Cable operators emerged with their heads high from the European Cable Congress in London last week, confident that they can see off the threat from OTT, and satellite, for that matter.
The sentiment was well caught and perhaps amplified by Guy Bisson, Research Director for Television at media analyst group IHS Screen Digest, in his annual Cable Congress assessment of cable industry prospects highlighting robust growth.
Naturally, Bisson was focusing on revenue growth within the 27 European Union member states for cable operators of 5.5 percent to €20.6 billion over the year, rather than on the 1.4-percent decline in the number of households served to 58 million. This echoes a trend among many major cable operators in the developed world of declining pay-TV subscriptions but rising revenues. The largest U.S. MSO Comcast for example saw revenues up 12 percent and operating income 13.6 percent in 2012 compared with the previous year, despite declining subs.
This is all partly because lost subscribers are being peeled off at the bottom, with the affect of actually boosting ARPU because those that remain pay a higher average subscription. This leakage at the bottom, often to a combination of Free-To-Air and OTT subscription, can be tolerated so long as revenues and profits increase, although probably the bigger contributor has been healthy growth in broadband. One trend noted at Cable Congress was how broadband and pay TV have more or less coalesced into a single market, bringing cable companies, telcos and satellite operators into direct contention, with OTT providers coming in from the wings as competitors for video only.
Therefore, it makes sense not to take cable TV performance in isolation but to compare it with satellite operators and telcos. Here, the picture is mixed but generally less rosy, since cable TV has generally been losing out to IPTV. According to ABI Research, cable companies’ share of the global pay TV market dropped from 48.5 percent in 2011 to 47 percent in 2012, while that of the IPTV sector rose from 10 percent to 11.5 percent. Satellite was largely flat but this concealed rapid growth in many developing markets, particularly Africa and Latin America, and corresponding decline elsewhere. In Europe, the picture varies between countries, with cable losing substantial share to IPTV and satellite in Germany, but holding up well in Holland where MSO Liberty Global first launched its Horizon hybrid service in September 2012.
The Horizon story provided a cue for Cable Congress, with a prevailing theme being that by harvesting their growing broadband customer base to offer bundled services and hybrid TV offerings, cable operators can compete with satellite or telco competitors while also seeing off the OTT threat. In the UK, MSO Virgin Media deployed its hybrid service based on a TiVo box developed under a joint project well before Liberty Global, in December 2010.
Its chief operating officer, Andrew Barron, claimed at Cable Congress that, by including OTT as part of its overall offering via the TiVo box, it has successfully repelled competition from pure-play OTT providers like Netflix. Cable’s ability to deliver bundled offerings meant that its business was secure even if TV increasingly went online, Barron asserted.
But, Barron did hit on a common note at the congress by emphasizing the need for cable operators to push as strongly into the mobile arena as they have into broadband, since that would become increasingly important for their competitive position in a four-play world. Small cell deployments, WiFi and business services were the next frontier for the industry, said Barron. Teaming up with mobile operators to provide WiFi access from Virgin Media street cabinets and other local sites to complement mobile networks represented a significant opportunity, he added.
It is actually a significant necessity. Some cable operators have seen the light sooner than others. In Portugal, MSO Zon Multimedia has merged with mobile operator Optimus, which Zon’s chief operating officer Luis Lopes said was required because mobile services were becoming more important. Portugal had seen aggressive moves by mobile operators to deliver video services for a low price to subscribers, bundled with quad-play, and this called for a response from the cable operator.
Increasingly then, mobile will be rolled in with fixed broadband and pay TV, so in future the cable sector will have to compare its performance with the cellular sector as well.