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 Inc.’s Prime Video,” according to Kagan.

Comcast Makes Formal $31 Billion Bid for Sky

As expected, Comcast Corp. April 25 announced a “pre-conditional superior cash offer” of $31 billion for Sky, the European satellite TV operator headquartered in the U.K. The offer represents a 16% premium on 21st Century Fox’s standing bid for the 61% stake in Sky it does not own.

“We have long believed Sky is an outstanding company and a great fit with Comcast,” Brian Roberts, CEO of Comcast Corp., said in a statement. “Sky has a strong business, excellent customer loyalty, and a valued brand. It is led by a terrific management team who we look forward to working with to build and grow this business.”

Comcast eyes Sky’s 23 million subscribers in the U.K, Italy, and Germany, and history of strong financial performance. Roberts said Sky would help expand Comcast’s international footprint in the U.K. and Western Europe.

“The combined customer base of approximately 52 million will allow us to invest more in original and acquired programming and more in innovation as we strive to deliver a truly differentiated customer experience,” he said.

Comcast, like Fox, said it intends to safeguard Sky’s editorial independence by maintaining fiscal support for Sky News for 10 years, establishing an editorial Sky News board; keeping Sky’s U.K headquarters in Osterley for five years; and not acquiring any majority interest in U.K. newspapers for five years.

In a move aimed at competing with Netflix and Amazon Prime Video in the U.K., Comcast said it would increase investment in U.K. film and TV production and maintain support of Sky’s technology hub in Leeds, among other actions.

Comcast, which owns NBC Universal and DreamWorks Animation in the United States, contends owning Sky would create a media conglomerate better equipped to compete in a rapidly changing and highly competitive industry.

“Together, the companies would be well positioned to drive growth to provide attractive returns to Comcast shareholders and to benefit the employees and customers of both organizations,” Comcast said in a statement.

Indeed, Sky’s board of directors issued an April 25 statement withdrawing its recommendation to shareholders to support Fox’s Dec. 15, 2016 offer. It said it was also terminating the co-operation agreement with Fox – which said it would respond shortly to the Comcast offer.

Middle East OTT Video Market Expands as Saudi Arabia Ends Theatrical Ban

The over-the-top video market in the Middle East and North Africa (MENA) topped 1.4 million subscribers in 2017, up 48% from 2016, according to new data from IHS Markit. Online video revenue grew 44%, exceeding $100 million for the first time. Subscriptions are forecast to grow at a compound annual growth rate of 34.4%, reaching 5 million in 2022.

At the same time, pay-TV subs fell 21% to 4.2 million — driven by the politically-driven embargo of beIN Media pay-TV service in Saudi Arabia, Egypt and Bahrain.

“There was a reversal in pay-TV growth in the MENA region at the end of 2017,” according to analysis provided by Constantinos Papavassilopoulos, principal research analyst at IHS Markit. “As Saudi Arabia, Egypt and Bahrain severed political ties with Qatar, the three nations subsequently also blocked beIN Media Group from their markets. A similar decision was taken in the United Arab Emirates, but the market was later reopened to beIN Media pay TV packages. While the precise amount of revenue damage to beIN Media from this blockade is unclear, IHS Markit estimates that it may have cost the company as much as $200 million in lost subscriptions last year, especially because Saudi Arabia and Egypt were the two largest markets for beIN Media satellite TV packages. If the beIN Media blockade continues, it could seriously affect the future growth prospects of pay-TV in the region.”

Even as pay TV subscriptions declined, there were other positive developments for entertainment markets in the MENA region. Saudi Arabia re-opened movie theaters in the country and is planning $64 billion investment of state and private funds in the country’s entertainment sector over the next 10 years.

Online video subscriptions in MENA exceeded 1 million in 2017 for the first time (1.38 million), up 48% over the previous year, according to IHS Markit. OTT video revenue is expected to reach $500 million in 2022, growing 36.6% annually. In 2017, the number of OTT subs were one-third of the number of pay-TV subscriptions. This share will increase to 50% in 2020 and 67% in 2022, Papavassilopoulos said.

Lionsgate-owned Starz Play remains the OTT video market leader, in both subscriptions and revenue, followed by local service Shahid Plus and Netflix.

