While many of the larger pay-TV providers (such as Comcast and Dish in the U.S.) are working on integrating over-the-top content into their services through new technologies and capabilities, those that haven’t begun the process are in danger of being left behind.
According to ABI Research, the pay-TV market is projected to see revenue growth of only 3.7% over the next five years, while over-the-top video will grow at about six times that rate (24%) by 2019. The increasing familiarity and simplicity of OTT services like Netflix and HBO Go mean the pay-TV providers must adopt strategies to integrate these services into their offerings, or risk falling into irrelevance.
“[Pay-TV providers] either need to integrate OTT services or offer similar [independent OTT] technologies,” Eric Abbruzzese, research analyst for ABI, tells Marketing Daily. “Many companies that have a name in the business are already doing that. Those that don’t are banking on the idea that their customers are going to remain loyal.”
Even those who have started developing these technologies — but haven’t come to market yet — are in danger of missing out. Though first-to-market products like SlingTV have run into hiccups, the potential in being a first-mover can yield higher average revenue per unit than coming in at a later time, Abbruzzese says. “We’re predicting the first to market — even with the growing pains — will see the most success,” Abbruzzese says.
The development of new technologies gives pay-TV providers access to new customers, while protecting the base they already have, Abbruzzese notes. To ensure both, he recommends developing technologies that both integrate with set-top boxes and providing independent OTT products.
“While pay TV will continue to hold market majority going forward, the best chance for positive growth in the pay TV space lies in the implementation of OTT capability in both stand-alone and IP-enabled STB capacities,” he says.