Video On Demand: The Future of Flexible, High-Quality Streaming

The video-on-demand market is encountering unprecedented growth, propelled by technological advancements and moving consumer preferences. As of 2023, 83% of U.S. households subscribe to at least one streaming service, a substantial growth from 52% in 2015. Globally, there are about 1.8 billion subscriptions to video streaming services, highlighting the widespread adoption of VOD platforms.

Major players like Disney+, Netflix, and Amazon Prime Video dominate the market, with Netflix leading at more than 260 million subscribers, Disney+ at 157 million, and Amazon Prime Video at 117 million. The U.S. market alone has more than 800,000 unique titles available, reflecting the vast content diversity that attracts viewers. Streaming now accounts for 36% of all TV usage, surpassing conventional cable and broadcast, as Americans spend an average of 3 hours and 6 minutes daily on streaming, with 26% binge-watching weekly.

The economic structure of the video on demand ecosystem is still evolving, and a report by Astute Analytica Projects that the?global video on demand market is expected to reach a market size of US$ 786.10 billion by 2032, with a compound annual growth rate (CAGR) of about 14.07% during the forecast period from 2024 to 2032.

A brief about the market: -

Consumer satisfaction with the video on demand market is high, with 72% of Americans describing contentment with their streaming experiences. This satisfaction is likely due to the flexibility and variety delivered by these platforms, as 93% of Americans plan to keep or augment their streaming alternatives. Cost and ease of use are critical factors for consumers when picking new platforms, with 84% and 81% respectively prioritizing these aspects. The trend of subscription cycling is notable, specifically among younger demographics, with 57% of Gen Z and 62% of millennials having canceled a subscription in the past six months. This behavior emphasizes the significance of competitive pricing and the appeal of ad-supported models, which 28% of users prefer for cost savings. Globally, music videos have the highest reach, with nearly half of internet users watching them weekly, and televisions stay the primary device for VOD consumption, used by 55% of viewers.

The future of the video on demand market looks promising, with projections indicating a global market value of US$ 803.85 billion by 2032. The U.S. market is anticipated to grow at a CAGR of 13.3% by 2024, while Germany expects a CAGR of 15.9% by 2024. This growth is propelled by the growing demand for original and exclusive content, the popularity of binge-watching, and the demand for flexible viewing alternatives across devices. As the industry evolves, key players like Amazon Prime Video, Netflix, and Disney+ continue to innovate, delivering unique features and extensive content libraries to capture and maintain audiences. The video on demand market's growth presents significant opportunities for both established companies and new entrants, as they navigate the challenges of market saturation, content licensing, and consumer retention.

Growing Adoption of Smart Devices Compelling Growth of the Video on Demand Market

The proliferation of smart devices has been a substantial driver in the expansion of the video on demand market. As of 2023, the number of?smartphone?users worldwide has reached 6.9 billion, according to industry estimates, delivering a vast audience for VoD services. The global sales of smart TVs have also witnessed substantial growth, with an estimated 250 million units sold in 2023, up from 220 million units in 2020. Also, the tablet market remains strong, with more than 160 million units shipped globally in 2023, reflecting sustained consumer interest in portable smart devices.

Accessibility to VoD services has been improved by the integration of streaming applications into smart devices. In 2023, it is estimated that 80% of households in created countries own at least one smart TV equipped with VoD apps like Amazon Prime Video, Netflix, and Disney+. The average consumer spends more than 100 minutes per day watching video content on mobile devices, indicating a substantial change towards mobile media consumption. Furthermore, global mobile data traffic related to video streaming is estimated to reach 77 exabytes per month by the end of 2023, underscoring the massive scale of VoD consumption on smart devices.

Emerging markets have also contributed significantly to this growth. In India, the number of smartphone users surpassed 750 million in 2023, leading to a VoD subscriber base of more than 100 million users. Similarly, in Africa, internet-enabled smartphone users have grown to more than 650 million, enabling the development of VoD services across the continent. The rollout of 5G networks has further driven VoD adoption by allowing faster streaming speeds and enhanced user experiences. The global Video-on-demand (VOD) market revenue is estimated to reach US$ 150 billion by the end of 2023, up from US$ 120 billion in 2020, highlighting the crucial role of smart devices in this growth trajectory.

