Omdia: YouTube, AVOD, FAST Up User Advantage Over SVOD

The once-dominant subscription streaming VOD business model is beginning to show signs of strain. According to new Omdia data from November 2023, the number of SVOD services per home has declined in a number of markets for the first time. At the same time, the use of free ad-supported video platforms remains on the rise.

The London-based research firm found YouTube’s continued growth as the preferred video service provider in key markets has been fundamental to the growth of AVOD/FAST over paid video content.

Top ten video service by monthly usage by market, November 2023

Unveiling new insights at Connected TV World Summit 2024 this week, Maria Rua Aquete, research director in media and entertainment at Omdia, said the growth of ad-supported VOD remains strong.

“The appetite for free content is ever-increasing and the major streamers are clearly leaning into this as a strategy; by end of 2024, all major SVOD services [including Apple TV+] will have advertising tiers,” Rua Aquete said in a statement.

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Indeed, FAST services have continued their upward trajectory in the United States, with key players Tubi, Pluto TV and The Roku Channel entering the Top 10 most used services on a monthly basis.

Average number of video services per video user by country, Nov 2020-2023

In the United Kingdom, Omdia found that the average number of free video services per video user increased from 5.1 to 6.2. It increased from 6 to 7.5 services in the United States.

The allure of social media video platforms such as TikTok and Instagram Reels has reshaped how individuals consume video content, according to Omdia. With engaging formats and vast user bases, social media services offer compelling alternatives to mainstream subscription streaming video services.

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“The landscape of video streaming services continues to undergo a significant transformation,” Aquete said in a statement. “Whether these changes are happenings in response to the cost of living increases, paid subscription fatigue, or other factors, it underscores the evolving preferences of consumers, who increasingly have more places to go to access video content.”

Consumer Spending on Home Entertainment in 2023 Hit New High of $43 Billion

U.S. consumer spending on home entertainment in 2023 reached a new high of $43 billion, according to estimates released Feb. 6 by DEG: The Digital Entertainment Group.

That’s up 16.8% from spending the prior year.

Subscription streaming continued to post impressive gains, rising 21% to top out at an estimated $37 billion, or more than 86% of total spending.

Of the $5.9 billion that was spent on traditional, transactional entertainment, digital sales of movies and shows fared best, rising nearly 5% to finish the year at $2.64 billion. Spending on digital purchases of theatrical titles for the year was up more than 13%, thanks to such high-profile films as Avatar: The Way of Water, Dungeons & Dragons: Honor Among Thieves, The Equalizer 3, The Flash, Guardians of the Galaxy Vol. 3, John Wick: Chapter 4, Puss in Boots: The Last Wish, Spider-Man: Across the Spider-Verse, The Super Mario Bros. Movie and Transformers: Rise of the Beasts.

Digital rentals in 2023 generated an estimated $1.69 billion in consumer spending, less than 1% more than in 2022, while the physical side of the business continued to lose ground. Combined sales and rentals of DVDs, Blu-ray Discs and 4K Ultra HDs came in at just $1.56 billion, a drop of 25.3% from the prior year.

The fourth quarter proved particularly strong, the DEG reported, with total consumer home entertainment spending rising more than 20% from the prior-year period to just over $11.7 billion.

Subscription streaming, as usual, led the way, posting a 24.5% gain to $10.15 billion.

But the digital transactional side of the business also posted healthy gains. Consumers in the fourth quarter of 2023 spent an estimated $713 million on buying movies and shows digitally in both premium and standard windows, up 7% from Q4 2022, while spending on digital rentals rose 11.5% to nearly $410 million. The gains were driven by a strong slate of theatrical movies becoming available for home viewing, with a collective box office value nearly three times as high as the Q4 2022 crop. These include Barbie, The Hunger Games: The Ballad of Songbirds & Snakes, Indiana Jones and the Dial of Destiny, Mission Impossible: Dead Reckoning Part One, Oppenheimer and The Super Mario Bros. Movie. New theatrical releases are historically a key driver of home entertainment spending.

Spending on physical media in the fourth quarter was down more than 20% to a little over $440 million, but the strong theatrical titles pushed spending on 4K Ultra HD Blu-ray Discs up an impressive 15%. Universal Pictures’ Oppenheimer 4K UHD disc, in fact, was in such high demand that several retailers reported shortages, which the studio promptly addressed.

The decline in disc spending in the fourth quarter was due largely to a drastic 50% drop in spending on rentals following Netflix’s late-September exit from the business.

