NAB
The pandemic
short-circuited the inevitable: Traditional Pay-TV will morph into Pay-TV
online. But as some analysts have been saying for a while, TV will still be TV.
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OTT is the delivery
medium of now and the future, particularly as growth in mobile video
consumption quickly resumes. According to Elizabeth Parks, president and
CMO of Parks Associates, this future will also be one where simply delivering
traditional Pay-TV packages and prices over a different medium will not be a
recipe for success for either vMVPDs (Virtual Multichannel Video Programming
Distributors) or the ecosystems around them.
While TV services
were formerly the indispensable base from which to upsell and bundle,
increasingly it is becoming broadband.
Parks gives the
following reason:
“Service providers
need to explore how to use bundled OTT TV services to differentiate themselves
from being just another broadband provider,” she advises.
“The opportunity to
raise ARPUs by bundling multiple services is decreasing as far as traditional
Pay-TV services are concerned but combining broadband with a vMVPD service
offer is an example of newer bundling possibilities.”
Parks notes that
for some service providers that are either unable/unwilling to offer a TV
service, or those considering divesting an unprofitable TV service business,
partnering to offer broadband bundles with a third party vMVPD may be an
increasingly viable option to gain and retain customers.
Industry analyst
Brett Sappington, who leads the video and entertainment research practice at
global insights firm Interpret, chats about the evolution of streaming and its
impact on the pay-TV model on the Light Reading podcast with senior
editor Jeff Baumgartner.
“Before you would
ever get to a subscriber floor, I think [the pay-TV industry] fundamentally has
to change… to make the economics work,” Sappington comments. “We’re really
looking at a pretty significant shift in how pay-TV works in the next few years
just to make the economics work out.”
Listen to the full
conversation in the audio player below:
Not only are there
reduced installation costs thanks to self-installation/BYOD, but also “offering
a vMVPD service can be used to enhance the value of high-speed broadband
packages, encourage bundling, increase ARPU, and enhance stickiness/loyalty as
well.
“In regards to the
vMVPD service itself, its odds of competing for the successfully long-term
hinge on whether or not the service is designed around today’s most significant
consumer preferences from the beginning — accessible pricing and content
package flexibility,” Park writes.
“With today’s
price-sensitive consumers and the inherently higher churn of vMVPD services,
vMVPD operators will need to concentrate on increasing subscribership and
retention via fitting the service to consumers first — not the opposite.”
Though Pay-TV is on
the decline, broadband subscribership and retention is doing well. Broadband
providers report that new customer acquisition is at an all-time high — Parks
Associates’ Q3 2020 survey of US broadband households finds that almost 4% of
broadband subscribers recently subscribed to an internet service after going
without for a year or longer; 3% subscribed for the first time.
Parks takes this to
mean that service providers should prepare for future generations that need
only broadband, and not a Pay-TV subscription. Content needs will be fulfilled
through one or more apps, or a non-traditional TV service provider.
“Future consumers
are unlikely to pick a Comcast, AT&T, or Verizon over Hulu + Live TV,
YouTube TV, or Sling TV for example on a pure content provider basis, unless
there is a significant price differential as an incentive to do so.
Increasingly, consumers are finding legacy Pay-TV, its packages, and its
pricing expendable — while broadband is becoming increasingly irreplaceable.”
A Map of Worldwide SVOD Penetration Rates
Facing a rising
number of competitors, Netflix has found it difficult to grab more share in the
streaming marketplace and recorded its first decline in its subscriber base
since the first quarter of 2022. However, worldwide growth of SVOD services
rose roughly 20% in 2022, according to market research & analysis
consultancy Statistia.
As Statista senor
data analyst Katharina Buchholz explains, the map below shows “the
most promising markets for chasing video-on-demand users are now South Asia,
Latin America and Africa, where Disney+ has arrived in several countries
(including South Africa) in 2022. While the market is expanding more slowly in
North America, where video-on-demand has reached approximately 50% of the
population, there is still some more room to grow in Europe, where this figure
varies from 14% in Bulgaria to 42% in the United Kingdom.”
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