Futuresource: Russian SVOD Market Spend to Increase 1,000% by 2024

Russia’s relatively underdeveloped SVOD market is poised for growth over the next five years — aided in part by government regulation of Netflix and growth of native-born OTT video services.

The SVOD market doubled in size last year to RUB 6.6 billion ($83.5 million), exceeding the digital transactional VOD market for the first time, according to new data from Futuresource Consulting. The London-based research firm forecasts SVOD spending in Russia to increase by 1,000% by 2024.

Despite launching the service in 2016, Netflix Russia continues to struggle gaining subscribers in an unresponsive market. Separate data from Comparitech found Russia didn’t rank among Netflix’s 25 largest markets through June 3o — a glaring statistic considering Costa Rica, the last country on the ranking, had just 264,000 Netflix subs.

Futuresource says Netflix is impeded in part by government legislation limiting the service to 100,000 viewers per day. As a result, homegrown OTT video players are taking command of the streaming landscape, leveraging enormous financial investment and ramping up the competitiveness of the sector. Kinopoisk HD, IVI and Okko are the frontrunners, all of them implementing a range of three different OTT business models, including SVOD, TVOD and ad-supported VOD.

“AVOD has a far more important role to play in Russia than in other territories,” analyst Tara Patel said in a statement. “Leading services such as IVI achieve around half their revenue through advertising.”

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Patel said AVOD acts as a steppingstone of sorts in OTT video, with users being upsold to SVOD. That’s in stark contrast to most other markets, where consumers supplement SVOD viewing with AVOD.

Digital sales of movies is also a prominent feature on the Russian video landscape. According to Futuresource, TVOD accounts for 74% of the home video market, compared to just 30% in the United Kingdom. This is due to a combination of ownership culture, rising affluence of the middle classes, a negligible physical market and a tightening of piracy control. Popularity of digital sales comes despite DVD and Blu-ray Disc never achieving a significant foothold in Russia because of piracy.

Among the top Russian OTT video services is Kinopoisk HD, developed by Yandex, Russia’s multi-billion-dollar search engine. Known as the “Google of Russia,” Yandex also employs an Amazon-like business model, with an e-commerce division and the option to subscribe to a Yandex+ service, which provides users with free shipping and access to KinoPoisk HD, as well as discounts for Yandex Taxis, a partnership with Uber.

“Yandex is built on robust financial foundations, allowing it to invest heavily in its Kinopoisk HD service,” Patel said.

The analyst said Kinopoisk HD was originally an online service providing information about movies and TV  shows. It was acquired by Yandex in 2013, with a 2015 redesign offering access to free ad-supported content via third-party services. The platform now provides paid-for content on a subscription or transactional basis.

“Like its rivals, Kinopoisk HD has been making significant investments in local productions, which are more appealing in Russia than American shows,” Patel said. “Investment in Kinopoisk HD not only captures new subscribers but is also used to prevent churn from Yandex+.”

In terms of consumer spend, IVI is Russia’s largest SVOD service, accounting for almost 50% of all SVOD revenue in the country, according to Futuresource. Backed by one of Russia’s largest commercial banks, Alfa Bank, the SVOD service has been operational since 2010 and began as an AVOD service before diversifying into subscription and transactional offerings. IVI has been successful in transitioning its customers onto paid subscription services, though it still makes most of its content available on AVOD. IVI is also strong on its transactional offerings, hosting “IVI weekends,” where it offers cheap video rentals.

Finally, Okko is the third largest SVOD service in Russia and the leading electronic sellthrough service, which was the company’s original focus. Okko built its reputation with a premium transactional service before beginning to invest in SVOD. Sberbank, a major state-owned bank, acquired a 46.5% stake in Okko’s holding company and has recently announced preparations for additional investment. As well as providing a significant cash injection, Sberbank is preparing Okko for accelerated growth, aiming to make the multimedia service the largest OTT platform in Russia as soon as in 2021.

Futuresource: Consumers Embracing SVOD Catalogs, Transactional VOD as Pandemic Continues

As the coronavirus pandemic continues, resulting in disruptions to traditional entertainment distribution such as movie theaters, subscription video-on-demand has solidified its position as a clear consumer favorite in the entertainment landscape, according to new data from Futuresource Consulting.

