Technology | Media | Telecommunications

Friday, June 26, 2015

Ongoing Disruption of Video Entertainment in America

Following the launch of the Netflix and Hulu video streaming services in America, most savvy industry analysts knew that while it wasn't clear how long it would take for these offerings to gain momentum, one thing was blatantly obvious -- the disruption of the legacy pay-TV model had begun.

Fast-forward to today, North America already had 50.6 million subscription video on demand (SVOD) homes -- for movie and TV services only, excluding sports -- by end-2014.

That SVOD adoption translates to 38.8 percent of all TV households and 48.1 percent of fixed broadband homes, according to the latest market study by Digital TV Research.

They have assessed that this market penetration represents considerable growth since 2010, when there were just 16.7 million SVOD homes -- that was about 13% of all TV households. Therefore, it has been said that the North American region is the world's most mature for SVOD services.

However, the disruption in the North American video entertainment market is far from over. Digital TV Research estimates that 7.1 million more SVOD homes will be added in 2015 alone.

The SVOD total is forecast to climb to 76.5 million by 2020 -- that's up by 26 million on 2014 -- reaching 57.3 percent penetration of TV households and 65.2 percent of fixed broadband homes.

Meanwhile, SVOD revenues will soar from $0.79 billion in 2010 to $4.46 billion in 2014 -- then onto $7.09 billion in 2020. That said, revenues are forecast to grow by 59 percent between 2014 and 2020.

Now, it's apparent that the market is far from being saturated. In fact, there's an abundance of dissatisfied pay-TV subscribers who seek a solution to their need for a more affordable video entertainment offering.


Overall Video Entertainment Market Development

North American over-the-top (OTT) TV and video revenues will reach $20.5 billion in 2020 -- that's up from $2.6 billion in 2010 and the $13.2 billion expected in 2015.

Advertising on OTT sites will generate revenues of $6.0 billion in 2015, quadruple the $1.4 billion in 2010. Rapid advertising expenditure growth will continue, to reach $10.3 billion in 2020.

Download-to-own (DTO) revenues are forecast to be $2,197 million in 2020 -- that's up from $321 million in 2010 and $1,218 million in 2014. Movies will contribute two-thirds of DTO revenues by 2020, with TV series providing the rest of the growth.

OTT TV and video rental or pay-per-view revenues will expand rapidly, climbing from $169 million in 2010 to reach $591 million in 2014 and then to reach  $999 million in 2020.

According to the Digital TV Research assessment, movies will be the main earner -- providing $715 million by 2020. TV box sets becoming a more popular promotional tool than single episodes.