that the main issue for OTT providers is low income/revenues:

Despite this exponential growth and consumer commitment, very few providers have solved the challenge of monetization. Netflix, an American OTT media services provider, headquartered in California, where its primary business is its subscription-based streaming service, which offers online streaming of a library of films and television programs is often portrayed as the rare golden child of OTT, combining a successful content line up with quality of experience and monetization relatively speaking.

As of April 2018, Netflix had 125 million total subscribers worldwide, including 56.71 million in the United States. Their efforts to produce new content, secure the rights for additional content, and diversify through 190 countries has resulted in the company racking up billions in long-term debt.

To better understand the situation it is important to differentiate between Advertising Video on Demand (“AVOD”) and the pay TV subscription service model (“SVOD”). These are the two models of “typical” Video On Demand (a programming system which allows users to select and watch/listen to video or audio content such as movies and TV shows whenever they choose, rather than at a scheduled broadcast time, the method that prevailed with over-the-air programming during the 20th century). With SVOD, how a viewer finds and consumes content will be conclusive in increasing success and profit.

The AVOD model is most in need of innovation. Today this model is not generating sufficient profit, even though volumes are growing in an exponential matter. Youtube states that it has more than one billion users - but it is far from being profitable.

In conclusion, the world is facing a huge technological shift. Consumers have truly adopted online video consumption but the main challenge OTT providers are facing is “lack of profitability”.

Is it necessary to regulate OTT services?

When it comes to voice and messaging applications in particular, OTT services have been subject to the question of whether they should be regulated in the same manner as traditional "electronic communications services" ("ECS").

Telecommunications companies, which provide ECS, argue in favour of an equal treatment. Across EU Member States, the current unclear, vague and imprecise definition of ECS has encouraged different views, regulatory authorities showed their tendency towards an equal regulatory treatment.

Its well known that traditional telecommunications services are heavily regulated whilst the internet does not have the same technological limitations, however it enables delivery of services with some of the same uses (such as a telephone vs. Skype, or Netflix vs. traditional cable TV).

Some of the regulators don’t take into account the differences between traditional telecommunications and OTT services and therefore propose using the old regulatory schemes for new internet.

Communications services and tools on the internet can introduce real challenges, and governments need to respond to them. In order to ensure the rights and safety of users it may be necessary to issue new laws, new regulations or update to current laws and policies. For instance, it’s absolutely vital for all communications services to abide by basic data protection principles, and this includes services that run over the internet.

But this regulation needs to be carefully considered so that it doesn’t expose or jeopardize customers or users rights. Moreover, governments should seek solutions that protect the environment that enable the growth of the internet and keep the internet open and free which in turn will retain the capacity to foster innovation and economic growth.

Read part 1: What is Over the Top Platform?

Read part 2: What are the potential benefits of OTT?

Read part 3: The challenges and considerations of OTT?

Read part 4: The regulatory positions of OTT - a global view

Source: BEREC press release. Jurisdiction: European Union

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