Bring the Entertainment to You: The Top Players in Video-on-demand
Gone are the days when a person had to be home at a specific time to catch his favorite television show. Video-on-demand (VOD) services allow viewers to watch television programming, movies and other audio-video content whenever is convenient for them.
The following companies were chosen as the top companies in the VOD field based on brand recognition, members and a commitment to reinvent themselves as the market changes.
The global leader in VOD services, available in nearly 200 countries.
Offers video rental and streaming services to those with an Amazon Prime account.
The paid-subscription tier for Hulu offers users limited advertising.
Globally, two-thirds of people watch VOD programming, according to a survey conducted of 30,000 individuals in 61 countries by Nielsen Co., and 43% watch both short- and long-form programming daily. VOD is a supplement to traditional television, not a replacement, for 75% of the survey’s respondents.
North American had the highest rate of VOD viewership, 35%, followed closely by Asia-Pacific with 32%.
“Today’s media landscape is complex, but the growth of video-on-demand programming services can create opportunities for all players in the media ecosystem,” Megan Clarken, Nielson president of product leadership said of the growing VOD market.
What sort of opportunities does the landscape create? Many viewers are planning to cancel their cable or satellite service in favor of subscribing to a VOD service. This is especially true in Asia-Pacific where 44% of respondents said they were planning to cut the cord. Those most likely to make the switch are under the age of 34.
VOD services face many of the same challenges as traditional television providers. They are hampered by rising costs, changing viewer preferences and oversaturation of the market. In addition, there is no VOD equivalent for live news and sports programming.
“See what’s next. Watch anywhere. Cancel anytime.” – Netflix
Netflix was founded in 1997 by CEO Reed Hastings and Marc Rudolph. The company was unprofitable, according to Inc. and had only 300,000 subscribers. Members rented DVDs through the mail starting in 1999, according to CNN. Netflix was competing against Blockbuster, which did not offer online services until 2004. Netflix added its VOD service in 2007 and original programming in 2012. By 2014, Blockbuster had gone out of business, and Netflix had 31 million subscribers.
Netflix viewers can use the service in a number of different ways: Smart TVs that have Netflix built into them, those paid TV providers, online or with a smartphone, on game consoles and through streaming media players.
The service is available in most nations with the exception of China, Syria, and North Korea.
The company’s revenue model is based on paid subscription tiers. There are three tiers ranging from $7.99 to $11.99 monthly with a free trial month.
During the first quarter of 2016, the company had 81.5 million subscribers, 42% outside the United States, and had introduced its service to 130 new countries according to a shareholders’ document. Revenue was $1.8 billion and contribution profit was $309 million. Cash flow was $2.1 billion.
In the U.S., 2.23 million members were added and revenue grew 18% from the same quarter in 2015. Internationally, revenue increased 57%.
For the second quarter, the company forecasts the addition of 2.5 million new subscribers and would work to strike a deal with Chinese officials to expand Netflix there.
Nasdaq forecasts Netflix earnings will grow at an annual rate of 25% over the next five years. In 2016, however, earnings are expected to decrease 6.65%, then rebound in 2017 and increase 298% in 2017.
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2. Amazon Video-on-Demand
“Prime Video offers exclusives from some of the world’s most passionate storytellers.” – Amazon Inc.
Also known as Amazon Prime Instant Video, Amazon Video-on-Demand operates on a subscription service revenue model. One subscription tier is offered at $8.99. Prior to spring 2016, only Amazon Prime members had access to VOD service. Now customers can select one or both services.
Its original programming has won 60 awards out of 120 nominations. Some of the awards are prestigious such as the Emmy awards and Golden Globes. Its most popular original programming is the alternate history drama “The Man in the High Castle” which has received critical acclaim.
Amazon began adding VOD services in 2006. At the time, the service was named Amazon Uncut. Today the service is available in the United States, Austria, Germany and the United Kingdom.
According to an Amazon annual report, VOD viewership grew 51% in 2015. No financial figures were available as video-only subscriptions have yet to be separated from Prime subscriptions. According to Motley Fool, Prime is the only aspect of Amazon Inc.’s business that keeps the company profitable; otherwise it would have had a $1.1 billion loss in 2015.
It is unknown how many Prime customers Amazon has. The company states it is in the tens of millions. Subscribers pay $99 annually and are offered special service such as faster shipping.
In 2016, Amazon’s earnings are expected to grow 329%, according to Nasdaq, and 82.5% in 2017. Over the next five years, Amazon’s earnings will grow at an annualized rate of 43.2%.
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3. Hulu Plus
“Hello, welcome to great TV.” – Hulu
Hulu Plus is a paid subscription service that offers Hulu members no commercials for $11.99 monthly. The service is only available in the United States and Japan.
Hulu was founded in 2008. Since then, 700 million hours of content have been streamed. The company has 12 million subscribers, 6.5 million of whom subscribe to Hulu Plus. During the time frame 2011 and 2014, Plus subscriptions grew 67%.
Mike Hopkins is the company chief executive officer. The company has annual revenues of $491.5 million, according to Owler. In Feb. 2016, it acquired smartphone app Vhoto for an undisclosed sum.
Hulu Plus comes to the market at the right time. According to L.E.K. Consulting, 14% of people are subscribing to VOD services because the fees are more reasonable than in the past. The second most cited reason in a L.E.K. market and entertainment survey.
It is forecasted that Hulu Plus will spend $250 million on original programming in 2019.