Consumer & Entertainment Services
By Ed Barton 21 Feb 2020
Rights holders are beginning to contemplate at what point will it become more profitable to stream live coverage directly to the audience rather than to collect licensing revenue.
The big three subscription-based video on demand (SVOD) services in the US – Netflix, Amazon, and Hulu – hold nearly 80% of the total US SVOD market based on number of subscribers. Netflix is the clear market leader, expected to have some 50 million subscribers at the end of 2016 and a market share of around 45%. Amazon's market share is around 22%, and it has about 25 million subscribers (if both Prime subscribers with access to Amazon Video and subscribers with access to Amazon’s standalone SVOD offering are counted). Hulu is the third-largest service: less than half the size of Amazon with 12 million subscribers and a market share of around 11%.
Netflix and Amazon are rightly seen as the cutting edge of SVOD original programming. Netflix’s original programs are popular and well known, from Orange Is the New Black to Narcos. Amazon's original programs, such as Transparent, The Man in the High Castle, and Bosch, may not be as well as known as some Netflix titles, but they are critically acclaimed and viewed around the world. But while Netflix’s core business is video-streaming subscriptions, Amazon’s core offering is retail, not video. Amazon’s flagship subscription service, Amazon Prime, bundles everything from free delivery of retail products to data storage, music streaming, and video streaming. In short, for Amazon, video is just one of several drivers for Prime subscription sales.
The two streaming rivals have long fought for exclusive digital distribution rights for third-party movies and TV content, but this situation is changing. Netflix has recently confirmed that it is striving for a 50/50 split between offering its own original content and third-party content, making it a direct competitor to the TV and movie rights holders it also buys from. Amazon’s strategy, by contrast, is much less about competing directly with content owners and more about partnering. Through its Streaming Partners Program in the US, Amazon is hosting other SVOD services within its Amazon Video service on a revenue-share basis with studios, TV broadcasters, networks operators, and online video specialists. As a result, Amazon is a key earner for pay-TV SVOD services such as Showtime and Starz, as well as for more genre-specific services such as Smithsonian Earth and CuriosityStream. According to Ovum analysis, CuriosityStream has around 150,000 subscribers to its standalone SVOD service, but upwards of 450,000 additional subscribers through Amazon Video.
Amazon is also going after the high-ARPU streaming market by offering transactional video on demand (TVOD) sales across both electronic sell-through and digital rental, which is music to the ears of Hollywood studios. Where Amazon has been particularly innovative is in its risk-taking, quietly placing TVOD content alongside SVOD catalogs for subscribers. Encouraging SVOD subscribers to spend extra on transactional content has been hugely successful, to the point that Amazon is now stealing TVOD market share from Apple’s iTunes (which was the market leader in TVOD until recently). Amazon is therefore a prime example of how TVOD and SVOD can coexist.
The two streaming giants differ even more on an international level. Amazon’s international SVOD business predates Netflix’s. In fact, in the UK and Germany, Amazon was, to all intents and purposes, the incumbent SVOD platform at the time of Netflix’s launch in Europe. But although Netflix has aggressively expanded internationally – and is now available in more than 200 markets – Amazon Video is limited to just four markets: the UK, Germany, Austria, and Japan.
This year, there have many unconfirmed rumors about Amazon’s intention to follow Netflix in expanding video streaming on a global basis. According to Ovum analysis, Amazon only ever adds Video to markets where it already has Prime. Prime has just been launched in India, and Amazon has confirmed that Amazon Video will follow shortly. Following the logic of "Prime first, Video second," Amazon is not looking likely to launch video streaming in the Netherlands, Australia, Brazil, China, Mexico, and Russia – all markets with Amazon services, but so far no Prime. It is not unlikely that Prime will be launched in some of these markets in the next five years, with Amazon Video following a couple of years later. But Amazon Video is not going to be anywhere near global this side of 2022.
Amazon may well expand Amazon Video to current Prime markets Canada, France, Spain, and Italy. In Canada, Amazon has already got a small but not insignificant base of Prime subscribers (1.3 million, according to Ovum analysis). With the exit of Shomi – the joint-venture SVOD service operated by Rogers and Shaw and until recently the second-largest Canadian SVOD service after Netflix – there may be an opening for Amazon Video. According to reports, Shomi has some 900,000 subscribers. However, out of that number, probably less than half are standalone SVOD subscribers. The majority are cable TV subscribers with free bundled access.
In France, Amazon Prime has just a few hundred thousand subscribers, so adding Amazon Video could help make the difference for Amazon. However, anyone looking to sell digital video in France is going to find it an uphill struggle for a range of reasons (not least because the French love their IPTV services). The French SVOD market has already been sliced up between Netflix and a strong local incumbent, CanalPlay, both of which have just under 1 million subscribers each. There have been rumors of Amazon Video launching in Italy and Spain this year. However, Spain and Italy remain very small streaming markets, split between Netflix and Sky’s Now TV (which launched in Spain this summer).
Amazon is also said to be looking to expand the Streaming Partners Program internationally. In the UK and in Germany, Amazon is unlikely to be able to offer the premium channels that Sky has, so the impact of smaller, genre-specific services such as CuriosityStream is likely to be negligible – even if they would gain much larger audiences. We are unlikely to see the introduction of the Streaming Partners Program in Europe before 2017, and when it does arrive it will be very different in character from in the US.
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Consumer & Entertainment Services
By Simon Dyson 21 Feb 2020
Time for record companies to push the music and gaming space convergence.
Consumer & Entertainment Services
By Simon Dyson 20 Feb 2020
Vivendi set to cash in on UMG as recorded and music publishing revenue keeps on rising.
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