The battle between US video streaming companies for subscribers, content and talent continues as forecasts suggest the size of the market will more than double over the next five years. Speculation that Comcast could withdraw rights to its NBC content for Hulu within the year illustrates the complexities of licensing agreements that currently help rival subscription video on demand (SVOD) companies meet insatiable customer demand for movies, TV shows, documentaries and more.
NBCUniversal, which is owned by Comcast, launched its own video streaming service – Peacock – for US audiences in the summer of 2020 (read my recent blog US pay-TV providers fight back with new SVOD launches here). NBCUniversal also owns a third of Hulu, with the Walt Disney Company owning the rest.
Press reports suggest that the current content licensing deal between the two companies includes a clause that will allow NBCUniversal to exit the agreement early next year,[i] otherwise its’ content will remain on Hulu until at least 2024. The intense competition is also impacting the jobs market, with ViacomCBS executive Kelly Day set to join Amazon Prime Video in the new year, tasked with honing content strategies in different regions of the world.[ii]
International expansion key to success
A ready supply of fresh, unique content is critical for attracting new subscribers onto SVOD platforms and retaining existing customers. So limiting the source of that material is one way to undermine the competition.
Statista predicts that by 2026, Disney+ will have around 60m subscribers in the US, with Hulu amassing 54m, and Peacock just over 16m. All are forecast to fall considerably short of Amazon Prime Video however, which by that time will have surpassed Netflix (70m) to account for 101m subscriptions in the US, over 22% of the 450m total.
If rival US SVOD providers are going to close that gap and reinvigorate flagging domestic growth rates, they will not only have to keep finding new content, but also additional subscribers in other countries. Hulu has enjoyed consistent subscriber growth over the past couple of years, but its expansion rate has slowed with scale.
Financial statements issued by the Walt Disney company reveal it had 44m paying subscribers in the fourth quarter of 2021, up 19% from 36.6m in Q420 but having expanded only 2% on the previous quarter (42.8m).
AVOD services exerting pressure
Streamers that offer alternative advertising video on demand (AVOD) services are also putting more competitive pressure on SVOD providers. Roku for example is reported to have lined up more than 50 new original series over the next two years[iii]. Roughly 155m people worldwide have access to the company’s media streaming devices, around half of whom tune into the Roku Channel that serves as a hub for ad-supported TV shows, movies and live news. The company recorded over 56m MAUs in Q321, up 23% year on year, with total net revenue having expanded 51% to US$680m in the same period according to Roku financial statements.
Much of that new content was originally intended for Quibi, the mobile centric SVOD service which shut down at the end of 2020 after failing to attract sufficient subscribers in the face of fierce competition from other new market entrants including Disney+, HBO Max and Peacock which launched around the same time.[iv]
Peacock too offers an AVOD option. Although NBCUniversal Media did not reveal sign up rates or monthly active user (MAU) numbers for its last financial quarter, but they stood at 54m subscribers and 20m MAUs respectively at the close of the Q2.[v] Company executives are confident that the service is heading in the right direction, especially given its phased rollout on Sky in the UK, Ireland, Germany, Italy, Austria and Switzerland for no extra cost starting in November – a user base estimated at around 20m.[vi] Even so, the US is still expected to account for the single largest share of a global AVOD market, forecast to expand at a compound annual growth rate (CAGR) of 10.4% between 2021 and 2025 to exceed US$127bn.
Smartphone viewers will play pivotal role
Mobile channels will play an increasingly pivotal role in the success of streaming TV platforms as more people switch to watching movies and TV shows on small, as well as big screen, devices. Research company Omdia also expects that SVOD apps will be a major driver of carrier billing revenue for instance, as US telcos allow their customers to fund service subscriptions through their mobile phone bill.
An earlier report – Ovum’s Global Carrier Billing Forecast 2019-2024 – also suggested that while video purchases accounted for just 12% of all direct carrier billed digital goods and services in 2019 (US$5.9bn of the US$49bn total), that figure will expand to US$26bn (33% of the US$79n total) by 2024. While the fortunes of individual SVOD/AVOD service providers may be hard to accurately predict amidst the intensity of the competition, it’s at least clear that global consumers will increasingly want to watch new movies and TV shows on their smartphones from wherever they happen to be.
[i] Comcast Weighs Pulling Some Content From Hulu in Effort to Boost Peacock, The Wall Street Journal, 22nd November 2021
[ii] Amazon Taps ViacomCBS Exec Kelly Day for New Role Overseeing Prime Video International, Variety, 30th November 2021
[iii] Roku Plans to Develop More Than 50 Original Shows in Next Two Years, The Wall Street Journal, 19th November 2021
[iv] Quibi is officially dead, Variety, 1st December 2020
[v] Peacock revenues up but NBCU CEO remains mum on total subscribers, S&P Global Market Intelligence, 28th October 2021
[vi] Peacock European rollout begins on Sky, Sky, 15th November 2021