In a recent interview founder of Curiosity Stream and Discovery Channel, John Hendricks, offered some interesting statistics and observations on the market size and pricing model strategies for streaming content services.
The streaming business is all about efficient scale, eyeballs (user experience) and advertiser appeal. Growth for any platform will come from international expansion, exclusivity in popular content niches and the advertiser appeal of the platform. However it’s still relatively early days in this arena with a lot of organic growth yet to be achieved.
The streaming industry, particularly in the US, is in a dynamic state of growth, consolidation and specialisation, but there is opportunity to be found on all fronts in the less established markets ie. other than the US. However there are a bunch of factors to consider for those participating or stepping into the streaming zone.
Currently there are around 4.5 billion Internet users globally and around 1-1.5 billion of those can currently (somewhat) reliably stream video (subject to their ISP’s capability and the viewers particular package), but the number of Internet users will grow to two-three billion in the coming years.
With around 165 million subscribers globally, Netflix holds around 13 percent of the marketplace, so even if they maintain this level as the market size increases, they have a potential market share of around 400 million subscribers when the addressable market reaches three billion.
It’s interesting to think about that for a minute because if Netflix can take an average of A$10 p/month from 400 million subscribers, that’s $4 billion dollars p/month, a revenue that could very likely be matched by $6 billion in advertising related revenue. At $10 billion per month, their annual content production expenditure looks conservative.
There’s a lot of chatter about subscription vs advertiser funded or supported content, how much the consumer will pay, how many services they’re willing to adopt and what content is going to deliver the most eyeballs. Here’s a few considerations on those fronts:
- While the Discovery channel was rated as one of the top 10 in most desirable channels, it did not rate in the top ten most watched channels, seemingly indicating that the perceived value of the channel was such that people were willing to pay a nominal amount for the OPTION to be able to watch it if and when desired. This indicates highly valued content underpins price tolerance.
- Niche channels with high enough volume of appeal (think international market size for any subject or genre) don’t need to $5-10 p/month to be profitable. An annual fee of A$20 p/a from one million subscribers (0.1% of the current addressable international market) would raise $2 billion per year.
- Smaller niche channels with world wide rights to their content may have easier access than say Netflix to difficult markets such as China and India, substantially increasing their potential global market share.
- AVOD content initiatives extend beyond the ‘brought to you by’ or even ‘commissioned by’ models as they begin to explore newer, more subtle initiatives such as brand theatre, seasonal and special interest content production geared to relationship with the customer.
The Australian content and streaming market is in its infancy comparatively speaking and the viability of any potential streaming channel and content produced, needs to be evaluated with an international market mindset and a view to the future impact of advertisers being the dominant financial force in content on all fronts.
For information on how you can take advantage of the growth in streaming content, contact Wanted – Reward Offered.