Omdia’s Straight Talk: For VOD, a COVID-19 boom precipitates a COVID-19 cooling

The closing year 2020 has seen SVOD grow at one of the fastest rates on record. In fact, in absolute terms, this year has seen more subscribers added to the VOD industry than at any other point in history, and most likely, at any point to come. Across the 328 online video subscription services that Omdia tracks as part of the TV and Online Database, more than 226 million subscribers were added. In short, SVOD has had a good year.

However, all industries and economies tend to move between waves of growth and pools of stagnation, and SVOD is no exception. While 2020 was a year for the records, 2021 will be a year of industry-wide cooling despite the myriad services coming from big Hollywood players including Discovery, NBC, Viacom, and Warner.

The four fastest-growing services of 2020 were Netflix, Apple TV+, Disney+, and Amazon Prime. All saw significant net adds stemming from COVID-19-affected markets. In 2021, all these services are expected to see significant declines in net additions. For Netflix and Amazon, 2021 will be their smallest year of growth in absolute terms since 2015.

For Apple TV+, the future is even more stark. After seeing a bumper year of growth, it is expected that the service will churn subscribers throughout the year, losing almost 8 million by year-end. This will partially be due to the end of generous free trials, but also due to the small library of content available on Apple’s subscription platform.

The reason for this stark contrast with the year before is that SVOD, more than many other types of entertainment, must maintain a healthy pipeline of potential new subscribers and carefully manage the high level of churn that is incumbent to monthly subscription products. 2020 has seen this pipeline exhausted; new subscribers have been converted at astonishing rates and the pool of subscribers in potential have been vastly reduced. Not only does this impact growth, but also strategy. To grow now, especially when faced with new competition, services such as Amazon and Netflix must refill the pot and gain access to new sources of subscriptions. In essence, this means being more open to integrated deals with consumer gatekeepers, such as pay-TV providers and telcos. These deals will include further integrated libraries and even the bundling of SVOD services.

2020 may have been a year of hubris for the SVOD industry, booming as all others struggled, but 2021 will be a year of humility; for the first time big SVOD players must rely on former rivals for their own success.

Maria Rua Aguete is senior research director at Omdia

Omdia’s Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.