Traditional pay-TV services continue to face a difficult future as advertised video on demand (AVOD) and subscription video on demand (SVOD) competition intensifies and the economic outlook grows darker, recent market research for TV viewing services suggests.
According to a study released this week by Parks Associates, the traditional pay-TV market (cable, satellite, telco subscription services) is forecast to decline to 76.7 million households by 2024, a 27% drop since 2014, and its lowest level in the past 10 years.
That’s not to say its full steam ahead for over-the-top (OTT) streaming services. PwC’s new Global Entertainment & Media Outlook 2022–2026 report indicates subscription streaming video has slowed somewhat from its explosive growth at the start of the pandemic lockdowns. But its still seeing expansion in the U.S., the segment’s largest and most mature market.
According to PwC, the U.S. OTT video market is generated $29 billion across SVOD and transactional VOD (electronic sell-through and rentals) segments in 2021, followed by China, which tallied OTT video revenue of $11.4 billion last year.
As for the decline of traditional pay-TV, the recent Paul Erickson, Parks Assoc.’s research director, said “streaming’s debut changed the trajectory of the modern video service industry. The evolution of streaming video has given consumers immense choice in how, when, and what they watch. The ease of trialling, subscribing, and cancelling services has created new dynamics and challenges for content companies and service providers.”
To counter the challenge, traditional pay-TV companies have also turned to streaming and are rebranding, making big acquisitions, and forming new partnerships.
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With so much choice and no long-term contracts for streaming video services, Parks said churn across all OTT service providers is increasing, and services are struggling to retain their viewers.
The data indicate showed OTT subscription churn averaged 48% in the first quarter of 2022, which is a 10% increase in two years.
According to Pwc’s OTT streaming services report, U.S. SVOD services in 2022 are on the way to generating $25.32 billion in revenue, up 13% from last year.The segment is projected to reach $33.59 billion by 2026, representing an 8.5% compound annual growth rate from 2021-26.
This year’s forecast for U.S. SVOD is down from 19.5% annual growth in 2021 and 27% in 2020. The PwC study noted that, as with other categories like TV sets, the pandemic generated a lot of pull forward demand for OTT viewing, years ahead of where it would otherwise have been.
As a result, market leader Netflix is now seeing subscriber numbers turn negative in the first half of 2022, losing 200,000 in Q1 and expecting a net loss of 2 million by the end of this second quarter, after generating hugh gains the perior two years. Netflix also has been challeged by aggressive competitors in Disney+ and HBO Max as the economy faces runaway inflation and a looming recession.
PwC believes SVOD will continue to account for the majority of revenue growth in the OTT segment, even as overall on demand television sees an 8% decline in the U.S. in 2022 to $6.13 billion. The firm says this will be due mainly to a return to former theatrical windowing policies in the United States.
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By Greg Tarr
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