Thanks to the continuous increase in the number of video-on-demand (VOD) service providers in Japan and beyond as well as the pandemic over the last few years, these have changed the viewing habits of content consumers from being tied to watching live broadcasts at designated timings to that of doing the same at your own time and pace. With the dizzying range of providers out there in the market, there is a lot of content, sometimes too much to choose from as consumers pick the platforms whose offerings suit their preferences and budgets.
In Japan, there are 4 main categories of VOD providers as mentioned below. Note that the list of providers quoted as examples is not exhaustive:
- AVOD (Advertising Video On Demand): Generally free access to videos in return for watching ads served before the video starts and during the screening duration
E.g. YouTube
- SVOD (Subscription Video On Demand): Access to an unlimited number of videos for a fixed monthly subscription fee
E.g. ABEMA Premium, Amazon Prime Video, DAZN, DMM TV, d Anime Store, FOD Premium, Hulu, Lemino (previously named dTV), Netflix, Paravi, TELASA, U-NEXT, Anime Houdai and Disney+ etc.
- TVOD (Transactional Video On Demand): Pay-per-video but access with a viewing period limit as compared to EST so the rate is usually cheaper
E.g. ABEMA Store, Amazon Prime Video, DMM Douga, FOD Premium, Google Play, GYAO! Store, Hulu Store, iTunes Store, J:COM On Demand, Lemino, Paravi, Rakuten TV, TELASA, U-NEXT and Hikari TV Video Service etc.
- EST (Electronic Sell-through): Pay-per-video but without a viewing period limit; tends to be more expensive than TVOD
E.g. Amazon Prime Video, DMM.com, Google Play, iTunes Store, Lemino, Rakuten TV and Hikari TV Video Service etc.
GEM Standard, a platform which provides information about the entertainment business through paid content such as rankings and analysis reports, has been sharing free excerpts of its data about the market share movements in the Japanese VOD scene over the past few years. For the purpose of this analysis, I will be focusing on the SVOD market only since the data from GEM Standard is primarily based on the subscription income which the SVOD providers reportedly earn and does not include advertisement income that the platforms earned.
Here are some of the key highlights where you can observe how the market has grown and changed as well as how the platforms are faring against one another in this competitive industry:
1) The overall VOD market size i.e. SVOD, TVOD and EST combined has been growing since 2019 but the percentage of this increase is getting smaller. (Source)
Comparing 2020 to 2019, the reported market size was about JPY 387.7 billion which was 32.5% higher than the previous year. This was largely attributed to the pandemic which began in 2020 thus leading to a spike in the demand for at-home entertainment as people stayed home most of the time due to lockdowns and social distancing. Subsequently, the growth percentages narrowed where 2021 was 19% higher, 2022 went up by 15% while 2023's growth slowed to a single digit of 8.2%.
As for the market value on a yearly basis, the subscription income was reported to have reached JPY 574 billion in 2023 and expected to hit JPY 737.1 billion by 2028.
2019: JPY 292.5 billion
2020: JPY 387.7 billion
2021: JPY 461.4 billion
2022: JPY 530.3 billion
2023: JPY 574.0 billion
The slowdown in growth could be due to a variety of factors other than increased competition such as the reopening of countries post-pandemic, increased international travel as well as uncertain or worsening economic conditions which will lead to people cutting back on expenditure for entertainment. While the market is still growing, the quantum of growth is no doubt decreasing so it will be essential to attract existing users of other platforms to "jump ship" besides trying to expand the industry.
2) Netflix is the market leader since 2019 but its market share is gradually eroded as the number of competitors increases and their offerings improve. (Source)
Netflix is the undisputed king of the SVOD market segment as seen from its domination of the No.1 slot for 4 consecutive years since 2019. Considering that the platform only entered the Japanese market on 1 September 2015, it had only taken them less than 4 years to achieve this.
However, as the competition gets stiffer and their competitors evolve and improve, the size of Netflix's leading position is somewhat affected although the amount of decrease is still less than one percent for now. It remains to be seen if the competition can step up its game and lure more new users into the market and/or attract existing Netflix users to sign up for their services.
3) U-NEXT has surged to become the No.2 in the market by overtaking Amazon Prime Video.
As seen in the figures shown in the table, while 2022 was a mixed bag with 7 out of the 13 featured platforms in the table seeing a drop in their market shares, 2023 was a sea of red as only 4 out of 13 platforms increased their market shares. (DMM TV and Others not included)
While Amazon Prime Video was a distant second compared to Netflix which had almost double of its market share back in 2021, U-NEXT had taken over Amazon's runner-up position in 2022 and 2023 to become the new No.2. This is despite the fact that Amazon had also increased its market share in 2023 but not as much as U-NEXT. The gap between No.1 and No.2 in the SVOD market has also narrowed with just 6.7% separating the two positions.
4) The market remains dominated by a few platforms only with the rest of the pie split among many competitors.
The number of platforms with more than 10% in market share remains limited to the top 3 or i.e. Netflix, U-NEXT and Amazon Prime Video. The only exception was DAZN which saw a temporary increase in 2022 probably due to major sporting events like the Qatar World Cup but it dropped below 10% in the following year as a result of dropping the most market share of 1.7%.
The changes in the top 3's combined market share i.e. 46.6% in 2021, 46.7% in 2022 and 49.6% in 2023 also show the following:
* The Top 3's dominance in the market has strengthened to close to 50% last year
* The spread of the Top 3's market shares is getting more even compared to 1 being much more dominant over the other two prior to 2023
* The rest of the competitors are fighting for a smaller share of what remains outside the top 3's membership bases now
What's also worth noting is that those which are above 5% in terms of market share but still haven't been able to threaten the Top 3's positions yet i.e. DAZN, Disney+ and Hulu tend to focus on niche areas such as sports or in-house productions as the core of its content offerings. Will this mean a relook into their content strategies to expand "outwards" for varied content sources or will they continue focusing on their strengths and in-house productions going forward so as to distinguish their exclusivity from those which aim to "have it all"?
As content consumers, we are really spoiled for choice these days - in fact a bit more than I need at times especially when not everything I want is on the same platform. Especially when seeking Japanese content, the biggest frustration I experience is that even on an international platform, the content restriction means that you cannot access the full Japanese catalogue if your IP address is not in Japan. And don't get me started on the hoax masked as "international release" which can sometimes be a delayed release outside Japan or worse still, not available in most countries. Last but not least, most of the platforms featured in this analysis are actually "domestic platforms" so users outside of Japan won't be able to access them anyway.
It doesn't make sense to subscribe to so many platforms not just because of cost concerns but also due to the limited time we have to spend on watching these shows. As such. it is interesting to see how consumers make more strategic choices going forward rather than pay for more platforms than they actually need. While our choices may or may not be necessarily affected by which platform is the market leader, these market movements provide interesting insights on how planned and unplanned events happening to consumers and the world at large can have an impact on our choices and possibly shape the type of content we can get on our chosen platform(s).
