Subscription home entertainment soars in Australia

Monday, August 17th, 2020
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Subscriptions across video and games boom as people stay home during pandemic

SYDNEY, AUSTRALIA — The COVID-19 pandemic has boosted home entertainment subscription services in Australia according to new research from emerging technology analyst firm Telsyte.

Australians added 5.6 million new subscriptions to the end of June 2020, an increase of 18 per cent from a year ago. This growth was across streaming video on demand (SVOD), streaming music and games related subscription services.

Australian Entertainment Subscription Market - SVOD, Music, Gaming, Pay TV - June 2020

The total number of subscriptions reached almost 37 million and is forecast to grow to 58 million by 2024.

The Telsyte Australian Entertainment Subscriptions Study 2020 found SVOD and streaming music remained the top two largest categories with 16 million and 12 million subscriptions respectively.

Video entertainment more important than ever

COVID-19 sent the Australian SVOD services market to new heights as Australians spent more time at home, with over half (52%) of SVOD users believing their services have become “essential” since the pandemic.

The total number of subscriptions reached around 16.3 million at the end of June 2020, a year-on-year increase of 32 per cent from 12.3 million in June 2019.

Telsyte research shows Netflix (5.4 million) and Stan (2.1 million) remained the top two SVOD service providers at the end of June 2020. Amazon Prime Video and Disney+ (launched in Nov 2019) both emerged strongly with 1.7 and 1.1 million subscriptions, respectively.

Use of “Amazon Prime Video” benefited from the strong uptake of “Amazon Prime” subscriptions (Telsyte measures a subset of Prime users based on those that use the Video option), as demand for online shopping and delivery has also soared.

Pent-up demand for sports content

With Australians unable to attend their favourite sporting matches, the pandemic has only made Australians’ appetite for sports content even stronger, with a surge in adoption towards the end of June 2020 when many sporting codes resumed.

“Despite a hiccup during the shutdown period, sports video subscriptions are set to continue to grow strongly as fans turn to apps instead attending stadiums,” Telsyte Managing Director, Foad Fadaghi says.

Telsyte estimates the total sports SVOD category grew by 11 per cent year on year to 4.9 million subscriptions at the end of June 2020. Telstra Sports Live Passes, Optus Sport and Kayo Sports made up around 95 per cent of total sports SVOD subscriptions.

Slowing content production boosting rivals

Disruptions to content production during the pandemic will likely present an issue for services going into the second half of 2020, with research showing consumers are recognising new program additions are in decline. More than 1-in-3 SVOD users feel there is less new content being added to their services since the pandemic.

However, rather than impacting negatively on the market, in the short term Telsyte believes this has driven consumers to consider subscribing to multiple services to address content shortfalls, rather than turning off services.

“Australians continue to show a strong willingness to subscribe to multiple services,” Fadaghi says.

Telsyte research shows that nearly half (47%) of households that subscribe to SVOD services have more than one service, an increase from 41 per cent in June 2019.

The market is well positioned to accommodate multiple providers, as more platforms such as Fetch TV, Apple TV and Foxtel are shaping to be more inclusive, allowing easy subscriptions to multiple services and single billing through the one platform. The study found 36 per cent of Australians are interested in using simplified, one-stop access to multiple services.

Free video demand solid as Pay TV subsides

SVOD services have not been the only winners during the past 12 months with free to air TV apps also growing viewership.

Broadcasting Video on Demand services (BVOD), including 9Now, ABC iView, etc have benefited as Australians searched for more content during the lockdown, especially as a trusted news sources for information about the current health crisis.

The main BVOD platforms had upwards of 10 million Australians using their service during FY2020 and almost half of survey respondents claimed they are spending more time on BVOD due to COVID-19.

In contrast, the total Pay TV market (which includes residential cable, satellite and IPTV) was down 6 per cent year on year to 2.6 million subscriptions at the end of June 2020.

Foxtel’s Pay TV was the main source of the market decline due to increasing adoption of SVOD, which itself is now pivoting strongly towards with Foxtel Now, Kayo Sport and Binge.

Fetch TV with its mixed business model as both a set top box platform and a IPTV subscription service remained the growth engine for the Pay TV market alongside the uptake of nbn broadband bundles.

Maturing streaming music market sees more starting to pay

The total number of streaming music subscriptions only increased 2 per cent year on year to 12.2 million at the end of June 2020; however, over half are now paid subscriptions, compared to 42 per cent at the end of June 2019.

The top three streaming music service providers in Australia remained Spotify, Google (including YouTube Music, YouTube Premium and Google Play Music) and Apple.

Streaming music providers are increasingly focused on the podcast segment as growth has slowed.

According to Telsyte’s research, more than 1-in-4 Australians aged 16 and over listened to podcasts between January and June 2020, with comedy, health and news and politics related podcasts most popular.

Game on! Game subscriptions starting to explode

Video games have been booming in popularity following the lockdown. About half of Australian households have a gaming console and 5 million people regularly purchase games (downloads and physical) making it a vibrant part of the entertainment market.

As well as dedicated consoles, Telsyte research shows that gamers overall were spending between 25 and 35 per cent more time on games during the pandemic ranging on devices such as smartphones, tablets, computers, and gaming consoles.

Australians had 5.8 million games related subscriptions at the end of June 2020, consisting of console subscriptions (e.g. PlayStation Plus, Xbox Live Gold), video game service subscriptions (e.g. EA Access, Xbox Game Pass and Apple Arcade), and Massively Multiplayer Online Game (MMOG) subscriptions (e.g. World of Warcraft).

The biggest growth was in video game service subscriptions which more than doubled to 2 million at the end of June 2020 (up from 0.9 million in June 2019). Telsyte forecasts this market is set to explode as several companies vie to be the ‘Netflix’ of games.

The study found a third of gamers are already aware of cloud gaming, where games are streamed from a remote server rather than stored locally on the users’ devices. This allows games to be played on devices with less computing power and the games also do not need to be downloaded and stored on the local device.

“Streaming gaming could be a game changer for the industry as it opens high end gaming to almost any device,” Fadaghi says.

Telsyte also found a growing interest in next-generation PlayStation 5 and Xbox Series X consoles as release dates get closer. Both will likely to help boost the games subscription market.

Telsyte estimates the total number of games related subscriptions could reach more than 17 million by June 2024, enabled by fast nbn and 5G Internet connectivity, next generation game consoles and services that will appeal to casual players on smartphones and tablets.