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The DEG also reported that AVOD and FAST platforms in 2023 generated $17.2 billion in advertising revenue, according to estimates from Omdia, as more major streamers diversified their offerings to include lower-cost subscription plans with ads. Ad revenue grew by more than 10% in the year, according to Omdia. In the final quarter of the year, according to the research firm, revenue from AVOD and FAST was nearly $5 billion, up nearly 17% from the fourth quarter of 2022.

According to Media Play News Research estimates, of the 13.7% of the home entertainment market space still devoted to transactional viewing at the end of the year, 9.2% was from sellthrough and 4.5% was from rental (both disc and digital). Disc sales and rentals by the end of 2023 accounted for 3.6% of total home entertainment market spending, down from 5.7% at the end of 2022.

Omdia: U.S. Consumers Streamlining SVOD Subscriptions in Favor of FAST Services

U.S. consumers are refocusing their appetite away from subscription streaming video services, in favor of free ad-supported streaming television platforms, according to new data from London-based Omdia, which found a notable shift in subscription video on demand (SVOD) “stacking” behavior.

According to the data, there is a significant change in the way consumers are subscribing to multiple streaming services. Previously, consumers would often stack multiple subscriptions to gain access to a wider range of content. However, the data suggests that there’s a shift in this trend, indicating consumers are becoming more selective in their choices and opting for a more focused approach to their streaming subscriptions.

 

“After over half a decade of steady growth, we’re observing a shift in how paid video services are consumed,” analyst Maria Rua Aguete said in a statement.

The analyst contends that the traditional model of stacking multiple paid services is losing ground. This is partly driven by the increasing popularity of free ad-supported television (FAST) channels, “which are becoming a preferred choice for supplementary viewing,” according to Rue Aguete.

The number of SVOD subscriptions per household in the United States was approaching 3.5 in April 2023, but the data now suggests that the number fell more than 10% to under three services by November 2023.

FAST has remained on track to become a prominent service in the United States, with weekly users of these channels representing 46% of total video users. Brazil has also seen a dramatic rise in FAST viewership, with weekly users now accounting for 36% of the video audience, a 4.5-fold increase from 2020. The United Kingdom, another key territory in the FAST market, has seen a surge in FAST viewers, now representing 21% of total video users, according to Omdia.

“The FAST channel market continues to witness strong growth … with ad-revenue projected to reach $8 billion by 2024,” Rue Aguete said in a statement. “This poses both opportunities and challenges for service providers as they adapt to the changing landscape to keep up with evolving viewer demands.”

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Theatrical Comeback Gives Digital Transactional Home Entertainment Business a Q2 Bump

The theatrical resurgence is paying off for the transactional home entertainment business, at least in the digital segment.

Consumer spending on digital movie sales, or electronic sellthrough (EST), rose 17.4% in the second quarter of 2023 to an estimated $695.1 million, up from $592.1 million in the second quarter of 2022, according to the latest quarterly estimates from DEG: The Digital Entertainment Group.

Spending on video-on-demand (VOD), or digital rentals, rose nearly 4% to an estimated $480.5 million in the quarter that ended June 30, up from $462.2 million in the comparable quarter last year.

The DEG reports digital sellthrough spending on theatrical titles was up 26.5%, while VOD spending on theatrical titles rose 6.4%.

Spending in the first quarter of this year was down in both categories by 12.3% (EST) and 11.5% (VOD), respectively.

For the first half, consumers spent an estimated $1.26 billion on EST and $924 million on VOD, up 1.9% and down 4%, respectively, from spending in the first half of 2022.

“The first quarter decline and second quarter gain were driven in large part by release schedules and windowing, with several large titles releasing in the very last week of the first quarter, including Avatar: The Way of Water and Creed III,” according to the DEG.

Top transactional films in the first half of the year include 65 (Sony); 80 for Brady (Paramount); Ant-Man and The Wasp: Quantumania (Disney); Avatar: The Way of Water (Disney); Creed III (MGM); Dungeons & Dragons: Honor Among Thieves (Paramount); Evil Dead Rise (Warner Bros. Discovery); John Wick: Chapter 4 (Lionsgate); A Man Called Otto (Sony); Puss in Boots: The Last Wish (Universal); Shazam! Fury of the Gods (Warner); and The Super Mario Bros. Movie (Universal).

Combining EST and VOD, total transactional video-on-demand (TVOD) was down 12% in Q1, but up 11.5% in Q2, finishing the first half down just 0.7%.

Disc sales and rentals, in contrast, continued to free fall, with spending in the second quarter coming in at just $392.4 million, down 26.3% from the second quarter of 2022. The estimated first-half consumer spending total was just $753.9 million, down 28% from spending in the first half of 2022.

