SVOD revenues from service like Netflix and Amazon are expected to more than double to more than $34.6 billion by 2021, from $14.6 billion this year, as viewers increase their migration away from traditional liner TV.
A new report from Juniper Research points out that Netflix subscriber levels in the U.S. are already level with the biggest pay-TV providers, DirecTV (47 million) and Comcast (47.7 million respectively).
The researcher said SVOD providers can expect substantial returns on their expansion and growth strategies, as more countries and markets move to this method of video consumption, in a continual move away from linear, scheduled TV.
Networks may be able to stall some of the flow of subscribers to SVOD services when Hulu and YouTube roll out their anticipated linear service in 2017. Their skinny bundles may appeal to consumers looking for a way to watch the Big 4 networks, CBS, NBC, Fox and ABC, without subscribing to a traditional pay-TV service.
The Big Dog in the space, Netflix, isn’t without its own challenges.
U.S. subscriber penetration has slowed and its international expansion could be price sensitive, especially as more local providers surface with big regional content libraries.
It’s deal with Liberty Global to be included on the service provider’s set-top boxes, however, could mitigate some of that price sensitivity as users may be upsold in an existing Liberty relationship.
Netflix has committed to again spending nearly $6 billion for content in 2017 after a similar expenditure in 2016, a massive amount. The streamer has some 126 original titles expected to go in 2016, more than any cable channel or broadcast network, including scripted series (29), unscripted series & specials (35), documentary films (11), kids’ series (29), foreign-language films (5) and films (17). That compares to 59 titles in 2015, 25 titles in 2014, 13 titles in 2013 and just four in 2012. The big question, of course, is whether it can continue at that pace.
Juniper, meanwhile, also projects total TV and video data usage to increase five-fold from 2016 to 2021, as uptake of 4K increases download sizes, and expects combined 4K SVOD and TVOD (Transactional Video on Demand, i.e. Pay per View and Download to Own) revenues to account for 13% of total OTT revenues by 2021.
While some reckon that the growth of the big SVOD players like Netflix, Amazon and Hulu will limit the potential for growth among other on-demand services, the reality is that the trio is helping to create a growing marketplace that is in the process of re-educating a global audience in the method of video consumption, an education that smaller, more niche services should look to leverage.
Liberty Global’s decision to offer Netflix directly to its 29 million customers – a la Comcast – is a clear indication that operators now are looking to deliver SVOD through their smart pipes and profit from every service they can add.
The days of operators looking to their own pay-TV services are limited.
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