New Report Finds Cautious Optimism Among U.S. Pay-TV Industry Execs

NAGRA and MTM released a report examining the thinking of top pay-TV executives.
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CHESEAUX, Switzerland & PHOENIX—Senior executives of leading pay-TV providers, broadcasters, OTT services and rights holders are cautiously optimistic about the ability of pay-TV providers to adapt in an era of rapid changes, according to a report released this week.

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The report, the U.S. edition of the “2019 Pay-TV Innovation Forum” from content protection and multiscreen TV solution provider NAGRA and international research and strategy consultancy MTM, examines insights gleaned from a seminar held earlier this summer in New York City.

“The 2019 U.S. edition of the ‘Pay-TV Innovation Forum’ showcases the massive opportunity available for industry players who can understand current market dynamics and implement the right strategies to remain competitive in today’s and tomorrow’s U.S. media and entertainment space,” said Simon Trudelle, senior director, product marketing at NAGRA.

During the seminar, the executives discussed the challenges, opportunities and priorities facing the U.S. pay-TV market.

According to the report, many of the executives are optimistic about the future commercial prospects for pay-TV in the U.S. However, some expressed caution stemming from anticipated growing pricing pressure, declining margins, fragmented distribution and greater competition.

The executives identified pay-TV providers’ main priority as re-addressing their role as aggregators and creating packages with greater appeal to younger customers.

The report also documents a mixed bag when it comes to how these executives view OTT services. Many see OTT as just another category of content to be aggregated and offered to pay-TV subscribers, while others view the availability of Disney+, priced competitively in a bundle with Hulu and ESPN+, as a possible existential threat to traditional pay-TV.

There was the notion among many seminar participants that some pay-TV packages may look like an increasingly good value to consumers when compared to the cost of subscribing to multiple direct-to-consumer (DTC) OTT services.

Many participants expect traditional pay-TV packages to be altered significantly. Fewer linear channels and a greater range of prices and packages are anticipated. These changes will require content providers to adapt their distribution strategies.

The executives also expressed their opinion that the industry is nearing the highpoint in content investment. There is a growing concern about the number of shows being produced.

Over the next few years, the highest priority of content providers will be transitioning to a more diverse distribution ecosystem. They must find a way to launch new DTC offerings to garner new revenue streams while protecting traditional, existing revenue sources.

The executives also agreed that connected platforms are creating opportunities for new entrants and aggregators. However, some believe streaming growth will slow in coming years as pay-TV providers reinvent their offerings and more streaming platforms launch. The result will be a fragmenting market.

Others see greater adoption of connected platforms as the genesis of a new wave of gatekeepers and aggregators.

Growing connectivity may prove to be a double-edged sword as it relates to content piracy, some argued. With more connected platforms may come greater focus from pirates on OTT services, some said.

“Most major U.S. companies are well advanced in developing their strategies, placing big bets on the future and rolling out new offerings—but there are lots of uncertainties ahead. The decade ahead promises to be a fascinating period for the industry,” said Jon Watts, managing partner at MTM.

A copy of the report is available online for download. Registration is required.