Next wave of SVOD adoption will intensify provider competition

March 12, 2021

Next wave of SVOD adoption will intensify provider competition

Filippo Giachi

VP – Asia Pacific, Middle East & Africa

There is absolutely no doubt that coronavirus lockdown restrictions have pushed more people towards subscriber video on demand (SVOD) content as they look for multiple forms of home entertainment. And that trend is reflected in the major’s financial performance over the top (OTT) video providers, though some saw more rapid growth than others last year.

Netflix surpassed 200m paid subscribers for the first time in Q420. For example, it has added another 8.5m customers in the quarter and around 37m subscribers over the full year. Warner Brothers HBO Max ended the year with 17.2m “activated” (which we take to mean as “paying” users) twice as many as in the previous quarter bringing its total subscriber base to just under 38m[i].

Total HBO Max and HBO Linear TV subscribers exceeded 41m in the last quarter of last year according to owner AT&T’s FY20 earnings statement, up from 38m in the previous quarter and 34.6m in the Q419. Including its global operations (mostly Latin America) that combined Warner Media, the subscriber base is 61m. DOCOMO Digital VP of Partnerships Greg Siegel wrote a blog discussing the additional competition that HBO Max would bring to the North and South American SVOD markets last year.

The big winner, though, was Disney+, which as of January 2021 claims almost 95m subscribers globally – not bad for a service that debuted just over a year earlier through a captive lockdown audience helped. That better-than-expected rate of take-up has prompted the company to revise its future growth predictions – it now expects to have 230-260m subscribers by 2024.

By contrast, Hulu, owned by the Walt Disney Company and offers services only in the US only, added just over 8m paying subscribers during the year, taking its total subscriber base to around 36.5m. According to Kagan, the average SVOD home in the US now subscribes to 3.1 SVOD services, up 15% over 2019 and 41% compared to 2018.[ii]

On a global basis, Statista now estimates that the total number of SVOD subscribers worldwide expanded 5% from 902m in 2019 to 949m in 2020. Figures from Strategy Analytics confirm the trend even if its numbers are slightly different. It estimates that total SVOD subscriptions reached 770m in the third quarter of 2020, compared to 552m a year earlier. That represents a record 28.3% increase and the third annual, quarterly expansion in a row following four previous periods of decline from Q119 to Q419.[iii]

SVOD success not guaranteed

That’s not to say that pandemic induced lockdowns and social distancing restrictions are a magic bullet for SVOD providers in terms of guaranteed success. The popularity of some remains understated, as revealed by US telco AT&T in its recent financial results. And while the overall customer base is set to expand further over the next four years, content providers will still face stiff competition for subscribers from both existing and emerging rivals – particularly traditional linear TV companies keen to offset declining revenue with their OTT video services.

There are differences in profitability too. The average revenue per user (ARPU) per paid Disney+ subscriber fell 28% from US$5.56 to US$4.03, reflecting a large number of people signed up to Disney+ Hotstar in India and Indonesia, where subscription fees are lower. Excluding those regions, Disney+ ARPU would have been US$5.37, for example.[i] Similar regional differences are evident at Netflix though numbers are significantly higher. Statista calculates Netflix’s quarterly average ARPU for Q420 at US$13.51 in North America, US$11.05 for Europe, the Middle East and Africa (EMEA), US$9.32 for the Asia Pacific and US$7.12 for Latin America.

One way of maximising subscriber ARPU is to enable fast, simple ways for customers in different countries to sign up and pay for SVOD subscriptions. A growing number of telcos and MNOs are now doing this by allowing consumers to pay for monthly, weekly and daily access to video content and one-off downloads of specific movies or TV shows by adding the fee to their mobile phone account.

TrueMove H attracts subscribers through carrier billing

The latest is Thai mobile operator TrueMove H which gave its subscribers the option to pay for their Netflix subscriptions via carrier billing in November 2020 in partnership with DOCOMO Digital.

In many ways, Thailand is the perfect geography for SVOD and carrier billing. The country had around 50m mobile Internet users in 2019, with approximately 89% of 16-64yr olds (roughly 48m) using mobile entertainment of video apps on their devices. Statista estimates that SVOD revenue in the country will reach US$146m this year [2021], forecast to expand at a compound annual growth rate (CAGR) of almost 14% to be worth US$246m by 2025. In the same period, user penetration is predicted to grow from 6.8% to 8.5% as new customers come on board.

By integrating business intelligence, bad debt management, subscription analytics and CRM capabilities into TruMove H’s existing infrastructure, the DOCOMO Digital payments platform gives the operator detailed visibility into usage and transaction volumes which can help drive targeted marketing campaigns elsewhere.

And with years of experience helping telcos enable carrier billing in different countries around the world (others using its platform include NTT DOCOMO, Telefónica and Vodafone Australia), our teams have detailed knowledge of local geographies and regulatory environments, which can help operators quickly forge billing partnerships with digital content providers.

[i] HBO Max Reaches 37.7M, Including 17.2M “Activated,” Subscribers, Hollywood Reporter, 27th January 2021

[ii]Forget the Streaming Wars—Pandemic-Stricken 2020 Lifted Netflix and Others, WSJ, 30th December 2020

[iii] Video streaming subscription growth sets new record in 2020, RapidTVNews, 16th December 2020

[iv] Disney smashes streaming subscriber expectations, boosting segments hurt by Covid, CNBC, 11th February 2021

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