Dollar SignThe streaming video spending growth rate will see its first ever decline between 2015 and 2016, according to Strategy Analytics, which forecasts U.S. consumers will spend $6.62 billion on video streaming services such as Netflix, Amazon Prime and Hulu, this year.

If realized, the forecast would translate to a 22%, or $1.19 billion, increase as compared to 2015, and the first-ever year-over-year (YoY) slowdown in growth. The total amount U.S. video streamers spent on such services was $1.21 billion higher in 2015 than it was in 2014, Strategy Analytics highlights in a press release.

The forecast indicates the U.S. video streaming market may be approaching saturation, the market research provider continues. Nearly 60% of broadband households subscribe to a video streaming service, Strategy Analytics Digital Media Director Michael Goodman points out.

Streaming Video Spending
Strategy Analytics pegs the saturation level for video streaming at 85% of broadband households, similar to that for pay TV. Commenting on its revenue and growth forecast for 2016, he said: “Although the change in increase is relatively small, its direction is extremely significant. It shows that, whilst actual market saturation is a few years off yet, the domestic U.S. streaming subscription market is now on the backside of the adoption curve. The incremental increase in annual dollar spend will decline from here on.”

More specifically, Strategy Analytics expects annual growth in spending on video streaming will fall below 8% within five years.

Americans will spend a total $19.1 billion on home video this year, according to Strategy Analytics, up 3.6% YoY and the equivalent of $13.42 per month. Advertising around paid VoD content will increase 21% to $8.82 billion, which would result in home video market overall growing 8.3% to $27.3 billion.

Drilling Down into the Data
Turning to streaming video service providers, market leader Netflix accounts for 53% of subscriptions, more than double that of second-ranked Amazon Prime Video. Hulu follows at 13%, according to the Strategy Analytics streaming video spending research. Strategy Analytics notes that nearly 40% of U.S. households subscribe to at least two services.

“This multi-subscription behavior means growth relies on cannibalizing other services or getting people to subscribe to more than one – and companies seem to be betting on the latter,” Goodman commented.

“Most of the new services being launched today are in the $2-$5 range – clearly designed to be complementary to a Netflix or Amazon. The domestic situation is also a huge reason why international expansion is so important, this is underscored by Amazon’s recent video initiatives, and is particularly relevant for Netflix who has the least room to grow in the U.S.”

A 22% increase in annual streaming subscription revenue would translate into 35% of consumers’ total spending on home video this year. DVD/Blu-ray purchases are the second most popular category of home video spending, but will decline 7% to $5.67 billion, or 30% of consumer spending. Disk rentals will drop 10% to $2.75 billion, a 14% market revenue share.

Purchase downloads meanwhile will rise 17% to $2.2 billion. Rental downloads, in contrast, will drop 5% to $1.84 billion, yielding a 22% combined market share, Strategy Analytics forecasts.

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