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nScreenMedia – Has US SVOD peaked?nScreenMedia

With Netflix and Disney+ struggling to add new US subscribers, some analysts say the SVOD industry has peaked. But it depends on how you judge industry growth.

Data from Ampere Analysis suggests SVOD in the US has peaked. The company says average household spending on the services peaked in 2022 and will decline by 8% by 2027. But looking at other growth measures, it looks like the industry still has room to run.

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SVOD Penetration is approaching the peak (2:00)

From the perspective of penetration of US households, it could be that the industry hasn’t much further to go. Kantar Media says penetration has reached 89% in the US. If so, SVOD penetration is now more deeply penetrated than traditional pay TV ever was. Cable, satellite, and telco TV penetration peaked in 2013 at 88.3% and is definitely on the way down. This year, it looks like penetration will fall below 50% for the first time in decades.

SVOD, on the other hand, may sneak over 90% penetration, but it is definitely at or near its peak penetration.

The number of SVOD services is still growing (4:00)

The number of SVOD services we subscribe to keeps on growing. TiVo’s latest Video Trends Report shows that between Q4 2021 and Q4 2022, the number of paid services we have increased by 1.1 to 7.6. Now, that includes traditional pay TV and vMVPDs, but most of the total is made up of SVOD services.

What’s going on? We are filling out our services to reflect our specific needs and interests. Back in cable’s heyday, people typically watched 17 channels in any month, with a core of 8 channels used weekly. The average SVOD service has more titles and content flow than the typical TV channel, so we probably don’t need as many SVODs as we did channels. But any special interest we may have is likely not fully covered by the big SVODs. Take me, for example. I have the big five services, but I still need more factual content from CuriosityStream, British shows from BritBox, and workout videos from Studio Sweat on Demand.

However, the growth in the number of services could be approaching its peak too. Here’s why.

SVOD usage declined in 2022 (7:40)

According to TiVo, the percentage of daily viewing time attributed to SVOD services shrank in 2022 from 31.4% to 30.1%. It is not as big a decline as traditional pay TV, though. Usage plummeted from 38% to 32.1%, and vMVPDs didn’t pick up the slack, and they gained only 0.3%. The big winner was free services, and they increased their share of our viewing time from 10.3% to 23.5%.

How much do people spend on SVOD services? (10:00)

It turns out that SVOD spending is a bit of a controversial topic. Parks Associates says spending on SVOD services has declined since Q1 2021 when it peaked at $90 monthly. The company says it has fallen to $69 a month in Q3 2022. To be fair, Parks includes all pay streaming services in the total – that would include vMVPDs. However, looking at the other data we have seen so far, it’s a little hard to believe.

TiVo, on the other hand, sees the amount as still growing. It says spending on SVODs increased in 2022 from $42.03 to $49.08. That’s about a $7 increase, which jibes with its claim that we added about one paid service over the same period.

BTW We spend way more on the big TV channel bundle than SVOD services. The average cable, satellite, and telco TV customer spends $120 monthly, while a vMPVD subscriber spends $65 monthly. That means big TV channel bundle customers spent $91 billion on their services in 2022. The average SVOD subscriber spent a third of that on SVOD.

Conclusions (13:50)

This data goes a long way to explain the change in behavior of SVOD providers like Netflix and Disney+. With the big growth phase of subs in the US market over, service providers are starting to look at how to generate more revenue. There are two ways many are going about it. One is to add an ad-supported tier, and the other is to boost distribution options. That is why CuriosityStream and Hallmark Now have launched FAST channels.

If you’d like a rough transcript of today’s podcast, head over to the nScreenMedia website. There are diagrams there that should be helpful in understanding the dynamics of the SVOD market too. Post a comment about the podcast while you’re there too. And why not sign up for the free newsletter?


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