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84% of pay-TV executives expect sharp increase in competition in next five years: Nagra study

An estimated 84% of pay-TV executives expect competition for paid-for video services to increase dramatically over the next five years as TV and OTT converge and the pay-TV industry evolves towards a platform-agnostic model, transitioning into a paid-for video market

These findings were part of the 2018 Pay-TV Innovation Forum published by content protection and multiscreen television solutions provider, Nagra, a Kudelski Group company, in partnership with MTM, a research and strategy consultancy. In its third year, the programme seeks to identify how innovation is driving opportunities for content owners and service providers around the world as they face a disrupted market. The findings are based on regional research conducted in Europe, North America, with a special focus on the United States, Asia-Pacific and Latin America.

The Nagra-supported research found that while participants are optimistic they can continue to appeal to paying consumers, an increasing number – 90% of executives – believe that pay-TV providers will have to innovate strongly to remain competitive and relevant, up from 85% in 2017.

The research highlights how the pay-TV industry is converging towards a platform-agnostic model, and as a result is transitioning into a paid-for-video market, spanning a variety of offerings including standalone OTT and direct-to-consumer services. This shift is another reason why 77% of pay-TV executives consider innovation to be one of the top three strategic priorities for the industry.

Content piracy remains a concern, with executives agreeing that the industry is experiencing a significant threat to the long-term sustainability of pay-TV and OTT businesses. 47% of 2018 respondents believe that piracy will lead to greater pressures on the industry over the next five years, in line with 2017 findings.

While challenges remain, this year’s research brings into focus the six key innovation areas in the industry.

Firstly most pay-TV providers (65%) have improved their portfolios in the last 12 months, primarily focusing on the core pay-TV proposition as they deploy next-generation set-top boxes that support advanced functionalities such as third-party apps, personalised content recommendations, and 4K.

Secondly, 77% of executives surveyed believe that pay-TV bundles will evolve substantially over the next five years, catering to the needs of different customer groups, and 89% agree that delivering a seamless and personal consumer experience will be key.

Thirdly, the model, where companies offer a range of content and services via a single subscription, is seen as a way of simplifying a fragmented marketplace for consumers, while also offering additional growth opportunities for well-established operators.

In addition, most traditional pay-TV providers are now looking to offer converged pay-TV/OTT services. As a result, the pay-TV market is transitioning into a paid-for-video market.Also, the study found that many industry executives believe that network infrastructure and billing relationships – rather than proprietary set-top boxes – are now the gateway to the customer.

And lastly, fixed and mobile broadband services are expected to grow in importance in future as providers pursue bundling strategies to deliver better value and improve stickiness.

Commenting on the findings, Simon Trudelle, Senior Director, Product Marketing, Nagra, said: “Change is the one constant in the global pay-TV industry, driven by numerous pressures from competitors, pirates and subscribers, making it challenging for service providers and content owners to maintain revenue growth. It has never been more important to understand new consumer expectations, anticipate future needs and innovate, and this report reflects the way pay-TV service providers around the world are taking the necessary steps to strengthen and grow their product and service portfolios.”

Elaborating on the findings, Jon Watts, Managing Partner, MTM, said: “It is exciting to see a growing number of service providers embarking on the next stage of innovation, encompassing product and service portfolio improvements, alongside advanced technology platforms and new commercial and operating models. By keeping innovation at the core of their strategies and recognising the need to diversify, service providers can continue to compete effectively and grow revenue.”