Subscription video-on-demand (SVOD) services and ad-supported video (AVOD) services are expected to combine to drive global OTT revenue past $200 billion by mid-decade.
Nearly all of that, 90%, will be subscription and advertising revenue, said the report, from industry analyst firm ABI Research.
Despite dire warnings about “subscription fatigue” from some pundits, SVOD subscription numbers continue to climb and new services, like Disney+ and Apple TV+, continue to launch. The increased competition has prompted some providers to offer deals on subscriptions. Apple TV+, for example, is offering 12 months of the service free to consumers who buy certain Apple hardware, including iPhones. Verizon is offering mobile phone subscribers a similar deal to Disney+.
And, the growth isn’t just occurring in the US. The Asia Pac region has seen huge subscriber growth, especially in China behind services like iQIYI/Baidu, Tencent, Youku Tudou/Alibaba Group in China. India also is seeing huge growth as mobile service – with video – gain traction among the country’s expanding middle class.
For pay-TV players, OTT becomes a feature
And, where OTT was once seen as a pay-TV foe, more players are seeing the streaming surge as an opportunity to expand connectivity services, including 5G. Executives at AT&T, for example, during the telco’s Q4 2019 earnings call, said they expect to make expansive deals for its soon-to-debut HBO Max subscription service. Due to launch in May, AT&T said the service will launch with 10 million current AT&T customers, adding that the company is looking at additional distribution through players like Comcast and other MSOs.
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Next-gen wireless service – 5G – could also be a crucial delivery mechanism for SVOD and AVOD services globally, especially in areas where fixed-line infrastructure can be difficult to deploy.
“Cord-cutting is often regarded as a consequence of expanding OTT consumption, but the market dynamics are more complex, particularly when one considers how the pay-TV industry has embraced OTT as a complement and value-additive, rather than strict competition,” said Michael Inouye, principal analyst at ABI Research. “Over time, we expect the traditional pay TV offer to continue to evolve and become indistinguishable from a pure OTT package of services.”
The bottom line
As I’ve said in the past, saturation of the SVOD market is a long way off. Consumers continue to cut the cord in the US (more than 1.2 million in Q4 for AT&T and 149,000 at Comcast) as they adopt OTT delivery and create their own bundles.
So much of this is about perceived value. For consumers, a self-curated bundle and micro-bundles of services is becoming increasingly popular because that control has its own intrinsic perceived value.
Much has been made of giving consumers too much choice, but the reality is that most are reveling in the moveable feast that is online video.
Sports fan? There’s an app (or 10 or 20 or more) for that. Increasingly, leagues and broadcasters are opening up live games, matches and the like online, either for a subscription or a pay-per-view fee. They’re also including shoulder content that often gives viewers an inside look at their favorite teams and sports stars.
Netflix, Hooq, iFlix, Amazon Prime and a bevy of other services around the world are offering tens of thousands of general interest entertainment titles – many of them originals – that are being snapped up by eager consumers. Even as Disney+, Apple TV+ and (soon) Peacock offer more choices for US consumers, services like Netflix continue to add subscribers, albeit at pace slower than Wall Street would like.
And, the appetite for niche services remains, with typical consumers in the US expected to subscribe to between five and 10 OTT services.
When (if) consumers begin to feel “subscription fatigue,” more AVOD and hybrid offerings from some SVOD services are available.
As I said, we’re a long way from saturation. 2020 is going to be a breakout year for D2C services, and sports are going to be a significant catalyst.