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Mixed Signals

Recent Pay TV Projections: Survey Says...Maybe Not, Probably Not

11/30/2010 2:15 PM

An essential way — and one of the best ways — “Mixed Signals” has ever seen to understand a business is to survey and understand its participants.

Thus, if one were to analyze the auto industry, one might spend a lot of time with either or both of its users and/or its executives (the latter of whom themselves are responsible to analyze and interpret the demands of their users).

In a similar context, I recently viewed an article within Multichannel News, entitled “10-Year Forecast: Cable Subs Down, Revenue Up,” written by Mike Farrell, that recounted some recent pay TV subscriber growth estimates from a firm’s presenter that stated that cable will decline to 56.8 million; satellite will increase to 34.6 million in 2014, and then decrease to its current number of 33+ million.; and telco TV will increase to 17.2 million, in the next 10 years.

I take issue with this data for at least four important reasons.

Point 1: There was no basis for the estimates. What are they based on? Single-person or two-person “group” guesses? Straight-line projection growth or decline? Consumer interviews? Executive interviews? Other interviews? Views of staff writers for trade journals? Views of other trade analysts? Just what?

Point 2:  The second reason I was troubled by these numbers is that they are not logical (see below).

Point 3: The third reason I object is because if ever there were a time to adjust the length of one’s projections, because of industry unknowns, it is now. Thus, for any company to project ten years into the future of pay TV it will have this number of pay TV subs is, well, very arguably silly. I can’t see anyone being comfortable with pay TV projections that go any further forward than 7 or 8 years, and probably no more than 5.

Point 4: And the fourth — and most important — reason I was shaken by these future growth projections is because they make no sense relative to a recent survey I and my company did of 50+ U.S. Pay TV and related services executives. To a person, every single industry executive I interviewed about this very question saw DBS declining, probably percentage-wise as much as cable, especially in light of the perceived growth of telco TV.

Not a single one echoed the growth projections of the article and the presenter relative to DBS or telco. Otherwise, how will Internet/OTT and telco grow as much as the presenter suggests? The logic — and the numbers — just aren’t there. And there are many other reasons.

This fourth point alone points to why my first and second reasons noted above are so important.

In addition, 17 million telco TV subs would mean about 36% penetration of currently planned homes passed. That’s an awfully ambitious assumption, unless the forecaster is expecting a big expansion of the telco TV footprint. But, that, too, is probably overly ambitious, since Verizon appears to have thrown in the towel and AT&T isn’t exactly racing to expand beyond its original projections. It is also not something my interviewees supported — even remotely.

Farrell, showing his own research and analysis, further states — which is probably true — that the presenter’s “…predictions seem to jibe with most other analysts who follow the sector.”

Well, actually, this analyst challenges the presenter’s basis and conclusions, as well as the common sense on which they are apparently based. He also challenges those projections, based upon the unanimous opinions of 50 of the very top pay TV and Internet/OTT executives today that are making these determinations within their own companies today (and, until I hear otherwise, the apparent lack of similar executive and/or user analysis and research on the part of the presenter).

In short, I’d love to witness the DBS growth the presenter claims. However, I have to base my growth projections on something other than my hopes and guess work, especially in the current environment of maximum pay TV change, and the carefully developed opinions of so many experts other than myself.

Jimmy Schaeffler is chairman and CSO of Carmel-by-the-Sea-based consultancy The Carmel Group (