Pay TV landscape – by Digitalis

Today, the global pay-TV industry is experiencing a period of change and disruption, with service providers in many markets facing a perfect storm of slowing growth, intensifying competition and business model disruption. In many markets, broadband quality and availability continue to improve steadily and connected devices, such as Smart TVs, digital media players, and smartphones, are gaining traction. This is providing consumers with access to a much wider range of video content and allowing new OTT entrants as well as content owners to retail premium TV and film content directly to consumers. A large number of telcos, both global and local, have aggressively entered the pay-TV market, leveraging their network capabilities and existing customer relationships to offer highly attractive multi-play bundles.

These developments are unevenly distributed across different geographies and are at a relatively early stage in many markets, where pay-TV remains a robust and often highly profitable business. Furthermore, many pay-TV providers have responded to increased competition by expanding into telecoms services, scaling up their investments in content, developing multiscreen and OTT offerings, and offering adjacent services, such as advanced advertising and Smart Home.


Nonetheless, a growing number of pay-TV executives around the world believe that the external pressures are intensifying and the industry is entering a transitional period, with future growth becoming significantly more challenging:


During the last year, the pace of change has accelerated across the pay-TV industry, with 67% of the 42 major pay-TV markets covered in the programme seeing lower subscriber growth compared to the year before.

The majority of pay-TV markets exhibited either a small, less than 5%, increase (e.g. UK, Malaysia, Australia, and Brazil) or a decline (e.g. Ireland, USA, Canada, and Hong Kong) in subscribers over the last year. Only a handful of pay-TV markets, mostly in emerging countries, such as Indonesia, Mexico, Vietnam, Philippines, have seen double-digit annual subscriber growth over the last two years, with growth still slowing over the last year. However, most of this growth is believed to have come from lower value subscriptions.

In the light of these recent trends, many pay-TV executives surveyed in 2017 are revising their expectations for future growth:

  • + 55% Believe that the pay-TV industry revenues will grow moderately / strongly over the next five years, down from 60% last year.
  • + 20% Believe that the industry revenues will decline over the next five years, up from only 8% last year.
  • + 69% Disagree that average revenues per subscriber for the major pay-TV service providers will grow strongly from current levels.

As growth slows down across the existing product and service portfolios, pay-TV service providers will need a new playbook, leveraging their key assets, expertise and relationships to develop innovative, high-growth propositions. Despite growing competitive threats, many industry participants believe that this is a great time for pay-TV providers to innovate and transform their businesses:

“Right now, service offerings change rapidly because innovation cycles have become shorter. It is cheaper to launch and run new services, which has a positive impact on creativity and innovation across the industry. Everybody knows that this is a big opportunity to modernize and offer more interesting and appealing services to customers”, reports Jonathan Judah, Digitalis Global VP of Research.


Although there are many trends and developments impacting the pay-TV industry, most pay-TV executives highlight three major challenges facing the industry:

  • The proliferation of OTT services
  • Changing consumer behaviour and demand
  • Content piracy, fuelled by illicit streaming devices

These trends are truly global, but there are important regional differences to consider: the Pay-TV industry in North America is seen as the most severely disrupted by the new consumption trends, primarily due to high levels of pay-TV penetration and high ARPUs. The pay-TV industries in Asia Pacific and Latin America, on the other hand, face their own set of challenges brought about by the rapid growth in content piracy, mostly due to the widespread availability of illicit streaming devices. In this context, the pay-TV industry in EMEA appears to be the least disrupted, but there is significant variation within the region.

To the credit of the pay-TV industry, many providers have made significant progress in strengthening and diversifying their businesses, by investing in advanced platforms, content, and new products and services as well as expanding into adjacent markets. Despite these positive developments, many pay-TV executives believe the industry needs to accelerate its transformation to succeed in this constantly evolving environment.


The pay-TV industry remains, in many respects, a global success story – providing a growing range of services to millions of households around the world. It invests heavily in infrastructure, innovative new products and advanced technologies, and delivers state-of-the-art experiences to customers, seamlessly combining entertainment and communications. In most markets, pay-TV providers have continued to grow during the last ten years, despite the global economic downturn at the end of the last decade.

