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SVOD threat 'exaggerated'

News, 07 January 2015

LONDON: The impact of subscription video-on-demand (SVOD) services such as Netflix and Amazon Prime on pay-TV broadcasters has been hugely overstated according to consulting firm Deloitte.

In its annual TMT Predictions report, published next week, Deloitte says that at around £5bn globally, SVOD accounts for just 3% of the pay-TV market, and a mere 1% once advertising and licence fees are factored into the equation.

The volume of attention being directed towards Netflix and Amazon Prime was not justified by the figures, said Paul Lee, director of technology, media and telecommunications (TMT) at Deloitte.

"When we look at the actual numbers, the impact of SVOD is just a few percentage points," he told the Independent.

"The rise of Netflix doesn't mean the demise of pay-TV," he added. "The impact of Netflix has been greatly exaggerated."

With around three quarters of UK SVOD subscribers also subscribing to a pay-TV service, Deloitte suggests that SVOD is not so much a rival to pay-TV as a complementary resource that has replaced DVDs and box sets.

He further noted how Netflix had grown to 37m subscribers while the number of pay-TV homes in the US had "barely shifted".

Previously Deloitte has remarked that a cable TV customer might want the high broadband speeds available via digital cable as well as some of the content only available from a satellite provider and choose to access the latter via an additional SVOD subscription rather than taking out a platform-based subscription.

And content is at the heart of the reason SVOD will not be eclipsing TV any time soon. Netflix may have made a splash with its original show House of Cards but it owns the exclusive rights to very few shows.

The high-end content that viewers want is costly to produce and likely to remain the preserve of broadcasters.

"If people like content, they will find content wherever they want," Lee said. "People who stream also watch a lot of live TV."

Data sourced from The Independent, Deloitte; additional content by Warc staff