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Gartner: Consumer video spend to reach $314bn

May 5, 2017

Global spending on consumer video media services will total $314 billion (€286bn) in 2017, a 4.2 per cent increase from 2016, according to research firm Gartner. Pay-TV services is the largest spending segment and is on pace to represent 90 per cent of the total market, totaling $282 billion in 2017.

In 2017, emerging Asia/Pacific (20.8 per cent) and Middle East and North Africa (17.4 per cent) are forecast to record the highest growth in end-user spending on consumer video media services.

Earlier in 2017, China Mobile began offering its pay-TV service free of charge to its premium subscribers for the first two years of a new contract. “This will lead to an influx of new subscribers in the pay-TV marketplace. However, it will also bolster price competitiveness and put negative pressures on the average revenue per user (ARPU) of the overall pay-TV market,” said Fernando Elizalde, principal research analyst at Gartner.

Moreover, Internet-delivered linear TV services have already launched in India and the Middle East, and Gartner expects these services will commence across all emerging regions by 2018. “We estimate that, incentivised by lower prices, one million households in emerging regions will enter the pay-TV market through an internet TV service by 2020,” said Elizalde. “The dramatic difference in the price of these packages compared with traditional pay-TV packages will also put downward pressure on ARPUs overall.”

4K TVoD Content to Increase Consumer Spending in Mature Regions

Transactional video on demand (TVoD) offers consumers the ability to access a wide variety of content, from either managed pay-TV providers or OTT companies such as Amazon, Google or Apple. “OTTVoD sources are changing the landscape,” said Derek O’Donnell, senior research analyst at Gartner. “OTTVoD services are the fastest-growing segment in the VoD landscape and eroding pay-TV providers’ share of revenue. OTTVoD sources began outperforming traditional pay-TV sources in 2016.”

O’Donnell added that the availability of premium-priced 4K content will increase end-user spending on TVoD content in mature regions, from $160 million in 2017 to $400 million by 2020. In emerging regions, increased competition in the TVoD marketplace from unmanaged providers and increased threats of piracy will put negative pressure on TVoD prices. End-user spending on TVoD services in emerging markets will decrease gradually each year, starting in 2017, by about $60 million to almost $445 million by 2020.

Global Spending on SVoD Services to Show Double-Digit Increases over the Next Four Years

Global consumer spending on SVoD services will total $18.7 billion in 2017, an increase of 28 per cent from 2016.

The average consumer adoption of SVoD services is 10 per cent in 2017, with an average ARPU of $7.41. The highest ARPUs are in Japan ($12.10), Mature Asia Pacific ($10.84) and North America ($9.60).

“Consumers will not subscribe to more than three services,” said O’Donnell. “This is because of price and content discovery fatigue. Consumers are having to go through each application separately to find content, which can create fatigue.”

Universal search is the key to driving further penetration, which will allow consumers to search for content across all their SVoD services. “However, this is a ‘holy grail’ in the industry as providers, such as Netflix and HBO don’t want to cooperate,” added O’Donnell. “Therefore, true universal search is still some years away.”

“Currently, there is a market for niche subscription video services and established streaming providers. However, as the market matures, we forecast more consolidation around the fewer companies that can innovate and set themselves apart from the juggernauts within the industry,” he concluded O’Donnell.

End-User Spending on Consumer Video Media Services, by Service Category, Worldwide, 2016-2020 (Billions of Constant US Dollars)

2016 2017  2018  2019 2020
Pay-TV Services 275.2 282.0 288.4 302.5 309.1
SVoD Services 14.6 18.7 22.9 26.6 30.1
TVoD Services 11.8 13.6 15.5 17.5 19.2
Total Video Media Services 301.6 314.3 326.9 346.6 358.4

Source: Gartner (May 2017)


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