What is OTT Technology? The Definitive Guide

Over-the-top or OTT technology has completely changed how people consume media, offering unprecedented access to entertainment, news, and information.

Unlike traditional broadcasting, OTT technologies enable music and video files to stream directly over the internet, effectively bypassing the usual distribution channels like cable and satellite.

OTT services allow consumers to watch their preferred TV shows, movies, and other media content on any internet-connected device—desktop computers, cellphones, tablets, gaming consoles, and smart TVs—from anywhere.

This guide uncovers the architecture and scalability behind the success of over-the-top technology, its various types, and how businesses can harness its potential for growth.

Key Takeaways

• Over-the-top or OTT technology is a dynamic technology that enables users to stream movies and TV shows online.
• The five main components of OTT technology are Content Management Systems (CMS), Content Delivery Networks (CDNs), Video Encoding and Transcoding, Digital Rights Management (DRM), and User Interfaces (UI).
• Thanks to developments in artificial intelligence, advanced OTT platform technology provides tailored content and highly-targeted ads based on user preferences and behaviors.
• The four types of OTT services are Subscription Video on Demand (SVOD), Advertising Video on Demand (AVOD), Transactional Video on Demand (TVOD), and Hybrid Video on Demand (HVOD), which combine two or more OTT broadcasting monetization strategies.
• As a business owner, you can leverage inoRain's end-to-end OTT platform solutions to transform your company into a revenue-generating streaming platform.

What is OTT Technology, and How Does it Work?

Over-the-top or OTT technology refers to the distribution of media content via the internet. It’s how music, movies, live events, and TV shows are delivered online without going through traditional pay-TV methods like broadcast, cable, or satellite.

This innovative approach enables businesses to reach a wider, more diverse audience as consumers worldwide stream content on various devices at their convenience.

In fact, Statista estimates that the number of OTT video market users will reach 4.9 billion by 2029, with the average revenue per user (ARPU) already at $80.70 in 2024.

If you want a piece of that profit pie by leveraging OTT video technology, it helps to understand its different components.

But first, how does OTT work?

Over-the-top technology works by leveraging the internet’s infrastructure to deliver on-demand media tailored to a user’s preferences, location, device, and connectivity—typically through websites or apps.

With the increasing demand for convenience, flexibility, and diverse content, OTT broadcasting has become the new normal.

That’s why marketers in the digital age are dependent on this new approach. OTT provides greater targeting for cost-effective advertising, more freedom to reach global audiences, and real-time data insights to inform marketing strategies.

With over-the-top (OTT) services, businesses can show relevant ads to ultra-specific audience segments based on user information like location, watching habits, and preferences. This allows for more efficient and effective advertising.

Both well-known video-streaming websites like YouTube and Hulu, as well as niche apps developed by independent producers, abound. We refer to the content type on these platforms as over-the-top (OTT) video. So, what is an OTT platform, exactly?

Put simply, an OTT video platform provides users with diverse online media through cloud-based or on-premises streaming. This encompasses everything from local programs and original content to live events, movies, and TV shows. But for OTT services to work, there are a few moving parts involved.

Five Components of OTT Technology

OTT video technology typically consists of five primary components. Each one is described in detail below.

1. Content Management System (CMS)

A CMS is a software solution that stores, organizes, and manages digital content. It allows for efficient metadata tagging, categorization, and content retrieval. This streamlines and enhances content discovery and access for OTT platform users.

2. Content Delivery Networks (CDNs)

CDNs are geographically distributed server networks vital for optimizing content delivery on over-the-top (OTT) platforms.

By caching content close to the end-user, CDNs reduce latency and buffering, thereby improving streaming quality. This enhances customer satisfaction by ensuring that viewers can experience uninterrupted playback regardless of their location.

3. Video Encoding and Transcoding

Video encoding compresses raw or original video content to reduce file size without affecting quality. Through transcoding, encoded file attributes like format, bitrate, codec, or resolution are altered into digital forms for efficient playback over the internet.

These processes are an essential component of OTT video technology. They optimize content for adaptive bitrate streaming, which guarantees a flawless viewing experience by modulating video quality depending on the user’s device and internet speed.

4. Digital Rights Management (DRM)

Digital Rights Management (DRM) prevents media from being copied or used without permission by encrypting content and providing authorized users with decryption keys.

This enables over-the-top (OTT) platforms to manage content licensing agreements, access restrictions, and different OTT monetization strategies. A DRM system also protects content for secure distribution across various devices.

