After taking up residence in living rooms across the world in recent years, video-streaming giants have been confronted with alarming signs of market saturation. For the last few years, subscribing to OTT platform streaming services such as Netflix, Disney+ and Amazon Prime Video had been an attractive option due to an ever-growing library of video content. However, frequent price hikes and an increasing amount of platforms offering more content for little to no fees, have forever changed customer loyalty.
In the face of increasing competition, changing consumer preferences, and evolving technologies, OTT providers are forced to restrategize how to best monetize their content and services.
Let’s dive deeper into the current state of OTT platform monetization and future trends to look out for.
The Current State of OTT Networks: A Snapshot of the Market Size, Growth, and Trends
The OTT video media distribution model allows users to watch video content on demand through an OTT platform or online service, without traditional broadcasting schedules or hardware. Users can watch what they want at any time on any connected device.
From movies and series to documentaries and kids’ programs, video-on-demand offers personalized viewing, convenience, and flexibility. These benefits drive its popularity, with the number of worldwide users expected to hit 4.22 billion by 2027. In addition, OTT video market revenue is projected to reach $323.3 billion this year—and grow to $474.7 billion by 2027.
Streaming Models & Monetization
Subscription Video on Demand (SVoD)
This comprises streaming content on a monthly subscription basis with the chosen OTT platform.
Transactional Video on Demand (TVoD)
This pay-per-view model entails paying only for the digital video content you choose to watch. It’s like renting a movie to watch for the evening—except that it all happens online.
Also known as electronic sell-through (EST), this model allows users to download the purchased content and watch it as many times as they like on any of their devices.
Free Ad-Supported Television (FAST)
While subscription-based OTT streaming is generally void of adverts, Free Ad-Supported Television (FAST) offers free content (no subscription required) but includes advertisements in between viewing.
Advertising is now the largest revenue generator in the market with a volume of $205.10 billion in 2023. Other main revenue streams include purchases and subscriptions.
Performance of Platforms: Who’s Winning and Who’s Losing in the OTT Market
Netflix: The Streaming Giant with a Global Reach
Netflix rolled out its streaming service in 2007, although it launched ten years prior as a DVD rental company. The worldwide streaming giant grew from $3.1 billion in revenue in 2011 to $31.6 billion in 2022.
Netflix has also launched its own programming, and in 2018 it picked up more Emmy nominations than HBO. However, such success enticed others to duplicate the formula and has significantly raised the competition. Its platform saw its first-ever decline in subscribers in North America in 2022.
To combat this, the OTT platform launched a new, lower-cost, ad-supported tier, to entice viewers who would otherwise not pay for the streaming service. The ad-supported model now also provides a new source of revenue, with subscription growth slowing down.
Although Netflix saw a 6.7% revenue increase (year-on-year) in 2022, its net income ($4.4 billion) displayed a 12.2% decline from the previous year. Still one of the major industry players and trailblazers, Netflix boasts 220.6 million subscribers worldwide (2022). North America remains its largest market.
Disney+: The Family-Friendly Platform with a Strong Brand
Although Disney+ only launched its OTT platform in November 2019, its popularity skyrocketed instantly, with 50 million subscribers by April 2020. Despite offering a smaller content library than platforms like Netflix, Disney’s great strength is quality over quantity.
Pixar, Lucasfilm, and Marvel all develop content for the service, while also drawing shows from other platforms including Netflix. Disney+ now has over 150 million subscribers (2022). Its growth rate is significantly higher than rival platforms such as Max and Peacock, which launched at a similar time.
Disney Plus offers an ad-free subscription tier, as well as a lower-fee ad-supported tier for subscribers.
Amazon Prime Video: The eCommerce Giant with a Diverse Content Mix
At 190 million subscribers globally (as of 2022), Amazon Prime Video has the second-largest OTT platform subscriber base after Netflix. Based on eMarketer forecasts, the number of Amazon Prime users in the US is expected to reach 157.4 million by 2023.
Amazon Unbox launched as the company’s first internet video service in 2006; the company then introduced Amazon Prime Video as a separate service in 2011, offering commercial-free VoD streaming. Given that millions of consumers already used Amazon’s other services for everything from online shopping to cloud computing, its streaming service was uniquely positioned to launch with great success. Amazon now also has a free, ad-supported streaming service, Amazon Freevee. Freevee, however, does not include all the premium content available on Prime Video.
Amazon spends a noteworthy amount on original programming. Additionally, its acquisition of MGM Studios for $8.4 billion significantly increased its movie and series content (by over 4,000 movies and 17,000 TV shows).
Prime Video expects to reach a subscription base of 250 million globally by 2027.
Max: The Premium Network with a Loyal Fan Base
HBO Max launched in May 2020. Already a premier entertainment brand in the United States, HBO started with an immediate advantage, building further by bundling content from the Warner Bros catalog and merging with Discovery in April 2022 (pivoting to the name “Max” with the rebrand).
Max’s subscription base is primarily a US market (73.8 million subscribers globally, with 46.8 million of those located stateside); however, Warner Bros. Discovery aims to improve global recognition and subscriptions. In the US, Max is already set to pass Hulu and Disney+ in market share, trailing just behind Netflix and Amazon Prime Video.
Offering both ad-free and ad-supported models, Max totaled a revenue of $7.7 billion in 2021—a 27% YoY increase. HBO Max (pre-rebrand) averaged $2.3M in daily net revenue with trends showing a downward trend (post-rebrand).
Apple TV+: The Tech Innovator with a Focus on Quality
Although Apple TV+ is still small in comparison to other players in the OTT platform market, it is establishing its own niche with affordable, yet high-quality programming and streaming.
In 2019, Apple invested $6 billion into its TV+ streaming service. Apple TV+ has a total of 75 million users (as of 2022); of these, 25 million are paid subscribers and approximately 50 million access the SVOD platform through the free one-year trial that accompanies a new Apple iPhone or iPad purchase.
While Apple’s services segment (encompassing Apple Cloud, TV+, App Store, Music, Arcade, and Fitness+) is not its primary source of revenue, it still generated a whopping $79.4 billion in 2022. Apple plans to continue expanding this segment as well, investing for the long term.
The Future of OTT Monetization—What to Expect in the Coming Years
Despite the dominance of industry giants, OTT streaming continues to grow with thousands of streaming platforms and channels available to viewers.
Transactional VoD may have dipped pre-pandemic, but the streaming model is making a comeback and is set to grow at a CAG of 8.9%, reaching $13.25 billion by 2028. Subscription VoD remains the most dominant of all streaming models; but with streaming services looking for additional ways to increase their revenue, advertisement-based models are predicted to reach a global revenue of $70 billion by 2027. In addition, the free ad-supported TV (FAST) model is also quickly gaining traction.
With FAST, consumers watch free content in a linear format, as opposed to on demand. There are over 1,400 FAST channels to choose from in the US today—a number ever on the rise, with no signs of slowing.
To stay competitive in the streaming market, content owners and producers need to adapt to meet consumer needs and adopt multiple revenue-generating strategies. That’s why dotstudioPRO makes it easier than ever to distribute and monetize your content.
dotstudioPRO’s complete OTT platform solution comes with an award-winning video content management system, allowing publishers to employ multiple monetization tools, integrate a live EPG (electronic program guide), and stream content to other smart TV apps like Apple TV, Amazon Fire TV, Vizio, and Roku. We look forward to showing you how easy it is to launch your DTC streaming network quickly and cost-effectively—request your demo today!