Netflix is the market leader in video streaming, both in revenue and in number of subscribers. Currently, the company has more than 200 million paying users worldwide.
As a pioneer in the space, Netflix (NFLX) – Get Netflix, Inc. Report can be credited for kickstarting the cut-the-cord movement that solidified new habits in media consumption. Over the past several years, the trend has only been reinforced.
Streaming video adoption continues to happen at a fast pace across the world, which should boost Netflix’s revenues over time. Today, MavenFlix looks at key data that illustrates how this phenomenon has been playing out.
(Read more from MavenFlix: Why Alphabet’s YouTube TV Could Be A Streaming War Winner)
Impacted by the pandemic, the streaming sector, mainly OTT, gained quite a bit of relevance in the past year. CAGR (compounded annual growth rate) in this space is now projected to surpass 10% in the next three years.
As streaming services gain ground, TV operators stand to lose. The latter’s CAGR, in fact, is now projected to be negative. In the coming years, more people are expected to migrate away from traditional TV toward OTT alternatives. See chart below.
Figure 2: Segment CAGR % 2020 – 2024.
eMarketer
Pay TV have become increasingly rare in US households. By 2020, nearly 25% of homes in the country had canceled their TV subscriptions. See chart below.
The phenomenon is likely to continue. By 2024, 35% of all households are expected to have cut the cord, feeding the top of funnel for streaming players like Netflix.
Figure 3: US cord-cutter households, 2019 – 2024.
eMarketer
With these dynamics in place, advertisers have also been shifting their focus. By 2020, more than 50% of companies had decreased their linear TV advertising spend, and nearly 60% of them increased their advertising allocation to cable and streaming services.
This could be a transformative force in the streaming sector over the coming years. As the attention of TV watchers continues to shift from linear to cable and from cable to streaming, players like Netflix could find monetization opportunities in advertising as well.
Figure 4: Changes in ad spending in H2 2020 vs 2019.
eMarketer
Cord cutting has been happening for years, but the phenomenon is far from over. As linear TV continues to decline and cable TV follows suit, demand for streaming will continue to increase. The beneficiaries will likely include Netflix, the leader in the space, as well as its stock investors.
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting MavenFlix)
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