Right now, on-demand video seems to be gaining in popularity — but, according to The Diffusion Group, it won’t entirely stay that way.
The report, posted by DigiDay, indicates that digital television will be growing, with programming through “over the top” (OTT) connected devices gaining popularity. Popular shows like SportsCenter and AMC’s The Walking Dead viewed through the likes of Apple TV and Chromecast could lead the charge.
The group reports that legacy TV advertising revenue will drop to $47.5 billion by 2018, while OTT-based TV advertising will increase to $31.5 billion in the same period.
“OTT advertising is still lumped in with YouTube videos and ads on sites that have video,” said Alan Wolk, senior analyst for The Diffusion Group and author of the report, titled Future of OTT TV Advertising. “By 2020, give or take, there will be no distinction between OTT and TV buying. If I’m Kraft, I will buy women 18 to 25 who are watching Scandal and that ad will show up through OTT or set-top boxes. They’ll be bought and sold together.”
As you can see from the chart above, legacy TV advertising is still pretty high at nearly $60 billion. But the 20 percent drop in just three years’ time is too big not to notice.
By comparison, OTT-based advertising will grow nearly five times over where it currently sits now, rising from $8.4 billion for this year all the way to $31.5 billion by 2018.
The proof, as provided in the result, lies in viewership. Last year, OTT viewing by U.S. consumers sat at 3.6 hours a week. However, as you can see, that number will nearly double this year, going up to 6.9 hours a week. And there’s no stopping its growth from there, as by 2020, it’ll nearly get to 20 hours a week.
Part of this consideration isn’t just from on-demand items through devices. YouTube clips also count in OTT viewership, although it seems viewers are more interested in longer content. A report from FreeWheel indicates that 91 percent of OTT ad views occur through content that lasts longer than 20 minutes, or with live broadcasts that last longer than that.
This fourth chart, compiled by FreeWheel, shows what kind of ad views come from content duration. While those with smartphones, tablets and desktops seem to prefer videos that go shorter than 20 minutes, those who have an OTT-enabled device (like Roku or Apple TV) tend to watch content longer than that, either pre-recorded or live. These numbers could change across the board for devices as more companies introduce OTT-related services, like the recently launched HBO Now.
Finally, the last chart shows the rate of annual change in OTT ad revenue for the United States, and although the growth seems to taper off over the coming years (with 2015 being the strongest at 133 percent), it’s still growth nevertheless — which means that on-demand services and Internet-based video could soon overshadow regular TV programming.
The “TV Everywhere” boom is happening, and in just a few years’ time, we’ll see just how substantial it’s going to get.