Pay-TV in North America is set to see its penetration in the region decline to 80% by 2021 from the current 87% as consumers move away from legacy service providers to alternatives like SVOD and virtual MSOs. A new study for Digital TV Research said that the number of pay-TV subscribers will see only a small decline, to 106 million in the United States and Canada, from 112 million in 2012, pay TV’s peak year.
A more significant issue, perhaps, is the decline in revenue expected over the same period.
Revenues from subscriptions and on-demand content hit $11.64 billion in 2015, the industry’s bet year ever.
But, by 2021, revenue is expected to decline 12% to $98.1 billion, some $13.54 billion less than this year.
The biggest decline is expected in the cable sector, which is forecast to drop $10.76 billion, follower by satellite at $2.13 billion and IPTV at $650 million.
Competition from OTT service providers will cut into VOD revenues and subscription revenues will be impacted as customer connections decline and the price being charged for service drops as a result of bargain pricing of bundled services.
The subscriber issue for pay-TV providers, meanwhile, is ongoing. An increasing number of homes are opting out of pay-TV service and, as younger consumers come online, that erosion will accelerate.
“At first glance, this does not indicate a massive cord-cutting problem,” said Simon Murray, Principal Analyst at Digital TV Research, said. “However, the number of non-pay TV homes will climb from 20.7 million to 33.3 million over the same period (as the number of households will continue to increase).”
The number of pay TV subscribers declined by 2 million in 2015.
Before 2015, much of the pay TV fall was attributed to the loss of analog cable subscribers (which still fell by 1.1 million in 2015). However, the number of IPTV subs fell slightly in 2015, with satellite TV losing 610,000 subscribers.
“2015 was notable because subscriber losses were recorded for all of the major platforms: cable, satellite and IPTV,” said Murray. “Cable has been losing subscribers since 2011. Satellite TV started in 2014, and IPTV joined them in 2015.”
Much of the IPTV loss is attributable to AT&T encouraging its U-Verse subscribers to switch its DirecTV satellite platform. However, not even this bonus was enough to stem the loss of satellite TV subscribers.
While Murray said subscriber loss between 2016 and 2021 likely will be small, totaling about 2 million customers, there’s also a very real possibility that those numbers will be higher, driven by more mobile services coming online.
While the growth of Verizon’s Go90 mobile video service has been less than anticipated, it may relate more to a lack of premium content availability than a desire for mobile services.
AT&T executives, meanwhile, have hinted that they plan to be more aggressive with content coming to mobile devices.
Offering a true mobile Cloud TV service could change the pay-TV equation substantially.
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