According to GlobalData forecasts, the global market for subscription video-on-demand (SVoD) services—where viewers pay a monthly fee to access a library of content—was worth $103bn in 2022.

It will grow to $155bn by 2027 at a compound annual growth rate (CAGR) of 8.5% between 2022 and 2027. By contrast, revenue from traditional pay TV services (which include cable TV, satellite TV, and terrestrial TV) will decline from $218bn in 2022 to $194bn by 2027.

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In 2022, global SVoD subscribers hit 1.5 billion, overtaking the number of pay TV subscribers, which fell to 1.4 billion for the first time, according to GlobalData.

SVoD platforms are under pressure on multiple fronts

The video streaming industry enjoyed strong growth during the Covid pandemic but has since entered choppier waters. This is due to a post-pandemic shift in viewing habits, rising inflation in several markets, and so-called subscription fatigue (where consumers feel overwhelmed by the number of subscription services they manage). These factors led to Netflix losing subscribers for the first time in a decade in the first quarter of 2022.

But now the video streaming business model that Netflix created is broken. Over the last decade, Netflix has sparked a content war by increasing its spending on film and TV content from less than $2bn in 2012 to over $16bn by the end of 2022. In the battle for streaming customers, Disney and others also increased their content production, resulting in billions of dollars being spent on exclusive, original content every year. Disney, for instance, spent $33bn in 2022 alone, which equates to over five times the BBC’s entire $6bn (£4.7bn) budget.

Tech giants such as Apple and Amazon do not separately report SVoD profits but are likely to be making losses, which they may be happy to tolerate to support their broader ecosystems. They are unlikely to recoup all of their money. But their oversized content budgets are increasing financial pressure on TV broadcasters like ITV and pure play video streamers like Netflix.

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Ad-supported video streaming is disrupting the industry

Streamers are now cutting costs, refreshing content libraries, and bundling other content (such as video games, sports, and music) in an attempt to maintain their appeal. However, these short-term fixes are unlikely to result in sustainable growth.

Both Netflix and Disney have seen their bubble burst, with the latter’s Disney+ service incurring heavy losses. As streaming services lose their lustre, the industry will see consolidation, and the number of independent players will fall.

One response has been for subscription-based streaming platforms to shift towards a hybrid model incorporating advertising-based video on demand (AVoD) or free ad-supported TV (FAST) to attract cost-conscious subscribers. This is unlikely to balance their books. The most likely outcome is more industry consolidation.

Success in the video streaming market is guaranteed for none

The video streaming industry is experiencing intensifying competition. Established media companies, technology giants, and content creators are investing in streaming platforms to capitalize on the growing market. Companies are vying for market share by offering compelling content libraries, unique features, and competitive pricing.

Alibaba, Alphabet, Amazon, Apple, Baidu, Comcast, Disney, Netflix, Paramount Global, Tencent, and Warner Bros. Discovery, are among the biggest video streaming companies, although many run loss-making SVoD divisions. Their success is no longer guaranteed. They are all under pressure to reduce content spend, retain customers, and increase profitability.

Traditional TV networks and cinemas that cannot compete with the expanding ecosystems and revenue streams of video streaming platforms and the tech giants face a bleak future.