VOD Market: Show Me The Money

Producers have for the past number of years been anticipating the arrival of worthwhile revenues from online video on demand. It has become particularly pertinent given the fall in DVD sales (although they still represent the most significant revenue stream for independent films). Looking at the figures available, its clear that the market is moving in the right direction, and quickly, with VOD platforms offering services that are beginning to gain traction.

Market In Numbers

Screen Digest estimates that the VOD film market in the UK was £52 million in 2011, up from £39 million in 2010. 1 The revenue trajectory continues to grow strongly as consumers become more accustomed to VOD take-up, technologies become more sophisticated and as the market matures. In 2012, the introduction of Netflix to the UK and the increasing popularity of other subscription services boosted the online market by 123% raising the VOD market value to £122 million.2 In context however, this represent only approximately 3% of the UK film entertainment market.3

But, market growth will continue to be fuelled with improvements in technology and increased availability of affordable hardware. Digital devices such as tablets, game consoles and smart TV’s allow for greater platform penetration. In particular, I am looking forward to seeing what Xbox One and PS4 bring to the table. Both have been billed as entertainment centres from the living room, and they should have a huge influence on bringing VOD directly to the TV screen.  Globally the VOD market is forecast to reach $11 billion by 2016. That’s up from $4 billion in 2011.

VOD Market Leaders

UK online VOD is considered the most mature market in Europe with a number of platforms competing for a dominant position in the marketplace. As  a result heavy investment is being made by each platform to secure their place, thus supporting the overall growth of the market.

The Transactional Video on Demand (TVOD) market is dominated by iTunes. In Europe, iTunes movie stores are open in 30 EU countries with iTunes so far being the pan-European global digital outlet. Part of the reason for this is that iTunes is able to sell multi-lingual packages. iTunes now generates more money for the Hollywood studios than many traditional cable operators including Time Warner cable. It is expected that by 2014, iTunes will surpass Comcast as the largest provider of video-on-demand.4 However it is limited on the number of devices it is available on as it is only accessible via an Apple product. As such in the UK, platforms such as Google Play, Filmflex (which powers Virgin Movies, Film 4oD, EE Film) and Blinkbox are beginning to gain greater traction.

Within the Subscription Video on Demand (SVOD) landscape; Netflix, Amazon Lovefilm and NowTV are the primary platforms. Backed by considerable acquisitions budgets, these companies are building large libraries. Indeed, Netflix and Amazon Lovefilm have begun developing original programming to build their subscriber base and brand loyalty. Netflix is the behemoth in this market with the streaming giant delivering 5 billion hours of film and TV a year to 40m subscribers in 40 countries 5, working out as roughly 33 million subscribers in the USA and 7 million internationally.

Advertising Video on Demand (AVOD) is dominated by Youtube, which is the fourth most visited website in the world with an estimated 450million unique visitors each month. However, a significant number of views is required to earn revenues with a standard $2.50 per 1000 payed to content owners.

Resources

  1. BFI Statistical Yearbook 2012 – http://www.bfi.org.uk/statisticalyearbook2012/
  2. BFI Statistical Yearbook 2013 – www.bfi.org.uk/statisticalyearbook2013/
  3. BFI Statistical Yearbook 2013 – www.bfi.org.uk/statisticalyearbook2013/
  4. CMPA: Maria DeRosa 2012 http://www.cmpa.ca/sites/default/files/documents/industry-information/studies/CAFDE%20-%20Distribution%20Study%20-%20Sept%202012.pdf
  5. Screen Daily: Jeremy Kay 2013  http://www.screendaily.com/news/digital/sarandos-exhibition-might-kill-movies/5062927.article?blocktitle=LATEST-FILM-NEWS&contentID=40562
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