Subscription video streaming industry to top £1bn in four years
James R | On 24, Mar 2015
The subscription video streaming industry is expected to top £1 billion within the next four years, according to one report.
A study by Mintel says that VOD has “revolutionised the market”. Its growth has certainly been rapid: in 2009, it held a value of £28 million, which Mintel estimates grew to £437 million in 2014, up 56 per cent from 2013. That trend is set to continue, with Mintel forecasting revenue from video streaming subscriptions to total £1,171 million in 2019, which would see the SVOD sector account for 38 per cent of the total UK video market (up from 20 per cent in 2014).
Streaming through subscriptions has become an affordable way to consume a variety of entertainment – a fact that has seen services such as Amazon Prime, Netflix and Spotify increasingly adopted by the public. The music subscription sector is worth little more than a third of its video counterpart, notes Mintel, but has recorded similar growth. The value of music streaming subscriptions surged 65 per cent to reach an estimated £175 million in 2014 and, by 2019, is projected to treble in size.
The shift is encouraged by the spread of digital technology in the living room.
“As more consumers acquire connected devices such as smart TVs, which allow them to stream films and TV programmes directly, more people will pick digital sources over physical formats such as DVDs and Blu-rays,” says Paul Davies, Senior Leisure and Technology Analyst at Mintel.
“Within the music industry, the big challenge for providers is to better monetise their user base by encouraging as many people to become subscribers as possible, with consumers three times as likely to use free streaming services rather than pay for access.”
“Video streaming services have enjoyed more success than music services when it comes to converting people into paid users,” he adds.
Indeed, while over two-thirds (69 per cent) of Brits have streamed online videos in the last 12 months, a third (32 per cent) of this group have paid for a VOD service. Overall, usage of online streaming services peaks at younger Brits, with a vast 91 per cent of 16-24s accessing a video streaming service in the past 12 months.
“While video subscriptions are often seen as offering good value, the market faces increased competition from pay-TV services that continue to reach more and more homes,” Paul continues. “Within the music sector, the incentive to upgrade users to paid services is not just about increased revenues but also about easing tensions with artists.”
The future could see the two sectors combine, suggests the report: 41 per cent of online music subscribers and 33 per cent of online video subscribers told Mintel they would be interested in a subscription package that included a bundle of different media services.
While the golden days of video rental shops are past, though, old habits die hard: half of UK consumers prefer to look through libraries themselves to find new music or video online rather than receive recommendations from providers. Netflix prides itself on its big data approach, which cross-references ratings and viewing history to select similar titles, but 4 in 10 consumers who have streamed music or video say they often find that recommendations from services do not fit their interests. Instead, almost one in three (31 per cent) users would like to see recommendations from their friends appear on sites. VHS tapes may be gone, but even in the digital age, browsing with friends is here to stay.