nScreenMedia OTT multiscreen media analysis

Short bites: AVOD and Disney+ growth, satellite mergers, Quibi ad value

satellite and vMVPD subscribers 2014-2018

DTV Research says AVOD will grow at 17% through 2024, and that Disney+ will hit between 60-90 million subscribers. Wall Street likes the idea of a Dish DirecTV merger and Quibi values ad-free viewing at $3 a month.

Worldwide AVOD growth

Digital TV Research releasedGrowth in global OTT revenues 2018-2024 a new forecast for the growth of online video around the world. The company sees the continued growth of SVOD, from revenues of $36 billion in 2018 to $87 billion in 2024. SVOD will grow at a compound annual growth rate of 15.8% over the period. However, AVOD will grow at a faster 17.1%. It delivered revenue of $22 billion in 2018 and will more than double, to $56 billion, by 2024.

Rental and electronic sell-through will grow much more slowly, according to DTV Research. The two segments will experience CAGR’s of 5.6% and 9.3% respectively, reaching a total of $15 billion by 2024.

Disney+ forecast for explosive growth, but is it enough?

DTV Research also sees a bright future for Disney+. The company says it expects Disney+ to reach between 60-90 million worldwide subscribers by 2024. Most of the growth will be in the US, where the company expects the yet-to-be-launched service to reach 25 million subscribers in 2024. The UK will have 5.5 million and Brazil 4.2 million, according to the company.

Assuming the company is charging an average of $7 a month for the service, it will be earning between $5 and $7.5 billion a year in subscription revenue. For the $60 billion company, an extra 10% from the SVOD service will undoubtedly be welcome. However, it puts at risk the revenue the company is earning from other sources. For example, in Q3 2018, Disney earned $6 billion from its media networks in the US.

US satellite merger rumor

Dish and DirecTV could take a swing at merging again if a report in Deadline comes to fruition. The site reports that a scenario is being floated on Wall Street for Dish to buy DirecTV from AT&T. The short-term gain for AT&T is a significant reduction in the debt load with which the company is struggling. The benefit for Dish is a substantial increase in scale and a similar rise in market clout in negotiations with TV programmers.

The combined company would give Dish 28 million satellite customers. If DirecTV Now came along with the sale, Dish would also have 4 million vMVPD subscribers. However, the longtime outlook for the company is not great. The two satellite companies lost 800,000 in Q1 2019 and 2.3 million in 2018. Of course, Sling TV and DirecTV Now have softened the subscriber losses. However, the profitability of vMVPD is much lower. In other words, swapping a satellite subscriber for a vMVPD means less revenue and much less profit.

Quibi values ad-free viewing at $3 a month

Jeff Katzenberg, the founder of the billion-dollar mobile video startup Qibi, says the service will provide two subscription tiers when it launches on April 6th, 2020. For $4.99 a month, subscribers will see one 10-second ad before a 5 minute or shorter video and one 15-second ad before longer videos. For $3 more, a subscriber will see no ads.

The service is bulking up the amount of content that will be available. Meg Whitman, a co-founder of the service, says there will be 7,000 titles available in the first year. As well, the company is following the Netflix model of working with producers. Katzenberg said the company guarantees the producer a profit by paying the producer costs plus 20% up to a maximum of $6 million for each hour produced.

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