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In a new study, LR's sister firm projects that US pay-TV providers will continue losing subscribers over the next four years but should cope by evolving their businesses.
In a new study, LR's sister firm projects that US pay-TV providers will continue losing subscribers over the next four years but should cope by evolving their businesses.
While the outlook for the US pay-TV industry may not be all that bright, it's not necessarily all gloom and doom either, at least not yet.
In a new report, Ovum Ltd. projects that US cable, satellite and telco TV providers will continue shedding video subscribers over the next four years as consumers keep cutting the cord and switching over to OTT video. Ovum's latest forecast calls for the number of traditional US pay-TV subscribers to drop to 88 million by 2022, down from 94 million at the end of last year. Accordingly, it also calls for pay-TV penetration rates to slip to 74% of all US TV households by 2022, down from 80% at the close of 2017.
These new projections come after the US pay-TV industry suffered its worst year of cord-cutting ever in 2017. In the fourth quarter alone, the industry lost more than 500,000 video subscribers, according to the latest analysis by MoffettNathanson LLC . Adding that total to the sub losses piled up over the first three quarters, that means the industry ended up losing more than 3 million subscribers for the year, while the number of OTT skinny bundle (or virtual MVPD) subs surged by about 2.6 million. (See Cord-Cutting: How Far Will It Go? )
Yet, in spite of this bleak trend, Ovum thinks that traditional pay-TV providers can and will find ways to ease the bloodletting over the next four years. It predicts that legacy providers, or at least the smarter ones, will respond by striking more partnerships with the leading streaming services, improving the user experiences for their customers, cutting or at least not raising video prices and making other moves.
"While Ovum recognizes the serious challenges that face the business, we don’t envisage a total meltdown," said Adam Thomas, lead analyst for global TV markets on Ovum’s Consumer and Entertainment Services team. "While the immediate future will remain highly uncomfortable for everyone except the scaled multinational digital platforms, we still see a scenario where pay-TV can act to limit the level of subscribers that it loses.”
What Thomas and his team envision is more deals like the one that Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Netflix Inc. (Nasdaq: NFLX) just announced late last week. In that deal, Comcast, once a bitter rival of Netflix, agreed to start bundling the streaming service into its new and existing cable subscription packages. "There seems to be a role there if pay-TV providers can swallow their pride a bit and take that role," Thomas said. (See Comcast, Netflix Cozy Up in New Deal.)
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As Thomas acknowledges, though, the big question is whether traditional pay-TV providers like Comcast will move quickly enough to become comprehensive aggregators of all video services, no matter what their origins. Last year's cord-cutting figures strongly indicate that providers need to speed up that process or watch their video businesses wither away.
"I don't think they are going fast enough," said Thomas, who was surprised by how much the cord-cutting losses accelerated last year. "If they don't act, then the meltdown could occur."
— Alan Breznick, Cable/Video Practice Leader, Light Reading
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