ABI: Pay TV Providers Need to Look to Over-the-Top to Sustain Pay TV Revenue Growth

The pay-TV industry will grow at a slow 3.7 percent compound annual growth rate (CAGR) through 2020 as sector participants struggle to find ways of curtailing customer churn and will raise, or at least maintain, average revenue per user (ARPU), according to new market research from ABI’s Over-theTop and Multiscreen Services research service. In contrast, OTT video will continue to show strong growth, with ABI forecasting that total revenue will increase 26 percent this year and at a 24 percent CAGR through 2019.

Pay-TV subscribers, moreover, are now looking to pay-TV service providers to incorporate popular features introduced by pioneering OTT video service providers, such as Netflix and HBO Go. These include content search and recommendation, and mobile device support. “Comparatively high priced pay TV bundles are losing customers to more inexpensive, IP-delivered content,” research analyst Eric Abbruzzese was quoted in a news release. Incorporating such features into set-top boxes is one way to meet the challenge from third-party OTT providers, he continues. “Operators that are first to market with new set-top box technologies can expect strong returns -- as much as 10 percent higher ARPU than with legacy technology -- while those introducing the technology later will struggle to see similar success.”