The new OTT ecosystem

Leon Siotis, managing director, UK and Southern Europe at SpotX, looks at the development of OTT video services in Europe.

Leon Siotis SpotXThere has been a habitual shift in the way audiences watch video content on different devices. New technology has enabled viewers to adopt new methods of TV consumption and changed the way they interact with their favourite video content. The development of over-the-top (OTT) services – where TV content is delivered through an internet connection – has seen increasing audiences thanks to the consumer-friendly flexibility OTT video offers.

According to BARB, the number of people watching recorded TV or video on demand (VoD) on TV has doubled from 9 per cent in 2010 to 20 per cent today. Viewers can watch content after the initial broadcast time and across multiple devices, which has given rise to a new TV ecosystem. Major broadcasters are recognising the opportunities of offering their premium content to viewers in a more flexible way, funded through advertising that harnesses data to allow better targeting.

STV, the leading broadcaster in Scotland, is embracing the new ecosystem. The STV Player enables viewers to watch their favourite TV programmes, such as World Cup football or The X Factor, live and on ‘catch-up’, free of charge within STV’s licence areas on their mobiles, as well as on laptops, tablets or their TV set, with the content delivered over the internet.

The broadcaster has extended its programmatic infrastructure to facilitate programmatic video advertising and was the first in the UK to introduce dynamic ad insertion (DAI) to live channels in 2014, with Yospace. Since then STV has developed a cutting-edge data strategy, allowing its TV programmes to be monetised programmatically.

Brand-safe environment
Many major global advertisers see enormous value in the cross-screen, brand-safe environment afforded by advertising in OTT environments. Adoption of OTT varies across Europe and is dependent on several key variables, which include OTT penetration in the market, consumer awareness, broadband speed and the availability of free-to-air TV. The adoption of OTT is, at present, an urban phenomenon across Europe, with the opportunity for development in rural areas.

In Germany, where TV content remains hugely popular, there are a wealth of options for subscription-based VoD services, with good competition among providers driving the uptake of OTT. As audiences are becoming more aware of how they can watch content through mobile, set-top boxes, streaming devices, games consoles and smart TVs, advertising investment will increase.

In Spain, broadband penetration is also excellent, creating optimism about the future of OTT in the region. Audiences are well informed and the strong demand from advertisers and their agencies outpaces the available supply of mobile video inventory. As the production of local broadcast content in Spain increases and it becomes available on OTT platforms, the Spanish market will see the new ecosystem develop.

Like Spain, the success of OTT in France is dependent on more local content being produced. According to eMarketer, half of France’s internet users access streaming video services at least once a month. Most of these consumers access free OTT video services following patterns identified in the US and UK. France also benefits from advanced video measurement, which was introduced into the market by Médiamétrie in 2016 and provides more standardised analysis across digital and TV. There is a predominance of IPTV viewing, which could pose a barrier to OTT growth, but awareness among consumers is high and advertisers are keen to deploy data-driven programmatic advertising.

In Italy, there is a strong culture of free-to-air live broadcast TV, which has limited consumer adoption of OTT viewing. Smart TV and broadband penetration is low, especially outside urban areas, and broadband speeds are also low, so broadcasters are less motivated to harness the new OTT ecosystem. However, demand from advertisers remains strong and rapid growth is expected.

According to SNL Kagan, the UK has one of the highest levels of broadband penetration in Europe: 91 per cent of UK households have fixed broadband connections, of which 91 per cent are over 4Mbps (Akamai, State Of The Internet: Q4 2016) and, like the US, the UK market has strong device penetration. There is also widespread audience awareness of OTT options, with a growing culture for watching TV across multiple devices, such as mobiles or tablets, and through catch-up or streaming services.

Hit shows such as ITV’s Love Island are streamed live by many viewers watching on tablets and mobile phones. As a result, broadcasters in the UK believe that OTT should be a top priority for them over the next three years, supported by the UK’s well-established programmatic video advertising ecosystem.

There is a clear opportunity for European broadcasters looking for incremental revenue from OTT. As audiences continue to watch TV but shift their viewing habits to incorporate mobile viewing, as well as more connected television, PC, live-streamed and ‘catch-up’, the demand from advertisers to reach these audiences more efficiently and effectively will only increase. Awareness of these options among consumers across Europe is generally high, and it is now in the hands of the broadcasters to capitalise on the opportunities presented by the new ecosystem.