Subscription video on demand (SVoD) set to overtake Pay-TV in Australia

The popularity of Netflix, coupled with the high costs of Pay-TV has helped propel the subscription VoD market in Australia

Subscription video on demand (SVoD) is set to overtake Pay-TV in Australia this year, according to a new report.

The video entertainment report, by Futuresource Consulting, found the uptake of SVoD households would surpass traditional Pay-TV households driven by the popularity of Netflix and the low cost of entry.

Australia is the first country to see this shift, which is being driven by the country’s high-priced pay-TV market, according to Joanna Wright, senior market analyst at Futuresource Consulting.

“Pay-TV subscription revenue plays a key role in the strength and size of the overall video market, representing half of total video spend. Australia has one of the highest Pay-TV ARPUs (Average Revenue per User) in the world, but the rise of low-cost Pay-TV-Lite and SVoD services has led to more promotions and a fall in the ARPUs.”

ARPUs dropped from $88 in 2014 to $65 in 2018, this led to a 7% fall in overall Pay-TV revenue in 2017. Revenues are expected to decline another 4% this year to $2.6 billion with average annual declines of 2% predicted longer term.

However, the revenues still outperform SVoD, with the two services viewed by consumers as complementary, with 65% of Pay-TV subscribers also taking an SVoD subscription.

SVoD has experienced impressive growth in recent years driven by the popularity of Netflix. In 2017, Netflix subscriptions reached 2.8 million, bringing it equal with the country’s dominant Pay-TV provider Foxtel’s subscriptions.

Netflix’s success has helped propel local services such as Stan and Foxtel Now, which are all experiencing growth. The market is set to expand further with Amazon launching its Prime service in June 2018, CBS expected to launch All Access this year and Disney predicted to join the category in 2019.

In total, SVoD is expected to reach 6.1 million subscriptions by the end of 2018. With SVoD spend expected to increase 48% this year to reach $647 million.

Consumer spend on video entertainment in Australia is expected to reach $5.3 billion next year.

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