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On-Demand Entertainment Gains Momentum

Connectivity is enabling new business models and innovative services, but it has also dramatically transformed established businesses. Nowhere is this better seen than in the monumental shift away from physical media.

The music industry highlights this phenomenon, where the primary method of content delivery changed from CDs to digital downloads, and then to streaming. Just 10 years ago, 40 million portable media players shipped to the U.S. In 2019, this number will drop to 5.3 million. Meanwhile, spending on subscription music streaming services in 2019 is expected to be $7.7 billion, while it was barely a market 10 years ago.

4G wireless connectivity has played a crucial role in music delivery models. Reliable wireless internet combined with all-you-can-use music services makes it convenient to access any song, anytime, anywhere.

Video at Home

Reliance on physical media in the home video industry is also fading. We see evidence of this format shift in hardware sales over the past 10 years. In 2009, U.S. shipments of DVD players (Blu-ray and standard) totaled 28.1 million units; in 2019, DVD player shipments are expected to reach 7.8 million — a decline of over 70 percent.

In contrast, U.S. smart TV shipments in 2009 totaled 749,000, but will reach 36.3 million in 2019. In 2009, 3.6 million streaming sticks and boxes shipped to the U.S., compared to 19.7 million shipping this year. And this does not include more popular devices that stream video, such as smartphones, notebook PCs and tablets.

Ten years ago, the app ecosystem was not capable of accommodating the video quality and streaming services that it does today. The amount of content available to video streamers in 2009 was a fraction of what it is now. Traditional pay-TV companies are taking their cues from trailblazers such as Netflix and Hulu, gearing their future business models toward subscription streaming platforms. Overall, consumers will spend $18.2 billion on subscription video streaming in 2019, an increase of 27% over 2018.

Game On

The gaming industry may be the next medium to make the leap to ondemand services. Microsoft recently released its One S All-Digital console, which omits the optical disc drive. All-digital gamers are being directed to Microsoft’s subscription game platform, Xbox Game Pass, to access a large library of online games. Sony also offers a subscription gaming platform called PlayStation Now. With Google recently announcing its console-less Stadia game platform, the writing is likely on the wall for the future of gaming.

CTA estimates spending on physical gaming software in 2019 will total $4.5 billion, representing 10% of total gaming software revenues. This is expected to shrink to 5% of the market in 2022. Spending on gaming subscription services is expected to surpass physical gaming next year, reaching $4.6 billion in 2020 and growing to $6.6 billion by 2022.

While these format shifts have not happened overnight, on-demand and subscription models will shape the future of entertainment. It’ll be exciting to see how content holders compete in this new environment. 

Rick Kowalski