Today, however, the pay-TV industry is experiencing a period of disruption as service providers face slowing growth, intensifying competition and business transformation challenges. In the last year, the pace of change has accelerated across the industry – with most major pay-TV markets seeing lower subscriber growth as a result. This pace shows no sign of slowing either: among the executives surveyed, 82%expect competition from other pay-TV companies, Telco’s and OTT service providers to increase dramatically over the next five years.

Although many trends and developments are impacting the pay-TV industry, executives identify three fundamental disruptive challenges facing the industry today:

  • The digital giants are transforming the pay-TV market with new OTT services, new device and service ecosystems and major investment in content and technology, as well as new business models.
  • Consumers are demanding multiscreen viewing, more flexibility in their content packages, and personalized experiences, while viewing and subscription patterns are increasingly fragmented among different consumer segments.
  • Pay-TV piracy is on the rise globally, notably in Latin America and Asia Pacific, with an estimated $7 billion per year lost in unrealized pay-TV service provider revenues, fuelled by improved broadband access and growing ownership of illicit streaming devices. This stimulates operators to invest in their product offerings and innovative anti-piracy measures to fend off illegal competitors.

To respond to these developments, pay-TV service providers require a newplaybook that leverages their assets, expertise and relationships to develop high-growth products and services, while retaining a pro table core business.

Innovation is a top priority for the majority (74%) of industry executives and has become even more of a priority for 69% of them during the last 12 months.

While most pay-TV providers have improved their portfolios (61%) in the last 12 months, the propensity to innovate varies significantly, pointing to a widening innovation gap between the lead innovators and followers. The top third of the most innovative providers identified in the last year’s analysis, for example, were significantly more likely to innovate than the bottom third, with 80% and 37%, respectively, improving their portfolios over the last 12 months by introducing new products or features.

Innovation capabilities also vary strongly by region:

Providers in North America are notably ahead in developing advanced and well-diversified offerings, followed by their peers in EMEA, Asia Pacific, and Latin America. Pay-TV providers in North America and EMEA are also the quickest to bring innovation to their customers, with 81% and 72%, respectively, improving their portfolios over the last year.

The core pay-TV proposition, including the TV platform and online TV services, remains the main area of innovation for operators globally as they deploy advanced functionalities and multiscreen services. Only a small number of large-scale providers, typically operating in larger, developed markets, are currently addressing adjacent business opportunities, such as advanced advertising, Smart Home solutions, and technology re-licensing. These providers are expected to continue driving innovation in adjacencies, because of their ability to deploy the necessary assets, budgets, and capabilities.

Despite slowing growth and external pressures, industry executives still believe there is considerable scope for innovation in pay-TV. So, which are the most commercially attractive and strategically important areas of opportunity for the pay-TV industry over the next five years?

Investment priorities vary significantly by market and service provider type, but most executives agree that the most commercially attractive opportunities relate to strengthening and differentiating their core pay-TV and online-TV propositions, in terms of both the product offering and the commercial model:

            +  Product innovation: service providers see a growing focus on delivering connected, interactive, and seamless pay-TV experiences across multiple devices. To do that, they are deploying next-generation back-end and front- end technologies and new content offerings, as well as online TV services.

            +  Commercial innovation: service providers are focusing on new ways to price and package their content, taking a more segmented view of their customers, introducing more flexibility, and establishing innovative partnerships with content providers.

Today, innovation capabilities vary significantly across the pay-TV industry, with providers at varying stages of developing and diversifying their product and service portfolios. So, how big is the innovation gap between the innovation leaders and the laggards, and what would be the impact of closing that gap? What would happen, for example, if the least innovative service providers upgraded their product and service portfolios at least to the level of the average innovators in their countries?

In this scenario, global industry revenues could be improved by 11%, equivalent to $20 billion per year, with the biggest improvements likely in EMEA and Asia Pacific, where pay-TV markets tend to be the most fragmented.

What steps do pay-TV providers need to take, to ensure that they are t-for-the-future and well-positioned to grow and remain competitive?

Jonathan Judah summarises the four main strategic priorities for pay-TV providers:

  • Establish strategic partnershipswith content providers and technology suppliers that go beyond rigid commercial structures.
  • Cultivate the right digital culture,processes and capabilities to support innovation, learning from the new breed of digital- first and data-led OTT service providers.
  • Focus on scale and diversifying product portfolios, by growing customer footprint and launching new products and services. 

  • Invest in the advanced technologies, such as IP-delivery and cloud, needed to support business transformation.

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