ott netflixThe pay-TV industry will grow at a slow 3.7 percent compound annual growth rate (CAGR) through 2020 as sector participants struggle to find ways of curtailing customer churn and will raise, or at least maintain, average revenue per user (ARPU), according to new market research from ABI’s OTT and Multiscreen Services research service.

In contrast, OTT video will continue to show strong growth, with ABI forecasting that total revenue will increase 26 percent this year and at a 24 percent CAGR through 2019. Pay-TV subscribers, moreover, are now looking to pay-TV service providers to incorporate popular features introduced by pioneering OTT video service providers, such as Netflix and HBO Go. These include content search and recommendation, and mobile device support.

“Comparatively high priced pay TV bundles are losing customers to more inexpensive, IP-delivered content,” research analyst Eric Abbruzzese was quoted in a news release. Incorporating such features into set-top boxes (STBs) is one way to meet the challenge from third-party OTT providers, he continues.

“Operators that are first to market with new set-top box technologies can expect strong returns – as much as 10% higher ARPU than with legacy technology – while those introducing the technology later will struggle to see similar success.”

Pay TV Revenue Growth Challenges
Pay-TV providers can also employ “pay TV Lite” services in their drive to attract new customers, Abbruzzese says, “as well as expand their current footprint.” He points out that “standalone OTT services, such as Dish Network’s Sling TV and BskyB’s Sky Go, offer live and on-demand content separate from a pay-TV subscription, which allows more choice and competition in TV services, as well as allowing operators to enter new geographies without incurring major costs for infrastructure expansion (seen with ViaSat’s expansion into Eastern Europe and Dish Network’s nationwide coverage with Sling TV).”

Some leading pay-TV providers – Comcast, Dish, Liberty Global and BskyB – have embraced these ideas, Abbruzzese notes. They’re “on track to see future growth in a slowly declining market.”

Those that haven’t, or are too slow, to craft and carry out such plans “face the challenge of maintaining subscriber counts even within their dedicated and satisfied customer base, while contending with other subscribers leaving in favor of progressive options.

“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 states.

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