Netflix business model ‘may be unsustainable’

Global subscription video-on-demand revenues are set to double to US$35 billion by 2021, but market leader Netflix’s model may could prove difficult to sustain, according to Juniper Research.

Juniper’s Digital TV & Video: Network and OTT Strategies 2016-2021 report predicts that revenues from SVOD services including Netflix and Amazon are set to grow from US$14.6 billion this year to US$34.6 billion in 2021 as consumers in more countries move to non-linear video consumption.

While Netflix now has a US subscriber base that rivals that of leading pay TV providers DirecTV and Comcast, Juniper says that the price increases that have followed Netflix’s big international expansion at the start of this year may benefit rival services such as Hulu in the US and Amazon internationally.

“Whilst Netflix has expanded its coverage globally, the test will be whether it can meet its original content production costs, as well as provide quality content to consumers,”said research author Lauren Foye.

“It is believed that US rival Hulu is now close to offering the same amount of content as Netflix, and others are pushing new models – such as Amazon’s monthly subscriptions to Prime video, and YouTube Red subscriptions for exclusive content.”

According to Juniper, pay TV channels providers are adapting to the changes taking place, with some OTT TV services such as YouTube and Hulu looking to offer linear cable streaming in the form of ‘skinny bundles’ as part of their offerings next year.

The growth of OTT will lead to a fivefold increase in data usage between 2016 and 2021 as uptake of 4K video increases file sizes, Juniper added. The research group predicts that combined 4K SVOD and transactional VOD revenues, including download-to-own, will account for 13% of total OTT revenues by 2021.