READ MORE: The Rise of Online Pay-TV (Elizabeth Parks)
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.
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.
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.”
“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.”— Elizabeth Parks
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.”
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:
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.”
READ MORE: The World Map of Video Streaming (Statista)
Currently one of the fastest-growing channels in advertising, Connected TV apps such as Roku, Amazon Fire Stick and Apple TV offer a highly effective way for brands to reach their target audience. Learn the basics and stay on top of the biggest trends in CTV with fresh insights hand-picked from the NAB Amplify archives:
- Connected TV Takes Over the World
- Connected TV Is the New TV, and That’s Where We Are
- FAST TV and SVOD Are “Channeling” the Cable Business Model
- More Consumers Are Headed Into the FAST Lane
- SVOD vs. AVOD Today, All Connected TV Tomorrow
- Ways Pay TV Operators Can Win the SVOD Game