The video streaming market may be “approaching saturation” as it shows a slow growth rate for the first time, a new study has found.
The study, conducted by research and consulting firm Strategy Analytics, found that U.S. consumers will spend $6.62 billion on video streaming services in 2016, which includes Netflix, Amazon Prime and Hulu. While this might mean a $1.19 billion, or 22 percent, increase from 2015, it’s actually lower that the previous year’s increase — $1.21 billion in 2015.
Almost 60 percent of households in the U.S. subscribe to a video streaming service. Digital media director Michael Goodman added, “we put market saturation at 85 percent of broadband households – similar to saturation levels for pay TV. Within five years, annual growth will fall below eight percent.”
53 percent of households subscribe to Netflix, followed by Amazon Prime (25 percent) and Hulu (13 percent). Nearly 40 percent are subscribed to two ore more services, according to the study.
“This multi-subscription behavior means 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. The domestic situation is also a huge reason why international expansion is so important, this is underscored by Amazon’s recent video initiatives, and is particularly relevant for Netflix who has the least room to grow in the U.S.”
The analysts at Strategy Analytics estimate that DVD/Blu-Ray purchases, the next popular format, will decline by 7 percent to $5.67 billion and disk rentals will decline by 10 percent to $2.75 billion. Downloading to buy will rise 17 percent to $2.2 billion, while downloading to rent will fall by 5 percent to $1.84 billion.
Overall, they estimate that Americans will spend $19.09 billion on home video this year, which would be a 3.6 percent rise from 2015. That means that the entire home video market in the U.S., including advertising, will rise 8.3 percent in 2016 to $27.3 billion.
