Viability of streaming services questioned
Despite the surge in sign-ups for streaming services, the SVOD industry faces two key challenges: low revenues per-subscriber, and the prospect that many consumers will drop out when the free trials end.
That’s the cautionary view of PwC, which has just released its 14th annual Australian Entertainment & Media Outlook 2015-2019.
The report forecasts subscription TV household (STV) penetration will improve from below 30% to reach 37.4% by 2019.
Over that period it expects IPTV services, which include Netflix, Stan, Presto and Fetch TV, will jump from 2.6% of pay households to 18.5%.
That would translate to total consumer spending of $2.9 billion by 2019, but of that, cable and satellite subs would account for $2.85 billion and IPTV just $82 million.
Outlook editor Megan Brownlow agrees with industry estimates that Netflix may have upwards of 500,000 subscribers. Stan has said it will soon reach 300,000 gross sign-ups.
Brownlow observes, “We are seeing a lot of people sign up in these early trials. But given that Australians traditionally have been reluctant to pay for digital content, it will be interesting to see how many move from the trials to paying.”
The report notes, “SVOD providers earn a relatively low ARPU (average revenue per subscriber). Achieving the scale required to cover marketing, distribution and content costs, especially ‘hero’ content to attract subscribers, will be a challenge.
“The question is therefore is can all these players survive? The current landscape has been likened to the music streaming market, which has been whittled down to just a few main offerings. We expect a similar outcome in the SVOD space within the forecast period.”