MediaWave Actionable Insights and Industry News for Media Professionals
Crystal ball on a lakeshore at sunset: the future of pay TV

What Is the Future of Pay TV?

July 5th, 2017   ||    by Charlene Weisler   ||    No Comments

What do we really mean when we say “pay TV”? To some, it means programming or networks that are commercial-free, available on any platform, and require the viewer to pay a fee. To others, it includes ad-supported TV channels offered through a multi-channel video program distributor (MVPD). It might also include newer innovations like video-on-demand (VOD) and streaming video-on-demand (SVOD) programming as part of a subscription service.

In sum, pay TV is evolving into an amalgam of networks and services that are typically supported by ads or subscriptions, and its definition keeps changing as technology and access to content expands. The generally accepted definition, however, comes from the Television Bureau of Advertising: “Home television programming for which the viewer pays by the program or by the month. Pay television includes both over-the-air transmission (with scrambled signals) and cable transmission (pay cable).”

A Downward Trend

By most reports, the business profitability trend for pay TV is worrying. Subscriptions over the years have showed a steady decline. In the first quarter of 2017, according to Business Insider, pay TV had “the worst ever annual growth rate, with customers shrinking by 2.4 percent year-over-year (YoY), and the rate of decline has been accelerating for the past two quarters.” The article concludes that cord-cutting is accelerating, and that streaming services are posing a threat to the business model that can no longer be ignored or explained away.

Whether we’re in a new reality of cord-cutting/cord-shaving or not, the net result of media digitization will be greater fragmentation, content choice, and viewer control. Additionally, there are many in the industry, as exemplified by this CNBC article, who negate the impact of cord-cutting.

Pay TV is struggling, but it’s not for lack of demand. It’s more about competition—primarily from over-the-top (OTT) services such as Hulu, Apple, Netflix, and Amazon Prime, as well as from expanding quality digital content. These additional channels enable consumers to view quality programming when and where they want. And it’s estimated this business model will only get worse—OTT viewership hours are expected to eclipse traditional TV within five years, according to a recent survey by Level 3 Communications.

Things to Come

Buyers and planners must take a careful look at the future value of pay TV to their clients. Media consultant Brad Adgate believes the biggest issue regarding its future business potential is how much leisure time is taken up with non-ad-supported content. “More people are watching premium content by bingeing, and they are not seeing the ads,” says Adgate. “This behavior cuts back on ratings, so buyers have to be a little smarter in where they will invest their dollars.”

Accurate measurement is also vital, according to Chris Bacon, the executive vice president of global research at the Advertising Research Foundation. “Transparency will be critical for media planners and advertisers to make smart investments in a space with people-based audiences,” says Bacon.

To maintain and strengthen their long-term financial outlook, media companies have to become nimbler, expansive, and risk-taking. This transformation is already occurring with the creation of new digital programming and platform alternatives, partnerships with a range of technology and digital media companies, and skinny-bundle offerings.

In the future, it may even look a lot like digital video. “You see HBO and Showtime migrating to streaming video,” says Adgate. “You don’t see Netflix migrating to becoming a cable network. So I see that HBO will become more like Netflix instead of Netflix becoming more like HBO.”

Tags: , , , , ,

Share this page:

Share on Facebook Share on Twitter Share on LinkedIn Share via Email
arrow_upward