Based on surveys with more than 20,000 respondents across the U.S., Canada, U.K., Germany, France, Italy, Spain, Sweden, Australia and Japan, London-based Futuresource found a marked increase in transactional digital video-on-demand purchases of movies as well.

“There’s no doubt that recently launched services like Disney+ have boosted both SVOD usage and uptake,” principal analyst David Sidebottom said in a statement. “However, it is the growth of sector stalwarts Netflix and Amazon Prime Video which are driving the overall reach of SVOD.”

The report suggests a 3% to 4% increase SVOD viewing as a proportion of total video consumption in 2020 compared to 2019. In the U.S., SVOD now accounts for over one in every four viewing hours — largely driven by those under 45 years of age. In addition to SVOD, many European markets have also witnessed an increase in free live TV consumption, accentuating its continued importance, particularly during times of uncertainty.

That said, Netflix, Prime Video and Disney+ continue to be the trendsetters, with the latter helping drive new levels of OTT video service stacking.

“Our research shows that over 90% of Disney+ subscribers are existing Netflix users, adding a new layer of growth to the SVOD environment,” Sidebottom said.

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Meanwhile, purchases and rental of digital movies and TV shows continues to see increased traction. In the U.S., almost 33% of respondents had bought or rented a digital movie or TV show from mid-March through July. The results show that VOD rentals are back in focus, with three quarters of respondents renting a digital movie.

Notably, Futuresource found that upwards of 20% of respondents buying or renting digital movies and TV shows were new consumers, in addition to those revisiting transactional VOD for the first time in a while.

“This re-emphasizes how much consumer behavior has changed due to prevailing market conditions, helping to broaden the reach of these categories,” Sidebottom wrote.

Indeed, with few new releases in movie theaters or on home video, consumers are embracing library titles. Month-on-month catalog sales continue to advance, and more than 80% of digital movie rental transactions involved a title that was more than six months old. Survey results suggest that catalog digital movie sales and rentals were typically driven by emotive impulses, such as wanting to watch an old-time favorite or a feel-good movie, either to provide escapism or just for pure nostalgia.

“The industry must now turn to strategies that keep consumers engaged across both SVOD and transactional digital video,” Sidebottom said. “From here on into 2021, it’s all about maintaining the momentum that has been born from lockdown and social distancing measures.”

Ampere: Pay-TV Added 3.1 Million Subs Globally in Q2

The pay-TV market may be in decline — especially in the United States — but globally, the industry saw an addition of 3.1 million subscribers in the second quarter (ended June 30), according to new data from Ampere Analysis.

The London-based research firm said that despite the loss of live sports due to the coronavirus pandemic — a major draw for pay-TV — emerging markets have seen subscriber gains, spearheaded by China adding 3.1 million subs, and offset by a loss of 1.1 million subs in the rest of the world.

The data is based on a “bellwether” of the top 70 reporting pay-TV operators, which represent more than half of the world’s 1.1 billion pay-TV subscribers.

The U.S. continued to be the loss leader, with 1.4 million subs decline in the quarter across bellwether companies — despite sub upticks from Charter and Dish Network. Other loss leaders included Australia, with Foxtel being hit particularly hard by the lack of sports in Q2; and Denmark, which has been suffering ongoing pay-TV losses since Q4 2016.

“While some countries are seeing pay-TV subscriptions suffer due to the pandemic, there is still growth in the market, driven partly by bundling of services,” senior analyst Toby Holleran said in a statement. “Cord-cutters in a number of developed territories like Canada — whose pay-TV market continues to mirror its North American neighbor — are being replaced by newer TV customers in emerging markets, leaving the market as a whole stable.”

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Holleran contends there is some sub growth left in developed nations such as France and Spain, which he said are bucking the trend of “stagnation” in Western territories.

Futuresource: Video Games Entering ‘Netflix’ Moment

With the pending arrival of new-generation video game consoles from Sony PlayStation and Microsoft Xbox, the transition toward online gaming, including subscription-based platforms, is heating up.

