State of Digital UK 2023
When Apple CEO Tim Cook declared in 2015 that “the future of TV is apps,” he was referring to a future where a majority of TV viewing is streamed over-the-top (OTT) via online apps. While we’re not there yet, over the past few years OTT viewing has grown to become a mainstream media behavior in the U.S., now with 51 million households – or 54% of Wi-Fi connected homes – streaming video content over-the-top to a television set.
Americans have an obvious fondness for streaming, but their methods of accessing OTT content vary dramatically from household-to-household. There are currently five main types of devices for streaming over-the-top to a TV screen: streaming boxes/sticks, smart TVs, game consoles, internet-enabled DVR / set-top boxes and internet-enabled Blu-ray players.
Currently, streaming boxes/sticks and smart TVs are the two most common device types for streaming, but within each of these device categories are several brands fighting for market share. Within the streaming box/stick market, Roku, Amazon, Google and Apple all have well-established footprints; within the smart TV market Samsung, Vizio, LG, Sony and others all factor in; and among game consoles Xbox, PlayStation and Wii all have sizeable shares of the market. It begs the question: why is the OTT device market so fragmented?
One big factor, of course, is that many of these devices are not dedicated to OTT streaming, but rather incorporate that feature as an added capability. Most people buy a TV primarily to watch TV, or a game console primarily to play games, or a Blu-ray player primarily to watch Blu-rays. But as more of these devices were sold with built-in internet-streaming, more consumers had the ability to stream OTT content if they wanted to. And as demand for streaming services like Netflix and Hulu grew in popularity, viewers opted for whichever living room device happened to enable OTT streaming. For a household that watches only one or two OTT streaming services, the specific device specs were secondary to the fact that it enabled the desired viewing behavior.
As the OTT market develops and households begin streaming content across an increasing number of OTT apps, user experience will likely become more important. When it comes to user experience, the streaming device hardware is secondary to the software platform. Since streaming boxes/sticks are designed for the explicit purpose of OTT streaming, this could be the segment of the market that becomes the eventual battleground for UX supremacy.
Supporting this hypothesis, Comscore OTT Intelligence™ data shows that among “skinny bundle” households – that is, those who watch any of the live TV OTT streaming services (defined here as Sling, PlayStation Vue and DirecTV Now) – a staggering 91% stream OTT content using a streaming box/stick. That is a huge share of the market relative to its 40% overall household penetration, and it’s telling because these are viewers who get nearly all their TV content via over-the-top. This suggests as consumers become more OTT-dependent in their viewing, the user experience becomes increasingly important to them.
It is worth considering to what extent the OTT market might eventually resemble the smartphone market and how user experience factors into the equation. Prior to the iPhone’s 2007 launch, the user experience was largely differentiated by the hardware – with Blackberry’s keyboard perhaps being the single most important differentiator back then. The iOS and Android platforms ultimately grabbed the lion’s share of the smartphone market as software (specifically, apps) became the differentiator in the user experience. If the future of TV is indeed apps, does that mean that the platform on streaming devices will eventually determine the biggest players in the market? Or will this market remain fragmented, much like the pay-TV market is today? Only time will tell.
For more insights on over-the-top viewing and how it’s changing the TV landscape, download our State of OTT presentation or watch the webinar recording today.