How Many More Americans Need Streaming Services?

Since the arrival of Netflix (NFLX -3.25%), observers have whispered about the next "Netflix killer." This year, we're going to see a lot of these allegedly homicidal new competitors: Disney (DIS -0.59%), Apple (AAPL -2.70%), and AT&T (T -1.29%) (through subsidiary WarnerMedia) are each going to release streaming video on demand (SVOD) services to compete with Netflix.

But Netflix has a lot of advantages, and perhaps the largest one is its massive user base. There are nearly 53 million Netflix subscribers in the United States, according to the company's third-quarter earnings report. And then there are the many Americans who subscribe to Amazon's (AMZN -1.05%) Amazon Prime Video (likely north of 60 million, though not all of them use the streaming service that comes with their Prime subscription), Hulu (more than 25 million), and other popular services.

Image source: Getty Images.

All of this begs the question: How many people in the U.S. are in the market for a streaming service? And if the market here is nearly saturated, where can streaming services find paying customers?

Land of the streams

It hasn't been that long since Netflix essentially invented the streaming video market, but it's already hard to find folks who don't stream. In a 2018 survey, CNBC found that 57% of Americans have a streaming service of some kind. For reference, 66% of people said they had cable or satellite TV (the majority of those said they had a streaming service as well).

Is streaming video nearing market saturation? Nobody knows for sure. But here's a back-of-an-envelope calculation: the Census Bureau estimates the U.S. population to be 327,167,434 as of July 2018, with 77.4% of those people being adults. That's 73,939,840 adults, and CNBC says that 57% of them already have at least one streaming subscription. So we have 31,794,131 adults left who could still subscribe to their first streaming service -- fewer than subscribe to Netflix alone.

Of course, there's not a hard limit to how many streaming services one person or household might subscribe to. CNBC found that about a quarter of all consumers have two or more. But there's not much useful data on this subject, at least in the public sphere. Without knowing which services overlap and how much, we can't say for sure that there's a big appetite for multiple subscriptions. People who have Netflix and Amazon Prime technically have two streaming services, but not all Amazon Prime users watch Amazon Prime Video (even though all U.S. Prime subscribers have it by default), and Amazon Prime is not entirely analogous to the incoming Netflix killers precisely because it is not just a streaming service. And there are other types of streaming services besides Netflix-like SVOD services, including live TV streaming services and other less direct competitors. Even if we find a significant population of people with multiple streaming subscriptions, that is not the same thing as saying that all of those people have multiple SVOD subscriptions.

In short, it's impossible to say exactly when the U.S. market for streaming will be saturated -- but no matter how you slice it, there's only so much headroom. Perhaps there's room for a new competitor or two, but it seems extremely unlikely that there is room for three such competitors. Ready or not, though, that's what we're getting.

Hungry new competitors

The streaming services are coming.

Disney is planning a new streaming service, Disney+, for 2019. AT&T's WarnerMedia, which already owns HBO and its streaming service HBO Now, is planning a new SVOD launch as well. And Apple has invested $1 billion in a new streaming service that should also appear sometime this year (though reports indicate that it may be free to Apple users rather than subscription based -- at least to start).

Presumably, given what we just explored about the streaming market in the U.S., the new services will have to come after Netflix customers. They'll have to get some consumers to defect and others to add to their total number of subscriptions. It's going to be a very competitive market -- here in the United States, at least.

The future battlegrounds of streaming

There are only so many streamers in our neck of the woods. But this isn't the only market for streaming, and the video giants know that.

Netflix has been expanding abroad for some time now. Its subscriber growth numbers have become increasingly reliant on foreign markets.

SOURCE: NETFLIX.

As active as Netflix has been, however, there is still plenty of room for competitors. It's a wide world, after all!

India is one obvious target. Its streaming market is estimated to be worth more than $700 million, and that number is rising. Netflix has been working hard to make inroads there, and so has Amazon. There are hurdles, of course: Most notably, India has a less developed internet infrastructure than the U.S. And there is a domestic streaming service market to compete with, led by Hotstar -- though Hotstar's distant parent company, once 21st Century Fox, will now be Disney.

China, too, has its own streaming platforms. But its huge, upwardly mobile population and its fast-improving infrastructure make it a potential growth area for U.S. streaming services, too. Netflix and Amazon are active in Europe as well, where the streaming market is smaller than the U.S. but is catching up due to faster growth. In Latin America, streaming revenues are projected to double in the next three years. The market for streaming video in the Middle East and Africa is projected to pass $1 billion by 2023.

Not all streaming services are active abroad -- Hulu, most notably, is not in on most of these markets (it's available in the U.S. and Japan). The streaming newcomers have not shared explicit plans to offer their services outside of the United States. But Disney is reportedly planning to expand Hulu's international presence, and similar moves for Disney+, Apple's service, and WarnerMedia's service all seem prohibitively likely.

Foreign factors

The race for domestic streaming subscribers is going to be a brutal one. But a more competitive market at home won't be the only place for streaming services to win battles. Look for foreign markets to become increasingly important to streaming services as they seek to keep growing subscriber counts and income even as the U.S. market reaches saturation.