New data from Parks Associates shows that 55% of OTT services in the U.S. have a subscription-only business model, such as Netflix or Hulu. In Canada, 50% of OTT services offer subscription-only services.
“There is an enormous amount of change going on in the OTT space right now, with new OTT video services entering the market each month. Many of these services have subscription as at least part of their business model,” said Brett Sappington, senior director of Research, Parks Associates. “The recent ruling of the U.S. Court of Appeals for the 9th Circuit is not likely to affect OTT video service business models. An OTT video service is unlikely to pursue legal action against someone who pays less than $10 per month unless they are doing something that disrupts the service.”
Earlier this month, the U.S. Court of Appeals for the 9th Circuit ruled that sharing passwords without the authorization of the system’s owner is a crime that can be prosecuted under the U.S. Computer Fraud and Abuse Act. A report by Parks Associates last year estimated total losses of more than $500 million in revenue in 2015 from password sharing. At the end of 2015, approximately 20% of U.S. broadband households had cancelled at least one OTT video service in the past 12 months. In 2Q 2015, 18% had done so.
“Services are experimenting with a variety of business models in order to differentiate themselves in this crowded market dominated by Netflix, Hulu, and Amazon. Smaller OTT companies are experimenting with the freemium model in particular,” said Ruby-Ren Bond, research analyst, Parks Associates. “The subscription services with smaller bases are increasingly partnering with other players, such as Amazon, Hulu, and Roku, which allows them to remain viable in a crowded market dominated by the top players.”