A $500 Billion Market http://seekingalpha.com/a
Post# of 96897
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Posted On: 02/11/2017 5:40:24 AM
A $500 Billion Market
http://seekingalpha.com/article/4044905-amazo...5&dr=1
The significance of this is not so much in how many pieces of hardware each company is selling but what those sales tell us about each company's success in accessing a larger market. The streaming box market comes to only a few billion a year. Even if it replaced the entire set-top box market, it would only come to $20 billion.
But streaming boxes are significant because they are the portal through which consumers access the larger TV/Film market. Americans alone spend almost $120 billion on pay-TV services. Corporations chip in another $70 billion in TV ads, and then there are the VOD sales and SVOD services like Hulu and Amazon Prime that stream across these platforms. Altogether, the size of the US TV market alone is well in excess of $200 billion.
By comparison, in the just finished calendar year 2016 all of Apple's iPhone sales put together did not reach that mark. The size of the pay-TV market worldwide comes to over half a trillion. The continuing growth in developing markets means it will probably go even higher.
Apple, Amazon and Google all use their own digital storefronts in their streaming boxes, so whoever can get their gear into consumers living rooms takes the 30% commission for each piece of digital content sold. But even more than that, the streaming box determines the user interface and customer experience and increasingly the very structure of the economics. Amazon already is using its Fire TV to sell individual channels to consumers, making them the potential gatekeeper for the next generation of television if they can spread Fire TV wide enough.
We don't know what share of the channel's revenue they take, but to give just one example, traditional distributors take 50% of HBO's monthly fees for themselves. If Amazon can persuade 20 million Prime members to subscribe to HBO through them, that's $1.8 billion per year in distribution fees. And that's just one channel in a $500 billion market. If even 10% of that amount goes to STB manufacturers, its potentially $50 billion a year in revenue when the transition to digital TV is complete.
http://seekingalpha.com/article/4044905-amazo...5&dr=1
The significance of this is not so much in how many pieces of hardware each company is selling but what those sales tell us about each company's success in accessing a larger market. The streaming box market comes to only a few billion a year. Even if it replaced the entire set-top box market, it would only come to $20 billion.
But streaming boxes are significant because they are the portal through which consumers access the larger TV/Film market. Americans alone spend almost $120 billion on pay-TV services. Corporations chip in another $70 billion in TV ads, and then there are the VOD sales and SVOD services like Hulu and Amazon Prime that stream across these platforms. Altogether, the size of the US TV market alone is well in excess of $200 billion.
By comparison, in the just finished calendar year 2016 all of Apple's iPhone sales put together did not reach that mark. The size of the pay-TV market worldwide comes to over half a trillion. The continuing growth in developing markets means it will probably go even higher.
Apple, Amazon and Google all use their own digital storefronts in their streaming boxes, so whoever can get their gear into consumers living rooms takes the 30% commission for each piece of digital content sold. But even more than that, the streaming box determines the user interface and customer experience and increasingly the very structure of the economics. Amazon already is using its Fire TV to sell individual channels to consumers, making them the potential gatekeeper for the next generation of television if they can spread Fire TV wide enough.
We don't know what share of the channel's revenue they take, but to give just one example, traditional distributors take 50% of HBO's monthly fees for themselves. If Amazon can persuade 20 million Prime members to subscribe to HBO through them, that's $1.8 billion per year in distribution fees. And that's just one channel in a $500 billion market. If even 10% of that amount goes to STB manufacturers, its potentially $50 billion a year in revenue when the transition to digital TV is complete.
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