TV Operators Put $16.8Bn Revenue Stream at Risk as 20% of Consumers Consider Online as Pay TV Replacement

22 Oct 2012

A new ABI Research Technology Barometer study reveals that nearly 20% of online consumers consider online video as a replacement for PayTV – representing significant risk to the traditional TV operator business of as much as $16.8bn in the US.

With the US Pay TV household penetration set to decline approximately 0.5% per year through 2017, ABI Research believes this slow migration will continue even with an economic recovery as consumers have additional entertainment choices like improved online and over-the-top (OTT) video experiences.

To offset this, TV operators should build a business that leverages OTT components. This will be critical and doing so requires an understanding of the current and future customer target. Dish Network acquired Blockbuster with the goal of capturing online market share against Netflix; however, they failed to license adequate content and have admitted this strategy has been a failure.  Verizon is the next US operator to target this dual-pronged approach, based on their Redbox Instant partnership.  European providers, including ViaSat’s Viaplay offering and Sky’s recently launched NOW TV are also looking at lightweight Pay TV offerings.

“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,” says Sam Rosen practice director, TV and video.

In contrast, the study also notes a larger longer-term opportunity – 30% of online consumers that have PayTV and the foundation in place for OTT services – but doesn’t yet see the value proposition for online video. This group is ripe for building and positioning services.

These findings are part of ABI Research’s Technology Barometer Research Service which includes additional survey analysis, and survey data.

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