Combining all sources of transactional home entertainment (physical disc sales and rentals, EST and VOD), the segment narrowed declines from 17.53% in Q1 to 1.17% in Q2, finishing the first half down 9.5%

Overall, home entertainment spending rose 14.8% to an estimated $10.4 billion in the second quarter and 14.7% to $20.5 billion in the first half, the DEG reported — driven, as usual, by double-digit gains in subscription video-on-demand (SVOD) spending.

Despite reports of subscription fatigue and sub losses at the major streamers, the DEG, citing Omdia data, maintains consumer spending on SVOD rose 18.1% in the second quarter to $8.8 billion and 20% in the first half to $17.5 billion. If those estimates are accurate, subscription streaming now accounts for about 85% of all consumer home entertainment spending.

Based on Media Play News research estimates of physical media sales (DEG no longer separates physical sales and rentals), sellthrough transactions account for about 9% of the home entertainment market, and rentals about 5.3%. Physical media still accounts for about 25% of all transactional revenue, and around 30% of sellthrough. Disc as a whole, compared with streaming, accounts for under 4% of the home entertainment market.

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Ad-supported premium AVOD and FAST content generated estimated advertising revenue of $4.2 billion in the second quarter of 2023, according to Omdia, as more major streamers added cheaper subscription plans with ads. Omdia estimates ad revenue grew 10.5% in the second quarter and 6.8% in the first half, to nearly $8.2 billion.

Report: 20% of Streaming Video Subscriptions Sold Through Telecom Bundling

About 20% of all streaming video subscriptions are now sold through bundling partnerships with telecom services — a percentage expected to increase to 25% by 2028, according to analysis from Omdia and Bango. In certain regions such as Latin America, almost 50% of new streaming video subscriptions is projected to come from telecom providers over the next five years.

Verizon’s +play platform offers bundled access to third-party SVOD services such as Netflix, Max and Paramount+.

Overall worldwide subscription revenue from video, music and other streaming services sold via telecoms is projected to total $24.8 billion in 2023, growing to $42.8 billion in 2027. 

The report finds that the global subscription streaming market remains strong. Earlier this year, Juniper Research similarly found the market is projected to grow by $268 billion over the next three years. 

A recent Bango survey suggests more than 70% of telecoms employing bundles access to SVOD services are seeing major gains in customer acquisition and retention, with the bundle the No. 1 driver of new subs. 

It’s win-win for all parties as the telecoms retain and gain subscribers and  content providers reach new customers. At the end of March, Omdia identified more than 1,600 partnerships between telecom providers and major streaming brands, including Paramount+, Disney+, Max and Netflix. Omdia estimates that 16.5% of video streaming revenue this year will originate from telecom bundles, increasing to 21.5% by 2027. 

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At the same time, the reports contend the situation is challenging. Telecoms embracing bundled SVOD service offerings face saturated markets, declining revenue per user and ongoing churn (subscribers dropping service). While network traffic will grow by 219% in 5 years, revenue is only projected to grow by 14.6%.

“With a fifth of SVOD subscriptions now sold through telco bundles, it’s clear there’s a paradigm shift under way in the streaming market,” Anil Malhotra, Bango co-founder, said in a statement. “We’re seeing the emergence of a win-win-win scenario that benefits SVOD providers, telcos and consumers alike.  

Malhotra suggests that streaming is only one component of the so-called “Super Bundle” phenomenon highlighted in the report. He says Super Bundling content hubs like +play and Optus SubHub beyond video, offering subscriptions for music, health, productivity and more.  

“There are compelling market drivers at work here, not least consumer subscription fatigue and telecom’ urgent need to differentiate and boost revenue,” Malhotra said. “Super Bundling is not only a churn buster — the more services telcos get customers to subscribe to, the more stickiness they create — but can also turn into a revenue stream in its own right.”

Omdia: Netflix Original Content Accounts for Less Than 40% of Viewing in Key Markets

Original content has become of even greater strategic importance to Netflix as it builds its worldwide footprint and faces competition from the owners of the biggest content catalogs in the world (major studios) and deeply entrenched local players in the U.K. and Nordics, among other regions.

New Omdia data from PlumResearch finds that the importance of original content varies by market. Netflix ended its most recent fiscal period with more than 232 million subscribers across more than 190 countries.

In the U.S., 35.6% of total hours watched in the first three months of 2023 were Netflix originals. The SVOD pioneer’s home country was its biggest market, with a total of 14.8 billion hours streamed in the first quarter, ended March 31. Originals also accounted for the largest share of total hours streamed  in Poland — just under 40%, and Spain at more than 35%. At the other end of the scale were Japan (20.6%) and South Korea (25.4%).

