Forecasts PwC: OTT Shows 10% Annual Growth Over Next 5 Years

Look for the over-the-top (OTT) video market to show impressive growth over the next five years. PwC released its Global Entertainment and Media outlook 2018-2022, and forecasts that the OTT space will show a compound annual growth rate (CAGR) of 10.1 percent. The only segment in the entertainment space with a higher CAGR is virtual reality with 40.4 percent, but that’s coming from a low starting point.

As the chart below illustrates, internet advertising, video games/e-sports, and internet access will also see strong gains. Only magazines and newspapers show a decline.

While Netflix is the dominant player in the OTT space and Amazon also invests heavily in content, PwC notes that Apple is making moves to be the third biggest international OTT company by sinking $1 billion in original content. Having exclusive content and the rights to high-profile sports is crucial for expanding subscribers and maintaining market share, the report says.

The growth of streaming is changing the revenue model for video, as more consumers, especially well-off consumers, move to ad-free subscription services. Over 80 percent of home video revenue will come from OTT services by 2022, PwC forecasts.

The report emphasizes the convergence taking place in the entertainment market, where companies are changing their business models to target viewers directly. While these companies have access to more data than ever, the challenge is to keep it safe and maintain the public’s trust.

“As more E&M companies enter direct commercial relationships with customers, whether selling products inside video games or signing up subscribers to OTT apps, they are assuming more responsibility for the protection of credit card numbers,” the report says. “In an age of large-scale hacks, it is natural for users to question whether it makes sense to transact so freely.”

you can find the report here.

Native display ads to spike by a third in 2017

Native digital display ad spending in the US will grow 36.2% this year to reach $22.09 billion, according to eMarketer’s inaugural forecast.

For the first time this year, native ad spending will make up more than half (52.9%) of all display ad spending in the US, the firm said.

“Growth of native digital display is being driven by publishers’ pursuit of higher-value and more mobile-friendly inventory, as well as by advertisers’ demands for more engaging, less intrusive ads,” said eMarketer principal analyst Lauren Fisher.

An overwhelming portion of US native display ad spending goes to social networks, driven mainly by Facebook. This year, native social network display ad spending will reach $18.59 billion, representing 84.2% of all US native display. Importantly, social’s share of native is falling and will drop to 82.2% next year, as non-social (specifically in-feed and sponsored content) grows faster.

“We’re seeing a huge ramp up in non-social publishers adopting in-feed ads and video,” Fisher said. “This, coupled with continued advancements on the programmatic native front, will accelerate non-social native ad spending.”

Since native advertising is largely purchased on social platforms, it’s also almost entirely mobile. Native mobile display ad spending will reach $19.50 billion this year, representing 88.3% of all native advertising – with that share growing. And native mobile will represent 64.5% of all US mobile display ad spending this year.

“Greater demand for native formats such as in-app rewarded video ads, and greater momentum around redesigning the mobile experience for a more in-feed and mobile-first world will also draw greater ad dollars to native inventory on mobile devices,” said Fisher.

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