Major media markets have room for 3BN additional SVOD customers | Media Analysis | Business | News | Rapid TV News
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Even though some territories are moving towards a stacking ceiling as users continue their purchase of subscription video-on-demand system, there is still ‘plenty’ of growth left for streaming services says research from Ampere Analysis.
Ampere SVOD ceiling 17Aug2020
The research looked at 20 of the largest TV subscription markets worldwide — namely the US, the UK, Canada, Argentina, Denmark, Norway, Australia, Netherlands, Poland, France, Germany, Japan, Sweden, Italy, Brazil, Mexico, Spain, China, India and Russia — to establish the theoretical ceiling in each country. Ampere summed each country’s spending on subscription cable, satellite, IPTV, DTT and OTT services, and expressed this on a per household basis, to estimate the average household expenditure on subscription TV and calculated the average cost of a typical SVOD service in each country. Ampere the divided the current average household expenditure on TV subscription services by the cost of this average SVOD service.

Ultimately, Ampere found that there was room for three billion additional streaming subscriptions across the world’s largest media markets. the maximum ceiling for SVOD services per household is highest in the US, at roughly eight. In Europe, the figure was lower, at between two to five services per household. However, it noted that market realities will mean that few territories are likely to see stacking numbers reach these heights.

Looking at individual territories, the study found that despite cord-cutting, the average US household has continued to spend an almost identical amount on TV services every year — $900 — as they switch from individual high cost cable and satellite contracts to multiple lower-price SVOD services. This stability in expenditure, mirrored in many other markets worldwide, led Ampere to conclude that the fundamental determinant of stacking behaviour will be household entertainment budgets, and this allows calculation of a theoretical ceiling for SVOD uptake.

The study also revealed that various factors will limit how close individual markets will get to this ceiling. One issue identified was sport. The study noted that pay-TV operators and networks currently control the majority of key sports rights in many major markets. Ampere’s past analysis has indicated that OTT players are unlikely to be able to wrest control of major domestic events in most developed markets. As a consequence, consumers who want to watch sport will have to continue subscribing to pay-TV services. This reduces the available budget for SVOD.

Factoring in sports spend, the study showed that in the US the capacity for SVOD services drops from eight per average household to between four and five. Outside the US, some major markets are still seeing growth in household spend on TV. However, Ampere noted that the underlying rate of change was relatively low. In these markets, it expects growth in household outlay on entertainment to increase the ceiling for SVOD services by just 20% - 30% over the next five years.

In addition, Ampere believes that spend that is un-addressable by SVOD platforms will limit the overall capacity and that to reach maximum capacity, SVOD spend will have to replace pay-TV spend. Ampere said that sport was the most significant barrier for this, but if other key film and TV content remained with pay-TV services on an exclusive basis, rather than moving to OTT products, this would further restrict capacity. Pricing was the final key determinant and that lower average SVOD prices driven by competition would likely mean that household budgets will stretch to more services.

“Even as we begin to see growth in SVOD services in emerging markets, our analysis shows that opportunity for expansion is actually still a very solid proposition in established territories,” remarked Daniel Gadher, research manager at Ampere Analysis. “As cord-cutting continues, the US stacking ceiling is theoretically as high as eight services per average household, while in developing markets like Brazil it is far lower – at just 1.5.”

After accounting for factors such as sport and future growth in spending, Ampere also found that markets such as the UK and Germany have an average household capacity of roughly three services at current price points. This still translated into sizeable number of subscriptions: 88 million in the UK and 124 million capacity in Germany. Similarly, in the USA, Even four to five services per household would translate to a total of 510 million to 640 million possible subscriptions.

“To make the most of this capacity, OTT players first need to demonstrate that they are a viable replacement for existing paid-for TV services,” Gadher added. “This process is ongoing in the US and Canada, but elsewhere in the world, pay-TV has remained resilient. But as US studio content increasingly moves to the online world, the opportunity for new players to take a share of consumer entertainment spending, even in already busy markets, improves.”