May 2, 2018
Cord-cutting trends that continue to undermine the pay-TV ecosystem are not confined solely to the United States. Pay-TV subs fell in 13 other markets worldwide as consumers increasingly favor over-the-top alternatives such as online TV and subscription streaming video, according to new data from IHS Markit.
The markets that saw pay-TV subs decline in 2017 include Brazil, Mexico, Hong Kong, Canada, Sweden, Denmark, Japan, New Zealand, Norway, Singapore, Israel, Venezuela and Ireland.
“The cord-cutting woes of pay TV companies in the U.S. have been well publicized,” Ted Hall, director of research for TV and video, said in a statement. “Although the rest of the world has been broadly resisting the trend, other markets have also experienced pay TV subscription losses.”
In eight countries — the U.S., Brazil, Mexico, Sweden, Japan, New Zealand, Norway and Venezuela — operators were able to compensate for sub loses by increasing ARPU (average revenue per subscriber) revenue from remaining subs. Even in the U.S., where 3.3 million pay TV subs were lost in 2017, operators upped revenue largely through price hikes.
Latin America experienced its first net decline in pay-TV subs since 2002 last year, with cord cutting contributing in part to decreases in two major markets. Brazil lost 617,000 pay TV subscriptions, while Mexico declined by 192,000, as economic difficulties also took their toll. Meanwhile, Venezuela’s pay TV market lost 16,000 subscriptions, as the country’s financial crisis worsened.
With a net loss of 3.5 million subs, North America suffered its biggest-ever annual pay TV decline in 2017. Between 2012 and 2017, subs fell by 7.1 million in the region. Meanwhile, net additions for Netflix and other over-the-top subscription video services totaled 101.3 million over the same period, with more than 26 million OTT subs added in 2017.
The cord-cutting trend has been most strongly associated with cable TV, but satellite TV is also struggling in several regions. It declined more than any other platform in both North America and Latin America in 2017, suffering net losses of 1.8 million and 882,000, respectively.
“[Indeed], a growing number of pay-TV operators are launching their own standalone streaming services to compete directly with Netflix, Amazon Prime Video and other OTT video companies,” Hall said. “These [online TV] alternatives … are more flexible and typically priced lower than operators’ core offerings.”
Hall warned that relying upon online TV, which generated a fraction of the revenue from pay-TV, represent a partial solution at best.
“These services have lower [ARPU] and are therefore worth less to operators,” he said.
IHS Markit anticipates further cord cutting in North America, with a net decline of 8.5 million subs anticipated through 2022. Latin America is expected to return to growth, as Brazil continues on the path of economic recovery.
Elsewhere in the world, alongside the growth of pay TV subscriptions in most regions, the surge in online video will continue unabated. Over the five years to the end of 2022, OTT net additions are expected to outstrip those of pay TV everywhere except the Middle East and Africa, where pay TV will grow faster. In total, 409 million OTT video subscriptions will be added globally over the forecast period, with almost two-thirds to come from Asia Pacific.