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Companies operating in the multichannel video services space have much to anticipate over the next five years, a new study shows.

 

According to an updated projection from SNL Kagan, U.S. multichannel video services will grow moderately in this time period that will be marked by an increased competition for subscriber loyalty.

The study, “U.S. Multichannel Projections,” examines the changes in multichannel market composition, the challenge to cable’s dominance and the impact of the February 2009 digital transition. By fully understanding the impact that these trends and events will have on the industry, vendors can better prepare for the future, according to the study.

This study projects annual growth of 2.1 percent for total multichannel subscriptions, reaching 108.5 million in 2012. While market penetrations are reaching a ceiling, there is still an increase expected in the total number of multichannel households, according to the study. In fact, multichannel subscribers will account for nearly 89 percent of TV households in the five-year outlook, according to the study.

The digital transition slated for February 2009 is expected to increase multichannel subscriptions without generating a large-scale migration, according to the study. SNL Kagan estimates that 10 percent of over-the-air households will opt for multichannel, with cable receiving the majority of converts and satellite and telco splitting the remainder.

SNL Kagan predicts that cable providers will maintain multichannel market dominance, but will face increased competition from the telcos and DBS offerings. The cable market’s share is expected to drop from 3 percent to 9 percent during the same period.

The company has also forecasted a loss for small-dish satellite providers as they lack bundles of voice/data packages and limits to on-demand delivery.

“Cable’s ability to prevent more rapid erosion to its subscriber base will depend on the migration to all-digital services,” says Ian Olgeirson, SNL Kagan senior analyst. “The ability to introduce enhanced services to a broader selection of subscribers and reclaim analog channels to free up bandwidth is going to prove critical to the long-term success for cable video packages.”

This study presents critical industry insight for those operating in this market space. While growth is projected, it is not promised and cable companies must be able to anticipate changes and challenges to be able to continue to deliver expected services and protect the customer base.

There is also the possibility of new technologies and services emerging over the next five years that can present increased competition among those competing for wallet, according to the study. This industry will be an interesting one to watch to learn who will ultimately emerge the winner.

Susan J. Campbell is a contributing editor for TMCnet and has also written for eastbiz.com. To read more of Susan’s articles, please visit her columnist page.

 

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