Advanced Television

20% consider online as pay-TV replacement

October 23, 2012

A new ABI Research Technology Barometer study reveals that nearly 20 per cent of online consumers consider online video as a replacement for pay-TV – representing significant risk to the traditional TV operator business of as much as $16.8 billion in the US.

With the US payTV household penetration set to decline approximately 0.5 per cent per year through 2017, ABI Research believes this slow migration will continue even with an economic recovery as consumers have additional entertainment choices like improved online and over-the-top (OTT) video experiences.

To offset this, TV operators should build a business that leverages OTT components, suggests ABI Research. This will be critical and doing so requires an understanding of the current and future customer target. Dish Network acquired Blockbuster with the goal of capturing online market share against Netflix; however, it failed to license adequate content and has admitted this strategy has been a failure. Verizon is the next US operator to target this dual-pronged approach, based on its Redbox Instant partnership. European providers, including ViaSat’s Viaplay offering and Sky’s recently launched NOW TV are also looking at lightweight pay-TV offerings, advises the market intelligence company.

“While many OTT services focus on movies, the goal of lightweight pay-TV packages should be to introduce customers to the brand and tease customers with premium content offerings,” suggests Sam Rosen practice director, TV and video.

In contrast, the study also notes a larger longer-term opportunity – 30 per cent of online consumers that have pay-TV and the foundation in place for OTT services – but doesn’t yet see the value proposition for online video. This group is ripe for building and positioning services, concludes ABI Research.

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