Activate’s newly released Tech & Media Outlook 2019 explores cord-cutting and SVOD subscriber projections for the next few years and estimates that global media and internet revenues—encompassing radio, music, publishing, video games, filmed entertainment, TV subscription and licensing fees, internet access and advertising—will hit $2.2 trillion in 2022, up from $1.8 trillion this year.
Subscriptions will be the primary revenue model, accounting for more than half of media and internet revenues, with ad revenues at 31 percent and single transactions at 17 percent.
The average American adult is spending 12 hours a day consuming tech and media, the report says, including almost 5 hours engaging with video content. Video is about a $200 billion ecosystem in the U.S., more than half of that being “traditional television,” with an estimated $90.4 billion in pay-TV subs and $69.4 billion in TV advertising in 2019. Digital will drive future growth, with ad-supported video set to generate $18.4 billion next year, subscriptions $14.8 billion and paid downloads/rentals $4.4 billion.
By 2022, Activate projects a U.S. pay-TV households base of 81 million, down from 93 million in 2018. Non pay-TV broadband homes are projected to rise from 14 million to 27 million in the same period.
The base of virtual pay-TV homes is expected to increase from 5.8 million today to anywhere between 11.1 million and 17.2 million in 2022. The sector has the opportunity to reach the top end of that target if live events and sports remain a strong draw, skinny bundles are affordable and 5G and broadband expansion widens the potential subscriber base. Growth will be constrained if younger viewers find less value in sports and live content, bundles become unwieldy and consumers see streaming on-demand services as more affordable options to linear TV.
Among cord-cutters and cord-nevers, 53 percent listed SVOD as their primary pay-TV replacement, with broadcast TV in a distant second at 16 percent (other replacements are web video, social video, downloads and piracy).
Users with both SVOD streaming and pay TV were asked which they would give up if they had to make a choice. For the 18-to-24 and 25-to-34 demos, SVOD was the must-keep over cable; for the older demos, pay TV won out.
Stacking is set to remain popular, with 31 percent having two services, 19 percent with three services and 12 percent with four or more.
On the streaming services, users come for the licensed content but stay for the originals, Activate says. Originals at least partially influenced the decision to subscribe to Netflix for 58 percent of respondents. For existing subs, originals at least partially influenced the decision to remain for 81 percent of respondents.
According to Activate, 41 percent of Netflix’s content spend will be on originals by 2021, up from 27 percent this year. Amazon’s will rise from 19 percent to 31 percent and Hulu’s from 7 percent to 12 percent.
“To succeed in a crowded market, new services will need to focus on getting homes to add a service while niche services will need unique programming and a dedicated fan base,” Activate says on surviving the busy streaming space. The big three—Netflix, Amazon and Hulu—will remain dominant, but there is room for niche services like Shudder and Crunchyroll to fare well.
To add subs, streaming services will need to partner with distributors such as Amazon, app stores or others, rather than solely relying on their own websites.