Netflix, Amazon, Hulu and other top OTT video providers in the U.S. will drive significant growth in revenues this year.
That’s according to Convergence Research Group’s new study, "The Battle for the American Couch Potato: OTT and TV." Based on 66 over-the-top (OTT) providers, led by Netflix, Hulu and Amazon, the firm estimates U.S. OTT access revenue grew 37% to $16.3 billion in 2018 and will grow even further to reach $22 billion for 2019.
Convergence said that even with new OTT offers from Apple, Disney, NBCU, Quibi, Warner, and billions of OTT revenue added, and although the U.S. OTT subscriber household trajectory will well surpass U.S. TV households, U.S. TV subscriber average revenue per user (ARPU) is still forecast at three times the U.S. OTT subscriber household ARPU in 2021.
“With ARPU half the traditional TV average, lackluster margins, programming gaps and technical issues, live multichannel OTT provides little counter to category killers Netflix and Amazon that sell at lower price points and essentially without advertising,” wrote Convergence. “We believe a number of OTT plays, including large and niche, will fail due to insufficient subscriber traction, cost and competition.”
The ARPU edge is the good news for traditional pay TV. But the study found plenty to be concerned about as well. Convergence estimates 2018 U.S. cable, satellite and telco TV access (not including OTT) revenue declined 3% to $103.4 billion, and the firm is forecasting a similar decline this year.
Convergence also is predicting expanded subscriber losses for traditional pay TV this year. The firm estimates 2018 saw a decline of 4.01 million U.S. TV subscribers (after 2017 saw a decline of 3.66 million), and it is forecasting a decline of 4.56 million TV subs for 2019. All told, the U.S. TV subscriber base will decline 5% in 2019 after declining 4% in 2018.
Convergence said that at the end of 2018, an estimated 30% of households did not have a traditional TV subscription with a cable, satellite or telco TV access provider, up from 26% at the end of 2017. The firm said that figure will rise to 34% of households by the end of 2019.