The development of the OTT video content market requires competitive conditions for providers and effective counter-piracy mechanisms

16-03-2018

Internet TV with the use of OTT (Over the top) technology* is gradually becoming an alternative to traditional types of delivery of audiovisual content. The global market of OTT audiovisual media services has grown by more than 20% every year, and according to expert estimates, the total revenue of OTT companies will reach 83 billion dollars in 2022, which is twice as much as in 2016.

In Ukraine, the share of audiovisual services using OTT technology is about 2% of the market, which is a small rate compared to satellite, cable and terrestrial TV. The current television and radio broadcasting legislation does not take into account the changes in the audiovisual sector and provide the comprehensive regulation for market participants using modern technologies. This provokes negative consequences for a promising segment: distortion of competition in the market, risks of illegal content use and threats to state information security.

The government, business and market representatives discussed the market issues during the Roundtable “OTT video content market: modern technologies VS outdated laws” on March 16. The event was organized by the BRDO Office with the EU4Business/FORBIZ support as part of the #PRODialogue Public Dialogue.

“Creating effective principles for interaction in any sector is possible only through a dialogue with market participants. The development of modern innovative markets requires the principles of open competition and equal rights,” the Sector Manager on Competition and Economic Issues of the EU Delegation to Ukraine Iryna Hubarets said.

The BRDO analyzed the regulatory environment of the sector and presented the results in the Green Paper “OTT Video Content Market”. “In Ukraine, the development of this market is restrained by the inability of the state to update the legislation quickly, so now it does not allow to fully identify OTT provider services as a software service provider. Instead, we have a high level of piracy and unequal conditions for Ukrainian provides compared to foreign ones in terms of taxation and state information security,” the BRDO’s IT&Telecom Sector Head Oleksandr Kubrakov said.

For example, OTT-providers who are non-residents do not pay taxes on incomes from economic activities when providing their services on the territory of Ukraine. At the same time, they do not need to meet the requirements for the distribution of foreign TV programs and content, which are subject to restrictions in Ukraine.

Due to the fact that there is no registration of OTT-providers in Ukraine, it is impossible to determine the exact number of such provides as well as the number of households receiving their services. In addition, the market is characterized by unequal conditions for provides that offer services using various technologies.

Experts concluded that the basic principles for activities of television and radio broadcasting market participants defined by the Law of Ukraine “On Television and Radio Broadcasting” didn’t meet the needs of the time and required urgent changes.

Market share by TV reception modes: Satellite, Cable, Terrestrial, IPTV, OTT. Source – the SES (data as of the end of 2016)

Oleh Chernysh, member of the National Council of Ukraine on Television and Radio Broadcasting, agrees with this. “In order to resolve problematic points and introduce European standards in audiovisual media services, we need to create a transparent and affordable procedure for domestic and foreign OTT-providers to enter the market by introducing a regulatory principle of registration and/or notification,” he said.

The implementation of this principle will allow:

  • consumers to receive services of guaranteed quality;
  • ensure compliance with the requirements for state information security;
  • create effective counter-piracy mechanisms.

“Technological markets are drivers of changes, so it is very important to introduce liberal and clear rules that will promote the development, fair competition and investment attraction,” Natalya Klitna, Chairman of the Board of the Association of Rights Holders and Content Providers, summed up.

Global OTT video content market

Analyzing the revenue growth in the OTT market globally (by 2022, the growth is expected to be more than doubled compared to 2016), it can be assumed that Ukraine will have the same dynamics.

Revenues from subscription-based TV in the world compared to OTT, billion dollars

OTT   Subscription-based TV

Source – the Digital TV Research Limited (2022 – forecast)

As a reminder, on December 14, 2017, the VRU registered a draft Law on amendments to the Law of Ukraine “On Television and Radio Broadcasting” (No.7397), which is restated as the Law of Ukraine “On audiovisual media services”.

The event will be attended by Tetyana Popova, Chairman of the Board of the Association “Telecommunication Chamber of Ukraine”, representatives of the “Clear Sky” Initiative as well as business, expert groups and the public.

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