Global revenue from subscription video on demand (SVOD) services, like Netflix and Amazon, is set to more than double from $14.6 billion this year, to $34.6 billion in 2021.
This is according to new data from Juniper Research, which says Netflix now sees US subscriber numbers level with leading network providers DirecTV and Comcast, which have 47 million and 47.7 million subscribers respectively.
Juniper's latest research found SVOD providers can expect to see substantial returns on their expansion and growth strategies, as more countries and markets move to this method of video consumption ? in a continual move away from linear, scheduled TV.
While SVOD continues to draw customers away from traditional providers, networks are now seeking to diversify and adapt through "cord shaving", with services such as YouTube and Hulu seeking to offer some linear cable streaming as part of subscription packages in 2017. Juniper says the concept is to offer "skinny bundles" of content which are smaller packages, offered at a cheaper price via Internet-delivered services.
Juniper also predicts total TV and video data usage will grow more than five-fold from 2016 to 2021, as uptake of 4K increases download sizes. Combined 4K SVOD and pay-per-view or download-to-own revenues will grow to account for 13% of total over-the-top revenues by 2021, according to the research firm.
More competition
Netflix saw rapid expansion in January, launching in 130 new markets, including South Africa, bringing its total coverage to 190 countries. However, international subscriber growth lacks pace, and its recent quarterly results show it added fewer subscribers than expected from April through June.
Netflix's expansion has resulted in price increases, but the beneficiaries may ultimately be the provider's rivals if the competitor price differential becomes too great, according to Juniper.
"While Netflix has expanded its coverage globally, the test will be whether it can meet its original content production costs, as well as provide quality content to consumers," according to Juniper Research author Lauren Foye.
Netflix signed up 1.7 million new customers in the quarter ended in June, but this was far below its projected 2.5 million. The SVOD service also forecast slower-than-expected growth in US and international markets in the current quarter.
"Netflix's Q1-2 subscriber growth was always going to be bad as many 'grandfather' customers are faced with price hikes after enjoying many years of cheap streaming. These price hikes now place Netflix into a similar price category as its competitors," according to Jonathan Broughton, senior analyst at IHS Technology.
The company has been phasing in price hikes for existing customers by $1 or $2 per month. The streaming service says cancellations "ticked up slightly and unexpectedly" in early April amid press coverage about the coming increases.
For the current quarter, Netflix predicted it will add 300 000 US subscribers and two million in markets outside the United States.
"We are growing, but not as fast as we would like or have been," Netflix said in its quarterly letter to shareholders.
"It is believed US rival Hulu is now close to offering the same amount of content as Netflix, and others are pushing new models, such as Amazon's monthly subscriptions to Prime video, and YouTube Red subscriptions for exclusive content," says Foye.
Broughton says international markets are more competitive, especially in important countries such as the UK, where Amazon and NowTV offers are increasingly well targeted to lower-end consumers. However, he says in the Nordic region, Netflix is still growing very strongly and is expected to be taken in more than 50% of households by the end of 2017.
"Netflix has been slow to invest in international content, even in larger countries, and this has stalled growth. Local content has been cited as key to expansion in international markets and pulling back from this may be detrimental to the company outlook outside the US and UK," according to Broughton.
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