Spending on Video Content May Have Hit Its Limit

Analysts Expect a Video Content Spending Decline

For the past three decades, consumer spending on video content has increased year-over-year. That said, a new report demonstrates how this trend could be coming to an end. More specifically, consumers may have reached a limit on the amount of money they’re willing to allocate from their paychecks to certain forms of video entertainment. This makes picking companies on either side of the cord-cutting cultural shift all the more interesting.

Cable services, theaters, and home video companies are all projected to experience dips. On the flipside, streaming platforms may steadily gain market share. Combined, however, as COVID-19 continues to impact the economy, overall spending on video content could decrease by 5% this year alone.

Taking a Look at the Trend

Analysts Michael Nathanson and Craig Moffett from Moffett Nathanson predict spending on video, cable, and satellite services to continue dropping for years to come. Despite seeing 2% annual growth from 2014 to 2019, the analysts estimate there could be a 0.4% per year decline in spending on these services for the next four years.

Although there is currently economic uncertainty due to coronavirus and shutdowns, analysts believe the decrease in spending is not necessarily because of current economic conditions but because of changes in technology. With the exception of live sports, which have currently been sidelined, legacy cable providers may continue to face headwinds in the form of weak advertising and continued cord-cutting even after the pandemic subsides.

Streaming Services Could Continue to Grow

Although other video content providers are taking a hit, total spending on subscription streaming services is expected to grow to $38 billion through 2024. Specifically, the market for virtual cable services such as AT&T Now (T) and YouTube TV (GOOGL) is expected to more than double, increasing from $6 billion in 2019 to $13 billion in four years.

Netflix (NFLX) in particular could be a company to watch. The streaming platform could reach 70 million subscribers by 2024. Amazon Prime (AMZN), Hulu, and Disney+ (DIS) are also expected to grow and to reach 65 million, 58 million, and 53 million subscribers, respectively.

Although coronavirus lockdowns caused more consumers to fill their time at home with video content, the industry may have reached a tipping point. Moreover, only certain segments of the hyper-competitive sector look set to outperform going forward. It will be crucial to assess a specific company’s offerings and business plan, especially as it relates to the future of the industry, before investing.

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