In the US the number of homes that have traditional pay TV in combination with a third-party Over-the-Top (OTT) Subscription Video-on-Demand (SVOD) service is now far greater than those that take pay TV alone.
The big European markets have some way to go before they catch-up, but with more than 25% of UK homes already taking stand-alone SVOD services in combination with a traditional pay TV offer, OTT SVOD from a third-party is becoming standard as part of the in-home channel line-up in paying households.
There is also a clear relationship in any given country between the number of homes taking a third-party SVOD service alongside their pay TV and the number of homes that take SVOD without pay TV. That shows that SVOD is simultaneously carving out its own market as a companion to free TV services or as a primary form of in-home entertainment.
Interestingly, but perhaps not surprisingly, the UK has the highest incidence of SVOD homes without pay TV, at more than 8%, against 7.5% in the US. Overall pay TV penetration in the UK is still far lower (reducing the opportunity for overlap) and the strong free TV offer on Freeview coupled with the availability of power-brand SVOD services like Netflix and Amazon Prime means the supplemental route is attractive. Alongside the UK, Germany is also notably high for SVOD-only homes.
But while, on the face of it, positive for the traditional players, there are implications in these figures for the future direction of traditional pay TV. Firstly, there is an opportunity to capture a market segment interested in supplementing their SVOD viewing with a pay TV-lite offer. It’s a strategy that has been tried many times before, but it seems that the SVOD players have inadvertently created a new segment opportunity that was previously in search of its unique selling point.
Another implication is that pay TV operators, across all platform technologies, must now realise the importance of services like Netflix to their own channel line-ups. Bringing SVOD services on-platform, something I have long suggested is key, suddenly seems hard to argue with.
And, finally, the role of content investment that has driven the rise of SVOD in key markets again becomes crystal clear. Players who have failed to sensibly invest directly in content are at risk of being side-lined as mere pipes.