Growing Trend of Hybrid Monetization Models

The video-on-demand (VOD) market is increasingly adopting hybrid monetization models that combine subscription services with advertising and transactional purchases. In 2023, major platforms like Netflix presented ad-supported subscription tiers, delivering lower-priced alternatives to consumers willing to view advertisements. Netflix's ad-supported plan attracted millions of subscribers within months of its launch, showing consumer openness to such models. Similarly, Disney+ expanded its service offerings by adding an ad-supported tier, contributing to its global subscriber base reaching more than 160 million in 2023.

This transition towards hybrid models is pushed by the demand to diversify revenue streams and cater to varying consumer preferences. Amazon Prime Video, while primarily a subscription service, generated substantial revenue from transactional video on demand (TVOD), with estimates suggesting more than US$ 4 billion in 2023 from rentals and digital purchases. Hulu has effectively used a hybrid model, with advertising revenues exceeding US$ 2 billion in 2023, thanks to its combination of ad-supported and premium tiers. By delivering flexible pricing and access alternatives, VoD providers can reach a broader audience and adapt to market competition.

The growth of hybrid monetization in the video-on-demand (VOD) market has also influenced advertising spend and content creation. Global advertising expenditure on streaming platforms is estimated to reach US$ 23 billion in 2023, reflecting the growing significance of VoD platforms in advertisers' strategies. Content creators profit from additional revenue opportunities and wider audience reach, while advanced targeting abilities improve ad effectiveness. In 2023, the average click-through rate for ads on streaming platforms was higher than conventional digital ads, highlighting the potential for advertisers. The trend towards hybrid monetization models signifies a strategic evolution in the VoD industry, balancing profitability with consumer demands in a dynamic market.

Recent Launches: -

In 2024, MwareTV, a Dutch provider of cloud-based TV platforms, introduced IGADO+, a new video?streaming service particularly created for the Ethiopian market. In collaboration with Ethio Telecom, the country’s primary telecommunications provider, IGADO+ desires to make diverse streaming alternatives widely accessible. The service, available over both broadband and mobile networks, delivers Ethiopian audiences with a range of content tailored to local interests and languages.

IGADO+ was established with an expansive selection of?125 live channels?and?thousands of hours of video-on-demand (VoD). The platform includes a broad range of programming, such as entertainment, educational content, religious broadcasts, children’s shows, and sports coverage, including international match days featuring teams like Arsenal and Real Madrid, as well as local sports channels. In line with its purpose to cater to the Ethiopian population, much of the content on IGADO+ is dubbed in Amharic and Afaan Oromoo, Ethiopia’s most widely spoken languages. The service delivers subscription rates starting at 199 Birr per month (about US$ 1.65), aiming to meet local expectations for affordable access.

In 2023, German telecommunications provider 1&1 partnered with Swiss TV-as-a-Service provider Zattoo and streaming platform Rakuten TV to launch its video-on-demand (VOD) service 1&1 Cinema.

The service, which is available to 1&1 broadband customers from now on, covers both premium content and free content for rent or buy. Offered together with the 1&1 IPTV service, 1&1 Cinema contains over 6,000 titles, from recent blockbusters to classic movies.

To allow the service, Zattoo has integrated Rakuten TV’s TVOD (Transactional Video-on-Demand) into the Zattoo-developed white-label TV platform of 1&1. The collaboration with Rakuten TV allows Zattoo to further expand its TV-as-a-Service offering for B2B customers as a “one-stop shop” including third-party apps for premium video content. “The successful integration of Rakuten TV into our white-label TV platform shows once more that Zattoo, as an enabler, can take the TV subscriber understanding at large TV providers like 1&1 in Germany to the next level,” said J?rg Meyer, Chief Commercial Officer at Zattoo.

Closing Note: -

As people look ahead, the video on demand (VoD) market is poised for remarkable growth, propelled by technological innovations, the growth of smart devices, and growing consumer preferences. With an expanding global subscriber base and the growing popularity of hybrid monetization models, VOD platforms are adapting to fulfill the diverse requirements of audiences worldwide. The integration of ad-supported tiers and flexible pricing ensures that content stays accessible to all, while the continuous growth of high-quality, original programming presents a compelling viewing experience. As the market progresses, the future of VOD promises a dynamic terrain, delivering unparalleled convenience, variety, and flexibility for viewers everywhere.

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