The growth of OTT is impacting markets and players
Now more than ever, the television sector must adapt as the market transitions to OTT. The pay-TV and free-to-air sectors are both affected, and OTT services have already launched. The race to reach critical size as fast as possible has already started as competition from the internet giants intensifies and global services from major US groups launch.
The television market is slowing down
Traditional TV access networks – terrestrial and cable – are still losing ground (-2.9% and -0.8% of TV households respectively between 2018 and 2019) to satellite (+1.1%) in the southern hemisphere and to IPTV (+10.8%) in the northern hemisphere. The number of TV subscribers is under pressure in mature markets. Linear TV viewing time is trending downwards (-18 minutes a day worldwide between 2014 and 2018).
TV revenues are still growing but at a slower pace. While the US market has already been contracting for five years, the major European markets are now also showing signs of slowing.
By 2023, the pay-TV market is expected to start dropping and fall below its 2019 level. Advertising revenues are likely to post average growth of 1.4% per year.
TV revenue growing only slightly worldwide
Change in TV revenue by source, 2015-2023
US players are driving concentration of the sector
There have been various acquisitions and mergers between major media groups (production, publishing, distribution), especially in the United States where the biggest media groups are already concentrated. Comcast alone, which also includes the Sky group, accounts for 21% for the turnover generated by the 20 leading global players.
Evolving consumption patterns are forcing traditional players to increase their market power, by moving up in the value chain towards producing content and owning rights, for example.
The European industry seems to be too fragmented to be able to compete. Unable to sign similar deals, European players are responding by entering into agreements on a national scale (e.g. BritBox, Salto, LovesTV, 7TV, Stievie) or international scale (e.g. European Broadcaster Exchange, the Alliance and Nordic 12).
American players' hegemony continues
World’s top 20 TV/video companies in 2018, by revenue
The impact of developments in OTT video is still unclear
The strategy of TV players will be significant: low-cost offerings in the premium pay sector; development of OTT partnerships on a national or pan-regional scale in the FTA sector. The launch of SVOD services from Disney, WarnerMedia and NBC Universal will also be fundamental in shaping the market. In sport, DAZN has been dubbed the “Netflix of sport” and aims to expand its presence from 9 to 20 countries by 2022.
It will also be interesting to see what comes of the internet giants’ plans for production and distribution of video content. Netflix has invested 15 billion USD in original productions and rights in 2019, while Amazon has spent 6 billion USD. Both have a paying subscriber base of around 100 million at the end of 2019. Apple is also thought to have spent 6 billion USD on content for its Apple TV+ platform in its first year.
Media sector driving OTT growth
Growth of linear TV and OTT revenue between 2015 and 2023
Media groups, the battle for SVOD
OTT video revenues are growing fast (+19.3% in 2019), driven by the success of SVOD and ad-funded free video platforms. The OTT market is expected to continue growing and account for a quarter of the total audiovisual market in 2023, versus 17.6% in 2019.
OTT is driving growth in the TV/video market
Netflix and Amazon Prime Video have established themselves as the SVOD leaders nearly everywhere. Although offerings from local TV groups offer some competition, they are struggling. However, the global launch of services from Disney and WarnerMedia could disrupt the balance of power in the coming years. The growth of this sector obviously appeals to traditional media groups, but also to internet and telecom leaders. They may have different goals, but they share a common trajectory: the leverage of OTT.