Mobile Internet 3.0 and OTT Services

Mobile Internet 3.0
and OTT Services
By ALI Saghaeian
Chief Analyst & Consultant
Telecoms, IT, and Media
Saghaeian [at] gmail.com

Objectives
• What is Mobile Internet 3.0
• What is an OTT Communications
Service
• What are OTT Threats and
Opportunities
• Who are the OTT Users
• Understanding OTT Business and
Monetization Models
• Learning the key market drivers
for OTT
• Brainstorming on
what OTT services
could be
introduced and
developed in your
market?
Exercise

Agenda
• Evolution of Communication Services
• Mobile Internet 3.0
• Leading global mobile operators
• Next Generation of TV & Video Viewing
• OTT Communications Services Market
• Consumer OTT offering and the genres
• OTT video market
• OTT Business and Monetization Models
• OTT Market Estimation Structure
• OTT monetization opportunities for Pay-TV
Over The Top (OTT)
Subscription Video on Demand (SVOD)
Transactional Video on Demand (TVOD)
Electronic Sell Through (EST)

Evolution of Communication Services

 The Mobile Internet 3.0 is defined by the cloud-enabled, software
driven, IP-centric, high-speed 4G+ networks; consumers using
multiple connected devices; flattened value chains; and operators
relying on mobile data services for majority of their revenues.
Mobile Internet 3.0
 In fact, mobile apps and VAS commanded the highest share from the
mobile data revenues.
 Additionally, the VASrevenue is also lost as this revenue moves to the
over-the-top (OTT) application providers such as Google, Facebook
and others.
 For China Mobile, Mobile VAS revenue is now greater than both
messaging and access revenues.

The Game is Changing …

Challenges for MNOs: Porter’s Forces
Mobile communication services have been heavily impacted by smartphones
and all IP networks
A good product roadmap needs to take into account these 4 challenges.

Mobile Internet 3.0 – Leading global mobile operators

What is an OTT Communications Service

Next Generation of TV & Video Viewing

The OTT Communications Services Market – Segmentation

Threats from OTT Communication Apps
 OTT communication apps are here to stay > Evolves & improves
permanently generating enormous user satisfaction (90%+) > Generates
enormous usage (WhatsApp has more messages alone than all GSM
operators combined)
 Communication suites are a threat to telcos > They capture value
outside of the traditional communication model > They cause irreparable
collateral damage (revenue, margin, image) > Churn is facilitated through
cloud-based context
 The “App” Model has advantages over native > Available on any
smartphone and secondary devices (tablets, PCs, TVs, Watches…) >
Evolves and updates more frequently than native or standard-based services
> Allows an autonomous strategy : no lengthy and difficult agreements with
other players (web, telcos, OEMs, OSes…) > Favors virality via Address
Book and usage of the Phone number

OTT set to corner Revenues of the Future
All Revenue Streams (Messaging in MENA-India & Gaming in Far-East)
are moving towards Internet Giants and away from Telcos…

Big OTT players are now almost everywhere…

Who are the OTT Users

Consumer OTT offering is right across genres
 OTT video was built on digital
distribution of movies, copying
the DVD model
 Predominantly movies,
available on buy or rent basis
 With transactional OTT being
relatively expensive, OTT
market growth has been slow
 The rise of Netflix and SVOD
has not only lead to a shift from
transactional to subscription,
but also a shift from movies to
TV programming

OTT video market has now reached a level of maturity
 OTT growth has been very rapid so far, growth is now slowing down across
all platforms except SVOD
 In just three years, total OTT video revenues worldwide will double from just
under $25m in 2012 to $50m in 2015

OTT platforms: Total market
 Today subscription (SVOD) is
the fastest growing sector of
OTT, and the key driver in OTT
video overall.
 The launch of Netflix in new
markets is typically
characterized by growth for the
entire digital video market, with
the launch of a SVOD rivals and
alternative models.
 But transactional VOD remains
the preferred model for studios.

