Across Europe's "Big Five" territories (France, Germany, Italy, Spain, and the UK) the average monthly OTT-video subscription price has increased from $5.55 in 2014 to $6.75 in 2017 and is forecast to rise to $8.87 in 2023. The change is even more stark when total household expenditure on OTT video is factored in – so taking account of household spending on multiple OTT-video subscriptions – increasing from $5.80 in 2014 to $13.57 in 2023. In 2014 OTT-video ARPU was less than a fifth of pay-TV ARPU: this proportion has already increased to over a quarter and will likely be in excess of 40% by 2023, as households increasingly sign up to multiple OTT subscriptions (see Figure 1).
Rising prices position the OTT-video cost proposition on or near the level of a basic pay-TV subscription – currently averaging around $15 across the five countries. Given price competition is diminishing, other differentiating factors will increase in importance, particularly around the availability of original and exclusive content, service quality (including UHD availability and broader platform functionality), user experience, and go-to-market strategies around pricing and bundling.
The once distinct ecosystems of traditional TV and OTT video are moving inexorably closer. We are moving into a post-OTT era, where the boundaries between the two become increasingly blurred and ultimately become imperceptible.
Figure 1: OTT-video ARPU moves closer to traditional pay TV
Before the rise of OTT video, households either had pay TV or free TV, and what complexity there was came from DVD players. Now, there are numerous variations just on a service level: pay TV only; pay TV plus OTT subscription or perhaps more; free TV only; OTT-video service or services only; or OTT video and free TV; and much else besides. To understand how households are collating video services from multiple providers, Ovum is launching the Global Multisubscription TV and OTT Households Forecast, which will be maintained alongside our existing core entertainment-forecasting models. This new forecast will split a country or region's households into the most common combinations of subscription TV and video services from different providers across 70 countries. Given some significant D2C platform launches are scheduled for 2019, we feel that the time is right to dissect why and how households are acquiring their premium entertainment services and what the competitive impacts will be on a country and regional basis.
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