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.

Lionsgate Inks Deal with ‘Overboard’ Star’s Production Company

Lionsgate’s television group has signed a deal with 3Pas Studios, a production company helmed by Latino star Eugenio Derbez and producing partner Benjamin Odell.

Derbez stars in Overboard from Lionsgate Films and MGM.

Under the agreement, 3Pas will produce English- and Spanish-language series for the TV group, as well as Lionsgate streaming platforms such as the recently-launched OTT service PANTAYA.

The partnership expands Lionsgate’s longstanding relationship with 3Pas, which already includes a first-look feature film deal with the company’s Pantelion Films label.  In addition to Overboard, Derbez has starred in and produced Pantelion’s Instructions Not Included, the highest-grossing Spanish-language film ever released in the United States, and last year’s hit How to Be a Latin Lover.

“We’re thrilled to expand our relationship with the incomparable comedic genius Eugenio Derbez and his 3Pas Studios into the television business,” said Lionsgate EVP and head of worldwide scripted television Chris Selak in a statement. “This multifaceted partnership is another example of working collaboratively across our divisions to identify premier brand name talent like Eugenio and Ben. We can’t wait to see the exciting new projects they’ll bring to our television slate.”

“We’re delighted to launch this new phase of our relationship with Lionsgate, a major Hollywood studio that embraces the creative vision of its artists and is committed to super-serve underserved audiences, including the growing acculturated Latinx market,” said Derbez and Odell in a statement. “It’s great working with Paul and his team at Pantelion, and we look forward to expanding that collaboration in order to supply Lionsgate’s television business and streaming services with exciting, premium quality content for a diverse spectrum of audiences.”

In addition to Instructions Not Included and How to Be a Latin Lover, Derbez is known for the Mexican comedy “La Familia Peluche,” which is being adapted into an animated feature by 3Pas. He also starred in such movies as Under the Same MoonJack and Jill and Miracles from Heaven and will appear in Disney’s upcoming The Nutcracker and the Four Realms. Odell has produced or executive produced more than 20 feature films, including many for Pantelion as former head of production. Prior to that, he was an award-winning TV writer and screenwriter in Latin America.

Research: U.S. Pay-TV Affordability Has Dropped Since 2000

Consumers who complain about their cable bill may have good reason.

Multichannel video affordability in the United States has plummeted since the turn of the millennium, squeezing the penetration rate, particularly among the more economically vulnerable households, according to new data from Kagan, S&P Global Market Intelligence.

Since 2000, there has been a 74% increase in the inflation-adjusted pay-TV bill while incomes have stagnated, according to the research.

The estimated nominal average monthly multichannel revenue per subscriber across the cable, DBS and telco platforms rose at a 5.5% CAGR between 2000 and 2017. Kagan calculated U.S. multichannel purchasing power based on 2017 inflation-adjusted annual multichannel average revenue per user, or ARPU, and average income figures. The affordability calculation dropped from a 10 in 2000 to a 6 in 2017.

Multichannel offerings have evolved a great deal since 2000, including a greater number of networks and advanced services such as video on demand, DVR services and improved user interfaces, with the vast majority of the packages delivered to subscribers digitally and in HD, but consumers’ ability to pay the price for that improvement didn’t grow much.

“The eroding legacy multichannel affordability partly explains the popularity of over-the-top services such as Netflix Inc. and Amazon.com Inc.’s Prime Video,” according to Kagan.

Research: OTT Sub Households to Far Outstrip TV Sub Households in 2020

U.S. OTT subscriber households will far surpass TV subscriber households in 2020, according to new data from Convergence Research.

In five years at the current run-rate Netflix will have in the United States as many subscribers as all the the traditional TV access providers combined, according the Convergence’s Brahm Eiley. Amazon Prime at the current run rate will surpass the traditional U.S. TV access providers in terms of subscribers in three years.

However, the average revenue per unit (ARPU) for U.S. TV subscribers in 2020 will still be four times U.S. OTT subscriber households’ ARPU, down from 6 times in 2017.

Convergence has just released its annual 2018 Couch Potato Reports, “The Battle for the American Couch Potato: OTT, TV, Online” and “The Battle for the American Couch Potato: Bundling, TV, Internet, Telephone, Wireless.”

Convergence estimates that U.S. OTT access revenue (based on 55 OTT providers led by Netflix) grew 41% to $11.9 billion in 2017, forecasts $16.6 billion for 2018 and $27.6 billion for 2020.

The firm estimates 2017 U.S. cable, satellite and telco TV access (not including OTT) revenue grew 1% to $107.6 billion ($94.30 per month ARPU) in 2017, forecasts $107.4 billion ($97.90 per month ARPU) for 2018, and $106.9 billion for 2020.

