Dec 23 2019
In part four of our Opportunities & Challenges series, IBISWorld discusses the opportunities and challenges industries face in response to changes in regulation, technology, competition and more. In this article, we’ll discuss the Canadian industry response to streaming services like Netflix and Disney+.
Last year, nearly 400,000 households in Canada chose to cut their cable subscription, a significant spike from the 193,000 cord-cutting households counted at the end of 2012. In addition, data from Convergence Research Group Ltd. revealed that by year-end 2017 nearly one-third of Canadian households, or an estimated 4.2 million homes, no longer had traditional TV subscriptions.
This pattern has only continued in subsequent years, largely augmented by the rise of video streaming services as an alternative to cable TV viewing. Video streaming services, which typically operate on a subscription-based model, provide on-demand online entertainment to their users in many forms (e.g. movies and TV shows). Netflix and Hulu in particular offer some of the most well-known streaming services, as both companies were early streaming pioneers that helped shape the current online entertainment landscape. However, the rise of streaming services has brought both opportunities and challenges, with some industries being left behind as the competition to win over Canadian consumers intensifies.
In Canada, the most popular video streaming services include Amazon Prime Video; Disney+; CraveTV (which includes HBO Canada); CBS All Access Canada; Club Illico; and Netflix. Moreover, Hulu is scheduled to become available in Canada between late 2019 and early 2020.
The most alluring aspect of these streaming services is their convenience. Video streaming services do not only offer consumers an increased menu of choices, but also enable consumers to download these shows or movies to watch offline without an internet connection. Plus, these services can be used on smart TVs, and generally also have corresponding mobile applications. These enable consumers to watch on their smartphones and tablets in addition to their desktop or laptop computers, rounding out a multi-platform viewing experience.
With leisure time projected to decrease at an annualized rate of 0.1% over the five years to 2024, Canadians may be a bit more discerning about how they spend their limited free time. To this end, they may increasingly opt to use video streaming services instead of passing hours channel-surfing on live cable TV in search of something to watch. Furthermore, the number of mobile telephone subscriptions and the number of fixed broadband connections in Canada are expected to increase at annualized rates of 3.5% and 1.9%, respectively, during the same five-year period, indicating more Canadians will be connected to the internet than ever before, both in and out of the home.
Revenue for the Cable Networks industry in Canada (IBISWorld report 51521CA) decreased at an annualized rate of 1.3% to $4.2 billion over the five years to 2019, according to IBISWorld estimates, indicating an ongoing decline in cable TV popularity. Yet falling cable subscriptions are not the only fallout in the wake of the rising prominence of streaming services.
The DVD, Game and Video Rental industry in Canada (53223CA) has long suffered as a result of online video streaming platforms. In fact, over the five years to 2019, industry revenue is anticipated to fall an annualized 6.8% to only $457.6 million and is anticipated to drop at an annualized rate of 1.7% over the five years to 2024. This is because streaming services and online video content have directly replaced many of the services traditionally offered by DVD, Game and Video Rental industry operators.
However, could streaming services eventually fall prey to their own success and bring about a resurgence in revenue for the DVD industry? Though the latter is not likely, the fragmentation and saturation that have characterized the market for video streaming services since its inception may act as deterrents to the market’s continued success, or perhaps provide opportunities for niche entrepreneurs providing alternatives to streaming.
Many companies, both new and established, have been launching streaming services of their own, but consumers are not likely to pay for all of them. One of the most-appealing qualities of these services is their affordability and having to pay for multiple services would counteract that aspect almost entirely. This may result in consumers feeling overwhelmed by having too many choices, struggling to decide which services to pay for, and which ones to leave behind. In this way, fragmentation and saturation may inhibit growth and bring about stagnation for the media conglomerates that own these platforms, or even discourage new participants altogether.
In a constantly evolving media landscape, the most-successful operators are the ones that can adapt to rapidly changing market conditions. Nevertheless, video streaming services are here to stay, and will present an interesting case study for product innovation over the five years to fiscal 2024.
Looking for related articles within our Opportunities and Challenges series? Discover our most recent Analyst Insight discussing the Canadian industry response to ride-sharing services here!
Edited by Sean Egan
Infographic Design by Alexandria Valenti