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Just as CBS, Showtime, HBO and others are ramping up their digital efforts to compete against the likes of Netflix, a study on Wednesday says the U.S. video streaming market is “approaching saturation.”
In 2016, video streaming revenue will increase 22 percent to $6.62 billion, but the $1.19 billion rise over the previous year marks the first time growth will have actually shrunk. The year before that, growth was $1.21 billion, according to Strategy Analytics.
“Although the change in increase is relatively small, its direction is extremely significant,” said Michael Goodman, the research firm’s digital media director. “It shows that, whilst actual market saturation is a few years off yet, the domestic U.S. streaming subscription market is now on the backside of the adoption curve.”
The group predicts that in 2017 the growth will fall to $1.04 billion, the year after that it will shrink to $1.03 billion, the next year it will fall to $960 million and so on. Within five years, annual domestic growth will fall below 8 percent, making international expansion imperative for services looking for faster growth.
Nearly 60 percent of U.S. broadband households subscribe to a video streaming service already, and Strategy Analytics figures full market saturation is at 85 percent.
Netflix dominates, with 53 percent of the subscription market, followed by Amazon Prime Video at 25 percent and Hulu with 13 percent. Nearly 40 percent of subscribers use two services or more.
“Growth relies on cannibalizing other services or getting people to subscribe to more than one — and companies seem to be betting on the latter,” said Goodman. “Most of the new services being launched today are in the $2-$5 range — clearly designed to be complementary to a Netflix or Amazon.”
Strategy Analytics estimates that Americans will spend $19.09 billion on home video formats in 2016, representing a 3.6 percent gain over 2015. Besides the $6.62 billion in streaming services, the rest will come from DVD sales (down 7 percent to $5.8 billion), DVD rentals (down 10 percent to $2.8 billion), buying downloads (up 17 percent to $2.2 billion) and downloading to rent (down 5 percent to $1.8 billion).
The entire paid home video market in the U.S., which includes advertising, will rise 8.3 percent in 2016 to $27.3 billion, according to the study.
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