Research: OTT Revenue Forecast to Reach $22 Billion in 2019

Based on 66 OTT providers, led by Netflix, Hulu and Amazon, U.S. OTT access revenue grew 37% to $16.3 billion in 2018 and is forecast to reach $22 billion in 2019, according to a new research from Convergence Research.

The research firm has released two new reports, “The Battle for the American Couch Potato: OTT and TV” and “The Battle for the American Couch Potato: Bundling, TV, Internet, Telephone, Wireless.”

Still, U.S. TV subscriber average revenue per user (ARPU) is still forecast to be three times U.S. OTT subscriber household ARPU in 2021.

The firm estimates 2018 U.S. cable, satellite, telco TV access (not including OTT) revenue declined 3% to $103.4 billion in 2018 and forecasts 2019 will see a similar decline. Also, 2018 saw a decline of 4.01 million U.S. TV subscribers and 2017 a decline of 3.66 million, according to the firm, which forecasts a decline of 4.56 million TV subs for 2019. The U.S. TV subscriber
base will decline 5% in 2019, from a decline of 4% in 2018, according to the firm’s estimates.

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By the end of 2018, the firm estimates 30% of households did not have a traditional TV subscription with a cable, satellite, or telco TV access provider, up from 26% at the end of 2017. The firm forecasts that number to reach 34% of households by the end of 2019. Convergence Research estimates 2018 saw almost 5 million cord cutter/never household additions.

The firm projects that a number of OTT plays, including large and niche, will fail due to insufficient subscriber traction, cost and competition, noting major programmers continue to accelerate their direct-to-consumer drive, including Disney and WarnerMedia. Other developments noted by the firm include:

  • Hulu spends more on content per sub than either Amazon or Netflix and continues to discount (notably with Spotify);
  • CBS/Showtime’s OTT subscriber trajectory has been faster than expected;
  • Discovery has backed and supplied Philo, gone live with Hulu, Sling and YouTube TV, and will be launching an OTT service with the BBC;
  • NBC Universal will be launching an OTT service in 2020;
  • and Viacom has backed and supplied Philo and others, acquired Pluto and Awesomeness TV and is producing for Amazon and Netflix.

Research: 30 Million Americans Have Never Paid for TV Programming

While Hollywood and media companies focus on “cord cutters” – adults who give up their cable or satellite TV subscriptions – new data from MRI – Simmons suggests millions of Americans have never paid for a traditional TV connection.

About 31 million U.S. consumers – 12% of the adult population – are so-called “cord-nevers” – up 9% from 2017. With a median age of 33, the demo’s average household income has risen by 27% over the last 2 years, from $41,500 to $52,800.

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Among cord nevers, 27% – about 8 million adults – say they plan to sign up for a pay-TV service in the next six months. Some 70% of these consumers say they will subscribe to a traditional (cable, fiber optic, or satellite) service, while 30% – 41% of 18-to-34 years olds – expect to acquire a streaming TV package, such as Hulu with Live TV, DirectTV Now, or Sling TV.

Why are millions of Cord Nevers looking to connect to pay-TV service? The reasons vary dramatically by age.

MRI’s research – based on roughly 24,000 in-person, in-home interviews – found the option to channel surf is a big motivator for those in the 35-to-49 and 50+ groups, while the youngest adults (18 to 34) are seeking access and the ability to watch and find shows easily.

Top reasons cited why “cord nevers” are looking to pay for TV access:

18+ 18 to 34 35 to 49 50+
I want to be able to channel surf 27%* 18%

(67)

46%

(168)

31%

(113)

I can get a good deal on a TV package 23% 30%

(131)

10%

(45)

15%

(67)

It is easier to watch/find shows 21% 29%

(138)

7%

(35)

11%

(53)

It is the only way to watch the TV networks I want to watch 18% 16%

(86)

23%

(122)

22%

(121)

It has better access to shows I want to watch 18% 23%

(126)

11%

(63)

9%

(50)

It is worth the expense 17% 16%

(92)

26%

(151)

4%

(22)

I want to watch live news 17% 14%

(79)

30%

(172)

6%

(37)

I want to watch live programming when it airs 16% 14%

(87)

21%

(134)

14%

(89)

I want to have a DVR service 14% 9%

(65)

26%

(185)

12%

(82)

“Young people used to say that, as soon as they got their first well-paying job, they would sign up for the full suite of traditional TV services,” Karen Ramspacher, SVP innovations & insights at MRI-Simmons, said in a statement. “Today, there are many more options for connecting to video content – so competition for these subscription dollars is fierce. As they grow in numbers and wealth, today’s ‘cord nevers’ definitely represent an opportunity for content providers – but understanding the Nevers’ underlying motivations is essential to targeting them effectively.”