Paid over-the-top (OTT) revenue in emerging markets will expand from US$1.9 billion in 2014 to US$6.0 billion in 2019, according to a new Pyramid Research report.
In 2014, subscription video on demand (SVoD) services such as Netflix were available to 1.3% of emerging market households, with a user base of 19.4 million.
This number is set to grow to 6.4% by the end of 2019, with a user base of 102.7 million.
OTT video has grown in developed regions and in emerging markets, both as an alternative and as a complement to established free-to-air (FTA) and pay-TV platforms.
"In recent years, OTT business models entirely relying on advertising revenue streams have become difficult to sustain, given the high cost of content," said Daniele Tricarico, senior analyst at Pyramid Research. "In many emerging markets, we are witnessing the emergence of hybrid models, whereby services offer free content to expand the user base, but at the same time position premium SVoD and transactional video on demand (TVoD) services to generate additional revenue."
Emerging Asia Pacific
Emerging Asia Pacific and Latin America accounted for 90% of paid OTT revenue in emerging markets in 2014.
Although these two regions will see marginal shares decrease in the next five years, they will make up 86% of the total in 2019.
The proliferation of hybrid models combining advertising-funded video on demand (AVoD) and SVoD will be a major driver for growth in China.
The regional Asia Pacific market will pick up from 2015-2016 onward with the strengthening of the paid OTT opportunity in China.
In Africa and the Middle East, the total paid OTT revenue (SVoD and TVoD) will expand in the next five years to represent 7% of the regional pay-TV revenue.
"SVoD adoption will pick up in the forecast period as the leading providers seek to monetise from the pervasiveness of online video through both TVoD and SVoD," added Tricarico.
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