Research: OTT Service Subscribers to Grow to 400 Million in 2018

Over-the-top services will reach a subscriber base of 400 million in 2018, according to ABI Research’s recently released Service Provider OTT Services and Set-top boxes Update report.

ABI forecasts that OTT video services will put more pressure on traditional pay-TV services, especially in the developed markets with high broadband and pay-TV penetration. The worldwide OTT video market is expected to grow at CAGR 10% to generate $51.4 billion in 2022, according to ABI.

“OTT video services offer less expensive alternatives and no long-term contract features compared to existing pay-TV offerings that are driving an increasing number of Pay-TV customers to switch to these OTT services,” according to ABI.

In markets such as North America and Europe, pay-TV operators have jumped into the OTT market to improve churn by providing less costly video service. DirecTV’s Now, Dish Network’s Sling TV, and Sky’s Now TV are among the operators which offer Virtual Multichannel Video Programming Distributor (vMVPD) services, linear channels via internet connection, according to the report.

“vMVPD services offer live TV packages as low as $10 and customized packages are attracting cost-sensitive customers,” said Khin Sandi Lynn, industry analyst at ABI Research, in a statement.

Dish Network’s Sling has secured more than 2 million subscribers in the two years since it launched, the report noted. DirecTV Now has gained 1.2 million subscribers within one year of its launch, offsetting the subscriber loss of its satellite TV platform.

“Pay-TV operators recognize the consumer demand for vMVPD services and are trying to expand their OTT offering by providing more content choice to compete against other subscription OTT services such as Netflix,” Lynn stated.

Despite the low cost of basic vMVPD packages, the availability of live sports packages and customization features contribute the higher ARPU compared to other subscription OTT services, according to the report. Hulu and YouTube launched live streaming packages in 2017 creating more competition in the vMVPD market.

“As competition intensifies, content and quality of service are crucial to win the OTT war,” Lynn stated.

‘Digital Driver’ Headed to Witness Stand in AT&T/DOJ Trial

AT&T entertainment chief content officer Dan York is reportedly slated to appear on the witness stand, along with other (including rivals Cox Communications and Comcast) industry executives, when the federal antitrust case against AT&T’s $85 billion acquisition of Time Warner begins today (March 22) in New York.

At the center of the government’s case against the AT&T/Time Warner merger is the contention the combined companies would consolidate too much industry power in the hands of one company, which the Dept. of Justice believes would stifle competition and hurt consumers.

York is a longtime inclusion in Media Play News’ (formerly Home Media Magazine) annual “Digital Drivers” feature highlighting executives driving digital entertainment.

But that’s not why York will appear under oath.

Instead, it is his alleged hardball negotiating tactics when he worked at DirecTV. The satellite operator was acquired by AT&T in 2014 for $48.4 billion.

While at DirecTV, York allegedly persuaded rival pay-TV operators to not carry SportsNet LA, a 25-year broadcast entity created in 2014 between the Los Angeles Dodgers and Time Warner Cable.

According to a Los Angeles Times 2016 profile, York’s all-night, tirade-fueled negotiating tactics were akin to “mashing your face into the cement,” among other allegations.

York reportedly felt burned by TWC in a previous carriage negotiation for the cabler’s Los Angeles Lakers network.

The DOJ subsequently filed a lawsuit against DirecTV over its York-led negotiations with The Weather Channel. York allegedly demanded the channel cut its programing fees 75%, which it refused to do. DirecTV then replaced The Weather Channel (just acquired by Byron Allen’s Entertainment Studios for $300 million) with other programing, confusing subscribers who had paid for the former.

While hardball negotiations are commonplace in Hollywood, broadcast and pay-TV, the DOJ apparently feels York’s behavior underscores the potential that a combined AT&T/Time Warner, which includes Warner Bros., HBO, Turner and CNN, would be anticompetitive going forward.

