OTT has become the fastest-growing method of video content consumption, and that growth is putting content owners in the best position to capitalize on the increasing audience fragmentation being caused by the rise of on-demand services, according to a new study that posits the demand for high quality content will remain strong across the board.
Still, the increasing disruption of traditional media models will create risks, as well as opportunities for media and entertainment companies, especially those that fail to rapidly evolve into what will eventually be the dominant model for video consumption, according to Fitch Ratings.
“Relevance will be determined by platforms that can capture large audiences with compelling content, target them specifically, and measure their success,” said David Peterson, Senior Director, U.S. Corporates.
Fitch said live sports programming, in both the U.S. and Europe, remains a significant opportunity for broadcast and cable networks to generate large viewing audiences. Despite astronomical licensing fees, sports remains one of the last segments to remain “appointment television” and resist the shift to on-demand, making it a bright spot for potential revenue to broadcasters and operators.
Traditional cable networks and broadcasters have responded to increased competition by launching their own OTT services like CBS/Showtime, HBO, DISH Network’s Sling TV, and Hulu, which is owned by Disney, Twenty-First Century Fox, Comcast and Time Warner.
Trends in advertising spending continue to be a bellwether for the sector’s operating performance. Fitch expects ad revenue growth will slow in the near term, likely not rising above GDP growth (1%-2%). Advertising dollars will follow broader trends in the industry, like the shift to digital and mobile platforms and to more measurable and targeted mediums.