Overall spend on video entertainment in Canada remained flat in 2018 at CA$11.3 billion (€7.4bn). However, the Canadian consumer’s appetite for on-demand entertainment continues to grow, helping fuel a progressive landscape, this is according to the latest video insights market report from Futuresource Consulting.
Despite a lack of Competition, SVoD is Dominating Home Video
“SVoD spend broke through the CA$1 billion mark in 2018, up 33 per cent with 11.3 million subscriptions,” says Tristan Veale, Market Analyst at Futuresource Consulting. “This was driven by market leader Netflix, which reached 6.3 million subscribers despite a steep price hike in 2018.”
SVoD is in the ascendency and 58 per cent of Canadian households have at least one subscription, with Futuresource predicting that in 2022 SVoD saturation will be approaching Pay-TV saturation, at 65 per cent and 69 per cent respectively. “Most SVoD households take Netflix, with penetration the highest in the world, even above the USA,” commented Veale. “A revamped Crave SVoD service in Q3 2018 meant the service saw a nearly doubling of subscribers throughout 2018, although the forced migration of The Movie Network channel subscribers certainly helped.” Amazon’s presence is building in line with continued uptake of the Prime service, a key focus for Amazon to drive its e-commerce business forward and capitalise on the strong online buying population in Canada.
EST and iVoD Thriving, Physical Video and Pay-TV VoD declining
Total transactional home video consumer spend across sell-through (DVD, Blu-ray and EST) and rental (iVoD, Pay-TV VoD and Physical rental) fell by 8 per cent in 2018 to CA$853 million, primarily as a result of declining spend on physical media. Although the rate of decline is to slow and there are signs of growth emerging, this is not expected to happen over the next 5 years.
Consumers are trending towards buying content digitally compared to renting. However, it is not expected to be until 2022 that EST spend outstrips iVoD and Pay-TV VoD combined, (TVoD) such has been the strength of Pay-TV VoD historically.
Consumers are buying more movies than ever before, with nearly 7 million EST movie transactions recorded in 2018, growth of 18 per cent. In Canada, the EST market continues to be driven by iTunes, which accounted for over two thirds of spend across Movies and TV. “There are an estimated 1.3 million Apple TVs in use in Canada, equivalent to 10 per cent of households,” commented Veale, “this means consumers have an easy way to watch premium content on a big screen, driving increased buying.”
Despite overall TVoD being almost flat, iVoD growth is almost in line with that of EST movies, with consumer spend up 19 per cent to CA$82 million compared to 21 per cent growth for EST movies. “This sector is also dominated by iTunes, although the other significant services of Google Play Movies and Cinemax have helped drive growth over the past year and gained market share,” commented Veale. Despite continued launch expectations in recent years, Amazon has yet to commit to digital rental/sell-through in Canada, as it is yet to do in the likes of France, Italy, Spain etc. When it does launch, it could be a catalyst to propel these markets to the next level.
Pay-TV VoD is in gradual decline, in 2018 it accounted for two thirds of TVoD spend. However, by 2022 this will have eroded to 58 per cent. This decline is caused by falling Pay-TV subscribers, competition from an improving experience from iVoD and the increasing availability of on-demand content from a wide selection of free and paid for sources. Consumer spend in 2019 is projected to fall by 1 per cent, with the rate of decline expected to worsen over the forecast period.
Pay-TV Struggling with Competition from All Sides
“Pay-TV captures the lion’s share of video entertainment spend. In 2018, it totalled CA$8.3 billion following 2 per cent erosion of consumer spend, as a result of declining subscriptions, with additional pressure from SVoD services,” says Veale. “Longer term, consumer spend declines will subside to 1 per cent per year, with continued subscriber losses, although cable and satellite companies are heavily investing in next generation IPTV technology to help improve customer experiences and differentiate against SVoD services.
By 2022, video entertainment in Canada is expected to be a CA$12 billion market, with SVoD carving out a significant segment. In 2018, Pay-TV accounted for 74 per cent of the market, with SVoD and Box Office accounting for 9 per cent each. However, by 2022 consumer spend on SVoD will be twice that of Box Office and therefore accounting for 17 per cent of all video entertainment spend.