Video market plateaus amid fragmented streaming landscape
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Consumer spending on video has plateaued since the pandemic, thanks to a costly, fragmented streaming landscape and a shift in discretionary spend toward out-of-home experiences, according to new data from MoffettNathanson.
Why it matters: Ad-supported video revenues aren't expected to meaningfully offset consumer spending declines in the near term, which spells trouble for Hollywood.
Reality check: In order for the video industry to meaningfully grow, its economics would need to favor cooperation instead of competition among streaming giants. MoffettNathanson experts don't see that happening anytime soon.
- "As long as each streaming service believes it can achieve better standalone profitability than it could through bundling, the prospect of a re-bundling — ironic as it would be, given that streaming drove the great un-bundling in the first place — remains elusive," senior analyst Robert Fishman wrote in a note to clients Monday.
State of play: Instead of finding ways to bundle services — which could drive an uptick in overall consumer spend — streamers are pushing consumers to their own cheaper, ad-supported options.
- Case in point: Netflix last week raised the price of its standard ad-free plan to a staggering $20 monthly, while holding the price of its ad tier steady.
Yes, but: Ad-supported services are mostly stealing dollars from linear TV as it declines, which means the overall ad-supported market for video isn't growing meaningfully enough right now to offset cord-cutting.
- Around 66% of lost linear ad dollars over the past two years have been recaptured by ad-supported, video-on-demand services, per MoffettNathanson.
- The remaining third has flowed to other digital players, including YouTube, or has disappeared.
The big picture: Consumer spend on video was plateauing even before the pandemic, but COVID-19 made it worse, mostly due to the rapid acceleration of cord-cutting.
- Additionally, the launch of new, low-priced subscription streamers and a decline in theatrical spending also contributed to a slower growth rate for consumer video spend between 2019 and 2025 compared with 2015 to 2019.
- The growth rate for consumer spend on video has trailed the Consumer Price Index of inflation every year since 2018, while live events continue to grow. Adults ages 35–54 are driving that trend.
The bottom line: In order for the video market to meaningfully grow again, cord-cutting would need to slow — or reach a floor — and streamers would need to come together to offer consumers a more expensive bundle option.
- With sports rights quickly moving to streaming, neither seems likely.
What to watch: Looking ahead, Fishman sees overall consumer spend on video to remain roughly flat through 2027, which could force entertainment companies to invest more in new forms of revenue.
- Former Disney CEO Bob Iger told investors last month that Disney now has "healthy competition" between its parks and entertainment divisions in terms of which could "prevail as the No. 1 driver of profitability for the company."
