Home Analysis SVOD, AVOD and Pay TV market trajectories: the latest analyst figures

SVOD, AVOD and Pay TV market trajectories: the latest analyst figures

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A flood of recent analyst figures demonstrate the growing importance of streaming services, with perhaps the keynote number coming from Parks Associates, which says average spending on OTT services in U.S. broadband homes doubled in two years from $8 per month in 2018 to $16 in 2020. Omdia points out that all growth in video subscription numbers in the next five years will come from streaming (with 500m net additions in that time). It should be pointed out, of course, that a streaming subscription can be worth just a few dollars a month.

Still in the U.S., Ampere Analysis counted 340 million subscription OTT contracts in Q1 2021, which as they point out, is more than one per person (on a near-330m population). Using data from its Consumer Media and Entertainment Tracker (covering a representative sample of 18-64 year-old Internet users), Ampere Analysis reports that 57% of U.S. consumers say VOD services are the main way they watch TV and film. More than one-quarter of U.S. respondents are now using five or more SVOD services.

“The launch of new studio-backed subscription services, and increased rates of stacking in the U.S., all contributed to the country reaching this milestone in Q1 of this year,” says Ampere Analysis, referring to the total OTT subscription figure of 340m.

SVOD growth at the expense of Pay TV

Ampere Analysis has little doubt that this growth is at the expense of Pay TV. Toby Holleran, Research Manager at the research firm, says: “In 2020, Pay TV penetration dropped below 60% for the first time, down from more than 80% at the beginning of 2015, with consumers increasingly shifting to SVOD services.”

He continues: “As consumers shift away from Pay TV and more streaming services enter the market, service stacking continues to grow as consumers curate their own content portfolios.” It is this stacking, his company believes, that has driven the total U.S. subscription figure to 340m.

Rapid SVOD slow-down in 2021

Omdia has noted the rapid growth in SVOD, giving a global figure of 246 million net subscriber additions in 2020. Speaking at Videoscape Europe recently, Maria Rua Aguete, Research Director at Omdia, said: “2020 was a record-breaking year for SVOD, caused by an unexpected uplift from Covid-19. Households in lockdown binged content, driving significant uptake of both incumbent and newly-launched SVOD services.”

Rua Aguete also pointed out that this rate of increase would not be sustained, and that “having exhausted the pool of new households to sell to, SVOD services must brace themselves for a much slower 2021.”

The latest quarterly subs figures from Netflix support her assertion. The SVOD leader reported 3.98 million net paid subscriber additions in Q1 this year compared to 15.8m in the first quarter of 2020, and only expects another one million additions in the current quarter.

“This is not the effect of Disney or Amazon,” Rua Aguete emphasizes. “It has more to do with the huge growth that streaming video achieved in 2020.”

Omdia is forecasting 139m SVOD net additions this year across all services. 2021 will provide the smallest growth for Netflix and Amazon, in absolute terms, since 2015, it reckons.

Omdia and Ampere Analysis have both given their views on how subscription streamers can kick-start growth again, relying on the kind of platform partnerships and discounted bundling that Pay TV is famous for. You can read about that here.

Global SVOD subs trajectory to mid-decade

Omdia has provided a forecast for total global SVOD subscriptions to 2025, when they will hit 1.6 billion. Year by year this looks like:

  • 2020, 1.1 billion
  • 2021, 1.24bn
  • 2022, 1.37bn
  • 2023, 1.49bn
  • 2024, 1.58bn
  • 2025, 1.64 bn.

Meanwhile the forecasting firm Digital TV Research has updated its figures for SVOD subscriptions across various regions. Its forecasts show:

  • Western Europe end-2020, 137m and by 2026, 234m.
  • Eastern Europe end-2020, 15m and by 2026, 40m (Russia and Poland will generate most of the new subscriptions).
  • Latin America end-2020, 53m and by 2026, 116m. Brazil and Mexico will contribute a clear majority of all the new subscribers in that region.

The biggest SVOD services in West Europe by 2026

Talking about Western Europe, Simon Murray, Principal Analyst at Digital TV Research, says Netflix will lose market share but remain the largest SVOD platform and will have 74 million paying subscribers by 2026 – up by 20m on 2020. Disney+ will become the second largest platform by the middle of the decade, based on a forecast of 55m paying subscribers by 2026. Amazon comes in at 53m at the end of the forecast period (up from 35m in 2020). Trailing these services are Apple TV+ (0.5m growing to 3.3m) and HBO (2.1m growing to 3.2m).

Murray says HBO could have hit 10m subscribers by 2026 if it had been able to launch across Western Europe, but the service is limited to six countries so far (pan-Nordics, Portugal and Spain). Exclusive content deals with Sky prevent roll-out in several big territories.