Starz Play’s success is based in part on partnering with local telecoms and IPTV networks offering easier payment options to consumers. This policy aligned pricing in relation to the average disposable income in each country, while providing attractive content with high relevance to some MENA regions, according to Papavassilopoulos.

“The pattern of growth will be determined by the decisions of the main players — primarily by their strategies for content, localization, partnerships and pricing,” Papavassilopoulos wrote in the report.

Pay-TV ‘Terror’: British Telecom Streaming First Episode of New AMC Networks Drama Free on YouTube

In a first, British Telecommunications (BT) said it would stream the first episode of new AMC Networks original period drama, “The Terror” free on YouTube. The episode will be available for 24 hours on April 24.

BT said it marks the first time a primetime program has launched in the United Kingdom on YouTube ahead of its pay-TV debut.

“BT likes to break new ground and we are delighted to partner with our friends at YouTube to take the first episode of ‘The Terror’ to everyone in the U.K.,” Tony Singh, content director at BT TV, said in a statement.

The fictional series showcases the Royal Navy’s dangerous mission trying to discover the Northwest Passage. Frozen, isolated and stuck at the end of the earth, “The Terror” highlights all that can go wrong when a group of men, desperate to survive, struggle not only with the elements but with each other.

The series stars Jared Harris (“Mad Men”), Tobias Menzies (“Outlander”) and Ciarán Hinds (“Game of Thrones”), among others.

“YouTube is committed to working with partners to boost discovery and viewership of their content in fresh and innovate ways,” said Richard Lewis, manager of entertainment content partnerships, YouTube.

As previously reported, AMC made all 10 episodes of “The Terror” available to AMC Premiere customers on the night of the show’s March 26 pay-TV launch in the United States.

“Providing entire seasons of shows … is one of the ways we are continuing to evolve AMC Premiere and make it even more valuable for fans of AMC programming,” said Mac McKean, head of innovation at AMC.




Report: Global Entertainment Spending to Grow to $439 Billion by 2021 With SVOD Surging

Consumer spending on entertainment content (video, games and music) is set to reach $439 billion globally by 2021, a 17% increase from 2017, according to the latest “Global Entertainment Content Outlook” report from Futuresource Consulting.

“As expected, TV and video account for the lion’s share of this consumer spend,” said author Tristan Veale, market analyst at Futuresource Consulting, in a statement. “However, music has enjoyed a resurgence in recent years and continued innovations within gaming means that both markets are impacting on consumers’ spending habits, with smartphones a key facilitator of this tearing up of the entertainment market rulebook.”

Both gaming and music will achieve a compound annual growth rate of 7% over the next five years, whereas video is on course for a more modest CAGR of 2%.

Futuresource found subscription video on demand (SVOD) services such as Netflix, Amazon Prime Video and Hulu are rapidly dominating the overall home video entertainment sector, which in addition to SVOD includes DVD, Blu-ray, EST and VOD. In 2013, SVOD was just 13% of home video consumer spend, according to the report, but at the end of 2017, SVOD comprised almost half of the $42 billion spent worldwide. Global subscription numbers will rise at a CAGR of 15% between 2017 to 2021, according to the report.

“2017 was the year that annual SVOD spend exceeded worldwide spend on packaged media,” said Veale in a statement. “Not only this, but by 2021 SVOD will account for 70% of total home video spend with households taking multiple services instrumental in the growth of this sector.”

Still, by comparison in 2017 SVOD was a $19 billion market whereas pay-TV was a $200 billion market, according to the report, which noted that there remains a significant appetite for pay-TV services, due to bundling with broadband and telephone services, early availability of premium content, and access to exclusive content, notably sports. Pay-TV expenditure rose 4% from 2016. In value terms, the United States accounted for close to half of all the global spend, at $106 billion in 2017. In subscriber terms, China’s 336 million pay-TV households took the top global position, but the average household spend in China was $3 per month — just one tenth of the U.S. spend. The number of pay-TV subscribers fell in the United States, Canada and France with drops of 1%, 1% and 3%, respectively. Still, price hikes and migration to higher tier packages helped subscription revenue in the United States rise.

Pay-TV Lite services (most prominent in the United States), which include YouTube, Hulu and Sony PlayStation and traditional operator services from DirecTV and Xfinity, totaled 4.8 subscriptions in the United States at the end of 2017.