 

Kagan: Pay-TV Sub Loss Softened in Fourth Quarter 2017

The pay-TV business model may be under siege, but subscriber losses actually slowed for traditional multichannel video providers in the fiscal quarter ended Dec. 31, 2017 – while declining for the full year, according to new data compiled by Kagan, a group within S&P Global Market Intelligence.

Combined cable, satellite TV (Dish Network and DirecTV) and telecom multichannel subscriptions fell to 94 million, including 91.1 million residential customers. Combined, cable, satellite and telecom subs are now down approximately 7.4 million from their peak in 2012.

The total multichannel count, including the top two virtual service providers Sling TV and DirecTV Now, is at 97.3 million.

Cable operators lost an estimated 986,411 video subscribers in 2017, more than twice the 2016 drop. That broke the sector’s three-year streak of decelerating video subscriber losses.

The telecoms (AT&T, Verizon) slowed their net subscriber losses for a third consecutive quarter. The sector shed 903,262 subscribers in 2017 to end the year at 10.6 million.

The satellite sector was down nearly 1.7 million subscribers in 2017 – the biggest annual loss on record, as DirecTV joined Dish Network in posting traditional subscriber declines.

U.S. Pay-TV Revenue to Drop $27B by 2023

Domestic pay-TV revenue is projected to decline $26 billion (26%) to $75 billion from a peak of $101.7 billion in 2015, according to new data from Digital TV Research.

Cable TV revenue will fall to $36.7 billion from a peak of $54.1 billion in 2010 at $54.1 billion. Cable will lose nearly 12 million subscribers, although most of the losses have already taken place.

“Satellite TV and [IPTV/telecom] are also losing subs and revenue,” Simon Murray, principal analyst at Digital TV Research, said in a statement. “Much of this is due to the operators shifting their subscribers to online platforms. However, growth from virtual MVPDs is not expected to make up completely for the subscriber and revenue shortfalls from traditional pay TV.”

The report suggests telecom sub losses are mainly due to AT&T encouraging U-Verse subs to convert to DirecTV. This is the reverse of what has happened in most other countries. Telecom revenue spiked in 2015 at $9.6 billion and will fall to $4.7 billion in 2023. The number of telecom subs topped 12 million in 2014, declining to 6.2 million in 2023.

Satellite TV revenue will decline (16%) from $39.7 billion in 2017 to $33.6 billion in 2023. Satellite TV subs will drop by 4 million from the end of 2017 to 2023 – down 3 million in 2017 alone. Dish is pushing its Sling TV platform, with DirecTV Now also making an impact.

The number of domestic traditional pay TV subs will fall from 100.3 million in 2012 to 80.3 million in 2023. Pay TV penetration will fall from 87.6% of TV households in apex year 2013 to 66.7% in 2023.

Although Canada is losing pay TV subs, its problems are not as severe as the United States. Pay TV penetration reached a highpoint in 2013 at 85.1%. The level will fall to 74.8% by 2023. However, the number of pay TV subs will be 11.2 million by 2023 – about the same as 2017. Pay TV revenue will fall from a peak of $6.8 billion in 2015 to $6 billion by 2023.

Pay-TV Operators Lost Nearly 1.5 Million Subs in 2017

Domestic pay-TV representing about 95% of the market lost about 1.49 million net video subscribers in 2017, compared to a pro forma loss of about 760,000 subscribers in 2016, according to new data from Leichtman Research Group. Traditional pay-TV services (not including Internet-delivered) lost about 3 million subs in 2017, compared to a loss of about 1.9 million subs in 2016.

The pay-TV providers account for 92.2 million subscribers — with the top six cable companies having about 48.1 million video subs, satellite TV services 31.5 million subscribers, telecoms 9.2 million subs, and online TV platforms with 3.4 million subscribers.

Leichtman said the top six cable companies lost about 660,000 video subs compared to a loss of 275,000 subs in 2016.

