i3 - September/October 2019 - 54

Business

By Steve Koenig

M A R K E T B E AT

Keep Calm and Stream On

 W 

hile the phrase "Netflix
and Chill" has nothing
to do with watching TV
(go ask a millennial if you don't
know) this cultural quip bears
testimony to the soaring popularity of video streaming services
that have reshaped the landscape
of TV. Now, shifts in the tectonic
plates of video content distribution are about to shake-up the
industry again; but there's no
cause for panic. Instead, we see
opportunity ahead.

54

SEPTEMBER/OCTOBER 2019

i3_0919_BUSINESS_Marketbeat.indd 54

also the highly anticipated entry of Apple
(Apple TV Plus), Disney (Disney Plus),
Warner Media (HBO Max) and NBC
Universal (expected in 2020) to the
SVOD market. And in a plot twist worthy
of Stranger Things, many promise live
TV offerings such as sports and news, a
content realm that continues to be dominated by traditional pay TV providers.
In other words, the video stream is
about to get wider and deeper and consumers are expected to wade in with their
wallets open. Variety magazine suggests
this dynamic portends the "Second Wave"
of video streaming is on hand; suggesting
the nearly simultaneous entry of so
many media powerhouses on the
streaming scene "has the potential to
meaningfully shift where consumers
access their SVOD content." The Atlantic
takes a dimmer view, heralding the
arrival of the "siloed age of television."
What may eventually happen as those
silos take shape is consumers will wind
up managing a mosaic of streaming service subscriptions to access the content
they care about. New services like Disney
Plus and HBO Max will themselves be a

mosaic of networks, studios and original
programming. Ironically, what this means
is some SVOD services may end up looking
and costing more like traditional pay TV
packages. We can also expect ad supported
SVOD services to emerge. It remains
unclear to what extent independents like
Netflix, Amazon and newcomer Apple will
be able to license programming, but we
can be sure they will crank out amazing
quantities of original content. Case in
point, Netflix spent roughly $7 billion last
year on original content.

What does this mean
for the industry?

Increases in consumer spending on video
streaming services will likely help drive
demand for upgraded devices with bigger
and better screens. For example, competition among SVOD providers will likely fuel
more 4K UHD streaming content, stimulating demand for 4K UHD TVs. And
emerging 5G networks offering faster
mobile broadband will trigger upgrades
across the mobile device landscape. It all
adds up to more choice for consumers and
more opportunity for industry.

Maxiphoto/Getty Images

The meteoric rise of video streaming
services can be traced to a confluence of
megatrends that underpin the 21st century lifestyle, including connectivity,
convenience, value and everything ondemand. But how will subscription
video on-demand (SVOD) services
evolve and what will be the ultimate
impact to the industry?
From a nearly endless list of movies
and TV shows to original series, most
would agree video streaming services
offer tremendous value. What's interesting is streaming services are driving consumer spending on media to new highs.
Data from IHS Markit and Digital
Entertainment Group (DEG) show
global spending on home video entertainment (physical and digital media
combined) rose nearly 16% last year,
mostly attributable to increased spending on SVOD services like Netflix,
Amazon Prime Video and Hulu.
Here in the U.S. we see an even
sharper trend. CTA estimates U.S. consumer spending on video streaming services this year will climb 27% to $18.2
billion. And in 2020, spending will
approach $22 billion, a gain of 22%.
Fueling the increase will be subscriber
growth among incumbent players, but

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i3 - September/October 2019

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