At the same time, original Korean content has become a goldmine for Netflix worldwide following the success of “Squid Game” and other locally-produced programs. The streamer recently announced plans to invest more than $2.5 billion in original Korean content to be distributed globally.

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Although these percentages appear to be low, considering the massive investments Netflix has made in original content, Omdia estimates that last year the vast majority of Netflix originals were produced in the United States — 403 titles out of a total 935 titles launched in 2022.

The analysis of viewing of local originals (i.e., content produced in the country in question) offers a noticeably different perspective of the streamer’s success with local production. Out of all original hours watched in South Korea, local titles accounted for nearly 68%. The U.S. also had a high percentage of 61.4%, and both countries were very far ahead of the next placed country, Japan. Viewing of German originals in Germany was just 2.7%.

“Given its increasing emphasis on originals and heavy investment, the share of viewing actually going to these titles seems surprisingly low,” Tim Westcott, senior principal at Omdia, said in a statement.

Westcott suggests the reasons for this could include the continuing strong performance of certain non-original content, especially theatrical movies, but also some TV series that have been acquired by Netflix.

For example, the “Harry Potter” movies and TV series like “Brooklyn Nine-Nine” and “Rick and Morty” feature among the top titles in other countries such as Italy and Germany.

“Another reason [for lower interest in original content in some markets] is the depth of catalog: Netflix has been originating since 2012, but still does not have the volume of Walt Disney, Warner Bros. Discovery or Paramount Pictures,” Westcott said.

Indeed, while Disney and Warner Bros. Pictures celebrate centennials this year, Paramount turned 100 in 2012.

Omdia: U.S. to Add 40 Million SVOD Subscriptions This Year

Despite the economic uncertainty, cost of living crisis and saturation of video services in some countries, 2023 is on track to be a good year for subscription video on demand (SVOD) services according to analysis from Omdia.

“Moving on from the impact of COVID, the introduction of ad tiers and an abundance of new content has meant that 2023 will be an important year for growth in SVOD and its subscribers,” Maria Rua Aguete, senior director in Omdia’s Media and Entertainment practice, said in a statement.

Rue Aguete said 2020 was a boom year for online video streaming, due to the pandemic and subsequent outdoor limitations, which resulted in more than 300 million new global subscription online video services.

“In absolute terms, 2020 added more subscribers to the video on demand industry than at any other point in history and most likely, at any point to come,” she said.

Omdia contends that all industries and economies tend to move between waves of growth and pools of stagnation and SVOD is no exception. While 2020 was a year for the records, 2023 will be a year of industry-wide cooling despite the myriad of services coming from big Hollywood players. The launch of advertising tiers does mean that for many of these players 2023 would still be a year of growth and SVOD players will add new 143 million subscriptions – these figures represent 50% of what was achieved in 2020 the record year.

Even in the U.S. where subscription video services have reached maturity, Omdia expects almost 40 million new SVOD subscriptions.

“The biggest battle services will face is the continuing rise in prices, which may scare customers and could slow down growth,” Rue Aguete said.

Due to the introduction of advertising tiers, SVOD players like Netflix could still expand a saturated U.S. subscription market, while also acquiring subscribers in Latin America or Asia-Pacific region where price was considered a reason not to subscribe.

“We expect 14% of all the subscriber growth in 2023 will come from Latin America,” Rua Aguete said.

Omdia: Nonlinear Viewing Gaining in U.S., Europe, Australia

Nonlinear viewing continued to gain greater popularity in the daily viewing habits of TV users across the United States, Europe and Australia in 2021 with online long-form and social media video viewing growing beyond the previous year’s boom in viewing time, according to new research from Omdia.

Linear TV viewing time decreased in all markets in 2021. The ending of restrictions and lockdowns that marked most of 2020 was the primary cause, according to Omdia, with the continual shift toward on-demand viewing also driving this.

Omdia’s “Cross-Platform Television Viewing Time Report — 2022” found that across all the markets covered, average total daily viewing time reached 362 minutes per person per day in 2021 (6 hours and 2 minutes), down 0.5% from the previous year. Declines in linear TV, online short form and pay-TV VOD accounted for this minor drop in viewing with the former seeing the sharpest falls. Growth in online long-form and social media video viewing however counterbalanced these declines, leaving overall viewing to drop by just 2 minutes.

In a statement, senior analyst Rob Moyser said “in highly developed markets such as the U.S. and the U.K., 2021 will likely be the last year where linear TV predominates over non-linear TV viewing.”

“On a platform-by-platform level, however, linear TV still remains by some distance the most popular way to watch TV in the markets covered,” he added.

