Market Analysis – 55111516 – Internet based television or motion picture program

Market Analysis: Internet-Based Video Production (UNSPSC 55111516)

1. Executive Summary

The global market for internet-based video programming is experiencing robust growth, with a current estimated total addressable market (TAM) of $115.5 billion. Projected to grow at a 3-year CAGR of est. 14.8%, the market is driven by strong consumer demand for on-demand content and expanding broadband access. The primary challenge facing the category is extreme price volatility, fueled by intense competition for premier talent and intellectual property. The most significant opportunity lies in leveraging new production technologies, such as generative AI, to control escalating costs and accelerate content creation timelines.

2. Market Size & Growth

The global market for streaming video content production is large and expanding rapidly as it continues to displace traditional linear broadcasting. North America remains the dominant market due to high consumer spending and a concentration of major production studios. However, the Asia-Pacific region is the fastest-growing, driven by rising disposable incomes and massive mobile internet adoption.

[Source - Allied Market Research, Feb 2024]

Largest Geographic Markets (by Revenue): 1. North America (est. 38%) 2. Asia-Pacific (est. 31%) 3. Europe (est. 22%)

3. Key Drivers & Constraints

1. Demand Driver: Cord-Cutting & Mobile Consumption. The structural shift away from traditional cable and broadcast television to on-demand, multi-device viewing is the primary demand driver. The proliferation of 5G networks is further accelerating mobile video consumption, increasing demand for short-form and mobile-first content.
2. Cost Constraint: Talent & IP Bidding Wars. "Above-the-line" costs for A-list actors, directors, and showrunners, along with fierce bidding for rights to established intellectual property (books, comics, games), are the largest sources of cost inflation and volatility.
3. Technology Shift: AI in Production. Generative AI is rapidly moving from concept to application in pre-production (script analysis, storyboarding), post-production (VFX, editing), and localization (dubbing), offering potential for significant cost and time savings.
4. Regulatory Pressure: Local Content Quotas. Governments, particularly in the EU, Canada, and India, are increasingly mandating that global streaming platforms fund and feature a minimum percentage of locally produced content, impacting global production strategies and budgets.
5. Consumer Behavior: Subscription Fatigue. A crowded market is leading to consumer churn and "subscription fatigue." This is driving a strategic shift by major suppliers towards hybrid business models, including lower-cost, ad-supported tiers (AVOD).

4. Competitive Landscape

Barriers to entry are High, defined by immense capital requirements for content production, the need for a compelling intellectual property library, and the global marketing and technology infrastructure required to compete at scale.

⮕ Tier 1 Leaders * Netflix: The global market leader, differentiated by its massive content budget, sophisticated user data analytics for greenlighting decisions, and extensive global production footprint. * The Walt Disney Company (Disney+): Competes with an unparalleled portfolio of high-value IP (Marvel, Star Wars, Pixar, Disney Animation), creating a powerful brand-driven ecosystem. * Amazon (Prime Video / MGM Studios): Leverages integration with the Amazon Prime subscription bundle and the vast MGM content library to drive subscriber value and retention.

⮕ Emerging/Niche Players * Apple (Apple TV+): Focuses on a "quality over quantity" strategy with high-budget, prestige productions featuring major stars. * Warner Bros. Discovery (Max): Relies on a deep, premium catalog from HBO, Warner Bros. films, and Discovery's unscripted content. * Paramount Global (Paramount+): Utilizes a broad mix of content from CBS, Paramount Pictures, and live sports to attract a wide demographic. * YouTube (Alphabet): Dominates the ad-supported space and is aggressively expanding into premium content and live sports rights (e.g., NFL Sunday Ticket).

5. Pricing Mechanics

The "price" of this commodity is the total production budget or licensing fee. For commissioned work (e.g., a corporate brand film), pricing is built up from line items across three phases: pre-production (scripting, casting, location scouting), production (crew labor, equipment rental, talent fees, location costs), and post-production (editing, visual effects, sound design, color grading). Studio overhead, producer fees, and contingency are typically added as a percentage of the subtotal, often 15-25%.

For licensing existing content, pricing is determined by factors such as exclusivity, term length, geographic territory, and the perceived value of the IP. The most volatile cost elements in new production are concentrated in specialized, high-demand inputs.

Most Volatile Cost Elements (24-Month Change): 1. Above-the-Line Talent (Actors, Directors): est. +8-12%. Driven by new union agreements post-strikes and intense competition for bankable stars. 2. Intellectual Property Rights: est. +15-25%. Bidding wars for popular book series, video games, and life rights have escalated acquisition costs significantly. 3. Visual Effects (VFX): est. +5-10%. A combination of skilled labor shortages, rising software licensing fees, and increased demand for complex CGI has driven up costs.

6. Recent Trends & Innovation

• Hollywood Labor Strikes (Resolved Nov 2023): The WGA and SAG-AFTRA strikes halted most U.S. production for nearly six months. The resulting agreements secured higher wages and new protections regarding AI, but created significant production backlogs and near-term cost increases.
• Mainstreaming of Ad-Supported Tiers (AVOD) (Q4 2022 - Present): Major players like Netflix and Disney+ successfully launched cheaper, ad-supported subscription plans to combat subscription fatigue, grow market share, and create a new revenue stream.
• Live Sports as a Key Differentiator (2023-2024): Streamers are aggressively bidding for and winning rights to major live sporting events (e.g., Amazon's NFL Thursday Night Football, Apple's MLS Season Pass), previously the domain of traditional broadcasters.
• Generative AI in Pre-Production (2024): Studios are actively piloting generative AI tools to accelerate script development, create concept art, and generate synthetic voiceovers for early-stage animation, signaling a major shift in production workflows.

7. Supplier Landscape

Note: Market share is based on subscription video-on-demand (SVOD) subscriber estimates. [Source - Ampere Analysis, Q1 2024]

8. Regional Focus: North Carolina (USA)

North Carolina presents a compelling alternative to traditional production hubs like California and New York. The state offers a 25% rebate on qualifying productions and purchases via the North Carolina Film and Entertainment Grant, creating a direct cost-saving opportunity. Demand is strong, with the state hosting numerous feature film, episodic series, and commercial productions. Local capacity is robust, centered around EUE/Screen Gems Studios in Wilmington, one of the largest studio facilities on the East Coast. The state boasts a deep and experienced non-union and union crew base, providing high-quality labor at a more competitive cost structure than primary markets.

9. Risk Outlook

10. Actionable Sourcing Recommendations

1. Unbundle Production Services for Corporate Projects. For any commissioned marketing or training video, avoid single turnkey contracts. Instead, issue separate RFPs for pre-production, production, and post-production. This strategy leverages competition among specialized vendors and allows for sourcing in lower-cost regions like North Carolina, potentially reducing non-talent production costs by est. 15-20%.

2. Negotiate Multi-Year Library Licensing. Instead of commissioning costly new content for recurring internal communications or training, pursue a multi-year licensing agreement for a curated selection from a Tier-2 supplier's (e.g., Paramount, CuriosityStream) back-catalog. This provides budget certainty, mitigates production risk, and offers immediate access to a large volume of professionally produced content at a fraction of the cost of creation.