5G promises to open new, exciting possibilities for the kinds of media services that can be delivered over mobile networks, including virtual-reality experiences, multiplayer video-game streaming, and high-definition live broadcasting of big events. What is less clear is what new opportunities it will open for bundling partnerships between providers of premium OTT media services and mobile operators.
Such partnerships are one of the most powerful symbioses that can occur between carriers and media OTTs, but they are kind of stuck in a rut. Subscription-based video and music streaming services, spearheaded by Netflix and Spotify, respectively, pretty much monopolize this space. The bundling of unlimited-music subscriptions is old hat and a declining space, and SVOD bundling has become so prevalent that there is little further differentiation it can give carriers.
Business-development and strategy staff at carriers have over the past two years or so been asking where the next “killer apps” in telco-OTT bundling partnerships will come from. That question has gained more urgency with the advent of the first 5G network rollouts.
For carriers, adding to their tariff plans attractive premium media services as a free or discounted extra is usually a more effective marketing ploy than competing against other networks on just price, coverage, or megabits per second. It enables a carrier to stand out in a unique way, charge more for its plans, and provide a powerful use case for a new network technology.
There is no shortage of compelling media use cases for 5G, but most appear not to lend themselves to telco bundling of premium OTT services:
There are numerous weird and wonderful uses predicted for virtual and mixed reality around 5G, but they do not clearly translate into standalone, premium services.
Esports is already proving fertile ground for telco partnerships, but mainly in the areas of sponsorship, event hosting, and team ownership. The live-streaming of esports events is usually free to view.
Cloud gaming ticks all the boxes – it is usually subscription-based and really puts 5G's capabilities to the test – but is still a nascent market.
Live-sports streaming is both a fully fledged market and an ideal premium service to bundle with 5G, but carriers have strong own-brand ambitions in this space.
However, the cloud-gaming market is on the cusp of a major transformation as tech giants such as Amazon, Google, Microsoft, and Tencent prepare to roll out services. The sudden confluence of numerous new services, all seeking consumer attention, alongside the rollout of 5G, should create ample opportunity for telco-OTT partnerships – as already seen by Rovio's bundling deals with NTT Docomo and Sprint for the Hatch service.
At the same time, bidding for the broadcast rights of prime-time mainstream sports can be prohibitively expensive, which is likely to often thwart carriers' own-brand broadcasting ambitions and open the door to partnerships with OTTs. And the OTT live-sports streaming space is becoming increasingly competitive as more and more players join the fray, including the FAANG giants and rights holders going direct to consumer – leading to a proliferation of partnership options.
Ovum estimates that live-sports streaming and cloud gaming alone will drive over $5bn in cumulative revenue derived from telco-OTT bundling over the next five years. Overall, 5G will boost telco-OTT media bundling revenue by more than 80% by 2024, bringing the total to nearly $11bn (see Figure 1).
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