SVoD Subscriptions Set to Continue to Soar in 2021 with New Entrants

January 20, 2021

Greg Sigel

VP, Partnerships

The number of people signing up to video streaming services like Netflix, Amazon Prime and Disney+ for the first time soared in 2020 as lockdown restrictions forced more people to stay indoors and find new sources of entertainment. But subscription video on demand (SVoD) providers may find it harder to maintain their stellar growth rates in 2021 once the Coronavirus pandemic subsides.

Increasingly fierce competition from new market entrants and saturation rates in developed markets may apply the brakes. Yet, there remain untapped opportunities for growth in emerging economies for SVoD providers to reach new customers via flexible billing options in partnership with local mobile network operators (MNOs). Ovum’s OTT Media Services Consumer Survey and OTT-CSP Partnership Study suggests a direct correlation between ease of billing and customer retention for MNOs that bundled media services with their mobile or broadband subscriptions in regions like South East Asia, for example. It has been instrumental in driving new subscriptions in a region underserved by credit cards.

Global SVoD subscriptions up 39% YoY

Strategy Analytics’ latest TV and Media Strategies research estimates that an additional 218m global SVoD subscriptions were added in the third quarter of 2020, up 28% on Q319 having eclipsed earlier annual gains of 198m in Q220 and 183m in Q120. Based on its analysis of 21 leading global SVoD services – including Netflix and Disney+ – the company calculates total of SVoD subscriptions at 770m as of the end of September 2020, up 39% from 552m in the third quarter of 2019. 

Netflix added 26m subscribers in the first six months of 2020 having signed up 28m for the whole of 2019. Its total global subscriber base reached almost 200m customers at last count, while that of Disney+ grew to 74m by early October, less than a year since its launch. Kantar’s quarterly Entertainment on Demand reports estimate that Amazon Prime now has around 150m subscribers worldwide having grown its share of the US market from 14% to 23% in the second quarter of 2020.

Making all of Warner Media’s 2021 movies available via streaming is also expected to help HBO Max entice new subscribers (see HBO Max Paves The Way for SVOD Market Shake-Up here) after its launch last May. With debuts from the likes of ViacomCBS (Paramount+) and NBCUniversal (Peacock) in the US, the country has become a hotbed of SVoD competition in 2020. So much so that 55% of households signed up to more than one SVoD service in 2020, up from 43% in 2018 and 20% in 2015 according to survey from Leichtman Research published in September. Of the almost 2,000 households polled, 78% had signed up to either Netflix, Amazon Prime or Hulu for example.

The phenomenal growth rates seen by SVoD companies appear to have tailed off in the third quarter of the year as lockdown restrictions were eased and alternative sources of entertainment such as live sports and cinema openings came back into play. Netflix added just 2.2m additional subscribers globally during the quarter, far short of the 10m added in Q2. Sensor Tower also noted a 12% YoY increase in downloads of entertainment apps from Apple’s App Store and Google Play combined in Q220, though both Netflix and Disney+ appeared in Top 20s around the world. And while entertainment app downloads grew 21% YoY in Q320 to 2.1bn the growth over the previous quarter was just 1.5%. We can extrapolate the trend given that most markets were still under lockdowns over the holiday period. 

Cinema and TV’s loss is SVoD’s gain

Despite the deceleration, PwC’s outlook for the technology media and entertainment segment still forecasts that over the top (OTT) video services (including SVoD) will thrive in 2020 at the expense of cinema and traditional TV as cord-cutters ditch their cable and satellite subscriptions. It predicts that SVoD revenue will overtake box office takings by the beginning of 2021, before accelerating to more than twice its size by 2024. Strategy Analytics now expects hundreds of millions more homes to move away from broadcast and pay-TV over the next decade, particularly in large untapped markets in emerging economies.

The global cinema industry is set to lose US$32bn in 2020 due to the COVID-19 pandemic after a 72% reduction in box office revenue compared to 2019, according to Omdia’s latest ‘Movie Windows: Adapting for the Future’ report. That led subscription video on demand (SVoD) providers to snap up new movies from studios which needed to offload their titles, whilst simultaneously needing to meet burgeoning demand from consumers for new OTT content (read more in Greg Sigel’s blog – Warner Media and HBO Max Shake Up the Film Industry).

2020 was an exceptional year in so many different ways, and it could prove more difficult for SVoD providers to replicate their runaway success in 2021 if and when additional pandemic lockdown restrictions are eased. Further expansion is likely to rely not only on their ability to incubate and distribute new and original content to their viewers but also enticing more people in emerging economies onto their platforms as saturation rates in the US and other developed markets begin to bite.

Carrier billing options expand customer reach

That means customising content and choice to local languages and preferences but also making it easier for consumers to access and pay for the movies and TV shows they want to watch. With large sections of their populations not owning credit/debits cards for example, or even having bank accounts, the availability of more flexible billing options in regions like South East Asia, Middle East and Latin America will go a long way to reaching customers who were previously beyond their reach – more so once fifth-generation (5G) mobile networks emerge to deliver better quality, high definition video streaming content to consumer smartphones. 

US telcos Verizon and Sprint already allow their customers to pay for Disney+ through their mobile phone accounts via direct carrier billing (DCB) for example. The same is true for Netflix subscriptions with Nextel and Iusacell in Mexico, and Vodafone and Airtel in India. And down under, Vodafone Australia first partnered with DOCOMO Digital to offer post-paid subscriber subscriptions to Amazon Prime, and Netflix paid for via DCB in 2019.

Ovum’s Global Carrier Billing Forecast 2019-2024 report suggests 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. However, it’s important to remember that Ovum’s forecasts were made before the onset of the COVID-19 pandemic. In hindsight, consumer adoption of OTT video services is more likely to accelerate faster than initially anticipated to boost DCB transaction volumes and value further.

To make the most of that opportunity, SVoD providers will have to move quickly to get ahead of their rivals by providing the most sought after and locally relevant content, as well as simplifying access to users’ preferred payment methods.  By partnering with specialist payment service providers, like DOCOMO Digital, these market leaders can rapidly establish several telco billing and e-wallet payment relationships across multiple territories.

[1] Strategy Analytics: Video Streaming Subscription Growth Sets New Record As Disney+ And Pandemic Continue To Drive Demand. Businesswire, 15th December 2020

[2] Amazon tops Disney, Netflix with surge in video service subscribers, Kantar, 5th August 2020

[3] Pandemic Boosting Streaming Service Users: 4 Stocks to Watch, Yahoo!Finance, 8th September 2020

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