New Services Set to Drive SVoD Revenues up 25% to USD$36 Billion in 2019
SVoD Market Research, Analysis and Commentary
Subscription Video on Demand (SVoD) continues to resonate with consumers across the globe, becoming an integral part of the video viewing lifestyle. A new SVoD report from Futuresource Consulting reveals that SVoD already reaches more than 60% of households in North America, 26% in Western Europe, 21% in Asia-Pacific and 19% in LATAM.
“SVoD has come of age, with consumer spend exceeding $29 billion last year, up 38% on 2017,” says David Sidebottom, Principal Analyst at Futuresource Consulting. “Improving broadband quality, increasing smart TV penetration, the availability of services and perceived value are all coming together to create the perfect conditions for growth.
“In 2018 we saw many companies realign their strategies amid a raft of major media acquisitions, setting the scene for the next wave of SVoD evolution. In particular, Disney’s acquisition of Fox, along with the completion of AT&T’s acquisition of Time Warner are making themselves felt. With both intending to launch direct-to-consumer (D2C) services, this will shape the SVoD landscape in the USA and, in the longer term, worldwide.”
Netflix and Amazon Prime Video accounted for one-third of all subscriptions globally in 2018. However, when it came to SVoD spend, the two companies commanded almost two-thirds of the market, with Netflix leading the way in terms of headlines, subscribers and revenue, adding an extra 31 million subscribers to its ranks in 2018 and has posted today (announced on the 17th April 2019) its most successful quarter to date.
“Consumers are seeking a combination of functionality, high-quality original content and low price,” says Sidebottom; “and, Netflix is choosing to invest back into original content programming and its library. Netflix has demonstrated continued growth in both its primary markets of the USA and UK, as well as France and Germany. Plus, Netflix has many options for turning profit, each requiring a local market-specific strategy, based on maturity of infrastructure, device usage, access to local content, GDP and market share.”
SVoD services need to be extremely mindful of Netflix, choosing their strategies carefully. The market has shown that competitors to Netflix do not perform well, and a complementary offering has a far better chance of survival and success. Exclusive, relevant and local content, particularly outside the USA, is a necessity to capture and hold audience appeal. Moving forward, although the uptake of multiple services will continue to drive overall subscription numbers, the market will be limited to a small number of clearly differentiated and complementary services. This makes a carefully defined market and content strategy even more crucial.
“Consumers face an increasingly confusing video landscape,” says Sidebottom, “and partnerships between trusted Pay TV or content aggregation platforms like Amazon Channels, Roku, Apple, and even Pay-TV providers, will be a vital aid to navigation. Due to large populations of existing users, Apple and Amazon Channels are both well-placed to succeed in the soon-to-be-fragmented world of aggregation, but both currently lack ubiquity of content internationally. However, this new breed of ‘super aggregators’ will become an important component in the battle for the living room, though, in many instances, they have yet to fully realise the three consumer requirements of quality, original content and price.”
SVoD Market Research, Analysis and Commentary
Subscription Video on Demand (SVoD) continues to resonate with consumers across the globe, becoming an integral part of the video viewing lifestyle. A new SVoD report from Futuresource Consulting reveals that SVoD already reaches more than 60% of households in North America, 26% in Western Europe, 21% in Asia-Pacific and 19% in LATAM.
“SVoD has come of age, with consumer spend exceeding $29 billion last year, up 38% on 2017,” says David Sidebottom, Principal Analyst at Futuresource Consulting. “Improving broadband quality, increasing smart TV penetration, the availability of services and perceived value are all coming together to create the perfect conditions for growth.
“In 2018 we saw many companies realign their strategies amid a raft of major media acquisitions, setting the scene for the next wave of SVoD evolution. In particular, Disney’s acquisition of Fox, along with the completion of AT&T’s acquisition of Time Warner are making themselves felt. With both intending to launch direct-to-consumer (D2C) services, this will shape the SVoD landscape in the USA and, in the longer term, worldwide.”
Netflix and Amazon Prime Video accounted for one-third of all subscriptions globally in 2018. However, when it came to SVoD spend, the two companies commanded almost two-thirds of the market, with Netflix leading the way in terms of headlines, subscribers and revenue, adding an extra 31 million subscribers to its ranks in 2018 and has posted today (announced on the 17th April 2019) its most successful quarter to date.
“Consumers are seeking a combination of functionality, high-quality original content and low price,” says Sidebottom; “and, Netflix is choosing to invest back into original content programming and its library. Netflix has demonstrated continued growth in both its primary markets of the USA and UK, as well as France and Germany. Plus, Netflix has many options for turning profit, each requiring a local market-specific strategy, based on maturity of infrastructure, device usage, access to local content, GDP and market share.”
SVoD services need to be extremely mindful of Netflix, choosing their strategies carefully. The market has shown that competitors to Netflix do not perform well, and a complementary offering has a far better chance of survival and success. Exclusive, relevant and local content, particularly outside the USA, is a necessity to capture and hold audience appeal. Moving forward, although the uptake of multiple services will continue to drive overall subscription numbers, the market will be limited to a small number of clearly differentiated and complementary services. This makes a carefully defined market and content strategy even more crucial.
“Consumers face an increasingly confusing video landscape,” says Sidebottom, “and partnerships between trusted Pay TV or content aggregation platforms like Amazon Channels, Roku, Apple, and even Pay-TV providers, will be a vital aid to navigation. Due to large populations of existing users, Apple and Amazon Channels are both well-placed to succeed in the soon-to-be-fragmented world of aggregation, but both currently lack ubiquity of content internationally. However, this new breed of ‘super aggregators’ will become an important component in the battle for the living room, though, in many instances, they have yet to fully realise the three consumer requirements of quality, original content and price.”
About the author
David is a Principal Analyst – Media and Entertainment. David has over 20 years’ experience in a research and consultancy environment and is closely involved in researching, analysing and consulting on key content industry and consumer technology developments worldwide, with a particular focus on the evolution of digital business models in the TV, video and music industry. David works with a wide variety of high profile Futuresource clients across the content ecosystem including studios, broadcasters, technology companies, hardware vendors, service providers and industry associations. He also directs Futuresource’s long-running global consumer panel ‘Living with Digital’.
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