Netflix

Study: Over-The-Top Adding $25B to Video Biz

Boston Consulting Group says Google, Facebook, Netflix capture bulk of extra revenue

The emergence of the global internet video and over-the-top market has added $25 billion in global revenue to the video industry, according to a new report.

Boston Consulting Group calculates that by providing more choice for consumers and more opportunity for content producers, OTT accounts for about 5% of the $500 billion video business worldwide, but it is growing at 20%, compared to 2% for traditional TV.

“The biggest impact of the OTT market on the television and film industries is the removal of barriers—strategic, economic, and national—to the distribution of video content," said John Rose, a senior partner at BCG and a coauthor of the report. "The demand for quality video content from consumers, and the number and variety of new services that OTT enables for meeting this need, is both increasing the market value of content and destabilizing the roles and market values of linear networks and traditional aggregators."

At this point, most of the revenue being generated by digital video and OTT distribution is going to a handful of global companies including Google, Facebook, Netflix, Amazon and Hulu.

Production spending in English language markets is up, with the U.S. registering a 7% annual increase and Canada 5%, Boston Consulting said. The number of network-level high-quality productions is now more than 400 in 2015, up from about 200 in 2009.

The impact has been smaller in non-English language countries.

While the big guys are making money, there are new opportunities for amateur and pro-am content creators.

The report found that in terms of value, exclusive and top-rated programming, including sports, is increasing, as is niche and specialty programing. Losing value is lower-rated programming and networks.

“The long-term impact of OTT is an evolving story,” said Martin Kon, a BCG partner and a coauthor of the report. “Content expenditures are strong and production revenue is increasing, driven by increasing investment in both traditional and amateur content creation. But the impact on jobs and culture is not as clear. Policy makers can no longer regulate supply in today's unconstrained environment as they have in the past, as consumers access unlimited on-demand catalogues.  Rather, they need to look at the demand side of the equation in order to determine the appropriate long-term support for local production and storytelling.”