Netflix and Hulu are just the beginning, with the over-the-top (OTT) pay-TV services market expected to climb to $10 billion by 2018, according to international market research firm Infonetics.
While SA lags its international counterparts in the evolution of OTT TV services, overseas development has sparked unprecedented demand, with local consumers devising means of accessing the likes of US-based Netflix, Hulu and Amazon through "backdoor" online services like Unotelly.
Jeff Heynen, principal analyst for broadband access and pay-TV at Infonetics Research, says subscription-based OTT providers like Netflix, Hulu Plus and Amazon have seen "phenomenal" growth over the last couple of years.
"With a combination of wide availability across end devices, user-friendly interfaces, and access to vast content libraries, these providers continue to challenge traditional pay-TV providers and are in the early stages of siphoning off revenue."
But beyond this approach, adds Heynen, OTT providers are also starting to expand their relationships with traditional pay-TV providers to get their apps and services integrated directly onto consumer set-top boxes, gaining access to a much larger pool of current pay-TV subscribers.
Local moves
About two weeks ago, SA pay-TV giant MultiChoice announced it had connected its flagship decoder, the Explora, to the cloud - a first for the Naspers-owned company. The move gives connected customers access to an additional 300 titles of new series, movies and other content via DStv Catch Up Plus, and is part of the company's broader video-on-demand strategy.
Meanwhile, local telcos are aiming to get a piece of the promising OTT TV pie, with Telkom last week announcing a decoder deal with MultiChoice; Orange investigating the landscape ahead of bringing expanding its own VOD offering into SA; and the country's mobile duopoly Vodacom and MTN both eyeing their options in the space.
Last month, MTN SA chief marketing officer Larry Annetts said the company would enter the subscription VOD fray by the end of November.
Research highlights
Infonetics' latest research reveals OTT pay-TV revenue is likely to grow from $5.8 billion in 2014 to just over $10 billion in 2018. The global pay-TV market totalled $117 billion in the first half of 2014 - an increase of 3.9% from the first half of 2013.
The firm adds satellite and telco pay-TV service revenue continues to grow, driven by new subscribers and increased average revenue per user in North America and Western Europe, although much of the increased revenue per user is being offset by ever-increasing content costs.
Overall, pay-TV subscribers reached 837 million in the first half of this year, representing growth of 10% over 2013, with the strongest growth again coming from the telco pay-TV segment. Locally, MultiChoice has around 95% of the market and is beamed to five million homes.
In reaching its findings on the OTT TV market, Infonetics tracked - among others - the following global players: Orange, Netflix, AT&T, Beijing Gehua, BCE (Bell Canada), British Sky Broadcasting, Cablevision, CanalSat, Charter, China Telecom, Comcast, Cox, DirecTV, DISH Network, J:COM, Jiangsu Cable, Kabel Deutschland, Shaw, Sky Italia, Tata Sky, Time Warner Cable, UPC Broadband, Verizon and Virgin Media.
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