August 17, 2020
Despite the global subscription streaming video-on-demand market reaching service saturation in some parts of the world, new data from Ampere Analysis contends the SVOD ecosystem has room for 3 billion new subscribers. The streaming video market reportedly ended 2019 with 642 million subscribers worldwide.
The London-based research firm says the U.S. will lead with a maximum of eight SVOD services per household, with Europe averaging from two to five services per household, followed by 1.5 services in developing countries.
Despite cord-cutting, the average U.S. household has continued to spend an almost identical amount on TV services every year — $900 — as they switch from cable and satellite pay-TV services to lower-price SVOD services. This stability in expenditure, mirrored in many other markets worldwide, has Ampere suggesting the fundamental determinant of the number of SVOD services in a home will be household entertainment budgets.
“Even as we begin to see growth in SVOD services in emerging markets, our analysis shows that opportunity for expansion is actually still a very solid proposition in established territories,” research manager Daniel Gadher said in a statement.
The Power of Live Sports
Various factors will limit how close individual markets will get to this ceiling. One issue is sports. Pay-TV operators and networks currently control the majority of key sports rights in many major markets. Ampere’s past analysis has indicated that OTT players are unlikely to be able to wrest control of major domestic events in most developed markets. As a consequence, consumers who want to watch sport will have to continue subscribing to pay TV services. This reduces the available budget for SVOD. In the US for example, factoring in sports spend, the capacity for SVOD services drops from eight per average household to between four and five.
Factors Influencing the SVOD Ceiling:
Outside the U.S., some major markets are still seeing growth in household spend on TV. However, the underlying rate of change is relatively low. In these markets, Ampere expects growth in household spending on entertainment to increase the ceiling for SVOD services from 20% to 30% over the next five years.
To reach maximum capacity, SVOD spending will have to replace pay-TV spending. A reality undermined by the fact that live sports, key movie and TV content remain tethered to linear television, according to Ampere.
Pricing remains the final key determinant — lower average SVOD service prices driven by competition will mean that household budgets will expand to accommodate more services.
Biggest SVOD Growth Ranges From 2-4 Services Per Household
- After accounting for factors such as sport and future growth in spending, markets such as the U.K. and Germany have an average household capacity of roughly three services at current price points.
- But this apparently low capacity still translates into a sizeable number of subscriptions —88 million capacity in the U.K. and a 124 million in Germany.
- Similarly, in the U.S., even four to five services per household would translate to a total of 510 million to 640 million possible subscriptions.
“To make the most of this capacity, OTT players first need to demonstrate that they are a viable replacement for existing paid-for TV services,” Gadher said. “This process is ongoing in the U.S. and Canada, but elsewhere in the world, pay-TV has remained resilient. But as U.S. studio content increasingly moves to the online world, the opportunity for new players to take a share of consumer entertainment spending, even in already busy markets, improves.”