Contrary to most reports, pay-TV is still a growing business around the world, according to a recent report from research company informitv. It's most recent Multiscreen Index, released yesterday, found that service providers around the world added more than 4 million subscribers in the last quarter of 2016. Sixty-one of the 100 providers tracked by the index grew their subscriber base, down from 67 in the same quarter in 2015.
This was, however, in the face of subscriber losses in North America. According to the index, the top ten service providers in the US lost 162,000 subscribers. Instead growth was largely driven by providers in the Asia-Pacific region, which added 2.36 million subscribers. Europe, Middle East and Africa (EMEA) also contributed significantly, adding 1.72 million across the region; with Canal Plus in Africa adding 516,000 -- the largest quarterly gain for any provider.
The largest loss was incurred by US provider AT&T Inc. (NYSE: T), down 262,000 subscribers. But this was largely offset by the addition of 235,000 subscribers to its satellite division, DirecTV.
The Multiscreen Index also tracks TV services delivered to additional screens, and found that these were on the rise. Eighty-eight of the 100 providers worldwide tracked by the index offer some kind of multiscreen services today, making them available to 90% of subscribers included the index.
The study does suggest that there is life in the TV business still, despite the ramping up of cord-cutting and adoption of OTT services. While younger audiences in particular are shifting towards non-traditional video services, there is a sizable base of subscribers that are still interested in pay-TV.
However, there may be differences in the nature of some of these subscriptions and associated revenues that the Multiscreen Index does not address. In Europe, for example, free-to-air broadcast services are common, and base TV packages are often bundled with broadband subscription at no additional cost. UK ISPs BT and TalkTalk provide hybrid boxes that combine over-the-air broadcast feeds with broadband VoD. Similarly, cable operator Virgin Media Inc. (Nasdaq: VMED) offers a free basic package of channels bundled with its broadband subscription. This would make many homes qualify as TV subscribers without contributing any TV-service revenue.
Similarly, in the US operators are increasingly offering "skinny" pay-TV bundles to attract potential cord-cutters. The revenues and associated margins from these services is lower than the traditional "full-fat" bundles. So even if the operator is retaining the subscriber, there is a cost associated with it.
The specific composition of the index is available only to informitiv subscribers, but it does seem that the index tracks the larger providers -- which are more likely to be able to defend themselves against OTT competition and cord-cutting. It's often the smaller, weaker providers with limited negotiating power for premium content, that are the most vulnerable. As such, there might be significant subscriber losses not included in this data.
Still, as an operator and pay-TV equipment vendor, this information is heartening. Cord-cutting is ramping up in the US, but operators still have a significant subscriber base. And in other parts of the world, cord-cutting still seems to be muted, at least for the larger players.
— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation