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Video streaming market beginning to saturate

26 May 2016
Video streaming market beginning to saturate

The growth rate of the video streaming market is slowing for the first time, according to the latest Strategy Analytics research.

The research has forecasted that, in the US, consumers will spend $6.62 billion on video streaming services throughout 2016, which represents a 22 per cent ($1.19 billion) increase on 2015.

Strategy Analytics stated, however, that this is the first time that total spend will be lower than the previous year’s increase after a $1.21 billion rise between 2014 and 2015.

“Although the change in increase is relatively small, its direction is extremely significant,” said Michael Goodman, Strategy Analytics’ digital media director.

“It shows that, whilst actual market saturation is a few years off yet, the domestic US streaming subscription market is now on the backside of the adoption curve. The incremental increase in annual spend will decline from here on.”

Nearly 60 per cent of US broadband households subscribe to a video streaming service. Goodman explained, “We put market saturation at 85 per cent of broadband households – similar to saturation levels for pay-TV. Within five years, annual growth will fall below eight percent.”

Netflix leads the market, accounting for 53 per cent of subscriptions – over double the second player, Amazon Prime Video (25 per cent) followed by Hulu (13 per cent). Nearly 40 per cent of streaming service households, however, subscribe to at least two services.

Goodman added, “This multi-subscription behavior means growth relies on cannibalising other services or getting people to subscribe to more than one, and companies seem to be betting on the latter.”

“Most of the new services being launched today are in the $2 to $5 range; clearly designed to be complementary to a Netflix or Amazon.

“The domestic situation is also a huge reason why international expansion is so important, this is underscored by Amazon’s recent video initiatives, and is particularly relevant for Netflix who has the least room to grow in the US.

The report further forecasted a 22 per cent increase in streaming subscription revenue, meaning that the format will account for 35 per cent of consumer spend on home video in 2016.

DVD/Blu-Ray purchasing, the next most popular format, will decline seven per cent to $5.67 billion, whilst disk rentals will decline ten per cent to $2.75 billion.

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