21st Century Fox

More than half of US homes now subscribe to a streaming service, spending US$2.1 billion a month

Fifty-five per cent of American households subscribe to at least one video streaming service, a new Deloitte survey finds

PUBLISHED : Tuesday, 20 March, 2018, 4:01pm
UPDATED : Tuesday, 20 March, 2018, 4:01pm

Media companies can keep worrying about cord cutting.

Deloitte found in its 12th annual digital media trends survey that the percentage of American households that subscribe to a streaming service has grown to 55 per cent. Last year, the firm reported that 49 per cent of households reported at least one video subscription service.

Kevin Westcott, vice chairman and U.S. media and entertainment leader at Deloitte, told CNBC that exclusive original content is a major driver for customers when they’re choosing which services to subscribe to. In its survey of 2,088 consumers, Deloitte said more than half of current streaming customers chose to subscribe to a service based on access to exclusive content.

That’s good news for streaming giant Netflix, which has seen its share price double in the past year even as it says it will continue to spend up to US$8 billion on content in 2018. The company has long argued that this cash burn is a long-term investment because it ultimately owns the rights to the content created. Amazon has reportedly committed US$5 billion a year to fund the growth of its content library.

Traditional media companies are trying to keep up and market their own direct-to-consumer offerings. Disney recently reorganised its corporate structure, creating a new unit focused on its upcoming streaming services.

That announcement came after the entertainment giant made a US$66.1 billion deal, including debt, to acquire many parts of Twenty First Century Fox. Disney’s proposed acquisition of Fox assets would broaden the company’s content portfolio, making it more competitive.

CNBC previously reported fear of being outspent was one of the main reasons Rupert Murdoch decided to sell those Fox assets.

But as the media companies run to market with their new services, they run into a potential cap. Deloitte reports that U.S. consumers are already flooded with choice. By their count, there are more than 200 streaming video-on-demand services available on the market.

The consulting firm said the average streaming customer has already subscribed to three services. U.S. consumers spend about US$2.1 billion a month on these subscriptions, according to Deloitte.

“Once consumers streaming subscriptions’ costs approach their Pay TV bundle there could be a slowdown in the SVOD growth,” Westcott said.

He said one way larger players may combat this is reaggregation, which could include making more services available per platform.

But it’s unlikely audiences would go back towards traditional bundles. Deloitte’s survey found that 23 per cent of those who don’t currently have a subscription said they have never had one. Of those that do have a subscription, 46 per cent of respondents said they were dissatisfied and that 70 per cent felt they were paying too much for the what they get out of the subscription.

Read the original article at CNBC