Annual revenues of subscription video on demand services in the United States will nearly equal those of traditional pay TV in 2027, marking a critical tipping point in the ongoing decline of cable TV, IPTV, and satellite TV services as over-the-top video streaming rises to dominate the media landscape. Revenues from SVOD services are forecast to increase from nearly US$47.6 billion in 2022 to US$64.6 billion in 2027, recording a compound annual growth rate of 6.3%, according to data and analytics company GlobalData.
The dynamic growth of SVOD services will contribute to the ongoing decline of traditional pay TV in the United States, as pay TV revenues plummet from US$88.5 billion in 2022 to less than US$65 billion in 2027, registering a negative CAGR of 6.0%. SVOD’s household penetration, having already reached a whopping 260% in 2022 thanks to households subscribing to multiple SVOD services, will jump to 312% in 2027.
Meanwhile, pay TV’s US household penetration rate will slide from 47% in 2022 to 33% in 2027, with ongoing declines registering across cable TV, broadband-delivered IPTV, and direct-to-home / satellite TV subscriptions as the ranks of cord-cutters and cord-nevers grow unabated. Young adults who have never subscribed to cable or satellite TV make up the cord-nevers, while older users who are turning away from traditional pay TV in favor of streaming services are considered cord-cutters.
“SVOD was already on an impressive upward trajectory, but the addition of live sports programming is changing audience viewing habits even more, helping drive additional pay TV cord-cutting and SVOD growth. Just this month, the National Football League and NBCUniversal announced that the Peacock streaming service will air the first-ever exclusive live streamed NFL postseason game in January 2024, when it presents an NFL Wild Card Playoff. Even ESPN is reportedly eyeing a standalone direct-to-consumer streaming version of its flagship channel,” commented Tammy Parker, Principal Analyst at GlobalData.
However, there is some good news for traditional pay TV service providers, as GlobalData anticipates their monthly average revenue per subscriber (ARPS) will remain strong. US pay TV ARPS reached US$113.49 in 2022 and is expected to rise to US$118.34 in 2027, thanks largely to price increases by cable TV and satellite TV providers. SVOD providers in the United States, meanwhile, will see low, but stable ARPS over the next few years, as the sector’s monthly ARPS of US$12.16 in 2022 will increase just slightly to US$12.79 in 2027. SVOD price increases will be reined in due to heated competition, as well as the increased use of ad-supported tiers, plans with limited content, and monthly and temporary discounts. Additionally, as inflation moderates, there should be less pressure on SVOD providers to dramatically raise prices.
“GlobalData expects Netflix to continue to dominate SVOD revenue market share, attracting about three times as much revenue as Prime Video, and twice as much as Hulu (SVOD only, without live TV) each year through 2027,” Parker concluded.