2018 Will Be Netflix’s Best Year (yet)

Netflix’s growth, especially outside the United States, has been so robust that some analysts had to change their outlooks. “These forecasts are a lot higher than the last edition of this report,” says Simon Murray, principle analyst at Digital TV Research, of his Netflix Forecasts report. “Similar to many other analysts, we underestimated the fast take-up in international markets.”

That fast take-up suggests Netflix will have its strongest year ever in 2018 as it adds 28 million subscribers. Its growth should slow after that, Digital TV Research believes.

By the end of 2023, look for the SVOD leader to count 201 million subscribers around the world. That’s up from 111 million at the end of 2017. By the end of 2023, North America and Western Europe will make up 62 percent of Netflix’s customer base. That’s down from the 76 percent they made up in 2017 thanks to surging demand in other countries. For example, look for the Asia Pacific region to make up 14 percent of Netflix’s base by the end of 2023.

“Netflix expanded to 130 more countries (notably excluding China) in January 2016 to bring its total to 190 countries.” says Simon Murray, principle analyst at Digital TV Research. “The 130 new countries will have 40 million subs combined by 2023, quintuple the 8 million at end-2017. The 2023 figure corresponds to 20 percent of Netflix’s global total; up from only 7 percent in 2017.”

As for revenue, look for it to grow from $11.3 billion in 2017 to $28.8 billion by the end of 2023. Of that, $11.2 billion will come from the U.S.

Top 10 pay-TV operators to lose $20bn

Despite adding 84 million subscribers between 2017 and 2023, subscription and PPV revenues for the world’s top 517 pay-TV operators will fall by $18 billion (€14.67bn) to $183 billion, according to analyst firm Digital TV Research. From the total, 29 pay-TV operators earned more than $1 billion in revenues in 2017, but this total will drop to 25 by 2023.

About $20 billion of the revenue losses will fall to the top 10 players; bringing their total down to $87 billion. The pay-TV revenue share for the top 10 operators will fall from 53 per cent in 2017 to 48 per cent in 2023.

All of the top 10 operators in 2017 will lose revenues over the next five years. In fact, 168 of the 517 operators (32 per cent) covered in the Global Pay-TV Operator Forecasts report will lose subscription and PPV revenues between 2017 and 2023.

Pay-TV subscriptions for 517 operators with 747 platforms [132 digital cable, 126 analogue cable, 286 satellite, 137 IPTV and 66 DTT] across 135 countries covered in the report will increase from a collective 880 million in 2017 to 967 million by 2023. These operators took 87% of the 1,006 million global subscribers by end-2017, with this level expected to inch up to 88% of the 1,100 million total by 2023.

“The good news is that 15 operators will add more than $100 million between 2017 and 2023, with China Telecom up by $1.4 billion,” advised Simon Murray, Principal Analyst at Digital TV Research. “However, five operators, including four from the US, will lose more than $1 billion in revenues. Seven of the top 10 losers will be in the US.”

Top 10 operators by revenues ($ million)

Operator Country 2017 Operator Country 2023
1 AT&T (total) USA 30,740 1 AT&T (total) USA 23,577
2 Comcast (total) USA 20,017 2 Comcast (total) USA 15,433
3 Charter merged (total cable) USA 15,589 3 Charter merged (total cable) USA 11,942
4 DISH Network (satellite) USA 12,310 4 DISH Network (satellite) USA 10,381
5 China Radio & TV (total) China 8,562 5 China Radio & TV (total) China 7,405
6 Sky (satellite) UK 5,258 6 Sky (satellite) UK 4,613
7 Verizon Fios (IPTV) USA 3,857 7 China Telecom (IPTV) China 3,753
8 Cox (total) USA 3,691 8 Sky (satellite) Brazil 3,662
9 Sky (satellite) Brazil 3,586 9 Verizon Fios (IPTV) USA 3,268
10 Altice USA (total cable) USA 3,190 10 Cox (total) USA 2,829

Source: Digital TV Research

Global pay-TV revenues ready to plunge

After peaking in 2016 at $205 billion, and despite the number of pay-TV subscribers projected to rise by 9% over the next five years, global pay-TV revenues are set to fall by 11% to $183 billion by 2023, says a report from Digital TV Research.

The Global Pay-TV Revenue Forecasts report says that the key driver for the decline in revenues per subscriber is due to more homes converting to bundles. It estimates that eight of the top ten countries will lose pay-TV revenues between 2017 and 2023, while revenues will decline in 47 of the 138 countries covered in the report between 2017 and 2023. Twelve countries are set to lose more than 10% of their revenues leading to a total global decline of $19 billion.

Looking at specific territories, Digital TV Research found that US pay-TV revenues peaked in 2015, at $102 billion and forecasts a $22 billion decline between 2017 and 2023 to take its total down to $75 billion. By contrast, China will gain nearly $1 billion in pay-TV revenues between 2017 and 2023 to bring its total to $13 billion while India will provide the largest increase in pay-TV revenues at $1.6 billion. Revenues will more than double for six countries between 2017 and 2023. Eight of the top ten fast-growth nations by percentage increase will be in Africa.

