Nagra’s 2017 Pay-TV Innovation Forum highlights that the pay-TV industry is in a period of unprecedented global change, with many service providers facing a perfect storm of slowing growth, intensifying competition and business model disruption.
The Forum is a global research programme examining the state of innovation in the pay-TV market published by Nagra, in partnership with research and strategy consultancy MTM.
82 per cent of executives agree that competition in the pay-TV industry is set to increase over the next five years, and 71 per cent believe that service providers will struggle to grow their businesses during the same period.
The research also identifies three key disruptive challenges facing the industry worldwide: the proliferation of cheaper OTT services, changing consumer behaviour and demand, and the rise of content piracy, noting for example that 67 percent of executives agree that competition from subscription VOD services will have a negative impact on pay-TV, pushing down prices and increasing churn, and 66 per cent agree that we will see a new wave of mobile-first services to cater to evolving consumer viewing habits.
Specifically on piracy, the research found that 50 per cent of executives believe content piracy will lead to greater pressures on the industry over the next five years (up from 41 percent in 2016) with online streaming, peer-to-peer downloads and IPTV piracy cited as the most important forms of piracy affecting service providers and content owners today.
The research goes further to examine actual revenue lost to pay-TV piracy, estimating that service providers could stand to gain $7 billion in unrealised pay-TV revenue annually, if at least one in four consumers of pirated pay-TV services would switch to a legitimate option. Additionally, 72 per cent of pay-TV providers see the benefits of engaging in anti-piracy activities, combining technology, legal and enforcement action and consumer education, to bring tangible positive results.
While this outlook remains challenging, the research highlights a strong consensus amongst executives that innovation is becoming more and more important in the industry: the majority of executives (85 per cent) agree that in order to grow, pay-TV service providers will have to innovate strongly over the next five years (up from 78 per cent in 2016), with 74 per cent considering innovation to be a top strategic priority.
Pay-TV executives are increasingly focused on delivering standalone OTT services (64 per cent of respondents believe it to be a commercially attractive area opportunity), multiscreen TV Everywhere (67 per cent), app-based TV services (61 per cent) and advanced functionality (53%) such as voice and 4K, alongside innovative content propositions (74 percent) and new pricing and packaging models (78%).
More advanced service providers are also increasingly investing in adjacent areas such as advanced advertising and data solutions (50 per cent), Internet of Things and Smart Home solutions (42 per cent), and new content and technology services (45 per cent), such as licensing or white-labelling in-house technical solutions.
“The second edition of the Pay-TV Innovation Forum provides a comprehensive view of the transformation that is happening in our industry and identifies key areas of opportunity for service providers and content owners,” said Simon Trudelle, senior director, Product Marketing, Nagra.
“It also brings to light new trends, and in particular the rise of content piracy which emerges as a growing concern. Overall, it is clear that the industry recognises the changing nature of TV and the need to adapt quickly to this fast-changing environment. By developing new services and partnerships as part of their innovation roadmap, service providers and content owners will be able to transform and successfully prepare their businesses for the future.”
“This research shows that while external pressures are intensifying, the pay-TV industry still has a strong competitive edge in delivering video entertainment services,” said Jon Watts, managing partner at MTM.
“In this period of change and disruption, those service providers that are prepared and willing to innovate by deploying new pricing models, technology partnerships and improved user experience will be successful in meeting quickly evolving consumer demand.”