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UTMCAP TMT - Sector Research - Video Streaming

• Stats / Market Overview:
  • Revenue: $\mathrm{\$}97.6$bn in $2025$
  • $2020$-$2025$ CAGR: $12.8\mathrm{\%}$
  • $2025$-$2030$ forecast CAGR: $6.8\mathrm{\%}$
  • Some centralization with biggest players:
    • YouTube (Alphabet), Netflix, and Disney account for $59.8\mathrm{\%}$ of the market ($28.5\mathrm{\%}$ + $18.9\mathrm{\%}$ + $12.4\mathrm{\%}$ respectively). Amazon is also a major competitor.
• Reasons for growth:
  • "Cord-cutting" from traditional cable continues to accelerate.
    • Ex: The value given by cable simply doesn't compete with video streaming.
  • Accessibility on mobile devices, tablets, and integrated smart TVs.
    • Ex: Netflix is on almost any device.
  • Flexibility and personalization offered by on-demand platforms.
    • Ex: Algorithms giving you exactly what you want.
  • Diversification of offerings into live sports and events.
    • Ex: WWE now on Netflix.
• Growth potential:
  • Capturing a larger share of advertising budgets as they shift from traditional TV.
  • Leveraging AI for enhanced content personalization and predicting show success.
  • Further consolidation and partnerships, like the Paramount and Skydance merger, to strengthen content libraries and technology.
  • A potential ban on TikTok could drive users and creators to platforms like YouTube Shorts, increasing engagement and ad revenue.
    • $23\mathrm{\%}$ of respondents on a survey consider YouTube as their next platform.
• Handbrakes to growth:
  • Hollywood labor strikes (e.g., the $2023$ WGA strike) can halt production, causing content delays and significant financial losses.
  • "Subscription fatigue" among consumers facing numerous services and rising costs.
    • Cable suffered the same fate, content was partitioned into many different subscriptions, resulting in less value and more price for the consumer.
  • High cost of content production and bidding for licensed content.
  • High debt levels carried by some major companies, such as Warner Bros. Discovery.
• Structure of Market:
  • High centralization with a few dominant players.
  • High barrier to entry due to massive costs for content and technology.
  • High competition, described as "fierce" and "intensified."
  • Life Cycle Stage: Growth (growing faster than the overall economy).
  • High volatility of revenue, with annual changes in a range from $(-10\mathrm{\%},10\mathrm{\%})$ to $(-20\mathrm{\%},20\mathrm{\%})$
• Centralization:
  • Players:
    • YouTube ($28.5\mathrm{\%}$), Netflix ($18.9\mathrm{\%}$), and Disney ($12.4\mathrm{\%}$) are the market leaders.
  • Products:
    • Nonlinear ad-based streaming (on-demand with ads): $50.9\mathrm{\%}$
    • Nonlinear subscription or free streaming (on-demand): $25.1\mathrm{\%}$
    • Live/linear ad-based streaming: $14.4\mathrm{\%}$
    • Live/linear subscription or free streaming: $9.6\mathrm{\%}$
  • Geographically:
    • California has majority share in the us for video streaming locations due to silicon valley and hollywood at $63.3\mathrm{\%}$.
    • Runners up are New York, Texas and Florida with $19.2\mathrm{\%},18.2\mathrm{\%}$ and $13.3\mathrm{\%}$ of share respectively.
• Products:
  • Nonlinear Ad-Based Streaming: On-demand content supported by ads (e.g., Tubi, Peacock's free tier, Youtube). Largest market segment.
  • Nonlinear Subscription/Free Streaming: On-demand content for a fee or free (e.g., Netflix, Disney+, Crunchyroll). Relies on exclusive content and binge-worthy series.
  • Live/Linear Ad-Based Streaming: Scheduled, real-time broadcasts like sports and news delivered online with ad breaks (e.g., Hulu + Live TV, YouTube TV).
  • Live/Linear Subscription/Free Streaming: Live, cable-like programming for a recurring fee without relying on ad revenue (e.g., Sling TV, fuboTV). Smallest market segment.
• SWOT:
  • Strengths
    • Widespread accessibility on numerous devices.
    • Advanced use of AI and algorithms for content personalization.
    • Flexible pricing models (e.g., ad-supported tiers) to attract price-sensitive consumers.
    • Strong brand identity and large, exclusive content libraries for major players.
  • Weaknesses
    • High and rising costs of producing original content and licensing popular titles.
    • High debt levels for some companies, limiting financial flexibility.
    • Dependence on a constant pipeline of new content to retain subscribers.
    • Consumer "subscription fatigue" from a fragmented market.
  • Opportunities
    • Expansion into high-demand live sports and events to attract broad audiences.
    • Capturing a larger share of the advertising market as it moves from linear TV.
    • Strategic mergers, acquisitions, and partnerships to consolidate market share and content libraries.
    • Leveraging AI and machine learning to optimize content strategy and reduce production risks.
  • Threats
    • Intense competition from both established players and new entrants ("streaming wars").
    • Production shutdowns and financial losses caused by Hollywood labor strikes.
    • Subscriber churn resulting from price increases or crackdowns on password sharing.
    • The risk of significant financial loss from expensive original content that fails to resonate with audiences.
• Exec Summary:
  • The U.S. video streaming industry is in a period of fierce competition and high growth, with a $2025$ revenue of $\mathrm{\$}97.6$ billion, driven primarily by consumers abandoning traditional cable. The market is dominated by YouTube, Netflix, Disney, and Amazon. Key strategies for success involve a hybrid approach to content (original vs. licensed), the adoption of multi-tiered pricing including ad-supported models, and expansion into live sports. The future outlook points toward continued growth, further market consolidation, and a critical reliance on advertising revenue and AI-driven innovation to ensure long-term sustainability. However, the industry faces significant threats from high content costs, labor strikes, and intense competition.