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.”

 

Research: U.S. Pay-TV Affordability Has Dropped Since 2000

Consumers who complain about their cable bill may have good reason.

Multichannel video affordability in the United States has plummeted since the turn of the millennium, squeezing the penetration rate, particularly among the more economically vulnerable households, according to new data from Kagan, S&P Global Market Intelligence.

Since 2000, there has been a 74% increase in the inflation-adjusted pay-TV bill while incomes have stagnated, according to the research.

The estimated nominal average monthly multichannel revenue per subscriber across the cable, DBS and telco platforms rose at a 5.5% CAGR between 2000 and 2017. Kagan calculated U.S. multichannel purchasing power based on 2017 inflation-adjusted annual multichannel average revenue per user, or ARPU, and average income figures. The affordability calculation dropped from a 10 in 2000 to a 6 in 2017.

Multichannel offerings have evolved a great deal since 2000, including a greater number of networks and advanced services such as video on demand, DVR services and improved user interfaces, with the vast majority of the packages delivered to subscribers digitally and in HD, but consumers’ ability to pay the price for that improvement didn’t grow much.

“The eroding legacy multichannel affordability partly explains the popularity of over-the-top services such as Netflix Inc. and Amazon.com Inc.’s Prime Video,” according to Kagan.

Research: OTT Sub Households to Far Outstrip TV Sub Households in 2020

U.S. OTT subscriber households will far surpass TV subscriber households in 2020, according to new data from Convergence Research.

In five years at the current run-rate Netflix will have in the United States as many subscribers as all the the traditional TV access providers combined, according the Convergence’s Brahm Eiley. Amazon Prime at the current run rate will surpass the traditional U.S. TV access providers in terms of subscribers in three years.

However, the average revenue per unit (ARPU) for U.S. TV subscribers in 2020 will still be four times U.S. OTT subscriber households’ ARPU, down from 6 times in 2017.

Convergence has just released its annual 2018 Couch Potato Reports, “The Battle for the American Couch Potato: OTT, TV, Online” and “The Battle for the American Couch Potato: Bundling, TV, Internet, Telephone, Wireless.”

Convergence estimates that U.S. OTT access revenue (based on 55 OTT providers led by Netflix) grew 41% to $11.9 billion in 2017, forecasts $16.6 billion for 2018 and $27.6 billion for 2020.

The firm estimates 2017 U.S. cable, satellite and telco TV access (not including OTT) revenue grew 1% to $107.6 billion ($94.30 per month ARPU) in 2017, forecasts $107.4 billion ($97.90 per month ARPU) for 2018, and $106.9 billion for 2020.

In 2017, the United States saw a decline of 3.66 million TV subscribers and in 2016 a decline of 2.2 million. Convergence forecasts a decline of 3.72 million TV subs for 2018.

The firm reports that 2010 saw the start of the rise in cord cutter/never households, and as of the end of 2017 estimates 32.13 million U.S. households (or 26.1% of households) did not have a traditional TV subscription with a cable, satellite or telco TV access provider, up from 27.56 million (22.6% of households) at the end of 2016. Convergence forecasts 36.76 million (29.6% of households) will be cord cutter/never households by the end of 2018.

Meanwhile, 2017 saw U.S. residential broadband subs surpass U.S. TV subs, growing to 96.95 million. Convergence estimates 2.33 million U.S. residential broadband subs were added in 2017 (2.66 million in 2016) and revenue grew 7% to $56.8 million; the firm forecasts 2.57 million additions and 6% growth to $60.5 billion for 2018.

“The gloves are off,” commentary in the report reads. “The TV-movie Industry is being reconstructed from the inside and by the outside, as programmers now directly compete against their traditional TV access and independent OTT buyers that rival them in terms of content spend. Amazon, Apple, DAZN, Facebook, Google and Netflix all have the money muscle to finance their own productions or outbid on programming including major sporting franchises.”

Because the OTT services are acting more like studios and vying for top content, traditional content owners may fight back, the commentary reads.

“We expect especially for the U.S. market going forward fewer content deals between programmers and independent OTT providers: 2017 saw Disney choose not to renew with Netflix and embrace OTT, HBO not renew with Amazon in the U.S., Hulu (which is spending more on content on a per U.S. subscriber basis than Amazon or Netflix) continue to bolster its offerings, compete more directly against TV access providers, and A+E, AMC, Discovery, Scripps, and Viacom back supply Philo,” the firm commented. “The traditional TV ecosystem does not show decline ‘yet’ except for TV subscribers. TV access players continue to raise prices (ARPU is growing but we forecast TV access revenue decline going forward), and programmers have kept up increases in programming fees and advertising rates, but this architecture cannot last in the long run.”