In 2017, the United States saw a decline of 3.66 million TV subscribers and in 2016 a decline of 2.2 million. Convergence forecasts a decline of 3.72 million TV subs for 2018.

The firm reports that 2010 saw the start of the rise in cord cutter/never households, and as of the end of 2017 estimates 32.13 million U.S. households (or 26.1% of households) did not have a traditional TV subscription with a cable, satellite or telco TV access provider, up from 27.56 million (22.6% of households) at the end of 2016. Convergence forecasts 36.76 million (29.6% of households) will be cord cutter/never households by the end of 2018.

Meanwhile, 2017 saw U.S. residential broadband subs surpass U.S. TV subs, growing to 96.95 million. Convergence estimates 2.33 million U.S. residential broadband subs were added in 2017 (2.66 million in 2016) and revenue grew 7% to $56.8 million; the firm forecasts 2.57 million additions and 6% growth to $60.5 billion for 2018.

“The gloves are off,” commentary in the report reads. “The TV-movie Industry is being reconstructed from the inside and by the outside, as programmers now directly compete against their traditional TV access and independent OTT buyers that rival them in terms of content spend. Amazon, Apple, DAZN, Facebook, Google and Netflix all have the money muscle to finance their own productions or outbid on programming including major sporting franchises.”

Because the OTT services are acting more like studios and vying for top content, traditional content owners may fight back, the commentary reads.

“We expect especially for the U.S. market going forward fewer content deals between programmers and independent OTT providers: 2017 saw Disney choose not to renew with Netflix and embrace OTT, HBO not renew with Amazon in the U.S., Hulu (which is spending more on content on a per U.S. subscriber basis than Amazon or Netflix) continue to bolster its offerings, compete more directly against TV access providers, and A+E, AMC, Discovery, Scripps, and Viacom back supply Philo,” the firm commented. “The traditional TV ecosystem does not show decline ‘yet’ except for TV subscribers. TV access players continue to raise prices (ARPU is growing but we forecast TV access revenue decline going forward), and programmers have kept up increases in programming fees and advertising rates, but this architecture cannot last in the long run.”

Parks Research Finds 21% of U.S. Pay-TV Subscribers Get Online Video Service Through Pay-TV Provider

About a fifth (21%) of U.S. pay-TV subscribers say they subscribe to an online video service through their pay-TV provider, up from 10% a year ago, according to new research from Parks Associates.

The research firm attributes this jump to the increasing number of partnerships between pay-TV and OTT providers, with operators such as Comcast adding support for Netflix in their set-top boxes.

Parks Associates will address the changing dynamics of the pay-TV market at a pre-show research workshop, Survivor’s Guide to the New Video World, May 14 in Denver at The Pay TV Show.

The Pay TV Show, hosted by FierceMarkets, will address innovative technologies, strategies, and business models that telecom, tech, and media companies are using to compete in this disrupted marketplace. Sponsored by Espial, Survivor’s Guide to the New Video World highlights the latest consumer research and explores trends defining success in the new landscape for video services.

“The number of ‘Cord Never’ households (which have never had pay-TV service) is increasing slowly, but those who have sampled pay TV are testing new alternatives,” said Brett Sappinton, senior director, Parks Associates, in a statement. “The percentage of those open to cancelling pay TV or minimizing their monthly spend on pay TV is also up. This ongoing shift is affecting all aspects of service design, promotion, packaging, and pricing. As a result, operators are having to reassess their technology and content investments as well as their partnerships and go-to-market strategy.”

Other highlights from Parks Associates’ new consumer study 360 View: Access and Entertainment in U.S. Broadband Households include:

  • Pay-TV subscription rates dropped from 86% in 2015 to 77% in late 2017.
  • 84% of pay-TV subscribers have service from a traditional cable, satellite, or telco provider.
  • Nearly 18% of pay-TV households have a subscription package from an online video service, such as Sling or a traditional provider now offering an online video bundle.

Workshop speakers include:

  • Mark Jensen, executive director, video product management and strategy, ATN International
  • Blake Sabatinelli, CEO, Newsy
  • Brett Sappington, senior director of research, Parks Associates
  • Hunter Sappington, research analyst, Parks Associates
  • Chris Thun, VP of user experience product management, TiVo
  • Clayton Wagar, VP of advanced technologies, Espial
  • Mitch Weinraub, director of product, AirTV

Workshop sessions include:

  • “Video Disrupted: The New Landscape for Video Services”
  • “Video Insight: Operating in the Age of Data Ninjas”
  • “Video Streamed: Lessons from OTT Video”
  • “Video Potential: Habits of Millennials, Cutters, and Nevers”
  • “Video Tomorrow: Innovations Fueling Future Vid