In the world of pay-TV there is now only one constant we can rely on – change. Consumers are constantly demanding more for less, while increasing competition from new entrants is flooding the market, and the cost of content investments is going up.
And when we add in the issue of pirates stealing that content – particularly valuable live assets – the outlook for the industry might look incredibly disrupted and even in jeopardy. In some regions, particularly Asia-Pacific and Latin America, piracy is such a problem that it threatens the long-term sustainability of pay-TV and OTT services and unless we start taking action now, there may not be a pay-TV industry as we know it for much longer.
To ensure the industry can maintain revenue growth into the future, NAGRA founded the Pay-TV Innovation Forum with MTM in 2016 to identify and catalyze innovation in global pay-TV. In this third year of research, which is generated through in-depth interviews and discussions with executives around the world, including at the World Economic Forum office in New York, as well as through a global analysis of pay-TV service provider portfolios and online survey, it’s clear that there is still much to be done. In fact, 84% of executives surveyed as part of the programme expect competition for all paid-video services to increase dramatically over the next five years to face off against such potential existential crises.
However, there is a light at the end of the tunnel, but only if the industry is prepared to innovate. Executives agree with 90% believing that to grow, providers will have to innovate strongly over the next five years. There is a strong consensus that advanced data analytics and artificial intelligence (AI) are crucial to pay-TV providers’ ability to innovate, providing the insights required to identify new opportunities representing an increasingly important area for investment and development.
Thankfully, our research shows service providers are already taking steps to innovate and ensure not just the survival of the industry, they’re working to cement their positions and value to consumers through six key areas globally:
1. Continuing to invest in next-generation pay-TV services: Many pay-TV providers (65%) have already improved their portfolios over the past twelve months, with a particular focus on developing their core propositions and next generation set-top boxes that can support advanced functionality, including third party apps, personalized recommendations and access to 4K content. Such investments must continue to ensure they meet the needs of consumers. Telecoms and cable providers are well placed to deliver such innovations, as they already have the necessary infrastructures in place to easily launch services.
2. Establish more diverse multiscreen pay-TV propositions: 89% of the executives we surveyed for the research agreed that delivering a seamless and personal consumer experience will be key, especially in light of increased churn and cord cutting that the industry is experiencing. This will in part be driven by catering to changing customer groups and consumption habits, with 77% believing that bundles will evolve substantially over the next five years to meet these needs. Advanced data and analytics will increasingly help pay-TV companies improve customer retention and reduce churn, deliver personalized experiences and relevant advertising, inform customer acquisition and new product development, and automate customer service and care.
3. Super-aggregators – the next wave: With content now available through so many different sources globally, and content owners launching their own streaming services, disaggregation is becoming an issue as consumers are increasingly split between sources. In this post-OTT era, there is a huge opportunity for those service providers who are prepared to become super-aggregators, offering pay-TV and OTT services through a single subscription. By offering simplification in such a fragmented landscape, consumers will likely take up such a service, which will provide real growth opportunities.
4. Converging pay-TV and OTT offerings: With such potential for super-aggregators, it’s logical that the converged offerings will lead to a platform-agnostic model and the evolution away from traditional pay-TV or OTT. Instead we will see a transition into a paid-for-video market where the content source is fundamentally irrelevant to the consumer.
5. Evolve beyond the owned set-top box: As content is now available through a gamut of sources, there is a growing need to move beyond the traditional value proposition. Pay-TV executives recognize this, and believe that network infrastructure and billing relationships, rather than proprietary set-top boxes, are now the gateway into the consumers’ lives.
6. A growing focus on diversification, particularly connectivity: Adjacent services – including mobile and fixed line connectivity – present real opportunities for the industry as they create a means to become more embedded within consumers’ mindsets. Smart home and advanced advertising solutions have particular potential, and 41% and 36% of executives respectively already recognize these areas as strategically important.
There’s no denying the global pay-TV industry continues to be highly disrupted. However, unlike previous research conducted by the Pay-TV Innovation Forum, the 2018 results appear to show we’re at a turning point. While the industry recognizes significant global pressures, steps are being taken to ensure it remains competitively viable to secure its future in the long term. And, with the worldwide pay-TV industry expected to reach $295 billion revenue value by 2022, it’s vital that we take steps to ensure its value for the global economy and the workforce it supports.
For more information on the Pay-TV Innovation Forum and to review the full 2018 findings, including regional breakdowns, download the report here.