“With content remaining as one of the main differentiating factors, spend to secure exclusive rights continues to soar placing added pressure on operator’s margins,” said Veale in a statement. “Furthermore, this is compounded by the increased competition stemming from a growing number of online platforms that includes Netflix and Amazon and increasingly the likes of Facebook and Twitter, all of which have significant war chests for content acquisitions. Combined, the FAANG companies are looking to spend around $20 billion on video content in 2018.”

Futuresource noted increased M&A activity in entertainment, such as Comcast’s recent bid for Sky and Disney move to acquire 21st Century Fox, are the result of increased competitiveness in the sector.

“Economies of scale have never been more critical, as content distributors and owners seek to maximise return on investment through broadening reach to the widest audience possible,” according to Futuresource. “Global conglomerates are increasingly operating with a fully integrated entertainment offering, not just video but also actively involved in creating content for the growing games market and ever tighter commercial links to the music sector. Consequently, they can maximize intellectual property returns across these ever more overlapping content divisions.”

For the latest from Futuresource, click here.

Comcast Returns ‘Watchathon’ Binge-Viewing Week

Comcast Cable April 11 announced it is bringing back the “Xfinity Watchathon Week” April 16-22, affording subscribers non-stop, on-demand access to thousands of hours of content – including over-the-top.

Launched six years ago as a TV Everywhere antidote to Netflix and OTT video, Comcast for the first time is offering Watchathon to Xfinity Internet-only subscribers and programming from Netflix and more than two dozen SVOD services, such as Acorn TV, AMC Premiere, FX+, Lifetime Movie Club, History Vault and even DOGTV, which offers a selection of programming made just for man’s best friend.

Eligible subs can also watch thousands of movies and TV shows from more than 50 networks, including AMC, FX, HBO, MTV, NBC, Showtime, and Starz.

Comcast will also offer a subset of programming to its Internet-only subs via the Xfinity Stream app and portal.

“This year, we’re … offering X1 customers a unique opportunity to sample and explore the best programming from dozens of traditional networks and studios, streaming services and emerging SVODs,” Daniel Spinosa, VP, video entertainment services, Comcast Cable, said in a statement.

Xfinity Internet-only subs have access to back episodes of HBO’s “Game of Thrones,” and ‘Westworld,” Showtime’s “Billions,” and “Homeland,” and Starz’s “Outlander,” and “Power,” among other programs.

The promotional week will enable Xfinity subs the option to explore dozens of third-party SVOD platforms, such as Acorn TV’s British hits, AMC Premiere, CuriosityStream’s documentary films and series, Daily Burn’s workout class, select shows from FX+, Gaiam TV Fit & Yoga fitness videos, History Vault’s historical and educational content, and Stingray Karaoke’s collection music.

“With voice control and the ability to surface our programming seamlessly within their experience, X1 provides networks like us with a unique platform for discovery alongside some of the best and most popular programming available today,” said Matthew Graham, GM, Acorn TV.

Report: Pay-TV Industry Adding 95 Million Subs Globally Through 2023

It may be an over-the-top video world, but pay-TV isn’t going away worldwide anytime soon, according to new data from Digital TV Research.

Pay-TV is projected to add 95 million subscribers through 2023, reaching a global sub base of 1.1 billion. Based on forecasts for 138 countries, DTR said pay-TV subs surpassed 1 billion in 2017.

Of the incoming subs, the majority — 81 million — will be via telecom, with IPTV subs surpassing pay satellite TV subs in 2018.

“Some operators, such as Telefonica in Spain, are encouraging subscribers to convert to IPTV from other platforms. IPTV/broadband subs are more lucrative than satellite TV subs,” principal analyst Simon Murray said in a statement.

Satellite TV will add 31 million subs and broadcast TV will add 10 million through 2023. Digital cable TV will add 61 million subs, but analog cable TV will lose 88 million subs — resulting in a net loss for cable.

There were 90 million analog cable TV subs at the end of 2017. Although this figure is down from 335 million in 2010, it still represents a major hurdle for pay TV operators to convert, according to DTR.

Meanwhile, there will be 525 million cable TV subs (analog and digital) globally by 2023, similar to the 528 million recorded in 2010.

“It’s no secret that pay TV subscriber numbers are falling in North America. We forecast 92 million pay TV subs in the region by 2023; down 20 million from 112 million in the peak year of 2012,” Murray said.

