Amazon Prime video growth to outpace Netflix as Hulu falls away

Hulu’s decision to cut its free, ad-supported streaming service is expected to sharply reduce the number of users of the service, dropping its base by nearly half, according to new research that also says Amazon’s Prime Instant Video service is booming.

eMarketer said that unbundling Amazon Prime Instant Video from Amazon’s Prime shopping service and offering it on a month-to-month SVOD basis is fueling a growth spurt this year that will register at 16.5%, enough, eMarketer said, to make it the fastest-growing over-the-top (OTT) service of the Big 3 (Netflix, Amazon and Hulu).

Netflix continues as the category leader, although its growth has slowed in the United States due to price increases and a market that’s become increasingly saturated. It’s likely to close 2016 with close to 48 million paid subscribers in the U.S. compared to Amazon’s estimated 30.5 million and Hulu’s 12 million (after losses due to the discontinuation of its free offering).

eMarketer said it expects continued growth for Netflix in the U.S., but at a slower rate.

 “Netflix has a larger user base and therefore less room to grow, but it continues to add subscribers in the U.S. and elsewhere thanks to the appeal of its original shows,” said eMarketer senior analyst Paul Verna. “The success of these companies, and of the OTT category as a whole, indicates continued momentum for subscription-based, on-demand video.”

Amazon’s growth, meanwhile is due to three primary factors, Verna said: the success of its Fire TV streaming devices, the roll-out of a standalone streaming video service, and its increased investment in original content, which the Boston Consulting Group estimates at $3.2 billion this year, second only to Netflix among streaming video platforms, and just behind Disney and NBC, according to a report last week from IHS.

Chromecast most-user streaming device

Low price, meanwhile, is helping to push Googles Chromecast dongle to the head of the pack as far as devices used to stream content, eMarketer said, and it expects that to be the status quo through 2020, barring any major technological upheavals.

But Amazon is also seeing its Fire TV device accelerate in the market, becoming the fastest growing device at a pace that may see it catch up to Chromecast by 2020, and could take it past Roku as the No. 2 device on the market by 2020, with 2X its current base.

And Apple TV? Well, it’s not dead, but increasingly it’s been forgotten by users. eMarketer expects it to grow slower than Amazon Fire TV, Chromecast and Roku, hamstrung by its relatively high price, a lack of a content ecosystem and the lack of support for content apps from platforms like Amazon and Spotify. It currently has some 20.5 million users in the U.S. and is expected to grow to just 25.8 million by 2020.

“The promise of an Apple ecosystem of content and devices—something it mastered with the iTunes Store a decade ago—has yet to materialize in the fast-growing world of digital television,” said Verna.

Stay tuned.

Jim O’Neill is Editor of Videomind and Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn