Report: Pay-TV operators will need OTT content to offset cord-cutting revenue losses

by Nov 27, 2019Brightcove, CMMA Blog0 comments

OTT content will be be a crucial tool for pay-TV providers hoping to increase revenue and retain subscribers in coming years.

That’s according to a new report from data and analytics company GlobalData, which points out that OTT traction is gaining in all geographies, pressuring traditional TV operators and, in the case of North America, driving cord cutting at an accelerated rate.

Operators will have to create interactive content libraries, provide on-demand video, and update their portfolio with HD and 4K content to remain compelling, the report said.

Broadband will play a more crucial role, as well. In the US, for example, operators have begun to pivot their businesses to make connectivity their primary business strategy over delivering low-margin pay-TV content.

Globally, high-speed broadband initiatives are accelerating, too, with many driven by government funding. That, said Antariksh Raut, senior analyst of Telecoms Market Data & Intelligence at GlobalData, will continue to help expand broadband coverage and adoption, which is critical for OTT video success.   

But, don’t assume pay-TV is getting stickier because global subscription numbers are forecast to increase. That’s more a product of expansion in the Asia-Pacific region than anything. Overall revenues are trending down for the next several years as more users cut the cord and turn to streaming content.

Total pay-TV revenue is expected to decline $9 billion in 2024 to $210.9 billion, compared to $219.9 billion in 2018, the company said, losses that will primarily be felt in developed markets.

OTT content is still pulling subs from pay-TV

While several pay-TV operators have launched their own OTT video services, SVOD players such as Netflix, Amazon, and HBO Now are gaining more relevance with their international and local content portfolio. And, streamers continue to increase their content budgets to appeal to local audiences.

“Adding live and pay-TV channels is also gaining relevance where the competition between pay-TV and OTT service providers is increasing,” said Raut. “For Instance, Hotstar, an OTT video platform in India, provides access to live sports and other broadcast channels along with its own content library comprising of movies and web series.”  

The US SVOD market remains the biggest in the world with an estimated 71% of revenues in the space.

The bottom line

Pay-TV providers like AT&T are leaning more toward offering their customers OTT services like HBO Max and DirecTV Now, a trend developing in the United Kingdom and elsewhere, as well.

The question, of course, is whether or not they’ll be able to stop the bleeding by offering what increasingly is a mirror image of the content they offer through their traditional services. Will over-the-top bundles of 70 channels or more be able to attract viewers that already have turned a cold shoulder to their pay-TV cousins?

In recent quarters, US operators haven’t been able to replace customers lost to cord cutting with the same number of customers buying virtual pay-TV bundles. With more competition from new a la carte offerings like Disney+, that trend is unlikely to change.

Stay tuned.

Ed. Note: This post first appeared on the Videomind  blog.

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