Outside North America, the number of Latin America pay-TV subs remained flat in 2017. Fewer than 5 million additional pay-TV subs are expected through 2023 – bringing its total to almost 76 million.

Eastern Europe will lose 2.4 million subscribers between 2017 and 2023 – down by 2.9% to 79 million. This is more to do with poor economic conditions than cord- cutting, according to DTR. Eastern Europe has a legacy of low-paying analog cable TV subs converting to digital. 2017 was the peak year for the region with 20 million analog cable subs.

Western Europe will gain 3 million subs through 2023, representing a 2.6% increase, to total 106 million.

Sub-Saharan Africa will climb by 74% to 41 million subs. In the Middle East and North Africa, the number of pay TV homes will increase by 4.5 million to 21 million. Asia Pacific will add 78 million subs over the next five years to 686 million.

China will continue to supply about a third of the world’s pay-TV subs, with 375 million expected by 2023. India will bring in another 16% of the total – or 180 million. China and India will together provide half the world’s pay-TV subs by 2023.

Survey: Pay-TV Not Worth the Money

In an age of over-the-top video services featuring loss-leader pricing to premium content, the pay-TV ecosystem continues to struggle justifying its cost.

New data from Parks Associates found that 10% of U.S. broadband households switched providers, downgraded their service, or cancelled pay-TV service in the past 12 months, primarily because of a negative perception of the service value, including statements that the “service wasn’t worth the monthly cost” or complaints that the service provider increased the price of the service.

By comparison, 77% of U.S. broadband households currently subscribe to pay TV, a drop from 81% in late 2016.

“Poor perceived value is the leading factor driving cord cutting, downgrading services, or switching providers,” Brett Sappington, senior director of research, said in a statement.

Pay-TV operators – notably Comcast – are fighting back. The nation’s No. 1 cabler now offers direct-access to SVOD services Netflix, Pandora, Acorn TV, in addition to YouTube.

Parks contends other pay-TV strategies countering subscriber loss could include promotional options and free or subsidized hardware such as routers, set-top boxes, and telephone handsets.

Cord-cutters and cord-shavers indicate these types of offers could entice them to keep their traditional pay-TV subscriptions,” according to Sappington.

“It is a primary reason for consumer interest in online pay-TV services, which are typically available at a much lower price than traditional pay TV,” he said.


Parks Associates: U.S. Broadband Households’ Average Monthly Spending on Non-Pay-TV Video Entertainment Drops to $23

U.S. broadband households report their average monthly expenditure on video entertainment outside of a pay-TV subscription has dropped from $29 in the past two years to $23 in the last half of 2017, according to research from Parks Associates.

Spending on internet video has held steady at roughly $9 per month for several years, while reduced spending on cinema tickets and DVDs and Blu-ray discs contributed significantly to the overall decline, according to the research.

Parks Associates released two new studies—360 View: Digital Media and Connected Consumers and 360 View: Access and Entertainment in U.S. Broadband Households—which also show a decline in multiplatform usage among households, as use rates on individual screens declined despite the fact that overall video viewing has held steady.

“The number of overall consumers viewing video on a connected device remains steady at 92% of U.S. broadband households, but viewers are using fewer devices to access that content,” said Parks Associates senior director Brett Sappington in a statement. “This finding indicates that consumers are starting to settle into particular viewing habits. They are focusing more on their favorite screen and connected devices and are reducing time spent on other video screens.”

The research firm also noted that many viewers want access to their OTT services through their pay-TV set-top box. Currently, one-fifth of pay-TV subscribers have the ability to access online video services through their set-top box, and one-third of pay-TV subscribers say access to OTT via a pay-TV user interface or channel guide is appealing.

“Users are experimenting less with multiple connected devices, but they continue to experiment with multiple OTT video services,” said Parks Associates research analyst Hunter Sappington in a statement. “Many consumers now see OTT video as complementary to both other OTT video services and pay-TV services, rather than a replacement. Today’s OTT market is much more about bundling and partnerships than it is about winning subscribers from direct competitors.”

Other highlights of Parks research include:

  • The increasing number of partnerships between pay-TV and OTT providers is driving the number of U.S. pay-TV households subscribing to an online video service through their pay-TV provider from 10% a year ago to 21% now.
  • Households watch an average of 14.6 hours per week of video on a TV screen.

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

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