New data from Futuresource Consulting said worldwide consumer spending on game software, hardware and accessories reached $194 billion in 2019 — excluding another $17 billion spent on in-game ads, video streaming sites and e-sports.

Specifically, London-based Futuresource contends gamers will increasingly switch to subscription-based platforms such as Fortnite, PlayStation Plus, Google Stadia, GeForce Now and Xbox Live Gold and Game Pass.

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“Gaming may be on the verge of having its Netflix moment,” analyst Morris Garrard said in a statement. “We’re seeing it transition from one-shot content sales into all-you-can-eat subscription-based content access.”

Garrard said widespread adoption and consumer spend on subscription-based games will drive platform adoption.

“As these platforms gain more extensive content catalogs, consumer traction will increase, accelerating the transition towards all-you-can-eat gaming subscription services,” he said.

Software, which includes packaged media and digital game titles, remains the “golden child” of gaming, generating $143 billion in revenue in 2019, or 74% of total gaming spend across software, hardware and accessories, according to Futuresource.

As increases in connectivity and on-device storage have facilitated a move to digital content, software monetization strategies have evolved accordingly.

“Games publishers have adopted innovative ways to profit from content, from the sale of downloadable content, to in-game sponsored advertising [i.e. Wordscapes] and wider entertainment opportunities such as in-game concerts and e-sports,” Garrard said. “All of these additional revenue streams are helping extend the lifecycle and increase the profitability of a title beyond the initial purchase.”

Futuresource: COVID-19 Had Positive Impact on Gaming

New data from Futuresource Consulting found by the end of this year, the gaming software market will be worth $154 billion, and gaming hardware will end the year at $15 billion, with 51 million consoles shipped.

Much of that growth will be digital as next-generation game consoles will offer an all-digital version, devoid of a disc drive, spurring further digitalization of gaming content access. Indeed, Microsoft just revealed that the Xbox Series S will cost $299, and $499 for the Xbox Series X when they bow on Nov. 10 in the United States.

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In the meantime, Nintendo is expected to have a strong year due to less competition from Sony and Microsoft in the first three fiscal quarters, as gamers await the PS5 and Xbox Series X.

“There has been a strong response to the title Animal Crossing: New Horizons, and its timely launch at the beginning of the pandemic,” analyst James Manning Smith wrote in a post. “The title has found success through its appeal across demographics, appealing to young gamers and families, as well as the franchise’s nostalgic older fanbase, offering the perfect escape from a difficult year.”

Futuresource said that beyond next-generation consoles, mobile gaming has remained the fastest growing segment of gaming software spending, largely due to rapid growth in emerging regions. This year, mobile gaming will account for 50% of total gaming software spend, driven by the coronavirus pandemic and social distancing. It is forecast to increase its market share to 52% by 2024 due to its popularity and accessibility in emerging markets.

Futuresource: Disney, Netflix, Amazon Added More Than 6 Million SVOD Subs in U.K. Through June

With European adoption of subscription streaming video driving subscriber growth among American platforms such as Disney+, Netflix and Amazon Prime Video, new data from Futuresource Consulting suggests the aforementioned services have added more than six million combined subs in the United Kingdom through June 30 — including four million alone for Disney+.

“Disney’s timing was impeccable with Disney+ launching on the first day [March 24] of full lockdown,” analyst David Sidebottom said in a statement. “Our forecasts indicate that the service will account for a significant proportion of the growth in the U.K. SVOD sector in 2020.”

Despite the sub growth, 2020 continues to be a volatile year for the British video and TV entertainment industry, with a lockdown boom that has played to the strengths of content hungry consumers, offset by challenges around consumer retention in the second half of the year, particularly for those reliant on monthly subscriptions, as the U.K. begins to open for business again.

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London-based Futuresource projects 2021 will see a 10% increase in video/TV entertainment consumer spending, topping £10 billion total spend on video for the first time driven by increased consumer choice and continued investment in the industry.

“A strong slate will help the box office recover and in turn provide a major boost to the home video sector,” Sidebottom said.

Beyond content delivery, the U.K. continues to make its mark as a global content production powerhouse. Major investments in studio facilities planned in and rolling out from 2020 to 2023 will further enhance the region’s reputation and feed digital services with a growing range of quality content.

