Analysis of OTT Users’ Watching Behavior for Identifying a Profitable Niche: Latent Class Regression Approach

Abstract

Over-the-top (OTT) firms must overcome the hurdle of the competitive Korean media market to achieve sustainable growth. To do so, understating how users enjoy OTT and analyzing usage patterns is essential. This research aims to empirically identify a profitable niche in the Korean OTT market by applying market segmentation theory. In addition, it investigates an effective content strategy to convert free users into paying customers belonging to profitable niche segments. The latent class regression model was applied to Korean Media Panel Survey data to divide Korean OTT customers into submarkets. According to an empirical analysis, Korean OTT users can be divided into three submarkets based on their OTT usage patterns, with the third segment serving as a profitable niche market. An additional analysis of the profitable niche market revealed that bundling content, such as foreign content, original content, and movies, is a crucial content strategy for increasing paying subscribers in a profitable niche segment.