The US edition of the 2019 Pay-TV Innovation Forum from content protection and multiscreen television solutions provider NAGRA and international research and strategy consultancy MTM has unveiled the challenges, opportunities and priorities that are driving the future of the US pay-TV market.
The report includes insights collected during a special seminar held in New York earlier this summer with senior executives representing leading pay-TV providers, broadcasters, OTT services and rights holders. It highlights five key findings:
Although many US pay-TV executives are broadly optimistic about the future commercial prospects for the industry, others are more cautious, anticipating growing pricing pressures, declining margins for traditional pay-TV offerings, a more fragmented distribution environment and growing competition. As the proliferation of new direct-to-consumer (DTC) offerings and next-generation streaming platforms, as well as pirate OTT streaming services, puts further pressure on traditional packages and approaches, the main priority for pay-TV providers will be to re-address their role as aggregators and re-invent packages to better reach younger customers.
Many executives see OTT offerings as simply another category of content offering to be aggregated and offered to subscribers on pay-TV platforms. Others argue that Disney+, in a competitively-priced discounted bundle with Hulu and ESPN+, could represent an “existential threat” to traditional pay-TV packages. However, many industry participants remain uncertain about whether or not all of the new offerings will succeed as standalone propositions as the cost of subscribing to multiple DTC OTT services could make some pay-TV packages look like an increasingly good value.
Industry participants widely expect traditional pay-TV packages to be radically re-structured – with fewer linear channels and a more diverse range of prices and packages. This includes bring-your-own-device offerings targeted at smart TV owners and sell-through models similar to Amazon’s Prime Video Channels.
Looking forward, many executives believe that the industry is approaching the point of peak investment in content, with growing concerns that too many shows are being produced. For content providers, the main priority for the next few years will be to manage the transition to a more diverse distribution environment – launching new DTC offerings and developing new revenue streams, while protecting existing revenues from affiliates, advertising and programme sales.
The range of distribution opportunities opening up to content providers and OTT services is growing rapidly, making it easier for new entrants to grow their footprints and attract new subscribers. However, some believe that the growth of the major streaming platforms will slow in the coming years, as pay-TV providers re-invent their offerings and other streaming platforms launch, fragmenting the market. Others argue that the steady growth in adoption of connected platforms, smart TVs and Roku devices could usher in a new wave of gatekeepers and aggregators. At the same time, the growing connectivity might be a double-edged sword when it comes to content piracy as it appears be shifting the focus of pirates towards OTT video services.
“The 2019 US edition of the Pay-TV Innovation Forum showcases the massive opportunity available for industry players who can understand current market dynamics and implement the right strategies to remain competitive in today’s and tomorrow’s US media and entertainment space,” suggested Simon Trudelle, Senior Director, Product Marketing at NAGRA. “At NAGRA, we are on the forefront of this unprecedented industry change, helping executives embrace and adapt to the evolving business landscape so that they can implement smart strategies that will set them up for long-term success.”
“The US pay-TV market continues to face a period of change,” said Jon Watts, Managing Partner at MTM. “We’re seeing a more complex, competitive market emerge rapidly, with a far more diverse range of pay-TV offerings and strategies on display. The US executives participating in this year’s Forum remain broadly optimistic about the prospects for the pay-TV industry in the 2020s, but they are also clear that business-as-usual is no longer sufficient. Most major US companies are well advanced in developing their strategies, placing big bets on the future and rolling out new offerings – but there are lots of uncertainties ahead. The decade ahead promises to be a fascinating period for the industry.”
The 2019 US findings report is part of the Pay-TV Innovation Forum, a global research programme for senior executives designed to explore the most significant challenges and opportunities facing the pay-TV and content industries at a time of unprecedented change. Hosted by NAGRA and chaired by MTM, US seminar participants included senior executives from A&E Networks, Altice USA, AMC Networks, AT&T, Charter, DISH Network, Disney, fuboTV, HBO, Showtime, Verizon, Viacom and other leading industry participants.