Report: OTT Revenue to Grow to $44.2 Billion in 2022

Convergence Research estimates U.S. OTT access revenue grew 35% to $22 billion in 2019 and forecasts 29% growth to $28.5 billion for 2020 and $44.2 billion for 2022.

That’s based on 77 OTT services (more than 50 providers) led by Netflix, Hulu and Amazon analyzed in its 2020 Couch Potato Reports. The forecast assumes the coronavirus will not be as major a disruptive force beyond 2020.

Given the accelerating decline in TV subscribers, revenue, and the ongoing programming cost and TV access price increases, TV advertising revenue has also started to decline, according to Convergence. The firm estimates 2019 U.S. cable, satellite, telco TV access revenue declined 3% to $100.4 billion and forecasts a decline of 6% to $94.8 billion in 2020 and higher percentage declines in 2021 and 2022.

Convergence estimates 2019 saw a decline of 6.36 million U.S. TV subscribers, 2018 a decline of 4.03 million, and forecasts a decline of 7.1 million TV subs in 2020. U.S. TV subscribers declined by more than 7% in 2019 and more than 4% in 2018, according to Convergence, which forecasts a 9% decline in 2020 and higher percentage declines in 2021 and 2022.

As of the end of 2019, the firm estimates more than 36% of U.S. households did not have a TV subscription with a cable, satellite or telco TV access provider, up from 31% at the end of 2018. Convergence forecasts 42% at the end of 2020 and 54% at the end of 2022.

The firm estimates 2019 saw more than 7.2 million U.S. cord-cutter/never household additions.

From the end of 2019 to the end of 2025, Convergence sees a decline of more than 50% of U.S. TV subscribers, more than 40% of annual TV access revenue, while cord-cutter/never households and OTT access revenue more than double, with OTT access revenue surpassing 2025 TV access revenue.

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The firm estimates 2.74 million U.S. residential broadband subscribers were added in 2019 and revenue grew 8% to $66.7 billion. It forecasts additions will moderate in 2020 and that 2022 residential broadband access revenue will almost be on par with 2022 TV access revenue. Residential broadband subs surpassed TV subs in 2017.

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Cable continues to add the lion’s share of residential broadband subs (telco has lost residential broadband subs every year since 2015). AT&T, CenturyLink and Frontier were responsible for the majority of 2019 telco broadband losses, and Convergence forecasts they will contribute the majority of losses in 2020 as well.

“With programmers having jumped in with both feet, and Apple, DAZN, and Quibi joining Netflix and Amazon’s spending parade, the OTT arms race has truly begun,” reads the report. “We believe Netflix no longer has the same flexibility to raise pricing as frequently as it has in the past. Alternatively, Amazon and Apple have the luxury of expensing OTT programming as an additional operating cost to their core businesses. Amazon has clearly demonstrated its programming commitment to OTT. It remains to be seen if Apple is willing to endure the long-term spending campaign required to become a key OTT player.”

“The Battle for the American Couch Potato: OTT and TV” and “The Battle for the American Couch Potato: Bundling, TV, Internet, Telephone, Wireless” samples, summary and contents can be found here.

Pay-TV Q2 Sub Loss Lowest Since 2014

Pay-TV operators, including cable, satellite and telecom, lost about 800,000 video subscribers in the second quarter – down from 930,000 subs in the previous-year period, according to new data from the Leichtman Research Group.

The losses were offset by ongoing gains in online TV services such as Sling TV, DirecTV Now and Spectrum TV Plus, which totaled 385,000 subs.

Leichtman found that the largest pay-TV providers in the U.S. – representing about 95% of the market – lost about 415,000 net video subs in Q2.

Specifically, satellite operators Dish Network and DirecTV shed 480,000 subs – the largest in any previous quarter.

The top six cable companies lost about 275,000 video subs compared to a loss about 190,000 subs in Q2 2017.

Telecoms lost about 45,000 video subs, compared to a loss of 270,000 subs last year.

The top pay-TV providers now account for about 91.3 million subscribers – with the top six cable companies having 47.4 million video subs, satellite TV services 30.6 million subs, the top telecoms 9.1 million subs.

Online TV services Sling TV and DirecTV Now have 4.2 million combined subs.

“This marked the fewest net losses [among pay-TV operators] in the traditionally weak second quarter since 2014,” Bruce Leichtman, president and principal analyst for Leichtman Research Group, said in a statement.

Leichtman said the rise in online TV is both a product of consumers opting for more economical services, as well as changes in providers’ strategies.

“This newer segment of the industry has helped to mitigate overall pay-TV losses, while also contributing to a share shift from traditional services,” he said.

Netflix Partnering with SiriusXM for Comedy Radio

In a first for Netflix, the SVOD pioneer is joining SiriusXM to create a satellite radio-based comedy channel, dubbed “Netflix is a Joke Radio,” launching in early 2019.

The channel would be used largely as a marketing tool for Netflix’s expanding list of stand-up comedies – including this year’s “Chris Rock: Tamborine,” according to The Wall Street Journal, which first reported the move.

Netflix has a long history producing original stand-up specials, including most-recently with Amy Schumer and Dave Chappelle. It also streams original comedy-themed shows with Michelle Wolf, Norm Macdonald, Joel McHale and David Letterman. Previous original comedy shows featured Aziz Ansari and Chelsea Handler.

“We look forward to creating one-of-a-kind exclusive original comedy programming with existing and new Netflix talent,” Scott Greenstein, chief content officer at SiriusXM, said in a statement.

Report: Multichannel Subscriptions Fall Slightly in Q1, But Get Virtual Lift

Combined cable, direct broadcast satellite (DBS) and telecom multichannel subscriptions fell 0.8% sequentially in the first quarter ended March 31, to 93.2 million, including 90.3 million residential customers.

That’s according to the Q1 2018 U.S. Multichannel Subscriber Report by Kagan, a media research group within S&P Global Market Intelligence.

However, noteworthy gains for virtual platforms DirecTV NOW and Sling TV cut the quarterly subscription losses in half, raising the overall residential figure to 94.1 million.

Other findings:

  • The residential multichannel penetration rate stood at 76.1% as of March 31 when including the virtual smartphone platforms owned by AT&T and DISH Network (DirecTV NOW and Sling TV).
  • Cable operators logged their largest first-quarter video subscriber decline on record, with the top two multiple system operators, Comcast and Charter, accounting for 59% of the drop.
  • Telco video appears to be regaining its footing as AT&T’s U-verse stabilizes. The platform’s video customer losses fell below 100,000 for the first time since the third quarter of 2015.
  • DBS losses ramped back up in the first quarter, bringing the sector’s total down to 31.1 million.For more information, visit www.spglobal.com/marketintelligence.

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.