KEY POINTS

  • Subscription-video-on-demand (SVOD) services are becoming increasingly entrenched among US consumers. A majority of US households had access to an SVOD platform for the first time in 2016, according to Nielsen, with penetration rates between 53% and 59%, up from 45% in 2015.
  • But growth is slowing in the US and other developed markets. Growth in North American SVOD subscribers is poised to fall from 30% in 2014 to 4% by 2018, according to SNL Kagan. And Strategy Analytics forecasts that growth in US consumer spending on SVOD will slow in absolute terms for the first time ever in 2016.
  • The best opportunity for continued growth lies in Asia. Amid rising competition worldwide, Asia represents a relatively untapped market for major SVOD players. The region had 41.7 million SVOD subscribers in 2015 and could have up to 157.8 million in 2021. 
  • Subscription video services are gaining traction, and mobile devices are becoming increasingly prevalent. The increasing adoption of smartphones and mobile data is propelling growth in mobile video viewing across the Asia-Pacific (APAC) region, which is poised to outpace the rest of world. 
  • Widespread use of ad-blocking technology favors subscription-driven business models. Thirty-six percent of smartphone users in APAC countries (the largest percentage across all regions) block ads on their smartphones.
  • Rising economic fortunes underline the opportunity. China and emerging Asian economies account for much of global economic growth, highlighting the potential for SVOD providers that can reach these audiences.
  • Content creators and marketers can take advantage of this new frontier for SVOD. Shorter-form video and brand and product placements offer avenues for content creators and marketers to reap the benefits of SVOD's Asian opportunity.

Introduction

Subscription-video-on-demand (SVOD) services have become commonplace across the US. Netflix, Hulu, and Amazon Prime are increasingly a top source for TV consumption, as traditional pay-TV subscriptions grow stagnant, or in some instances, begin to fall.

However, domestic growth of these services has slowed considerably over the last year as competition in the online video streaming space intensifies. The disruptors increasingly face disruption themselves, as new competitors emerge with niche content that is siphoning off potential subscribers to incumbent SVOD services. Whereas the ceiling for Netflix and other players in the space was once seen as virtually unlimited, the crowded, competitive landscape is now prompting a conversation about a "new normal" in SVOD.  

Therefore, international markets will be paramount for both established SVOD players and new [...]