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On Demand Entertainment Explodes as Video Games Take a Cue from Music and Video Services

Richard Kowalski, Sr. Manager, Industry Analysis and Business Intelligence, Consumer Technology Association

2019 is shaping up to be a successful year for subscription entertainment, shows CTA’s latest edition of the U.S. Consumer Technology Sales & Forecasts. Music lovers, binge-watchers and gamers continue to gravitate toward on-demand services, attracted by exclusive content, extensive catalogs and the benefits of anytime and anywhere access. Collectively, consumer spending on video, music and video game subscription services will hit $31 billion in 2019, gaining 27% over 2018, according to the report. Plus, there is still plenty of room for these delivery models to grow.

Video Games Move to the Cloud

The video game space is seeing the most exciting and disruptive developments in distribution models. With new entrants to the market – the Apple Arcade and Google Stadia – competition should be fierce among platforms over the next few years. Well-established players such as Sony and Microsoft have also announced future enhancements to their existing subscription streaming services.

Additionally, developers are trying to make it easier for people to play games on more devices. Currently, many popular titles rely on dedicated consoles or high-powered PCs to run. The industry is exploring cloud computing solutions to this problem, where devices with less powerful processors – most notably smartphones and tablets – would rely on cloud services for graphically-demanding games. Cloud-based games offer an additional benefit of allowing gamers to save their progress on one device and pick up where they left off on another.

Subscription packages that provide access to hundreds of titles allow gamers the freedom to sample titles and casually jump from one game to another. This all-you-can-eat approach to entertainment has worked marvelously for music and video and has the potential to do the same for gaming. Video game subscription services that combine the perks of cloud computing with large game catalogs are expected to do well in the coming years. Overall, consumer spending on video game subscription services will reach $5 billion in 2019, up 26% from last year, CTA forecasts.  

Music Services Continue to Resonate

According to our research, the 70 million smart speakers and over 200 million smartphones in American households create ideal conditions for the rapid uptake of music streaming services. But music is not the only attraction now, as service providers include audiobooks and podcasts in their offerings. Given the large role that music plays in American culture, millions of potential new subscribers remain untapped. Watch for services to differentiate themselves on audio quality, exclusive releases and discount bundling tied to video streaming services. According to CTA, consumer spending on music streaming services is expected to rise by 33% this year to $8.4 billion.

Video Streaming Universe Expands

Video streaming services continue to flourish. Subscription Video On Demand (SVOD) services such as Netflix and Hulu have drawn many subscribers with quality exclusive programming, helping this segment maintain annual double-digit growth. All eyes are on live TV services, which aim to provide streaming access to much of the content once exclusive to traditional pay TV packages, such as sports, live news and networks that did not allow streaming. While live TV streaming services run three to five times the price of SVOD services, they still cost less than cable and satellite packages. This price difference is expected to pull in many more viewers in the next five years, as people tap into the potential of their smart TVs and tune in to more over-the-top video content. Streaming video services will grow 25% this year, reaching $17.7 billion, CTA says.

The on-demand entertainment movement is still in its infancy and is sure to bring interesting developments in the years ahead. The CTA forecast team will continue to keep a close eye on innovations in this segment.

Download the full U.S. Consumer Technology Sales & Forecasts report.