Dissecting digital disruption and the rise of SVOD


ABNewswire – Dec 21, 2016

SVOD is growing fast at 13% CAGR in terms of revenue and will reach 428 million across 200 countries by 2021. As consumers have drastically changed the way of consumption and have raised their expectations on the availability of content, the industry has to re-think the traditional financing and distribution models.

Global SVOD revenues will reach $32.18 billion in 2021, up from the total $17.46 billion in 2016. The number of SVOD homes is forecast to reach 428 million across 200 countries by 2021, up from 177 million in 2015 and an expected 248 million by end-2016. The US (127 million subscribers by 2021) will remain the SVOD market leader by some distance, although China (74 million in 2021 – up by 34 million on 2016) will record strong growth to close the gap, according to the Global SVOD Forecasts.

According to Alessandro Masi, international film and tv sales and distribution professional based in Los Angeles with recent experiences at leading companies like FremantleMedia and Sierra/Affinity and a successful background as VOD specialist in Europe at Own Air, where he was responsible for turning the business around into profit in less than one year and quadruple revenues, distributing award-winning content such as ‘Enter the Void’, ‘Italy: Love It, or Leave It’, ‘Goodbye Solo’, Wendy and Lucy’ exclusively using cutting-edge day-and-date strategies and being awarded an Italian Golden Globe for the original ‘Suicide Italy’ as Best Documentary in 2013, and an innovator for the entertainment industry with his brand FlexyMovies™, “the global digital players are disrupting the traditional sales model territory-by-territory and buying worldwide rights at a premium over the production budget, while also changing the television financing model by ordering to series entire seasons instead of going through the pilot model. SVOD is clearly the most interesting business model at the moment and is increasingly influencing traditional television consumption as well as pushing into the theatrical window”.

Netflix will have almost 118 million paying subs by 2021 – or 27.5% of the global total. Amazon is also expanding internationally, and these two players alone will control two-thirds of Western Europe’s SVOD subs, where meanwhile the digital single market regulation is being approved.

Masi adds that “it can be reasonably argued that the existence of more powerful buyers could ultimately drive content prices down for the Studios because of a diminished contractual power. However, it could as well mean the opportunity for European content producers and distributors and local VOD players to benefit from a stronger internal market”.

However, the theatrical window is more alive than even as the US box office just reached the $10 billion milestones faster than ever before and the exploding Chinese internal market grew by 49% in 2015 and will overcome the United States in 2-3 years. Masi claims that “soon movie theaters and distributors will realize that they need to make the ticket price variable according to demand. The battle of the studios for ownership with EST is pretty much desperate because there is too much content and, obviously, limited time. Soon a new window for super premium consumption of movies at home while still in theaters will make its debut replacing the so-called black window when the movie is dead in its theatrical run but it’s still unavailable in premium VOD or cable”.

A more immediate and direct effect of the digital disruption is cord-cutting from cable and satellite providers, but that is happening slowly and anyways broadcasters are gearing up with proprietary standalone OTT services to face the shift.

“As consumers have drastically changed the way of consumption and have raised their expectations on the availability of content, the industry has to re-think the traditional financing and distribution models. These new challenges have paved the way for innovative and creative marketing and distribution strategies, designed to increase the audience reach both in cinemas and across additional platforms” concludes Masi, who calls up for a less risk-adverse approach to innovation speaking from his experience with digital distribution and cutting-edge distribution strategies.