Straight Talk Consumer and Entertainment Services
To say that some of Ovum's more established telecoms and media clients are feeling anxious is an understatement. Technology and consumer behavior are changing faster than ever, few companies are clear which business models will win out, and many are concerned they won't survive, let alone thrive. Yet the net result of all this disruption will be growth: Ovum forecasts that revenues from core consumer telecoms, media, and technology (TMT) services will near $2.1 trillion in 2022, an increase of $290bn on 2017 (see Figure 1).
Figure 1: Mobile broadband drives most consumer TMT revenue growth
Here's some further insight into what consumer TMT companies can expect on the road to 2022:
- Broadband will be the world's largest source of consumer TMT service revenue.
Despite long-held angst over Google, Facebook, and others riding "over the top" (OTT) of their networks, telcos will ultimately be the biggest benefactors of consumer demand for digital services. Revenue from consumer mobile broadband and other non-voice mobile services will grow at a 6.7% compound annual growth rate (CAGR) over 2017–22 to reach $577bn; consumer fixed broadband will take that number to $830bn. Digital advertising will account for "just" $330bn in 2022.
- Video and the home will drive a new wave of the consumer Internet of Things.
Over 10.3 billion video devices – smartphones, tablets, smart TVs, media streamers, TV set-top boxes, and VR headsets – will be connected to the internet in 2022, up from 6.9 billion in 2017. The number of connected cameras, sensors, appliances, and other smart home devices, meanwhile, will increase more than sixfold to 5.5 billion. In North America, the average household will have 8.9 video and 7.0 smart home devices.
- OTT will account for 19% of global TV and video revenue – and 60% of growth.
Revenue from Netflix, YouTube, Hulu, DirecTV Now, and other online-only video services will more than double over the forecast period to reach $97bn in 2022. OTT services' share will also grow as revenues from pay-TV and broadcast TV advertising slow or decline in large mature markets. Traditional TV revenue will decline in absolute terms in the US, Canada, France, Singapore, Denmark, Israel, and Hong Kong. In the US, OTT will account for 138% of total TV and video revenue growth over 2018–22.
- Broadband, pay TV, and OTT video will only just offset massive declines in voice for telcos.
Global revenues from core consumer telco services – fixed and mobile voice and broadband, and telco pay-TV and OTT-video services – will increase at a CAGR of just 1.1% to near $1.1 trillion. Most of that growth will be from relatively untapped emerging markets, such as India, Nigeria, Turkey, Indonesia, and Thailand. Core consumer telco service revenue will rise at CAGRs of 1% or less across almost all mature markets and will decline in Hong Kong, Japan, Greece, Taiwan, Ireland, and Singapore.
- New entrants will account for 70% of OTT video subscriptions in 2022.
Subscription-based services will account for most growth in the OTT video market, and Netflix, Amazon Prime, and other new entrants will account for most subscriptions. Services from operators such as AT&T's DirecTV Now and Sky's Now TV will account for 9% of subscriptions, and broadcaster offerings such as Hulu will account for 6%, with the rest served by a mix of production companies, sports associations, and other media groups. Operators and broadcasters will take a large share in emerging markets, although the size of the prize will be considerably smaller.
Our market share forecasts are based largely on companies' known strategies. Telcos, pay-TV operators, and broadcasters have the potential to "change the future" through more ambitious service launches, mergers and acquisitions, and partnerships. But so do the tech giants. We fully expect, for example, Apple to launch a subscription video offering and Amazon to bring its e-commerce might to reinvent video advertising.
Our analyst Rob Gallagher will be delivering this research and more in the form of a workshop at our office in New York on Tuesday, June 5. Find out more about the workshop here.
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