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Futuresource forecasts the overall video and TV entertainment sector will reach £11.3 billion in consumer spend in 2024. This will help drive total sector revenue and U.K. exports, which can be reinvested into the industry.

“The polarization of fortunes in 2020 means overall video and entertainment revenues are set to fall this year, but there is massive potential waiting around the corner,” Sidebottom said.

Futuresource: Amazon’s Canadian Launch of Digital Movie Sales/Rentals Expected to Jumpstart Video Market

With the coronavirus pandemic projected to shrink Canadian consumer spending on video entertainment by 6% in 2020, the sector is expected to increase by 11% since 2019, thanks in part to Amazon Prime Video launching first-time digital sales/rentals of movies in April, according to new data from Futuresource Consulting.

Amazon’s transactional VOD launch is expected to help turn around a flatlining home entertainment sector and drive the market to a new level over the coming years, leveraging the ability to monetize consumers who are already engaged on the Prime Video platform for SVOD and can now find movies to rent or buy without having to leave the user interface.

Other factors jumpstarting Canadian consumer video spending includes a resurgence in box office, driven by a strong slate of releases enhanced by this year’s postponements and ongoing SVOD growth.

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“Despite the challenges faced by the fallout from COVID-19, there have been some high points in the market,” market analyst Tristan Veale said in a statement. “SVOD has led the charge, with our forecasts showing a 39% increase in revenue in 2020.”

While social distancing and lockdown measures have resulted in consumers immersing themselves in streaming video services, including Disney+, this has not carried enough momentum to supersede the deficit created by the shuttered box office and large declines in physical media. Other factors include pay-TV cord cutting, dropping of sports TV packages, due to cancellations of sporting events.

SVOD will continue to drive growth in the Canadian video market, growing from CA$1.4 billion last year, to achieve in excess of CA$3.3 billion in 2024. The launch of Disney+ has been highly successful, bolstering the industry with nearly two million subscribers signing up before the end of 2019.

Amazon’s Prime service, in terms of household penetration, is also performing well, accelerating faster in Canada than it did in the U.S. or the U.K. The proportion of subscribers who are watching Prime’s video content is currently low, although Futuresource does expect this to rise.

As is the case in many territories, Netflix continues to dominate. It remains the market leader with 6.6 million subscribers at the end of last year, showing strong growth despite maturity. However, now at 45% household penetration and with a high proportion of password sharing, Futuresource expects future growth to become more difficult.

Bell Media’s Crave celebrated its fifth year in 2019 with strong growth helped along by HBO content and the final season of “Game of Thrones.” Crave’s peak of 2.7 million subs came during summer 2019, before falling back slightly by year end. Apple TV+ joined the market in November and has generated one million subs by the end of 2019. However, many are free annual subscription due to qualifying device purchases, retention once the free trial expires will be key.

“Despite the short-term industry challenges, next year’s recovery is expected to generate the largest consumer expenditure on video entertainment ever recorded,” Veale said. “What’s more, the growth will continue to be sustained, with an average expansion of 4% each year from 2020 to 2024, achieving nearly CA$13 billion in 2024.”

Transactional VOD, Disc Sales Up in Scandinavia

The Nordic video markets have always led global trends when it comes to over-the-top video, transactional VOD and packaged media. It’s no different during a pandemic.

Sweden, Denmark, Norway and Finland enjoy high penetration of superfast broadband, wide adoption of the English language, a strong market for entertainment and a high level of disposable income.

New data from Futuresource Consulting finds that while consumers in the region subscribe to multiple SVOD services, they are also driving a return to growth for the transactional video market.

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“To see transactional video shifting course and moving into a growth phase is something of a rarity,” market analyst Tristan Veale said in a statement. “These countries are expected to be amongst the first markets to experience the reversal, a direct result of changing consumer behaviour in the face of COVID-19.”

London-based Futuresource expects transactional VOD consumption or renting across DVD, Blu-ray Disc and digital to grow 4% in 2020, the second consecutive year of growth. The biggest player in the digital transactional space remains Apple iTunes, though key growth service Viaplay is successfully upselling transactional video to its existing subscriber base and is a close second

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Despite the rise in transactional video, the Nordics market remains dominated by SVOD, which accounted for 80% of all home video spend in 2019, with Netflix, Viaplay and HBO Nordic leading.