Three key success factors: Content, User experience and
low price driving scale

OTT Video Market Share
Direct revenues’ share of video will increase and provide monetization opportunities

OTT Video Revenue will exceed Physical by 2018
Global video revenue, OTT vs physical (US$bn), 2013-2018
Source: Ovum, PwC

OTT is eating away at the disc-based market

OTT is Taking Up
› Inline with other markets
around the world, OTT
revenues in China and Korea
are mainly advertisement
driven
› Japan, however, continues
to rely more on subscription
revenue.

Growth of online video through 2017 in SE Asia

OTT Business and Monetization Models
1. Free
• Build subscriber base/market reach
• Then sell content/services/advertising
• Creates data traffic/revenue for mobile operators
2. Subscription
• Small monthly fee
• Include in mobile operator monthly price plans
• Eg BBM, WhatsApp, operators‟ services
3. Advertising and sponsorship
• Based on building subscriber base/market reach
• Eg Nimbuzz, Fring, OoVoo, TextPlus
4. Virtual content and apps
• Stickers, avatars, games
• Eg Line, KakaoTalk, Tango
5. Call-out/message-out
• Skype, Nimbuzz, Rebtel, T-Mobile Bobsled, Fring
6. Partnerships
• Mobile operators – revenue share, market reach
• Handset manufacturers – market reach

Combine Business Models for OTT

OTT Market Estimation Structure

Modeling the Overall Value of the OTT Market

OTT monetization opportunities for Pay-TV

The 6 Cs are the key market drivers
Commoditization, content, convenience, collaboration, consumers and
consolidation are all shaping the future landscape for OTT services
 Commoditization of traditional revenue streams (e.g. voice) means
operators must create new profit centers.
 Content remains key to the take up of access and demand is almost
inexhaustible, but premium content remains a scarce resource.
 Convenience is what consumers value in content services – they want it
to be readily accessible across multiple devices, easy to pay for and easy to
find.
 Collaboration is key to the future of operators’ digital strategies. Very few
have the skills and resources to compete with best of breed services.
 Consolidation is starting to reshape the landscape as operators move up
and across the content value chain, and grow scale, though M & A activity.
 Consumers are happier to spend on access models than single
transactions, and Internet access is taking wallet share from pure content
spend.

OTT content is key to revenue growth
Operators should partner to find attractive content bundles for consumers
 Commoditization: As core services become commoditized, service
providers will need to offer content bundles to attract and retain
consumers.
 Content is not just a retention tool; there are significant revenue
opportunities as content providers and aggregators explore new ways to
package and sell content.
 Convenience: Operators can play to their strengths – an active base
of paying users, a robust billing and CRM platform, and marketing clout.
 Collaboration is not easy, but is the best way to respond to evolving
consumer demand, and unlocking multi-billion dollar revenues.
 Consolidation: We expect to see larger entities competition for
rights and a shift of power within the value chain.
 Consumers are demanding more content, on more devices - OTT
video services, digital music, video games, and e-books.

Key things to look out for in future….
 OTT has reached maturity in many developed Western markets
 Growth will therefore be driven by the expansion and development of OTT in
underachieving regions like Asia and Africa
 Can OTT overcome local challenges in developing legitimate home
entertainment markets in Vietnam, China, Russia and India?
 Up until recently, OTT had to be subsidized by devices (Apple), e-retail
(Amazon) or discs (Hollywood)
 SVOD is unsustainable business model for movie industry, but highly
suitable for premium TV consumption—SVOD was built for binge viewing of TV
series!
 EST, on the other hand, is perfectly suited to take over disc market, however
home video has already contracted significantly, and some ex-disc consumers
have switched to other platforms including pay-TV
 TVOD is therefore likely to be best platform for premium movie content,
complementing TV content and older movies consumed as part of SVOD
platforms

Any Questions?
33
ALI Saghaeian | saghaeian@gmail.com

Mobile Internet 3.0 and OTT Services

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