SVOD Market in 2020: Netflix, HBO, and Disney

The Over-the-Top Services (OTT) Market can be segmented by Type (Online Gaming, Music Streaming, VoD, and Communication), Monetization Model (Subscription-Based, Advertising-Based, and Transaction-Based), Streaming Device, Vertical, and Region. The $81.6 billion market is expected to grow at 14% CAGR to reach $156.9 billion in 2024. With a $20.1 billion revenue, Netflix is currently the US and International leader of the Subscription-based Video on Demand (SVOD) segment of the market, while the likes of Prime Video (AMZN), HBO, or Disney+ (DIS) are competitors. In our view, however, SVOD services are more likely to be complements to each other than competitors. On the other hand, the linear pay-TV services are actually more at risk of being disrupted by SVOD services. 

Based on Statista data, a US household subscribes to approximately 3 SVOD services on average in 2018. The figure had jumped from just 1 SVOD service per-household in 2015 and is only likely to increase given the declining preference on pay-TV services. LRG research shows that major pay-TV providers lost more than 1.7 million subscribers in the third quarter of 2019, while the share of the total US household subscribing to pay-TV has declined to 75% from 87% in the last decade. 

As coronavirus continues to spread globally and progressively looks to leave a lasting impact throughout FY 2020, we predict that subscriber growth will be positively affected due to more people choosing to stay at home to avoid outdoor activities such as going to cinemas. Furthermore, more companies are forcing their employees to work from home, which also increases indoor time during working hours. Netflix’s competitors such as Disney, however, may get less benefit from the coronavirus situation. While the recent Mandalorian series has attracted millions of viewers, we expect Disney to be more conservative in its future SVOD investment given its severely impacted theme park and resort businesses.

Currently, Netflix remains the leader despite the rising competition for viewerships in the $81.6 billion OTT streaming market. The data, however, shows that end-users increasingly view SVOD providers as complements than competitors to each other.