5. User Interface and Experience

A top OTT provider offers end-users an engaging experience with a user interface (UI) that’s intuitive and personalized. It’s a crucial aspect of any OTT platform, enabling users to browse, search, and play content on their preferred device through a website or mobile app.

What are OTT devices in this context? OTT devices refer to internet-able devices like computers, smart TVs, gaming consoles, tablets, smartphones, and even Internet of Things (IoT) devices that can stream content.

Advanced Over-the-Top Technology

OTT video technologies are continuously evolving, enhancing both the quality and experience of digital media consumption. Below, we explore some of the latest advancements.

AI-Powered Insights and Hyper-Personalization

Like many other spheres, artificial intelligence (AI) has had a major impact on the over-the-top (OTT) industry. AI and machine learning (ML) developments have revolutionized OTT services with:

• Highly-contextualized customization based on consumers’ behavioral data like search terms, viewing history, ratings, and other real-time information.
• Enhanced content delivery and more granular search results through recommender systems using content-based, collaborative filtering-based, and knowledge-based approaches.
• Detailed data analytics on viewer behavior, content performance, and ad campaign effectiveness for optimized marketing efforts.

AI-driven OTT platform technology is hyper-personalized, leading to increased and prolonged engagement. It delivers distinctive user experiences while enabling data-driven decision-making for efficient resource allocation.

Multi-Platform Support

OTT solutions largely rely on data visibility. With cross-device compatibility, anyone with any gadget can instantly view content, allowing seamless and enjoyable viewing anytime, anywhere.

Cloud-Based Infrastructures

The full form of OTT video technology leverages cloud-based infrastructure to reliably store, organize, and distribute content to users worldwide. This allows businesses to expand their operations at scale to meet the growing demand for their services.

Cloud-based technologies also enable flexible content delivery with the ability to modify server capacity depending on demand—reducing costs without compromising speed.

Four Types of OTT Services

The ‘OTT technology’ meaning isn’t complete without understanding the four different types of OTT services available. These are outlined below.

1. Subscription Video on Demand (SVOD)

Access to an online video catalog for a predefined monthly or annual charge is an OTT monetization model called subscription video on demand (SVOD). Subscribers can typically enjoy a library of curated content for a fixed fee, providing OTT platform owners with a steady revenue stream. Disney+, Netflix, and Amazon Prime Video are all SVOD-based services.

2. Advertising-Based Video on Demand (AVOD)

AVOD services are supported by advertisements, allowing users to access online content at no cost or at a discounted price. This enables OTT platforms to have a more expansive reach. A few examples are Crackle, YouTube, and Tubi.

With the AVOD business model, content producers make most of their income from advertising.

3. Transactional Video on Demand (TVOD)

The transactional video-on-demand (TVOD) model lets users buy or rent premium content once-off. Given that viewers are only charged for an individual piece of content rather than the entire library, TVOD is commonly referred to as pay-per-view (PPV), pay-per-download (PPD), or electronic sell-through (EST).

One example is paying to view a big sporting event, such as a boxing match, on Sky Box Office. TVOD is an excellent choice for a business looking to rent out or sell a single video feature. Movie premieres, once-off athletic events, instructional films, and live-streaming events are all instances of content that can greatly benefit from this format. Google Play Movies, Vudu, and iTunes are some popular TVOD-based services.

4. Hybrid Video On Demand (HVOD)

An HVOD model combines different AVOD, SVOD, and TVOD monetization strategies to maximize revenue and expand audience reach. The three most common OTT broadcasting hybrid models are:

• AVOD + SVOD: This approach offers both subscription-based content and no-charge ad-based viewing, often accompanied by free samples of premium content to attract new subscribers.
• SVOD + TVOD: This hybrid model is designed to meet the needs of a wider audience. An OTT provider can serve both long-term subscribers and one-time buyers by accepting both types of payments.
• Multi-Tiered Model: This approach leverages AVOD, SVOD, and TVOD to offer a combination of subscription-based, ad-supported, and pay-per-view content. This allows an OTT platform to diversify its revenue opportunities by catering to a wider audience with different preferences.

Peacock, YouTube, and Samsung TV Plus all use hybrid OTT monetization methods.

How Does OTT Monetization Work?

OTT monetization works according to an OTT provider’s available monetization models (or a combination) as follows:

• For SVOD: The OTT platform sets subscription fees and manages access rights, user accounts, and billing.
• For AVOD: The OTT platform integrates with specific ad tech platforms to dynamically insert targeted ads across video content.
• For TVOD: Per-title purchase and pay-per-view pricing are handled directly on the OTT platform, along with transactions.

