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Analysts at MoffettNathanson are projecting that overall video consumer spending in the U.S. will, for the first time ever, decline in 2020.
After a gain of just 0.3 percent in 2019 to $141 billion, the firm predicts a 5 percent decline, the first ever in its set of data, this year. A large driver of that 2020 drop is lower box office due to the pandemic, while the rest of the video spending segments, including pay TV and streaming services, are largely following longer-term trends.
Box office will fall to $5.5 billion this year from $11.4 billion in 2019, the analysts project. They expect the box office to rise to $9.7 billion in 2021 before steady declines to $8.5 billion in 2024.
The research firm forecasts roughly flat trends in total video spending over the next five years to reach $138 billion in 2024.
“I can’t imagine another time when spending on video has fallen this dramatically,” MoffettNathanson’s Michael Nathanson tells THR. “Usually in recessions, spending goes up as it is cheaper to see a movie or watch cable than go on vacation.”
The MoffettNathanson report starts off with a history lesson. “For the past 30 years, consumer spending on video content has been in growth mode as continual waves of technological innovation worked in concert to take more and more money out of U.S. households,” the analysts write. “Analog cable gave way to digital cable, VHS to DVDs, DVDs to SVOD, and linear [pay TV distributors] to virtual [ones]. All along, consumers have paid more and more for video content.”
Over the past year, however, “we have been repeatedly asked about the future direction of this spending” given the explosion in streaming options and the acceleration in cord-cutting, the analysts acknowledged.
“While we don’t believe the video marketplace will look like the music industry which declined by a compound annual rate of 3 percent for over 16 years, we do forecast video spend to flatten longer term after a 5 percent dip in 2020 due to the COVID-19 pandemic,” the MoffettNathanson team concluded. “In aggregate, we anticipate a slight 0.4 percent compound [annual rate of] decline in video spending over the next five years compared to the 2 percent compound annual growth rate from 2014 to 2019 as declines in linear and traditional consumption are offset by growth in SVOD and virtual [distributors].”
The MoffettNathanson team also warned: “While flat long-term growth in video spending may not be that worrying, the overall industry is in the process of a mix-shift to a period of lower margins.” And that means: “The challenge is balancing the need to invest in direct-to-consumer against the likely accelerating weakness in core profits.”
Concluded the analysts: “We remain skeptical that investors will be rewarded, at this time, by funding this transition.”
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