OYSTER BAY, N.Y.—Traditional pay-TV providers are feeling the heat from OTT subscription services as hundreds of millions worldwide choose over-the-top providers for their video content, according to a new report from ABI Research.
The report, “Service Provider OTT Services and Set-top boxes Update,” finds the OTT subscriber base will reach 400 million this year, largely by providing a lower-cost service with no long-term contracts.
In North America and Europe, pay-TV operators fighting fire with fire. There, operators are offering their own OTT services, improving churn by offering consumers less costly alternatives.
DirecTV’s Now, Dish Network’s Sling TV and Sky’s Now TV are among the operators offering Virtual Multichannel Video Programming Distributor (vMVPD) services, linear channels via an internet connection. “vMVPD services offer live TV packages as low as US$10 and customized packages are attracting cost-sensitive customers,” says Khin Sandi Lynn, industry analyst at ABI Research.
Dish Network’s Sling, which has secured 2 million customers since launching two years ago, and DirecTV Now, which has won 1.2 million subscribers in one year, are examples of successful vMVPDs. DirecTV has even been able to offset satellite subscriber losses with its vMVPD service, the research firm says.
Although vMVPD packages cost less, live sports packages and customized feature sets have elevated average revenue per user when compared to other OTT subscription services. Both Hulu and YouTube launched live services last year.
“As competition intensifies, content and quality of service are crucial to win the OTT war,” says Lynn.
More information is available on the ABI Research website.