The U.S. streaming market is set to become even more crowded, according to PwC, with OTT revenues projected to hit $30.6 billion in 2022.
The U.S. will remain the world’s biggest OTT video market over the period charted in PwC’s latest Global Entertainment and Media Outlook, but gains in the international SVOD sector will diminish its dominance from 55.6 percent in 2017 to 52.4 percent in 2022. In the U.S., SVOD’s share of OTT revenues are expected to rise from 79.6 percent last year to 81.6 percent ($25 billion) in 2022.
“OTT video has been a disruptive technology to the traditional TV market, although the extent of cord cutting has not been as severe as initially feared, with many households taking SVOD platforms as supplementary services,” PwC observes. “Increasing competition and a shift towards original programming and exclusive content leaves households having to subscribe to a range of services to receive the content they desire. This situation may put pricing pressure on existing and new services, but will provide opportunities for operators to offer bundled OTT services, with the future looking towards app bundling rather than the traditional cable bundle.”
PwC sees U.S. TV advertising rising to $74.9 billion in 2022 ($27.2 billion on multichannel TV, $41.9 billion on terrestrial). Another key finding is the decline in live audiences. “With linear TV viewing in decline, content that will gain the largest live audiences is becoming increasingly expensive for broadcasters, pay- TV operators and advertisers,” PwC says. “Though TV advertising still offers the chance to reach a mass audience, digital campaigns are increasingly being used to build adverts’ resonance among the public.”
The traditional U.S. subscription pay-TV market is expected to see revenues contract to $92.7 billion in 2022. “There is no doubt that the traditional pay-TV market is approaching a near-term tipping point, where it must continue the process it has already put in play—to reinvent itself with the introduction of next-generation platforms, wholesale or retail opportunities, video consumption anchored to the broadband product in the home, aggregation capabilities and on-the-go alternatives. The sector’s emphasis has shifted from generating subscriber growth towards minimizing churn in the face of heightened competition from streaming services.”
Consolidation—and content ownership—are seen as key elements as traditional media companies navigate the new ecosystem. “The balance of power is increasingly lying with digital operators who are capturing subscriber growth, creating compelling TV content as well as the traditional studios, and are even ready to bid against those traditional operators for all-important sports rights,” PwC says. “Consolidation is thus more and more likely among the rest of the traditional TV market. Companies are finding themselves in a bidding war for premium content rights while the demand for premium content production is also driving up programming costs. These developments, coupled with pricing pressure from OTT providers, are compelling pay-TV providers to seek mergers and acquisitions, so they can achieve the scale and alternative revenue streams that are necessary to remain competitive.”