Study: Netflix's Domestic Market Share to Fall14 Jul, 2015 By: Erik Gruenwedel
Netflix’s reign as juggernaut in the over-the-top video space in the United States is projected to fall from 85% of the market in 2014 to 50% in 2018, according to new data from an OTT video study conducted in May and June by London-based research firm MKM.
The study of 45 executives from entertainment content and service providers involved in OTT video (including Lionsgate, Sony Pictures, BBC Worldwide, DirecTV, Fox, Starz, Warner Bros., Cinedigm and Verizon, among others) found that as the market continues to explode, new entrants — notably HBO Now, MLB.tv, Showtime, MGM, Sling TV, PlayStation Vue, CBS All Access — in addition to Amazon Prime Instant Video and Hulu Plus will undermine Netflix’s first-mover status.
“By 2018, the U.S. OTT video market will exceed $8 billion in revenue, driven by new market entrants and growing consumer demand,” Caitlin Spaan, VP of marketing with Ooyala, said in a statement.
Indeed, the domestic OTT video market topped $4 billion in revenue at the end of 2014 (excluding Prime Instant Video), the majority of revenue driven by Netflix and Hulu Plus.
The market is poised to grow due in large part to 77% penetration of broadband households, and 75% smartphone penetration and 44% tablet. With pay-TV households hovering around 100 million, the opportunity for less expensive OTT video is significant.
More importantly, the study found that the fiscal largess of the U.S. market affords easier opportunities for Internet companies and online services to build scale without having to expand globally.
“Net neutrality was a great victory for OTT providers — it will encourage investment and support growth,” said one media executive.
Indeed, with more than 40% of TV households subscribing to at least one OTT video service at the end of 2014, according to Nielsen, industry observers contend upwards of 20 niche OTT video services (i.e. Acorn TV focusing on British fare; Urban Movie Channel, Shout! TV featuring eclectic content, and Comic-Con centric CONtv) will materialize grabbing consumer eyeballs.
“For these niche providers, there’s tremendous fan-base potential in providing entertainment based on sports, personal hobbies, kids’ entertainment, indie, specialized film and TV, and expatriate or multicultural programing,” Spaan said.
While niche genres can thrive via OTT video, mainstream TV consumers will continue to flock toward recognized broadcasters and established subscription streaming services, according to the report.
“They’ve got deep pockets, relationships with content providers and a real motivation to succeed,” said one executive.