On platforms, Digital TV Research believes that satellite TV and digital cable TV revenues will continue to be broadly similar. Revenues for the former were $83 billion in 2017; falling to $77 billion by 2023 and digital cable TV is set to supply $76 billion in 2023; down from $85 billion in 2023. The Global Pay-TV Revenue Forecasts report rates IPTV as the pay-TV revenue winner, with revenues increasing from $25 billion in 2017 to $27 billion in 2023.

Analyst: US pay-TV revenues to fall by $27bn

US pay-TV revenues peaked in 2015, at $101.71 billion (€82.51bn), according to the eighth edition of the North America Pay TV Forecasts report from Digital TV Research. A $26.58 billion decline (26 per cent) is forecast between 2015 and 2023 to take the total down to $75.13 billion.

Cable TV revenues peaked in 2010 at $54.11 billion, but they will fall to $36.75 billion by 2023. Cable will lose nearly 12 million subscribers between 2010 and 2023 (although most of the heaviest losses have already taken place).

“Cable TV is not the only platform to suffer,” noted Simon Murray, Principal Analyst at Digital TV Research. “Satellite TV and IPTV are also losing subscribers and revenues. Much of this is due to the operators shifting their subscribers to online platforms. However, growth from vMVPDs is not expected to make up completely for the subscriber and revenue shortfalls from traditional pay-TV.”

IPTV’s fall is mainly as a result of AT&T encouraging its U-Verse subscribers to convert to DirecTV, its other pay-TV asset. This is the reverse of what has happened in most other countries. IPTV revenues spiked in 2015 at $9.60 billion, and they will halve to $4.77 billion in 2023. The number of IPTV subs topped 12 million in 2014, but it will decline to 6.26 million in 2023.

Satellite TV revenues will fall from $39.78 billion in 2017 to $33.61 billion in 2023 – or down by 16 per cent. Satellite TV subscriptions will drop by 4.08 million between end-2017 and 2023; having fallen by nearly 3 million in 2017 alone. DISH is pushing its vMVPD platform Sling TV hard, with DirecTV Now also making an impact.

The number of US traditional pay-TV subscribers will fall from a zenith of 100.34 million in 2012 to 90.35 million by end-2017 and down to 80.33 million in 2023. Pay-TV penetration will fall from 87.6 per cent of TV households in apex year 2013 to 66.7 per cent in 2023.

Although Canada is losing pay-TV subscribers, its problems are not as severe as its Southern neighbour. Pay-TV penetration reached a high point in 2013 at 85.1 per cent. The level will fall to 74.8 per cent by 2023. However, the number of pay-TV subscribers will be 11.17 million by 2023 – about the same as 2017. Pay-TV revenues will fall from a peak of $6.82 billion in 2015 to $6.01 billion by 2023.

Streaming Piracy to Total $52 Billion in Losses by 2022

Worldwide revenue lost to online TV and movie piracy grew from $6.7 billion in 2010 to $31.8 billion this year, and will increase to $51.6 billion in 2022, forecasts London-based Digital TV Research. Those figures don’t include online sports piracy.

Revenues from legitimate streaming sources overtook piracy losses in 2013, and since then the gap has been widening. Legitimate revenue totaled $6.1 billion in 2010, grew to $46.5 billion this year, and should hit $83.4 billion in 2022.

While the amount lost to piracy is increasing, Digital TV Research sees its growth rate declining thanks to government enforcement efforts and consumers getting easy and affordable legal streaming options.

While North America is currently the largest region for online piracy, Asia Pacific will take the lead in 2018. By 2022, that region’s piracy losses will double to almost $20 billion. The top five countries for piracy loss are the U.S., China, Brazil, the U.K., and South Korea. The U.S. will stay in the top spot in 2022, Digital TV Research forecasts, while India—currently in the eighth spot with $700 million in losses—will climb to number 3 in 2022 with $3.1 billion in losses. China’s efforts to reduce piracy will help legitimate revenues overtake losses by 2022.

This data comes from Digital TV Research’s October 2017 piracy report, which sells for £1200.00.

US pay-TV penetration set for slide

The US and Canadian pay-TV markets are set for serious headwinds as the industry is hit by subscribers dropping services and a significant rise in on-pay homes, says Digital TV Research.

In its North America Pay-TV Forecasts report, the analyst forecasts that the number of pay-TV subs in North America will fall by ten million from 112 million in the peak year of 2012 to 102 million in 2022, a 9% decline. Though it says that this is evidence of a massive cord-cutting problem in itself, there will also be a steep rise in the number of non-pay homes during this period. These are expected to hit 41.56 million by 2022, nearly double the amount over the same research period. The total number of TV households will increase by 11 million meaning that pay-TV penetration will drop from the peak of 87.4% in 2013 to 75.2% by 2022.

The research company adds that the number of pay-TV subscribers declined by two million in both 2015 and in 2016, and that the 2022 total will be five million lower than the end-2016 total. However, it noted that the rate of decline is actually slowing.

“Where are the lost subscribers in the decade to 2022 going?” asked Simon Murray, principal analyst at Digital TV Research. “Some analogue cable subscribers will give up paying for TV services rather than convert to an often more expensive digital platform. Cord-cutting is also a factor. It has been somewhat exacerbated by the traditional pay-TV operators starting their own OTT platforms: satellite TV platform Dish provides Sling TV and DirecTV Now has recently started. Other distractions include Hulu, HBO Now and, of course, Netflix and Amazon Prime Video.”

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