Report: SVOD is a Transactional VOD Killer8 Jun, 2016 By: Erik Gruenwedel
Despite facing a mature domestic market, subscription-streaming video is projected to undermine transactional VOD rentals of movies and TV shows, according to new data from Digital TV Research.
While transactional VOD revenue increased from $708 million in 2010 to $2 billion million in 2014, it is expected to decline to $1.7 billion by 2021 as consumers increasingly gravitate toward SVOD and over-the-top video.
“SVOD is seen as a more attractive substitute,” read the report.
Electronic sellthrough will not be as badly affected by SVOD. Digital sales revenue is expected to reach $2.5 billion in 2021, up from $279 million in 2010 and $1.49 billion in 2015.
At the same time, North American growth in SVOD will be dependent upon consumption of more than one service per household, according to DTR.
The North American market includes about 82 million SVOD subscribers (of movies and TV shows; excluding sports) and is projected to top 109 million by 2021 — primarily from Netflix, Amazon Prime Video and Hulu.
Simon Murray, report author and principal analyst, said he doubts increasing numbers of domestic pay-TV households will subscribe to SVOD services. Instead, he contends current SVOD households will add an additional service.
Indeed, based on the projected 110 million SVOD subs in 2021, Murray says 25 million will be secondary SVOD subscriptions — with the average SVOD household paying for 1.33 subscriptions.
“Putting it another way, there will be 76 million primary U.S. SVOD users by 2021,” Murray said in a statement.
Canadian and U.S. SVOD revenue will climb from $580 million in 2010 to $6.26 billion in 2015, surpassing $9.1 billion in 2021. DTR factored in half of an Amazon Prime monthly fee as an SVOD subscription to homes it estimated take Amazon Video (about 70%).
Meanwhile, advertising will become the main SVOD revenue source in 2018 as sub growth wanes. Advertising generated $5.65 billion in revenue in 2015, quintuple the $1.11 billion generated in 2010. The sector is expected to reach $10.98 billion in 2021.