Even though 2020 was a record-breaking year for streaming services, the subscription video-on-demand (SVOD) industry needs to brace for a wide cooling over 2021 with the big players seeing growth slow and in some cases sharply fall back warns research from Omdia.
Establishing a baseline for its predictions of the new year, the analyst said 2020 saw the SVOD sector grow at one of the fastest rates on record. In fact, in absolute terms, the year saw more subscribers added to the VOD industry than at any other point in history, and most likely, at any point to come. Across the 328 online video subscription services that Omdia tracks as part of its TV and Online Database, more than 226 million subscribers were added.
The study showed that the four fastest-growing services of 2020 were Netflix, Apple TV+, Disney+ and Amazon Prime. All of these saw significant net adds stemming from Covid-19-affected markets. Yet Omdia warned that all industries and economies tend to move between waves of growth and pools of stagnation, and SVOD is no exception and that a contraction will occur despite more SVOD services coming from big Hollywood players including Discovery, NBC, Viacom and Warner.
The bottom line is that Omdia expects to see significant declines in net additions for the aforementioned large provider. For Netflix and Amazon, Omdia believes that 2021 will be their smallest year of growth in absolute terms since 2015 yet the projected big loser will be Apple TV+ which Omdia sees as having an even starker future. After seeing a bumper year of growth 2020, the CE giant’s fledgling video service is projected to lose almost 8 million customer by the end of the year. Driving this said Omdia would partially be due to the end of free trials, but also down to the small library of content available on Apple’s subscription platform.
Looking at what was necessary to maintain growth, Omdia senior research director, TV, video and advertising Maria Rua Aguete said SVOD, more than many other types of entertainment, must maintain a healthy pipeline of potential new subscribers and carefully manage the high level of churn that is incumbent to monthly subscription products. Yet 2020 had seen this pipeline exhausted.
“New subscribers have been converted at astonishing rates and the pool of subscribers in potential have been vastly reduced. Not only does this impact growth, but also strategy,” she explained. “To grow now, especially when faced with new competition, services such as Amazon and Netflix must refill the pot and gain access to new sources of subscriptions. In essence, this means being more open to integrated deals with consumer gatekeepers, such as pay-TV providers and telcos. These deals will include further integrated libraries and even the bundling of SVOD services. 2020 may have been a year of hubris for the SVOD industry, booming as all others struggled, but 2021 will be a year of humility; for the first time big SVOD players must rely on former rivals for their own success.”
Among other key findings revealed in the Omdia study were that despite the rise in paid subscriptions, consumers were also increasingly turning to free advertising VOD services for viewing and also that despite having a huge market to appeal to, Spanish-language TV content was relatively under-represented on the major US OTT video services.
Omdia’s consumer surveys in November 2020 highlighted the growth in AVOD video consumption both in terms of number of services accessed and frequency of viewing. In the height of the pandemic, AVOD saw a considerable rise in viewing across connected devices as consumers turned to a higher number of devices and services during stay-at-home orders. Yet the study also noted that the rise in AVOD however was not solely driven by the pandemic as consumer surveys reveal increased viewing in the latter part of 2019 driven by developments in the AVOD market including new service launches.
As regards Spanish language content, Netflix and Hulu offered the highest volume of Spanish-language TV content in the US. Amazon had the largest overall on-demand offering, but less than 1% was in Spanish. Colombia was the largest supplier of Spanish-language content for US services, accounting for a quarter of Spanish-language TV content across all providers, followed by Mexico at 18%. Ad-funded service Tubi offered the largest selection of TV content from Spain.