The Digital Revolution and the accompanying advances in mobile, video, and wireless technologies have ignited an explosion in the growth of streaming services. More than two-thirds of U.S. households are now subscribed to one or more streaming services and the rapid growth of streaming services is driving fundamental trends in Media & Entertainment.
Last year, 1.85 million U.S. viewers replaced their multichannel subscription services with more “streamlined” solutions. This disruption to the core economic model of the distribution side of the business, can spell opportunity for nimble media companies and their systems integration partners as the opportunity grows to leverage this emerging demand.
The impact of these changes has been felt in multiple ways. Data consumption will “hockey stick” even more rapidly in the next five years. Between now and 2025, analysts expect data traffic levels will grow by a 22+% CAGR, reaching 398 trillion megabytes in 2023. Analysts attribute the growth in data consumption to consumers’ growing appetite for video content, which will account for 86% of total data consumption in 2023. 5G, which is already being rolled out, will contribute significantly to this boost.
Another result of the shakeup in the core content creation and distribution model, is an unprecedented surge in mergers and acquisitions. The M&A activity is creating major re-alignments and disruption across the industry. A highly-fragmented, unforgiving global entertainment market is accelerating the pace of mergers, acquisitions and integrations to levels never seen before as companies position themselves in a highly competitive marketplace. Just this past year has seen M&A activity that would have been hard to imagine just a short time ago as we saw the $US 85.4 billion acquisition of Time Warner by AT&T and the rebranding to Warner Media, and Disney’s acquisition of 20th Century Fox. There is no doubt that these deals don’t represent the last of the big mergers. Rather it expected that they will set the precedent for future large scale consolidation in media & entertainment.
Streaming will also drive major revenue growth. OTT video revenue for media and entertainment (Disney+, Netflix, Peacock, HBOMax, HBO Go, Hulu, Netflix, CBS All Access, Sony Crackle etc.) in the U.S. reached $27.1 billion in 2019, up 15.2% YoY. Revenue in this area is expected to reach $38.6 billion in 2023. Additionally, the U.S. continues to lead the global Internet advertising market, with total revenue of $98.9 billion in 2019. Analyst predictions are that the market will continue to experience growth, expanding at a 7.7% CAGR between 2020 and 2023 to reach $127.4 billion
Finally, on the technology front, streaming is driving a new model that signals major changes in the underlying platforms that deliver content for distribution and consumption. The emergence of vMVPDs-Virtual Multichannel Video Programming Distributors (vMVPDs) like DirectTV Now, Sling TV, and YouTube TV now claim just over 20% of the U.S. subscriber market. Internationally, HotStar is a fast growing vMVPD platform serving India, one of the largest global markets for streaming services outside the U.S.
VP and Client Partner - Media & Entertainment Group, Birlasoft