“The Nordic love affair with SVOD continues to blossom,” Veale said. “In 2019, for every dollar spent on transactional video, four dollars were spent on SVOD.”

Futuresource expects established services Netflix, HBO Nordic and Viaplay to be pushed by Apple TV +, which launched in Q3 2019, and the upcoming Disney+ debut.

On Netflix alone, consumers across Sweden, Norway, Denmark and Finland spent over half a billion dollars in 2019 and Netflix remains the leading SVOD provider, but it is slowly approaching saturation, as over half of all households across these four Nordics have a subscription.

“We expect SVOD subscriptions and spend to be pushed to a whole new level,” Veale said.

Streaming Filmed Content May Be Up, But Music Isn’t Sharing in the Spoils, Study Finds

Streaming services like Netflix, Disney+ and Hulu may be chalking up significant upticks in viewership due to the coronvirus pandemic stay-at-home orders, but music services aren’t enjoying a similar bonanza, according to Futuresource Consulting.

Indeed, the research firm in a study released April 27 said that since the lockdown began, some music streaming services have been seeing a drop in consumption.

“With key music consumption moments such as daily commutes, in-car, office and gym times being removed,” the study said, “consumers’ routines have been disrupted and so are their music consumption habits.”

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Futuresource also says the type of audio content being consumed has changed, “to more home-friendly lean-back and mood playlists as well as indoor activity podcasts (e.g. news, fitness, cooking, kids).”

Futuresource said it expects the growth of music streaming subscriptions to be relatively unaffected across 2020 as a result of COVID-19, with a total subscriber count forecasted to reach 371 million globally at the end of 2020, up 19% compared to 2019, according to its recently published Streaming Music Outlook & Services Overview report.

Futuresource: Music Streaming Declines in COVID-19 World

With the exception of vinyl records, subscription streaming music services remain the number one growth driver in the global music market, accounting for more than 70% of spending on music last year, according to Futuresource Consulting.

Yet, as measures to halt the spread of COVID-19 begin to reshape the lives of consumers, music streaming is experiencing a temporary decline, with consumption down from 15% to 20%.

“We may have expected to see an uptake in the use of streaming music services, as people become confined in their homes,” market analyst Alexandre Jornod said in a statement. “This is linked to consumers adjusting to new confinement rules, which have removed key music listening situations like the daily commute, as well as office and gym time.”

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Futuresource says that as families spend more time at home together, music consumption is becoming a shared activity. Before the pandemic people were using separate accounts to play different music, now smart speakers are likely to be used with a single account used to play music in the household.

The London-based firm said there is also competition from gaming, movie and TV show streaming. These activities require a higher level of attention and tend to be favored when some extra time is freed up as a result of routines being interrupted.

“Once consumers become accustomed to the situation and establish new routines, we expect streaming music to get back to levels similar to before the crisis,” Jornod said. “Home listening will dominate, with a shift in the music types and genres as consumers seek out lean-back mood playlists as opposed to searching for specific songs or artists.”

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Meanwhile, Futuresource said Spotify and Apple account for more than 60% of combined global subscriptions. Spotify remains No.1 globally, with Apple No. 1 in the United States. Amazon Music’s multiple streaming plans cater to a wide audience, although its subscriptions are closely linked to Echo smart speaker geographies, which skew heavily towards the U.S. and U.K., according to Futuresource.

The research firm contends Google-owned YouTube Music has the potential to become a key player thanks to its established YouTube audience. Smaller players like Deezer, Tidal and Napster are focusing instead on strategies such as targeting local markets, serving niche audiences or B2B operations.

“Streaming music subscriptions also benefit from markets where physical media has been historically strong and they are now transitioning to streaming,” Jornod said, alluding to Germany, Japan and France, which he said are experiencing accelerated adoption — unlike maturing markets in North America.

“Watch out for a rise in podcasts beginning to exert its influence, as well as enhanced listening experiences such as Hi-Res audio, Dolby Atmos Music and Sony 360 Reality Audio,” Jornod said.