There is room for some three billion additional streaming subscriptions across the world’s largest media markets despite some territories moving towards a ‘stacking ceiling’.
In trying to answer the question “how many services will the average household ultimately take?” Ampere Research looked at 20 of the largest TV subscription markets worldwide, including the US, UK, France, Germany, China, India, Japan and Brazil, to establish the theoretical ceiling for SVOD stacking behaviour. It estimates that this maximum ceiling for SVOD services per household is highest in the US, at roughly eight. In Europe, the figure is lower, at between two to five services per household. However, market realities will mean that few territories are likely to see stacking numbers reach these heights.
Ampere notes that despite cord-cutting, the average US household has continued to spend an almost identical amount on TV services every year — $900 — as they switch from individual high cost cable and satellite contracts to multiple lower-price SVOD services. This stability in expenditure, mirrored in many other markets worldwide, leads it to conclude that the fundamental determinant of stacking behaviour will be household entertainment budgets, and this allows calculation of a theoretical ceiling for SVOD uptake.
Daniel Gadher, research manager at Ampere Analysis, said: “Even as we begin to see growth in SVOD services in emerging markets, our analysis shows that opportunity for expansion is actually still a very solid proposition in established territories. As cord-cutting continues, the US stacking ceiling is theoretically as high as eight services per average household, while in developing markets like Brazil it is far lower – at just 1.5”.
Various factors will limit how close individual markets will get to this ceiling. One issue is sport. Pay-TV operators and networks currently control the majority of key sports rights in many major markets. Ampere’s past analysis has indicated that OTT players are unlikely to be able to wrest control of major domestic events in most developed markets. As a consequence, consumers who want to watch sport will have to continue subscribing to pay-TV services. This reduces the available budget for SVOD. In the US for example, factoring in sports spend, the capacity for SVOD services drops from eight per average household to between four and five.
Outside the US, some major markets are still seeing growth in household spend on TV. However, the underlying rate of change is relatively low. In these markets, Ampere expects growth in household outlay on entertainment to increase the ceiling for SVOD services by just 20% – 30% over the next five years.
In Ampere’s view, markets such as the UK and Germany have an average household capacity of roughly three services at current price points. However, this still translates into a sizeable number of subscriptions —88 million in the UK and 124 million in Germany. Similarly, in the USA, even four to five services per household would translate to a total of 510 -640 million possible subscriptions.
In total, this would mean up to 3 billion further SVOD contracts.
Gadher concluded: “To make the most of this capacity, OTT players first need to demonstrate that they are a viable replacement for existing paid-for TV services. This process is ongoing in the US and Canada, but elsewhere in the world, pay-TV has remained resilient. But as US studio content increasingly moves to the online world, the opportunity for new players to take a share of consumer entertainment spending, even in already busy markets, improves”.
