Transactional movie revenues across pay TV and online stores, excluding premium VOD, increased by 14% YoY in 2020, exceeding the $6bn mark for the first time, according to Omdia’s latest Consumers and Movie Windows report.
Despite the growth in transactional video (TVOD) revenues, consumer spend in these areas were unable to compensate for the declines in box office revenues caused by the COVID-19 pandemic Total consumer spending on movies in cinemas, TVOD and physical was down 43% compared to 2019, but remains flat with the addition of subscription online video.
As a result of the COVID-19 pandemic, studios are experimenting with ways to recoup lost revenues due to theatres being closed for extended periods. Many studios have provided greater emphasis on their own direct-to-consumer (D2C) streaming services as well as experimenting with traditional release windows placing a greater emphasis on PVOD and SVOD.
This approach has meant that some studios with a D2C platform are able to use new release movies to drive SVOD uptake and generate recurring revenues. However, SVOD availability not only breaks the transactional video window but significantly reduces the lifespan of a movie. While subscription online video is behind a paywall, the relatively low price and large catalogues means it acts in a similar fashion to the second pay TV or free TV windows.
SVOD availability skips through all stages of the traditional windowing system. This not only limits exploitation opportunities but impacts industry standards and KPIs for measuring success.
Consumer Appetite for PVOD / TVOD:
Over 57% of US online adults stated that they are willing to pay a premium for early access to new movie releases with the average maximum spend totalling $15.16, only $1 more than the average cost of digital retail movies. However, among households of 4 with children under the age of 18, 71% are willing to pay for PVOD at an average price of $20.07. Within this consumer group, those that visited the cinema more than six times a year prior to the pandemic are willing to pay $28, approximately the same price of a family cinema ticket.
There are also great opportunities for repeat purchase with over 93% of 2020 PVOD users expressing interest in further PVOD purchasing with nearly one in two willing to pay up to $20 per release.
However, for studios to match the $10.7bn box office revenues of 2019 through PVOD, each household would have to make at least 5.5 PVOD transactions equating to 700m transactions within one year. This rises to 17 PVOD transactions per family for households with four children.
Increase in Demand for content:
In 2020, consumer demand for online video content increased across all business models. The year saw an influx of new TVOD users, a rise in VOD consumption as well as increased SVOD conversion and uptake. Contrary to popular belief, consumers that engage more with subscription online video services are more likely to visit the cinema than the average consumer, as well as being more likely to purchase or rent via digital video stores.
Omdia found that willingness to pay for premium titles increases with the number of online video subscriptions, in particular among those consumers with 4 or more video services. This highlights the opportunity for studios to use new release movies to generate incremental TVOD revenues while driving subscriptions and retention on D2C services.
While ‘cinema power users’ were the primary consumer group driving TVOD revenues in 2020, their greater appetite for content access also saw them gravitate towards unauthorised websites at an increasing rate. Among this high spending consumer group. 22% admitted to watching content via unauthorised sites in November 2020, representing revenue loss for content providers.
Fateha Begum, principal analyst at Omdia, commented: “It is clear that the demand for content is continuing to increase across all consumers and whilst studios are reacting to this demand by providing more new content to SVOD, there is a balancing act that needs to continue.
“PVOD presents a great opportunity for studios however, it is not a magic cure to recoup lost revenues through the global pandemic. It should not be viewed as an alternative to the cinema but an accompaniment. In response to the global pandemic studios have been able to experiment with theatrical windows and release times, but once things go back to normal, we anticipate that whilst consumer demand remands for new releases, release windows will go back to resemble those pre pandemic.”