Streaming approaches its saturation point
The battle for streaming video subscribers is about to intensify.
That’s because even though U.S. consumers continue to spend more on subscription services, the growth in spending is on the downswing.
Spending on services such as Netflix, Amazon Prime Video and Hulu is expected to be $6.62 billion this year, compared with $5.43 billion last year, according to Strategy Analytics. That’s a 22% increase. However, last year’s increase was 29%. This is the first time the year-to-year increase in consumer spending is lower than the previous year, the research firm says, and it is projected to be the start of a trend.
“We’re not saying the market isn’t going to grow. We are saying the real growth is going to be a little bit less each year, because every year that goes by we are getting a little bit closer to the market being saturated,” said Michael Goodman, digital media director for Strategy Analytics. “We think we are getting to that tipping point.”
Among the 117.9 million U.S. households, about 97 million have broadband Internet connectivity, the research firm says. Nearly 60% of those homes, about 58 million, subscribe to a streaming video service.
That means on the subscription streaming-video adoption curve, we have passed the halfway point. “It gets harder to acquire new subscribers,” Goodman said. This dip in the increased spending on streaming subscriptions is small, but it’s significant, with implications for streaming services, Goodman says. “The new reality is that it’s not the Field of Dreams scenario any more where ‘If you build it, they will come,’ ” he said. “It is a competitive marketplace where you are either going to have to be able to cannibalize subscribers from other services, or you are going to have to position yourself so that you are a complementary service.”
Among the primary services, which charge $8 to $15 monthly, Netflix leads the market, accounting for 53% of all subscriptions, followed by Amazon (25%), Hulu (13%) and HBO (1%), Strategy Analytics found. Nearly 40% of consumers subscribe to at least two streaming services. Some are from the growing list of complementary services, described by Goodman as those charging $2 to $5 monthly. Among these niche-oriented players are services such as Tribeca Shortlist and FilmStruck.
Netflix likely saw this day coming and prepared for it with its multiyear deal, announced in 2012, which makes it the pay-TV home for Disney films beginning in September. With films from Disney studios such as Lucasfilm, Marvel and Pixar, that means Netflix will be the place to stream movies such as Captain America: Civil War, in theaters now, and
Rogue One: A Star Wars Story, in theaters Dec. 16.
As more streaming services arrive, consumers will begin to get picky as to what they add and keep, Goodman says. “Stagnant household incomes do not help the growth of streaming video on demand services,” he said. “It leads to more cannibalization.”