What does OTT (over-the-top) mean?
OTT or over-the-top is an application service that transmits data over the internet that circumvents conventional mediums of delivery like telcos or cable tv networks. There are fundamentally three types of OTT services; content OTT, number-based messaging OTT (WhatsApp, WeChat), and number-independent messaging OTT (Facebook Messenger). The extent of this article is limited to the discussion of over-the-top content that refers to the distribution of film and television content directly to the users bypassing cable, broadcast, and satellite television platforms which typically controls the rights of distribution for such content. A content OTT not only allows on-demand round the clock access to content but it further disrupts stereotyped billing models resulting in better customer engagement and satisfaction. Content OTT providers offer streaming media as the product that combines both video and audio.
How it all started, who came first Netflix or YouTube?
We are in love with YouTube for ages, and content lovers cannot think of living their life without Netflix, but who is the true pioneer of streaming?
On February 14, 2005, Chad Hurley a designer and Steve Chen, Jawed Karim both engineers bought the domain and launched YouTube beta in May 2005. It was not until December 2005 when Saturday Night Live streamed a video clip called “Lazy Sunday”, and YouTube became an online phenomenon overnight. Unfortunately, it was not all good news for YouTube because popularity brought in traffic and a huge bandwidth cost. At that time, they only had $11 million from Sequoia Capital VC funding and $1 million bandwidth cost per month and the majority of the user-uploaded videos were copyrighted content. YouTube founders were trying to cope between bandwidth bills and fear of copyright lawsuits, meanwhile, mighty Google stepped in and purchased YouTube for $.1.6 billion on October 9, 2006. By far YouTube acquisition has been proved as one of the most profitable for Google, and apart from being one of the biggest OTT streaming players, it is the second-largest search engine.
Reed Hastings and software executive Marc Randolph started Netflix in 1997 to offer online movie rentals, and in 1998 they launched the first DVD rental and sales site netflix.com. At that time, their foremost competitor was Blockbuster LLC, which offered traditional VHS tapes rental service. In later years Hastings approached Blockbuster a couple of times, with the idea where Netflix becomes their online streaming service, but Blockbuster didn’t budge. In 2007 Netflix finally introduced streaming and revolutionised the world of streaming. In 2013 they produced their first original series “House of Cards” followed by “Orange is the New Black” to date one of their most loved shows.
In the same year, Netflix launched its streaming service, Hulu.com also launched its private beta website. Hulu was a Yahoo venture along with a couple of other online giants back then like Facebook, MSN, AOL, Comcast, and Myspace.
In September 2007 Prime Video was launched as Amazon Unbox in the United States. Later, it was renamed as Amazon Prime Video and launched globally. This year (2019) Disney+ and Apple TV+ was launched as part of Disney and Apple’s online streaming offering. Other global players include HOOQ, YuppTV, Mavshack.com, Viu.
In India, there is a rise in regional streaming platforms like Hotstar, ALTBalaji, ZEE5, Sony Liv, Voot, Hoichoi, Jio TV, Vodafone Play, Airtel TV, Sun NXT. There is also a new player called DocuBay which only streams documentaries.
Understanding the target audience
The biggest challenge in OTT is understanding the target group or audience. User demographics, geography, content genre, socio-economic dynamics everything needs to be taken into reckoning while creating content or acquiring licenses for an OTT platform.
Content creation, licensing, and maintaining production value
Understanding the target group may be the biggest challenge but using that knowledge to attract new users and retaining existing users hooked to the platform requires a rich content bank. OTTs acquire new content by either buying licenses or producing original content, both of which happen with hefty investments.
Using the right technology and people to build the OVP
The technology behind an OTT ecosystem is supported by an OVP (Online Video Platform) which is an end-to-end tech-based solution to create a website/app, managing UI/UX of the website/app, uploading videos, transcoding/encoding videos, compressing videos, video playback, in-video advertisements, user & subscription management, video analytics, content distribution over the internet for both VOD (Video on Demand) and live streaming. All the mentioned functionalities require advanced technologies and experienced professionals. There are many off-the-shelf solutions available in the market like BrightCove, Evergent, Accedo using which we can build an OVP quickly, but they entail a substantial amount of capital as well as operational expenditure. It is also feasible to build an OVP using inexpensive and pay-as-go cloud services, and AWS (Amazon Web Services) offers an array of services like Elemental Media Convert & MediaTailor, S3, ACM, CloudFront, Lambda, API Gateway, Elasticsearch, Elasticache, RDS using which an experienced software architect can design and build a DIY OVP. Since OTTs are all about playing video content on various screens, building an OVP requires extensive front-end technology expertise like ReactJS, AngularJS, BrightScript, Android (Java/Kotlin), iOS (Swift).
UX or user experience is the key to retention and stickiness of the OTT. How fast the video plays, what are the playback options like fast-forwarding and navigating between segments, how is the video experience in fluctuating bandwidth conditions, how much bandwidth it consumes to play the entire movie or a single episode, how great is the content even if bandwidth quality is poor, how many renditions are supported, will the content work well in low-end devices, is the video buffering too much.
Driving an OTT business can be quite challenging considering the amount of investment it requires in terms of both money and people, hence having a compact and efficient revenue strategy is a must. These days OTT platforms are using three significant revenue models namely TVOD (Transactional based VOD), AVOD (Advertisement based VOD), and SVOD (Subscription based VOD) there are also brand partnerships and contextual advertisements.
Making the right business decision using analytics
As they say, “data is the new oil” and only an analytics solution can help accumulate relevant data from a software-based platform. As far as video analytics is concerned, YOUBORA offers a best-in-class video analytics solution but comes with a humongous cost which can be well afforded by larger OTT players but not the smaller guys. The other way is to develop a DIY solution using Video.js for the playback, which will need significant people investment.
OTT Revenue models – SVOD, TVOD, AVOD
Among the three top revenue channels, SVOD is the one that is being implemented by almost every OTT service provider, some providers also go for a mix of SVOD, and TVOD and some rare ones use all three to make revenue.
In SVOD the user and the provider enter into a time-bound subscription agreement which only ends if the use unsubscribes either involuntarily or voluntarily. Netflix, Amazon Prime Video both run on the SVOD revenue model.
In TVOD user typically pays for a particular piece/set of content for a limited period. Like we can buy and watch movies on YouTube or Google Play where we pay for each movie independently.
In AVOD in-video advertisements are played to generate revenue. It works for demographics where users are not willing to pay for watching content.
I tried to keep this article relevant for all sorts of readers like OTT consumers, media personnel, business guys, as well as techies who are already building or aspiring to develop OTT platforms. I hope it helps everyone in some way or the other.