Global Pay-TV Subscriptions to Top 1 Billion Before Decade Ends

High Definition content is driving pay-TV worldwide. Photo: a Sony HDTV

[Via Satellite 10-26-2014] The number of pay-TV subscribers is expected to reach 1.1 billion worldwide by 2019, according to ABI Research. Growth in this sector has not been easy as competition from online services increasingly chips away would-be subscribers. Alternative viewing options such as Netflix and Hulu are driving lower Average Revenue Per User (ARPU) for satellite and cable providers, though the research group noted the World Cup helped stem this decline for 2014.

“Availability of service and choice of content are contributing to the growth of the pay-TV market,” Khin Sandi Lynn, industry analyst at ABI Research told Via Satellite. “In addition, bundled packages consumers can get from pay-TV operators are the drivers for growth too.”

ABI Research noted operators have reacted differently to the increased competition. Sky Perfect JSAT in Japan, for example has developed Video on Demand (VOD) services to access video content from multiple devices including smartphones and tablets. This approach is in response to a loss of more than 200,000 subscribers over the past year. Sky Perfect JSAT encouraged 126,000 of its customers to opt for VOD by the end of the first quarter of 2014 in order to lower churn and maintain service revenue.

By the end of 2014 ABI Research anticipates the global pay-TV market will crest 920 million subscribers and generate more than $269 billion. By 2019, 1.1 billion subscribers are expected to create $323 billion in revenues.

“[The] pay-TV market in North America is quite mature with penetration over 80 percent of households. Europe and Asia Pacific also have pretty high penetration,” said Lynn, adding that Latin America and the Middle East are today’s high potential markets.

Satellite pay-TV provider DirecTV illustrates this point, according to ABI Research. The company lost approximately 39,000 subscribers in North America during Q2 this year, while at the same time gaining 532,000 subscribers in Latin America. DirecTV saw an increase in pay-TV subscribers along with an 8 percent increase in ARPU compared to Q2 last year. Earlier this month the company added more capacity over Latin America with the launch of its DL1 A payload on Intelsat 30 as a way to continue growing in this market.

In the Middle East, the pay-TV environment is maturing to become a prime opportunity for operators, but Lynn warns this market has challenges to overcome.

“In the Middle East, satellite TV is currently dominating pay-TV market, and it is likely to remain the largest pay-TV platform in the region, [but] piracy is being a barrier in the development of the pay-TV market in the Middle East. We expect growth of IPTV and satellite TV will drive the pay-TV market growth,” she said.

The top drivers for pay-TV growth according to ABI Research are sporting events and an increase in the number of High Definition (HD) channel broadcasts. Premium subscribers desirous of these channels are offsetting the decline in ARPU. The research group expects this trend, along with the take up of advanced Set Top Boxes (STBs), to drive pay-TV subscriptions for years to come.

Ultra-HD/4K is also an upcoming driver for growth, with both broadcasters and satellite companies taking steps in this direction. Lynn believes that, in time, these higher quality broadcasts will have a similar effect to HD today.

“Many operators have announced the delivery of 4K services. Sky Italia plans to provide 4K service around 2016; Korea’s KT plans 4K commercial launch in 2015; other operators who are planning for 4K services include Comcast, DirecTV, Sky Deutschland, etc. I think [when the] 4K TV price point gets lower for higher adoption, and when content becomes available, 4K can become a revenue boosting service,” she said.