Report: Domestic Consumer SVOD Spending to Decline in 20161 Jun, 2016 By: Erik Gruenwedel
Consumer spending in the United States on subscription streaming video service is expected to decline almost 2% this year to $1.19 billion, from $1.21 billion in 2015, according to from British research firm Strategy Analytics. While the percentage drop is small, the dollar amount tops $20 million — underscoring Netflix and Amazon Prime Video’s decision to expand globally.
“It shows that, whilst actual market saturation is a few years off yet, the domestic streaming subscription market is now on the backside of the adoption curve. The incremental increase in annual spend will decline from here on,” Michael Goodman, digital media director at Strategy Analytics, said in a statement.
Indeed, Goodman said domestic consumer spending on SVOD could drop 55% to $540 million in five years. With nearly 60% of U.S. homes subscribing to a SVOD service, Strategy Analytics contends market saturation will occur at 85% of broadband households — similar to pay-TV.
“Within five years, annual growth will fall below 8%,” he said.
SVOD pioneer Netflix leads with 53% of the U.S. market, followed by Amazon Prime Video with 25% and Hulu at 13%. It is believed that 40% of SVOD households subscribe to at least two services, which include myriad new over-the-top video entrants (CBS All Access, HBO Now, Showtime OTT, Starz, CONtv, Acorn TV, among others) touting niche content priced from $5 monthly.
“The domestic situation is a huge reason why international expansion is so important. This is underscored by Amazon’s recent video initiatives, and is particularly relevant for Netflix, which has the least room to grow in the U.S.,” Goodman said.
Despite a gradual slowing in SVOD spending, the business will account for 35% of consumer spend on home video in 2016 — which is up 22% year-over-year.
DVD/Blu-ray Disc spending will decline 7% to $5.67 billion (30% of consumer spend), packaged-media rentals will decline 10% to $2.75 billion (14% share).
Digital HD or electronic sellthrough will increase 17% to $2.2 billion, with transactional VOD dropping 5% to $1.84 billion — accounting for 22% combined market share.
Overall, Strategy Analytics projects a 3.6% increase in domestic spending on home video this year to more than $19 billion — the equivalent of $13.42 per household a month. With European analysts including pay-TV ad-supported VOD (pay-TV) revenue in home entertainment, SA expects the domestic home video market will grow 8.3% to $27.3 billion this year.