The international marketplace for IP audio-video facilitated through paid-to-own media vendors and pay-as-you-go subscription services is on solid financial ground, and firmly integrated into the consumer experience.
These emerging businesses frame a 12-year CAGR of 61.2%, with 2015 receipts projected at $22.6 billion, split between multiple music plans, movies, television and sports programming.
This globally distributed marketplace is presently forecast to reach $31.7 billion in transaction value by year-end 2018. Over the past twelve years, IP music (i.e. download-to-own stores, subscription song-play and internet music radio services) has captured the vast majority of marketplace revenues.
As recent as 2008, these stores, vendors and services owned 82.3% of the market (including iTunes), in contrast to movies/TV (including NetFlix, Hulu) at 11.3% Today, comparable figures are 48.9% movies/TV and 49.4% music, with sports programming capturing the remainder. Movies/TV receipts are on track to surpass all modes of IP music payments in 2016, and increase total share of revenues through 2018, according to the industry trade resource IP Audio-Video Stores, Paid Channels and Subscription Services 2015 – 2018.
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IP music subscription services (including Spotify, Pandora, RDIO, Rhapsody, new entrant Apple Music, plus the internet subscriber tier offered by SiriusXM) are forecast to deliver $2.6 billion in revenue across all served geographies.
Download-to-own stores (including iTunes and Amazon) are estimated to post $8.5 billion in global sales. By contrast, IP video services are a majority subscription or rentals-centric business, with approximately 18% of total revenue generated through store sales.
This investment grade resource provides annual data and analysis of music track downloads by vendor (2003 – 2015), movie/TV purchases and transactions, subscribers by service and program category, global revenues, growth projections, technology relationships, viewing hours, listening hours and more.
Across all stores, vendors and services, library scale matters. To claim a stake in the IP audio-video marketplace, it’s vital to possess the cash reserves necessary to pony up for digital rights, and or cover royalty payments owed to organizations and guilds.
This marketplace is dominated by large consumer brands, from internet pure-plays to highly integrated cross-platform organizations, including Netflix, Hulu, the broadcast networks, studios and programmers, Amazon, Pandora, the major professional sports leagues, Apple (i.e. iTunes Video), Microsoft, Wal-Mart and Sony.
Subscriber satisfaction, at this point in the market’s evolution, is less likely to be tied to improved resolution (i.e. higher bit rates employed as a marketing tactic, offering very highest quality experience as a compelling point of differentiation) but rather library size, aggressive/flat rate pricing and content accessibility (i.e. better navigation and search) across a broad set of devices; consumers want choice.
The growth in movie/TV libraries migrating online continues, but at a moderate rate compared to the growth of subscribers and viewing hours per subscriber to better manage media processing, storage and licensing costs.
However, that strategy creates a dynamic which we believe translates into slower market expansion over the next several years (and reflected in our forecasts), even considering a ramp-up of in-house productions such as House of Cards.
For example, NetFlix had 61 million paid/non-paid subs at year-end December 2014; that figure is presently 65 million, with a projected total of 67 – 69+ million by year-end 2015 (44 – 46 million in the U.S.), an annual increase of 12% – 15% NetFlix generated 1 billion hours of viewing per month, on average, in 2013, against 33 million online subscribers, or 30.3 hours of monthly viewing. NetFlix generated 3.3 billion hours of viewing per month, on average, against 64 million subscribers so far in 2015, or 51.56 hours of viewing, a 15-month change of 69%.
However, while NetFlix has negotiated rights to an estimated 30,000 titles, the service only makes available about 10,000 – 11,000 selections at any given time, with titles added or removed as licensing windows open or expire. Music services, with the notable exception of Pandora (with about 1 million tracks available), maintain libraries of 30 million or more tracks.
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