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Global spending on consumer video media services will total $314 billion in 2017, a 4.2% increase from 2016, according to Gartner, Inc. Pay-TV services is the largest spending segment and is on pace to represent 90% of the total market, totaling $282 billion in 2017.
In 2017, emerging Asia/Pacific (20.8%) and Middle East and North Africa (17.4%) are forecast to record the highest growth in end-user spending on consumer video media services.
Earlier this year, China Mobile began offering its pay-TV service free of charge to its premium subscribers for the first two years of a new contract. "This will lead to an influx of new subscribers in the pay-TV marketplace. However, it will also bolster price competitiveness and put negative pressures on the average revenue per user (ARPU) of the overall pay-TV market," said Fernando Elizalde, principal research analyst at Gartner.
Moreover, internet-delivered linear TV services have already launched in India and the Middle East, and Gartner expects these services will commence across all emerging regions by 2018. "We estimate that, incentivized by lower prices, one million households in emerging regions will enter the pay-TV market through an internet TV service by 2020," said Mr. Elizalde. "The dramatic difference in the price of these packages compared with traditional pay-TV packages will also put downward pressure on ARPUs overall."
Transactional video on demand (T-VOD) offers consumers the ability to access a wide variety of content, from either managed pay-TV providers or over-the-top (OTT) companies such as Amazon, Google or Apple. "OTT-VOD sources are changing the landscape," said Derek O'Donnell, senior research analyst at Gartner. "OTT-VOD services are the fastest-growing segment in the VOD landscape and eroding pay-TV providers' share of revenue. OTT-VOD sources began outperforming traditional pay-TV sources in 2016."
Mr. O'Donnell added that the availability of premium-priced 4K content will increase end-user spending on T-VOD content in mature regions, from $160 million in 2017 to $400 million by 2020. In emerging regions, increased competition in the T-VOD marketplace from unmanaged providers and increased threats of piracy will put negative pressure on T-VOD prices. End-user spending on T-VOD services in emerging markets will decrease gradually each year, starting in 2017, by about $60 million to almost $445 million by 2020.
Global Spending on S-VOD Services to Show Double-Digit Increases over the Next Four Years
Global consumer spending on subscription-based video on demand (S-VOD) services will total $18.7 billion in 2017, an increase of 28% from 2016.
The average consumer adoption of S-VOD services is 10% in 2017, with an average ARPU of $7.41. The highest ARPUs are in Japan ($12.10), Mature Asia Pacific ($10.84) and North America ($9.60).
"Consumers will not subscribe to more than three services," said Mr. O'Donnell. "This is because of price and content discovery fatigue. Consumers are having to go through each application separately to find content, which can create fatigue."
Universal search is the key to driving further penetration, which will allow consumers to search for content across all their S-VOD services. "However, this is a 'holy grail' in the industry as providers, such as Netflix and HBO don't want to cooperate," added Mr. O'Donnell. "Therefore, true universal search is still some years away."
"Currently, there is a market for niche subscription video services and established streaming providers. However, as the market matures, we forecast more consolidation around the fewer companies that can innovate and set themselves apart from the juggernauts within the industry," concluded Mr. O'Donnell.
Gartner, Inc. is the world's leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior information technology (IT) leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to supply chain professionals, digital marketing professionals and technology investors, Gartner is the valuable partner to clients in more than 11,000 distinct enterprises. Gartner works with clients to research, analyze and interpret the business of IT within the context of their individual roles. Gartner is headquartered in Stamford, Connecticut, U.S.A., and has almost 9,000 associates, including 1,900 research analysts and consultants, operating in more than 90 countries.