OTT is Slowing Down

The US OTT market is approaching saturation, says Strategy Analytics, as the growth rate has been recorded as slowing for the first time.

US consumers will spend $6.6 billion on OTT services like Netflix this year: a 22% rise on 2015. However, this is the first time that the increase ($1.19 billion) will be lower than that of the previous year ($1.21 billion).

Michael Goodman of Strategy Analytics said that the change was “small, [but] its direction is extremely significant.” Although full market saturation is some years away, the US streaming subscription market is now “on the backside of the adoption curve.”

Almost 60% of US broadband households – which represent 85% of all US households – subscribe to a streaming service. This is similar to pay-TV saturation levels. Within five years, Strategy Analytics expects growth to fall below 8% YoY.

Netflix is the OTT market leader, with a 53% share – more than double that of second-place Amazon Prime (25%). Hulu (13%) is in third place. It should be noted that almost 40% of OTT households subscribe to more than one service, however. This means that growth relies on cannibalising other services or getting consumers to subscribe to more than one.

With the OTT revenue increase, Strategy Analytics expects the format to account for 35% of consumer spend on home video this year. DVD/Blu-ray purchasing will come second (down 7% to 30% of consumer spend: $5.7 billion) and disk rentals (down 10% to 14% share: $2.8 billion). Downloading to buy will climb 17% to $2.2 billion while downloading to rent will fall 5% to $1.8 billion. Together, these last categories have a 22% share.

Overall, Americans will spend $19.1 billion on home video this year: a 3.6% YoY rise and equivalent to $13.42 per household per month. Including advertising, home video revenue will rise 8.3% to $27.3 billion.