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Online long form was a key area of growth across all markets, driven largely by incumbent online subscription services such as Netflix, Amazon Prime, and Disney+, and the launch of several new OTT services, such as Discovery+ and Paramount+, according to Omdia. In total, long-form viewing grew by eight minutes, reaching 68 minutes, eight minutes ahead of social media video viewing.

Time spent viewing video content on social media platforms increased by 9 minutes in 2021 to an average of 60 minutes per person per day across the nine markets analyzed. TikTok was the standout performer for video growth during the year, with the platform set to overtake Facebook in total time spent for the first time in 2022.

Omdia: Global Pay-TV and Online Video Subscriptions to Top 3 Billion by 2027

Despite market saturation, the number of subscription streaming video consumers continues to grow. New data from London-based Omdia finds that the global total of SVOD subs increased from 1.14 billion at the end of 2020 to 1.34 billion at the end of 2021, up 17.7% year-over-year.

Omdia is forecasting a further 10.5% growth in 2022 to take the figure to 1.48 billion by year’s end. With new services continually entering the market and, crucially, major players still only part of the way through their respective global expansion efforts, this means the market will continue to expand for several years and Omdia’s forecasts show the global total will exceed 2 billion in 2027.

Adam Thomas, senior analyst at Omdia, said continued global expansion for Disney+, Paramount+, Peacock, in addition to the alliance of HBO Max with Discovery+, portend strong sub growth going forward.

“There are numerous reasons to be positive for online video’s prospects over the next few years, which are reflected in our forecasts,” Thomas said in a statement.

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Meanwhile, global pay-TV subscription numbers grew by 0.6% in 2021, from 1.02 billion to 1.03 billion. With competition from online video intensifying, Omdia expects the pay-TV market to exhibit slow decline looking ahead and forecasts subscription numbers to drop from the 1.03 billion figure to one billion in 2027, down by 1.9%.

While SVOD numbers are growing just about everywhere, the scenario for pay-TV differs a great deal from country-to-country. Of the 101 markets that Omdia tracks, the outcomes show significant fluctuations, with 55 countries still reporting subscription growth, 41 reporting decline and five essentially static. Over the next five years Omdia expects those contrasting trends to continue, with countries like Indonesia continuing to post solid increases, while others — most notably the U.S. — seeing increasing declines.

Thomas contends that with pay-TV as a whole plateauing, the TV and video business is becoming increasingly reliant on growth from online video. But with that business having been built on high content investment aligned with low subscription prices, a price-sensitive public has come to expect a lot of bang for their buck.

“The content costs versus pricing balancing act is a tricky one to navigate and we’ve already heard from Netflix that it expects to lose 2 million customers in this quarter,” he said. “It is quite clear that constant growth for online video is by no means guaranteed.”

DEG Credits New Initiatives With Drawing 26 New Members This Year

DEG: The Digital Entertainment Group is entering its 25th year with an influx of new members, the trade group announced Dec. 2.

The newest DEG members include Altman Solon, Anuvu, BIGtoken, Guts + Data, IRIS.TV, NAGRA, Omdia, Plex, Synamedia, TiVo, Visual Data Media Services, Vobile and ZOO Digital. Spherex also returned as a member of DEG, bringing the number of new DEG member companies to 26 so far in 2021 (a total that includes 12 new members announced at the end of the first quarter).

DEG’s Direct-to-Consumer Alliance (D2CA), created in 2019, and Advanced Content Delivery Alliance (ACDA), new this year, play an increasingly important role in focusing DEG membership for the future and attracting new members across a broad swath of the digital entertainment industry, according to the trade group.

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“DEG’s wide reach across content creators, retailers, platforms and strategic vendors is an important part of its value to members, bringing companies in different industry segments together to work within DEG to advance industry positions and meet common goals,” said DEG chair Jim Wuthrich, president of content distribution for WarnerMedia. “The D2C Alliance and the Advanced Content Delivery Alliance are the latest examples of this community building, and I’m thrilled that so many new members see the value in DEG. I’m happy to welcome all of the new member companies to the DEG community.”

The new ACDA within DEG addresses advancements in technology to enable more and improved content delivery. ACDA member companies are aligned in committees addressing localization, supply chain efficiencies and security, cloud/edge computing and 5G.

The D2C Alliance represents the global direct-to-consumer media industry and supports its members to help create a robust marketplace to lead the new era of content consumption.

“We are thrilled about the expanding participation in DEG of advanced content delivery and direct-to-consumer companies,” said Amy Jo Smith, DEG president and CEO. “I’m grateful that they see the value of membership in DEG, which has been working harder and smarter than ever since last year to provide our members increased opportunities for business collaboration, education and networking.”