New research by Ampere Analysis reveals that SVoD stacking is fuelling the continued growth of the SVOD market as adoption amongst new customers slows.
Most notably in established markets such as the UK, US and Germany, multiple subscription households are on the rise, and the average SVOD home now takes two services. In the US the figure rises to 2.8.
Across the globe, Netflix and Amazon are the SVOD services of choice, dominating the field in all markets amidst a plethora of local brands. Netflix claims the crown in all but three markets surveyed, making it the clear choice of consumers worldwide.
While Netflix’s global dominance is without question, for many consumers, Netflix alone simply isn’t enough. In the vast majority of markets, SVoD service stacking is the norm, and household spend on OTT services is rocketing. In Q1 2018, spending in the US was highest at $35 per household, up from $15.6 in Q3 2015.
In the UK, spend rose from $10.4 to $18.7. The trend is echoed in the majority of markets. The exceptions are Spain and Italy where Amazon’s low launch price of €20 a year has driven a decline in spending per SVOD household.
According to the research, Amazon customers exhibit particularly strong stacking behaviour. In only two of the markets surveyed do Amazon subscribers average fewer than two SVoD subscriptions, demonstrating an almost universal propensity to stack and a promising future for Amazon’s Channels service.
Toby Holleran, Senior Analyst at Ampere Analysis says: “Netflix and Amazon have acted as catalysts for SVoD stacking, particularly in those European markets where they have seized the initiative through low cost subscriptions. While some European countries have been slower to adopt SVoD, the American giants are now part of the package in virtually every SVoD household. This is particularly notable in The Netherlands, where nearly three in four SVoD households take only Netflix.”
MARKET-BY-MARKET
Pay TV and SVoD in UK, Germany and Poland: Stagnated markets find a temporary balance
Ampere’s consumer data shows that SVoD growth has slowed in these markets but nevertheless, it is beginning to eat into pay TV growth.
Partnerships in the UK between pay TV operators and SVoD services are bearing fruit as services such as Netflix and Amazon Prime can now be accessed through pay TV boxes. Here Pay TV has remained static in terms of uptake, while SVoD adoption has seen an uptick of 4% (comparing Q1 2017 to Q1 2018).
In Germany, the large utility cable market and strong local SVoD players Maxdome and Sky Ticket are just about holding their own despite a growing presence from Netflix and Amazon.
In Poland, leading OTT services operate multiple business models, with SVoD struggling to gain traction against a strong and inexpensive pay TV sector.
France, Italy and Spain: Netflix and Amazon drive stacking behaviour. After Netflix launched in Spain and Italy in late 2015, stacking started its ascent, reaching 1.4 and 1.7 respectively within a year. In both markets Amazon’s highly competitive pricing strategy has converted Amazon Prime subscribers into Prime Video viewers.
In France, strict local content regulations saw slow initial growth from the global SVoD giants. However, it still represents a difficult market for local players, with CanalPlay announcing the closure of its service, citing Netflix as a key cause – likely to lead to a temporary decline in stacking.
By Q1 2018, French and Spanish SVoD households averaged 1.5 services each. Italian households are in line with the global average of 2.0.
Denmark, Sweden, the Netherlands and US: Cord-cutting threatens pay TV business. Over the past three years, Northern European and US consumers have increasingly cut the cord with pay TV in favour of SVoD.
Between Q3 2015 and Q1 2018, around one third of internet homes in the Netherlands and Sweden joined the initial ranks of SVoD subscribers. In the same timeframe, Pay TV suffered declines of 15% in the Netherlands, and 11% in Sweden.
“While the SVoD market may be near saturation point in terms of the number of households it attracts, there remains significant growth opportunity as viewers increasingly stack services,” said Tony Maroulis, Research Manager at Ampere Analysis.
“Although in some cases a growing number of SVoD subscriptions is leading to a decline in pay TV, that is certainly not always the case – heavy stackers are most likely to have pay TV services. Clearly there’s a healthy appetite amongst consumers worldwide for quality content across a range of paid-for platforms.”