Pay-TV Set for Growth, but IPTV, Satellite Continue to Beat Up Cable

Churn is becoming a defining characteristic for pay-TV as consumer consumption patterns—and economic realities—continue to be volatile. Cable will be the big loser as IPTV (News - Alert) and satellite continue to woo subscribers in mature markets. Overall, globally, traditional pay-TV will continue to grow.

Infonetics Research found in its November 2012 Pay TV Services and Subscribers report that cord-cutting is less of an issue in the IPTV, cable video and satellite video services markets than industry buzz would lead one to believe.

"Subscribers are far less loyal than they used to be," said Jeff Heynen, directing analyst for broadband access and pay TV at Infonetics (News - Alert) Research. "The cable TV industry is characterized more by churn than cord cutting, as subscribers take advantage of introductory pricing on satellite and IPTV subscriptions that's 30 to 50 percent below their cable bills.

Overall, cord-cutting appears to be having little effect. The research firm has found that the number of global pay-TV subscribers will reach 719 million in 2012, up 6 percent from 2011. Accordingly, the money follows: the global pay-TV market (cable, satellite and telco IPTV) totaled $137 billion in the first half of 2012 (1H12), a 9.4 percent increase over the same time last year.

Less mature markets are a bright spot worldwide however. Global pay-TV service revenue is forecast by Infonetics to grow at a 7 percent CAGR from 2011 to 2016, spurred by emerging markets like Brazil, Argentina, Mexico, Russia, India and China. Latin America, the smallest but fastest-growing pay-TV market, is on track to jump 23 percent this year to top $23 billion.

"Ongoing challenging economic conditions in the key revenue-generating markets of North America and Western Europe have resulted in slowing subscriber and revenue growth in the cable TV market," Heynen said. “DirecTV, Verizon, AT&T (News - Alert) and Virgin Media have all set their sights on existing cable subscribers, and they're seeing their subscriber bases increase as cable TV subscriptions shrink."

Individual segments have their own characteristics. While cable subscribers continue to make up the lion's share of pay-TV subscribers for now (60 percent), growth is strongest in the telco IPTV segment, up 19 percent in the first half of the year over the six months previous. Satellite is growing too, and by 2016, Infonetics expects satellite TV revenue to overtake cable TV revenue for the first time.

Verizon (News - Alert) and AT&T are neck-and-neck for revenue share in the fast-growing telco IPTV market, followed by France Telecom and Deutsche Telekom in Europe and NTT (News - Alert) and CTC in Asia, Infonetics found.