AVOD growth and its causes

The other part of the streaming growth is in AVOD, of course, and Omdia’s Rua Aguete is predicting that 2021 will be the year of ad-supported streaming VOD services. “The CPMs (cost per thousand viewers, i.e. advertising rates) are higher now for AVOD than linear TV, meaning that in some markets the value of AVOD could eclipse that of broadcast,” she declares, making it clear that ad-funding is a viable model as audiences migrate to digital.

“If you are not involved in AVOD, you are missing out on a core and growing monetisation window,” she declares.

In fact, Omdia figures suggest that AVOD revenues have already exceeded SVOD in both the U.S. and APAC in 2020. The analyst company’s figures show that in the U.S. during 2020, Pay TV was worth $93 billion, SVOD was worth $32bn and AVOD was valued at $40bn.

Focusing on the U.S., Rua Aguete highlights an issue that is widely accepted by analysts as a catalyst for future AVOD expansion everywhere: the growing cost of the SVOD stack in consumer homes. “Six new major direct-to-consumer services have been added to the U.S. market in just over one year. When you add up the costs of these services you already reach the average monthly Pay TV costs,” she said at Videoscape Europe in March. “That is why the appetite for AVOD services is higher than ever.”

Rua Aguete pointed to the growing incidence of ‘hybrid’ business models in streaming, with either free and paid contained in the same service offer or spread across the portfolio of streamers owned by a television group. Thus, ViacomCBS offers Showtime (paid), Pluto TV (free) and Paramount+ (hybrid), while Disney encompasses Hulu and Star (both hybrid) along with Disney+ and ESPN+ (both paid).

AVOD value vs SVOD value

Digital TV Research still puts SVOD ahead of AVOD for total market value in multiple markets. According to Simon Murray, SVOD revenues overtook AVOD in Asia Pacific in 2019. “Revenues for both AVOD and SVOD will double between 2020 and 2026 to $22 billion and $28bn respectively,” he says of that market.

According to his figures, in North America (so not just the U.S.), SVOD was worth $32.6bn in 2020, will be valued at $40.2bn this year and will reach $54.4bn in 2026. AVOD in North America was worth $10.7bn in 2020, will reach $13.6bn this year and grow to $32.6bn by 2026.

“AVOD revenues will triple. SVOD will remain the main revenue source by 2026,” his company forecasts.

Pay TV decline, 2010-2026

Digital TV Research has just released its latest batch of Pay TV subscription forecasts, as well, which help to put all these streaming figures into perspective. Looking at the same 2020-2026 period, the company says Pay TV subscribers in Western Europe will fall by 4 million to 103 million.

At first glance, this 3.7% drop sounds like a decent result given the fast-growing competition for eyeballs (and the loss of exclusivity on some content due to direct-to-consumer). But Murray points to lower Pay TV ARPUs leading to a revenue decline of 15% (or $4 billion) in the period. Pay TV revenues in 2026 will be worth $23 billion.

There is a mixed picture based on network type: IPTV will gain 4 million subscribers to reach 47m, while satellite will lose 5m (to 18m subscribers) and cable will lose 2m (to 37 million), according to Digital TV Research. The differences are down to a service provider’s ability to offer high-speed Internet.

“European operators shifted their emphasis from premium TV to high-speed broadband delivery. This is particularly true in Denmark and Italy – which are at opposite ends of the Pay TV penetration spectrum – where most operators promote OTT platforms ahead of traditional Pay TV ones,” Murray comments.

According to his company, Eastern Europe will lose nearly 5m Pay TV subscribers between 2020 and 2026 to take the total to 78m. This means Pay TV will be taken by 63% of the region’s TV homes rather than 66%.

The same research company predicts that in North America there will be a further loss of 18% of Pay TV subscribers between 2020 and 2026, amounting to 16m subscribers. That follows losses of 27m between 2010-20 (which amounted to a 23% drop during that period). When you take the 2010-2026 period (confirmed plus forecast) the Digital TV Research figures show (for North America):

  • 116m Pay TV subscriber starting figure (2010)
  • End-forecast of 74m subscribers
  • Total loss of 43m subscribers (all figures are rounded up)
  • Original subscriber figure reduced by 37%
  • Pay TV penetration started at 90.5% (2010)
  • End-forecast penetration of 53.6% (2026).

In a different forecast, emarketer has predicted that only half of U.S. homes will take Pay TV by 2024. In an analyst note focused on penetration rather than value, issued last September, this research company said Pay TV peaked in the U.S. in 2014 and had fallen 22.8% off that peak by the end of 2020.

“The worst of cord-cutting is over”

The good news for Pay TV? To start with, “The worst of the cord-cutting is over,” according to Murray at Digital TV Research. And figures from Omdia show that on a global basis, Pay TV revenues will still be double that of all streaming revenues by 2025 (US$ 217bn vs $115bn).

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