Thirty-odd years ago, movie theater owners worried that HBO and other premium cable networks like Showtime would pull customers out of their theaters to watch movies in the comfort of their own home. That didn't happen at the time--but the ease and perceived cost savings of accessing movies through Netflix (NASDAQ: NFLX), Amazon (NASDAQ: AMZN), Redbox Instant and other SVOD or TVOD (subscription- or transactional-video-on-demand) services is now making an impact, and could pass box office revenues by 2018.
A PriceWaterhouseCoopers report on entertainment and media forecast that revenues from SVOD services will climb to $10.1 billion in the U.S. by 2018, at a CAGR of 24.8 percent. Box office revenues will stay resilient, growing from $10.8 billion in 2013 to $12.5 billion by 2018. But, Gigaom's Janko Roettgers notes, when TVOD services like Amazon, Redbox, iTunes or Google Play (NASDAQ: GOOG) are added in, OTT revenue jumps to $14 billion in four years, meaning these services will overtake box office revenues by 2018.
Further adding to the mix, a new Adobe report claims that TV Everywhere usage in the United States has exploded--growing 246 percent year over year. The data strongly supports the notion that Americans like being able to watch TV programs and movies anywhere they go.
Cord cutters appear to be on the move, too. Even though a recent Horowitz Associates report found that only a small percentage of respondents who didn't have pay TV were taking advantage of OTT options available to them, a new study by The Diffusion Group says that the number of people who intend to turn off their pay-TV service and shift to all-OTT within six months remains unchanged since 2011, at 15 percent.
Further, incumbent pay-TV operators are ramping up their TV Everywhere offerings and exploring ways to carve into the OTT beast. It's a move they need to make to hang onto subscribers: the PwC report said that by 2018, pay-TV penetration will fall to 77 percent from its 2009 high of 81.7 percent.
In addition to Verizon's anemic support of On Cue, the service it bought from Intel five months ago, other OTT hopefuls have failed to make a decisive impact on the market, leaving a void that MVPDs might fill more capably.
"Google fell flat with its initial OTT TV offering. Sony has verbally capitulated, and other outsiders like Apple have yet to make a serious move," said Michael Greeson, president of TDG and director of research. He pointed to Dish Network and DirecTV as examples of traditional operators considering OTT alternatives, like Dish's still-sketchy streaming service, slated to launch sometime this summer. "…Funny that the new boss is looking more like the old boss as incumbents emerge as major movers in the OTT video space."
Although MVPDs appear to be suffering the same jitters, starts and stops as competitors like Apple and Sony, the online streaming market has at least four stalwarts in Netflix, Amazon, Hulu and YouTube. It's an environment that threatens to lure away even more moviegoers. Hopefully theaters can sustain themselves on the margins with their stale, oil-coated popcorn and soda combos.
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