As the pay TV universe continues to dwindle, content providers should look more closely at offering programming directly to their consumers, eliminating the traditional distribution channel altogether, according to a PricewaterhouseCoopers study.
In Industry Perspective: 2016 Entertainment & Media Industry TrendsPwC's Strategy& division examines the increasingly rapid transition toward a direct-to-consumer future and the acceleration that’s expected in 2016 with OTT/streaming services, smart devices/mobile apps, live events/digital engagement and the high-growth Latino market.
According to PwC, 78% of U.S. consumers already subscribe to at least one OTT service. And while currently most of those subscriptions complement an existing pay TV relationship, there is strong potential for disruption. PwC points to its own Videoquake 3.0: The Evolution of TV’s Revolution report, which showed in 2014 that 91% of U.S. consumers said they could see themselves subscribing to cable. In the following year, that number fell to 79%.
While products like TV Everywhere apps were supposed to curb the migration to over-the-top providers, PwC says low awareness, a tepid user experience and authentication problems have hurt adoption.
“Today, fewer than one in seven U.S. pay TV households actively use TVE,” PwC said in the report.
At the same time content providers have struck deals with SVOD services like Netflix, Hulu and Amazon for movies and series.
“Although these sales have driven short-term revenue gains for [entertainment and media] production companies, they have also enabled OTT services to gain a firmer grasp on the end-user relationship, monetize viewership in more advertising-free and ad-light environments, and build their brands at the expense of the networks or studios supplying the shows — and do all of this at lower prices compared with traditional TV bundles,” PwC stated in the report.
Pay TV numbers have been on the decline, with total subscribers at the top MVPDs down by 190,000 in the third quarter, as telco and satellite began to see a decrease in additions. Cable operators have shown strong improvements in their video subscriber metrics over the past few years, substantially reducing losses. While some operators are reporting video customer gains in 2015 – Time Warner Cable said it added 32,000 basic video subscribers in 2015, its best year in nine years – the growth hasn’t been enough to offset satellite declines.