Revenues from subscription video on demand (SVOD) services, such as Netflix and Amazon, are set to more than double from $14.6 billion this year, to $34.6 billion in 2021. Netflix will now grow its U.S. subscriber base to be similar in size with leading traditional pay-TV service providers.
Ongoing SVOD Market Development
According to the latest market study by Juniper Research, SVOD providers will see substantial returns on their expansion and growth strategies, as more countries and markets move to this method of video consumption. And, as more consumers adopt the move away from the old linear, scheduled TV model.
While SVOD continues to draw customers away from traditional pay-TV providers, legacy networks are now seeking to diversify and adapt through progressive strategies, with services such as YouTube and Hulu seeking to offer some linear cable streaming as part of subscription packages in 2017.
The concept is to offer what the industry calls "skinny bundles" of content which are smaller packages, offered at a lower price via Internet delivered services.
Netflix saw rapid expansion in January 2016, launching in 130 new markets simultaneously, bringing its total coverage to 190 countries. Yet, according to the Juniper assessment, international subscriber growth lacks pace, as evidenced in its recent quarterly results.
New Challengers to the Netflix Dominance
Netflix’s expansion has resulted in price increases, but the beneficiaries may ultimately be the provider's rivals if the competitor price differential becomes too great. That being said, it would likely take a long time in the North American market, where typical pay-TV service prices are very high.
"Whilst Netflix has expanded its coverage globally, the test will be whether it can meet its original content production costs, as well as provide quality content to consumers," said Lauren Foye, analyst at Juniper Research.
It's believed that U.S. rival Hulu is now close to offering a somewhat similar amount of content as Netflix, and others are pushing other new business models -- such as Amazon’s monthly subscriptions to Prime video, and YouTube Red subscriptions for exclusive content.
Other key findings from the study include:
- Total TV and video data usage will grow more than five-fold from 2016 to 2021, as uptake of 4K increases download sizes.
- Combined 4K SVOD and TVOD (Transactional Video on Demand, i.e. Pay per View and Download to Own) revenues will grow to account for 13 percent of total OTT revenues by 2021.