OTT monetization is one successful way an OTT provider can generate income for your business from your content. With lower data costs and rising internet penetration, the demand for top-quality content is at an all-time high. With the right monetization model, you can target tailored audiences according to your company’s needs.

How Can Businesses Benefit from OTT Platforms?

If you are a business owner, there are several ways your business can benefit from OTT platforms. Four such proven methods are listed below.

1. Broadcast Any Type of Ad Content

When it comes to streaming services, television networks often have limitations in terms of the number of channels and advertising opportunities available. As a result, they may not be able to broadcast all types of ad content.

However, OTT platform technology allows you to run any kind of advertising content for your business. Rest assured that your ads will reach a diverse range of demographics relevant to your marketing needs, ensuring maximum visibility.

2. Better Control Over Your Campaigns

Having more control over your advertising efforts is another advantage of using OTT video technology. Unlike traditional media, OTT platforms provide in-depth data analytics, allowing you to pause, resume, and adjust your ad strategies in real time.

With this level of authority, you can effortlessly transition between platforms and optimize your campaigns for improved performance and return on investment (ROI).

3. Increased Audience Engagement

OTT platforms enable you to greatly enhance audience engagement through features like personalized recommendations, social media integration, and interactive advertisements.

By offering content tailored to individual preferences, your business can leverage highly-targeted OTT commercials for maximum ROI. It’s something conventional media channels lack.

4. Improved Targeting Abilities

The long-term success of any brand depends on engaging their target audience at the appropriate moment. OTT ads ensure that your efforts reach the correct individuals depending on age, gender, viewing patterns, and geography.

With AI-powered algorithms and data-driven insights, OTT technology allows you to implement more impactful and relevant ad campaigns, optimized for cost-effectiveness and efficiency.

Leveraging inoRain for OTT Solutions

OTT platforms are no longer limited to the entertainment industry. Businesses across all sectors—from education and fitness to corporate, hospitality, and everything in between—can harness OTT technology to break geographical barriers, expand audiences, and diversify revenue streams.

Experts in providing scalable products, inoRain focuses on high-quality, fully customizable OTT solutions. Whether you’re a small content creator, large enterprise, or medium-sized content owner, you can leverage inoRain’s end-to-end OTT platform to transform your business into a revenue-generating streaming machine.

The best part? You can be up and running all in one day.

That’s the inoRain Guarantee of Success.

Join the 50+ organizations worldwide that trust us to expand their audience and boost their revenue with custom features and affordable pricing.

Ready to take your business to the next level? Let inoRain show you how.

The Future of OTT Technologies

As technology continues to evolve, several trends are shaping the future of over-the-top technology, including:

1. AI and Machine Learning

Ongoing developments in machine learning and artificial intelligence are poised to revolutionize OTT video technology. Various AI applications can greatly enhance content discovery and viewer engagement. These include automated content tagging, enhanced content recommendation engines, and powerful predictive analytics.

2. 5G and Edge Computing

New developments in edge computing and the introduction of 5G networks will allow for lower latency, more reliability, and faster streaming. OTT companies will need these technologies to offer immersive experiences like VR and AR content.

3. Blockchain Technology

Blockchain technology is currently being explored as a viable option for improved OTT content protection. It enables secure storage, classification, and distribution of digital content—helping to reduce piracy and protect intellectual property rights.

Frequently Asked Questions

What is the difference between OTT and IPTV?

IPTV (Internet Protocol Television) transmits TV programming over private IP networks, usually maintained by telecom operators or ISPs. Conversely, OTT platform technology provides video content directly to consumers through the internet, therefore bypassing traditional TV networks and cable providers.

What is OTT ad tech?

OTT ad tech refers to the technology and systems used to advertise on OTT platforms and across streaming services. OTT ad tech encompasses ad targeting, ad performance measurement, and ad insertion.

What is the biggest OTT platform?

The biggest OTT platform is currently Netflix. That said, major contenders include Disney+ and Amazon Prime Video.

Conclusion

Knowing the technical underpinnings of OTT technology is vital for digital marketers looking to gain a competitive edge. With AI-driven customization and varying monetization models, OTT platforms are fast becoming an integral part of today’s corporate landscape.

Businesses that leverage over-the-top technology can benefit from wider audiences, increased engagement, and more revenue opportunities, making it a crucial component of any modern digital strategy.