Should you believe what you’re reading? Are TV operators, broadcasters and everyone else involved in TV in trouble? Read on and find out
Cable TV revenues are about to take a nose-dive, investment firms call companies that own TV networks ‘structurally impaired’ and you really shouldn’t be fooled by the rise in TV ad sales, because ‘those are obviously just temporary’. If you blindly believe what you read and you work in television, you’re probably out looking for a job in an industry with better prospects. Something in brick-and-mortar retail, for example. That poses an interesting question, though. Should you believe what you’re reading? Are TV operators, broadcasters and everyone else involved in TV in trouble?
…. Well, maybe.
Some of you probably are.
TV and Video Worldwide, by the Numbers
(TV industry revenue worldwide, in USD Billions – from PwC Global Entertainment and Media Outlook ’16-‘20)
TV revenues worldwide are increasing. Not just in developing nations (5% YoY predicted for 2016-2020 in South Africa, Nigeria and Kenya), but also in the UK (3% YoY) and the US (0,5% YoY).
“Traditional TV subscription revenue is still expected to growth quite a bit with roughly 24% projected for the period 2014-2020”
Even though streaming VoD services make up a good portion of this growth, traditional TV subscription revenue is still expected to growth quite a bit with roughly 24% projected for the period 2014-2020. A decent percentage that outpaces the overall worldwide economy, but pales when compared to the projections for VoD:
(% Growth in TV sub and VoD revenues versus 2014, based on numbers from PwC Global Entertainment and Media Outlook ’16-‘20)
Both SVOD (Subscription Video on Demand) and TVOD (Transactional Video on Demand) are projected to more than double in the 2014-2020 period, with SVOD looking to almost triple in size.
“Revenue is fine, subscriber numbers are fine, there’s nothing to see here so keep calm and carry on”
According to research by SNL Kagan, the global number of linear TV subscriptions are forecast to increase to 1,2 billion by 2021 (a net growth of 203.1 million subscribers over five years). In short, revenue is fine, subscriber numbers are fine, there’s nothing to see here so keep calm and carry on. Right?
Some of you might actually be in trouble…
The global number of cable TV subscribers is expected to decline 7% by 2021.
Consumers are increasingly moving to alternatives like IPTV and DTH. Also, even though the global penetration of pay TV in general increases from 60 to 65,4% over the coming years, that global trend looks a bit different when you break it down by region:
In Western-Europe the number of pay TV subscribers looks relatively flat, with a decline in cable TV subs being offset by strong growth in IPTV subscribers. In the North America, the trend of pay TV subscriber decline shows no signs of slowing down since it first appeared in 2013. By 2021, they are expected to have lost another 100+ Million subs, bringing the pay TV penetration on par - or just below - of the projected penetration rate in Asia.
High Video ARPU’s in North-America are Skewing the Numbers
In a strategically interesting move, many North-American pay TV providers seem to be doubling down on price-hikes that make video service ARPU’s (Average Revenue Per User) in the region significantly higher than anywhere else in the world. Even though continuing subscriber declines will leave the region the third-largest by subscribers in 2021, at that point it will still account for roughly 46% of global video service revenues. Research has consistently shown that pricing of video services and wide availability of affordable OTT alternatives is culprit number 1 in causing North Americans to ‘cut the cord’, which makes the industry’s insistence to keep prices high somewhat questionable. Alternatives seem to be emerging though. More and more cable companies are offering so-called ‘Skinny Bundles’, where the number of channels is limited compared to the ‘regular’ 100+ packages sold, but pricing is somewhat more reasonable. If this will turn out to be enough to stop the continent-wide hemorrhaging of pay TV subscribers remains to be seen.
There’s Growth, If You Know Where To Look
In essence, the TV industry isn’t so much in decline, as it’s going through a transformation. As a whole, we’re growing, but a lot of the traditional TV businesses appear to have trouble offering the kind of services that consumers are looking for. If you think the majority of consumers can’t wait to sign up for your 500-channel, $200 a month service, you’re wrong. If you’re a cable TV business that isn’t – at least – contemplating a hybrid OTT service, you’re probably in trouble. If you’re a broadcaster that’s clinging to a time in which cable companies paid you for the exclusive privilege of distributing your content, you have some soul-searching to do. The world is changing, you should too.
So What Do You Do Now?
Or buckle down and look at how you can transform your business to flourish in the new reality TV and video companies face over the coming years. A good starting point for that transformation is the follow-up article to this one by Divitel Principal Consultant Marcel Veening. Next week, he will dive into some of the emerging technologies, consumer behaviors and business models that will shape the TV industry in the coming years.
For now, just:
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We're currently scheduling meetings for both NAB in Las Vegas, as well as ANGACOM in Cologne. If you'd like to meet up, send us an email or reach out to your Divitel contact and we'll happily talk to you in person.