What is OTT Video?

If you’ve ever binged a TV show on Netflix, then you’ve seen firsthand how OTT video works. “OTT” stands for over-the-top, a term that’s come to describe a rapidly evolving content delivery mechanism that counts services like Netflix, Hulu, and Amazon Prime among its most prominent examples.

Simply put, the OTT process delivers content through the internet, bypassing traditional cable and telecommunications services run by companies like Comcast. OTT has come to include any product or service that bypasses traditional gatekeepers via the internet; in the realm of video, OTT refers to TV shows, films, and other media that you get through this new delivery model.

How Does OTT Work?

The standard model of video content delivery, especially for TV shows, usually involved signing up with cable providers or similar paid-TV companies. Customers would choose from a number of packages, each covering a preset selection of channels. Often, cable companies bundled popular, high-demand channels with a host of less popular channels; to get access to the channels they wanted, customers often found themselves paying the subscription cost for a bunch of unwanted channels that came with their chosen package.

This spelled profit for most cable companies, but most consumers chafed against the inflexible costs and general lack of choice when it came to their video content access. With monumental improvements in broadband Internet quality and access, though, came companies that redefined the traditional model. Successful ventures like Netflix have brought OTT video into the mainstream.

So how does OTT video work?

By leveraging today’s powerful consumer broadband connections, OTT video puts the marketplace of shows at the viewer’s fingertips. You can now pick and play the programs you want to watch, as well as choose when and how you watch them. Instead of having you absorb the cost of unwanted bundled channels and pay for a dedicated delivery avenue like cable TV did, OTT video instead acts like any other action you take using your Internet connection — like surfing the web, downloading an email attachment, or logging into social media.

Essentially, your TV show, film, or other video content travels over the top of your existing Internet service, rather than as a separate service alongside it.

OTT’s Revenue Models

Most OTT video providers use one of three main revenue models:

• SVOD: Subscription Video on Demand, seen in services like Netflix, Hulu, and Amazon Prime that have users paying at regular intervals for an account that grants unlimited access to the service’s full catalog of content.
• TVOD: Transactional Video on Demand, exemplified by services like iTunes and Amazon Instant Video, where users can purchase either permanent or limited access to individual pieces of content.
• AVOD: Advertising-based Video on Demand, typically free and ad-supported channels like YouTube or Crackle, where ads served alongside freely accessible video cover the production and delivery costs of content.

What Does This Mean for You?

OTT video gives audiences far greater control over the video they consume. Consequently, OTT video redefines consumer expectations for how video content gets served to them.

Netflix has helped lead the charge for OTT video adoption, and with more than 90 million subscribers all over the world, the service has driven many competitors to launch similar OTT video services. Amazon, HBO, Hulu, and even broadcast TV networks like CBS and Lifetime have over-the-top video services that count millions of subscribers, and OTT video service usage came in at 70% of American audiences as early as 2015.

All of this indicates robust growth in OTT video uptake for both consumers and publishers. For digital video advertisers, that means 3 things:

New Business Models

OTT video doesn’t operate like traditional cable, and today’s consumers receive and engage with video content differently than their counterparts from cable TV’s heydays. To maximize revenue and ad effectiveness, you’ll need ad strategies that play to the unique strengths and demands of the OTT medium, as well as to audience preferences that have been shaped by the evolving OTT video landscape. Without the same rigid ad spot duration limits of broadcast TV, for example, OTT video lends itself well to long-form advertainment that can, in turn, spark more engagement in target audiences.

Fragmented Delivery Channels

OTT video untethers viewers from traditional telecommunications providers and their bundled cable, satellite, and other paid-video packages. As viewers break free of the TV set and scatter across multiple devices and platforms, even while watching the same TV show, advertisers gain more options for reaching these viewers. An ad aimed at fans of CBS’ comedy The Big Bang Theory, for example, could be run using a traditional broadcast TV ad spot or served through the CBS All-Access advertising framework to reach viewers who watch the show online.

On the other hand, this presents a new challenge to advertisers, too. Instead of going through a single delivery avenue to reach all the viewers of a particular piece of video, you’ll need to execute campaigns that run ads across multiple platforms and devices if you want to reach all of that core audience. This can be time-consuming, labor-intensive, and costly.

New Measurement Systems

Finally, there’s the challenge of measurement. Related to the fragmentation of viewing platforms, the variety of delivery models and methods that fall under the “OTT” label means there’s no standardized evaluation rubric for the OTT video category as a whole.

The rapid evolution of OTT technology itself adds to the issue, as advertisers have to keep up with the shifting protocols and standards of various OTT platforms. Standard ad delivery protocols like the IAB’s VAST ease the burden, but this doesn’t mean advertisers can simply disregard the development of technology and the accompanying standards in OTT video.