Report: US TV industry is being “reconstructed”
April 23, 2019
Convergence Research has released its 2019 Couch Potato Reports (launched annually since 2003). The reports suggest that the TV/movie industry is being reconstructed from the inside and by the outside in the US, as programmers now directly compete against their traditional TV access and independent OTT buyers that rival in terms of content spend.
Traditional TV access subscriptions continue to decline (revenue has started to decline) as subscribers pay higher prices due to ongoing programmer price increases, while traditional TV advertising revenue plateaus (2020 revenue is forecast to be on par with 2016 revenue), according to the reports.
With ARPU half the traditional TV average, lackluster margins, programming gaps and technical issues, live multichannel OTT provides little counter to category killers Netflix & Amazon that sell at lower price points and essentially without advertising. The reports believe a number of OTT plays, including large and niche, will fail due to insufficient subscriber traction, cost, and competition.
Meanwhile major programmers continue to accelerate their direct to consumer drive: Notably, Disney and WarnerMedia have moved away from being Netflix & Amazon Prime’s suppliers respectively (in the US) and embraced OTT, Hulu spends more on content/sub than either Amazon or Netflix and continues to discount (notably with Spotify), CBS/Showtime’s OTT subscriber trajectory has been faster than expected, Discovery has backed & supplied Philo, gone live with Hulu, Sling, YouTube TV, and will be launching an OTT service with the BBC, NBCU will be launching an OTT service in 2020, and Viacom has backed & supplied Philo and others, acquired Pluto & AwesomenessTV, and is producing for Amazon & Netflix.
Being caught in the programmer versus independent OTT squeeze play hampers TV access provider margins, however as the majority of TV access providers are also Internet providers there are benefits to facilitating the rise of OTT. Residential broadband subs first surpassed TV subscribers in 2017.
Key data points from the reports:
- Based on 66 OTT providers, led by Netflix, Hulu, Amazon, the reports estimate US OTT access revenue grew 37 per cent to $16.3 billion in 2018, and forecasts $22 billion for 2019.
Even with new OTT offers from Apple, Disney, NBCU, Quibi, Warner, and billions of OTT revenue added, and although US OTT subscriber household trajectory will well surpass US TV households, US TV subscriber ARPU will still be we forecast three times US OTT subscriber household ARPU in 2021.
2. The reports estimate 2018 US Cable, Satellite, Telco TV access (not including OTT) revenue declined 3 per cent to $103.4 billion and forecast 2019 will see similar decline.
3. The reports estimate 2018 saw a decline of 4.01 million US TV subscribers, 2017 a decline of 3.66 million, and the reports forecast a decline of 4.56 million TV subs for 2019; hence the US TV subscriber-base will decline 5 per cent in 2019, up from 4 per cent in 2018.
2010 saw the start of the rise in cord cutter/never households. As of YE2018 we estimate 30 per cent of households (HHs) did not have a traditional TV subscription with a Cable, Satellite, or Telco TV access provider, up from 26 per cent of HHs YE2017, and we forecast 34 per cent of HHs YE2019. We estimate 2018 saw almost 5 million cord cutter/never household additions.
4. The reports estimate Broadcast & Cable TV Network Online advertising (increasingly driven by OTT) will represent 6.5 per cent of 2019 US TV advertising revenue.
5. The reports estimate 2.85 million US residential broadband subscribers were added in 2018 and revenue grew 7 per cent to $61.6 billion; the reports forecast about the same additions & revenue growth for 2019.
Cable continues to add the lion’s share of residential broadband subs (Telco has lost residential broadband subs every year since 2015). CenturyLink & Frontier were responsible for the majority of 2018 Telco broadband losses; the reports forecast they will contribute the majority of losses in 2019 as well.