The revenues from subscription video services from Netflix and Amazon are rising and are projected to account for 18% of pay-television revenues in the United States in 2022. At least, that is one forecast for the future of services in the United States. That will still leave legacy providers with over 80% of total television and video subscription revenue. The United States accounts for around half of all pay-television revenue worldwide.
Online video services from new players like Netflix, Amazon and Sony represented an estimated 8% of subscription television and video revenue in the United States in 2016.
Strategy Analytics forecasts that figure could rise to around 18% in 2022, making it worth more than $20 billion a year in the United States. Revenues for services from legacy cable, satellite and telco providers, including their own online offerings, are forecast to decline from 2020. However, they will still account for over $100 billion a year.
Interestingly, if you add the forecast figures for emerging services to those for legacy operators, the totals rise to 2020 but then start to decline, led by a fall in revenues for incumbents.
Of course, this view of the future is based on assumptions. The data to date suggest that the rise of traditional pay television revenues has flattened off, which is consistent with flat or falling subscriber numbers. The clear indication is that revenues for online subscription video services are rising and that this will continue.
What is not so clear, we would suggest, is whether incumbent operators will allow their revenues to fall as projected, or will become better at embracing the opportunities of online services to maintain their position.
“The OTT players have had a remarkable impact on the video landscape and will continue to shake things up, but there is a long way to go before the winners can be announced,” notes David Mercer of Strategy Analytics.
To which we might add that while Netflix recorded an impressive $8.8 billion in worldwide revenues for 2016, $5 billion of which was from the United States, its total net income was a rather more modest $186 million.
In comparison, Comcast recorded annual revenues of over $80 billion, of which $50 billion was from cable, with over $22 billion of that from video, with the cable business generating over $20 billion in operating cash flow.
The United States accounts for just under half of global pay television revenues. The figure fell below half for the first time in 2016.
Digital TV Research puts to the global market at just over $200 billion in 2016, up from $170 billion in 2010, with the United States accounting for just under $100 million, compared to $92 billion in 2010.
Europe accounted for over $34 billion, led by the United Kingdom, while the Asia Pacific region was worth about the same, led by China and Japan.
There are approaching a billion pay television homes worldwide. Estimates vary but Digital TV Research puts the figure at 969 million in 2016, up from 715 million in 2010. Of those, the figure for digital pay television rose from 380 million in 2010 to 852 million in 2016.
We note that Digital TV Research puts pay television revenues for the United States at just under $100 billion in 2016, while Strategy Analytics put it at over $110 billion and forecasts that it will still be over $100 billion in 2022.
PwC expects subscription video business in the United States to be worth around $14 billion in 2021, with a further $4.8 billion in transactional revenue. PwC also forecasts that subscription revenue will remain broadly flat at around $100 billion through to 2021.
According to that view of the world, online video revenues will be mainly additive, or at least will displace the market for discs, rather than that of pay-television. As ever with forecasts, you pay your money and you take your choice.
Subscription Video and TV –North America is published by Stategy Analytics. The Global Pay TV Revenue Databook is published by Digital TV Research. The Global Entertainment and Media Outlook is published online by PwC.