PwC Projects 25% U.S. VOD Ad Growth Through 2027

Over-the-top (OTT)/streaming video advertising revenue in the U.S. will grow at a compound annual rate (CAGR) of 25% between 2022 and 2007, to reach $33.4 billion, according to PwC’s latest Global Entertainment & Media Outlook, covering 2023 through 2027.

U.S. streaming subscription revenue is projected at a 14.2% CAGR, which will bring it to $35.8 billion by 2027. Transactional VOD will grow by nearly $11 billion over the period.

Total U.S. OTT revenue is forecast to increase 15.9% annually, rising from $49.4 billion in 2022 to $57.1 billion this year and $75.5 billion in 2027.

On a global basis, streaming revenue will have a projected CAGR of 8.4%, rising from $116.5 billion in 2022 to $133 billion this year and $174.6 billion in 2027.

That includes CAGRs of 13.8% for advertising and 7% for subscription revenue.

But streaming revenue growth is projected to slow to 4.3% in 2027, down from 35.3% during the pandemic in 2020. Even globally, growth is projected at just 4.6%.

Ad-based video-on-demand (AVOD), rather than subscription-based VOD (SVOD), will drive most growth.

Like other researchers, PwC notes that operators are seizing the opportunity to offer cheaper streaming alternatives as consumers worldwide cut back on SVOD services in response to an inflation-driven financial squeeze.

The AVOD market has to date “not been exploited in many territories” and is just starting to be tapped by some of the biggest streaming players, the report points out.

Between 2022 and 2027, the U.S. AVOD market will “balloon” by $16.3 billion, compared to a $9.2 billion gain for SVOD globally, PwC estimates.

Still, SVOD will remain the largest revenue contributor, passing $100 billion in global revenue in 2025 and hitting $109 billion in 2027, for a 62.5% share.

Looking at individual markets, the U.S. will continue to dominate, with its $75.5 2027 projected revenue far surpassing China’s $25.9 projected revenue.

Streaming operators are responding to slowed subscription revenue and investor pressure for profits by turning to content licensing, returning to release windows to garner box-office revenue, offering bundles, and focusing content investment in live sports and sure-fire content, like franchise extensions.

A decade into the streaming era, OTT players’ business models are “beginning to look increasingly like those of the traditional pay-TV, free-to-air and cble operators that they have disrupted,” states the report. “Streaming services are increasingly forming new pay bundles,” including with pay-TV partners and combining their own multiple services into discounted bundles, or bundling video and non-video streaming services, a la Apple.

Meanwhile, with a projected CAGR of negative 0.9% between 2022 and 2027, traditional TV revenues will total $173.6 billion globally in 2027 — down from $200 billion in 2017.

In the U.S., subscription revenue is expected to fall at 5% per year, dropping to $61.1 billion by 2027 — down from $100 billion in 2017.

Advertising, however, will continue modest growth. Globally, its CAGR is projected at 0.5%, to bring its total to $160.1 billion by 2027. In the U.S., a projected CAGR of 0.5% will bring the total to $74.1 billion in 2027. Much of that will be driven not by traditional broadcast, cable and local advertisers, but online advertising, which is forecast to see a 10% CAGR.

“The steady, if unspectacular, growth of the TV advertising market has seen the medium move gradually closer to parity with subscription TV revenue, which by contrast is seeing inexorable long-term decline as consumers continue to cord-cut in the streaming era,” sums up PwC.

By 2027, global TV subscription revenue is projected to exceed ad revenue by just $13.5 billion—down from a $37.6 billion advantage in 2018.

In the U.S., where U.S. homes are projected to shrink to 49.9 million by 2027 (down from almost 100 million in 2016), overall pay-TV revenue will be $30 billion less in 2027 than 2017.

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