Online Video Replacing Some Pay TV

Hulu-BNow there's something else for pay TV operators to worry about: about one-fifth of people believe online video can be a replacement for pay TV channels.

A new report from ABI Research says nearly 20% of online consumers consider online video a replacement for monthly subscription TV services. The authors say this represents a significant risk to the traditional TV operator business, which amounts to some $16.8 billion in the U.S.

ABI notes that U.S. pay TV household penetration from traditional cable, satellite and telco TV programming services will slowly decline -- at a rate of 0.5% per year through 2017. In this regard, ABI believes that so-called over-the-top services [OTT] as well as online services -- especially ones that focus on movies -- will gain market share.

For many consumers, a transition from pay TV to other services is becoming easier. The study says 30% of online consumers who have subscription TV have a "foundation" in place for OTT and other services.

Their recommendation to halt some of this migration is for many traditional pay TV operators to offer "lightweight" pay TV services. In addition, that pay TV operators build a business that leverages OTT components.

Says Sam Rosen, practice director, TV and video for ABI: “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.”

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