In 2017, the top cable providers cumulatively lost 1.4% of video subscribers — compared to a loss of 0.6% in 2016. Satellite TV services lost about 1.55 million subs in 2017 — compared to a loss of about 40,000 subs in 2016. DirecTV lost 554,000 subs compared to a gain of 1.22 million subs in 2016.

In 2017, DBS services cumulatively lost 4.7% of video subscribers — compared to a loss 0.1% in 2016

The top telephone providers lost about 885,000 video subscribers in 2017 — compared to a loss of about 1.59 million subs. AT&T U-verse lost 624,000 subs in 2017, compared to a loss of 1.35 million subs.

In 2017, the top Telcos cumulatively lost 8.7% of video subs, compared to a loss of 13.6% in 2016. The top (publicly reporting) Internet-delivered services added about 1.6 million subs in 2017, compared to 1.14 million net adds in 2016.

Subscribers to the top Internet-delivered services increased by 90% in 2017.

“Satellite TV services had more combined net losses in 2017 than in any previous year, yet these losses were offset by gains from their Internet-delivered flanker brands, such as DirecTV Now and Sling TV,” analyst Bruce Leichtman said in a statement. “Overall, the top pay-TV services lost 1.6% of subscribers in 2017 compared to a loss of 0.8% in 2016.”

 

Pay-TV Providers Subscribers at
End of 4Q 2017
Net Adds in
2017
Cable Companies
Comcast 22,357,000 (151,000)
Charter 16,997,000 (239,000)
Altice 3,405,500 (129,000)
Mediacom 821,000 (14,000)
Cable ONE* 283,001 (37,245)
Other major private company** 4,200,000 (90,000)
Total Top Cable 48,063,501 (660,245)
Satellite Services (DBS)
DIRECTV 20,458,000 (554,000)
DISH TV^ 11,030,000 (995,000)
Total DBS 31,488,000 (1,549,000)
Phone Companies
Verizon FiOS 4,619,000 (75,000)
AT&T U-verse 3,657,000 (624,000)
Frontier 961,000 (184,000)
Total Top Phone 9,237,000 (883,000)
Internet-Delivered
Sling TV^^ 2,212,000 711,000
DIRECTV NOW 1,155,000 888,000
Total Top Internet-Delivered 3,367,000 1,599,000
Total Top Providers 92,155,501 (1,493,245)

Gun Safety Activists Urge Tech Companies to Drop NRA TV Streaming Service

In the wake of the Florida high-school shooting that left 14 students and three teachers dead, gun safety activists are asking tech companies to stop streaming NRA TV, an ad-supported service of the National Rifle Association.

Launched in 2016, NRA TV features original programming supporting gun rights and other issues, in addition to covering conservative events such as C-PAC.

“Moms Demand Action for Gun Sense” and “Everytown for Gun Safety” are calling on companies such as Amazon, YouTube, Roku and Apple to stop carrying the NRA TV app, claiming the platform “promotes dangerous conspiracy theories, racially charged rhetoric and violent demonization of the NRA’s political opponents,” among other issues.

“Everytown,” which is fighting to close existing loopholes in gun purchase background checks and curbing the illegal trafficking of firearms, is helping spread hashtag #DumpNRATV.

The groups are also asking pay-TV operators such as DirecTV Now to cancel programming produced by the NRA.

“American businesses have the responsibility to make ethical decisions about the content they will provide on their platforms,” Shannon Watts, founder of Moms Demand Action, said in a statement.

Watts, a mother of five children, founded “Moms Demand Action” following the Sandy Hook Elementary School shootings in 2012 that left 20 children and six adults dead.

Roku spokesperson Tricia Mifsud took the high ground, saying the over-the-top video pioneer merely acts as a conduit to programming users voluntarily choose to stream.

“We operate an open-streaming platform; however, our content policies prohibit the publication of content that is unlawful, incites illegal activities or violates third-party rights,” Mifsud said in a statement to CNN.com.