By: Alice Bartram

Sponsored by: Comverse

The changing face of PayTV

People all over the world still love to watch TV.  The number of households that subscribe to pay-TV, an umbrella term that encompasses cable, satellite and IPTV (internet protocol television) services, currently stands at 804 million, having grown 8 percent last year, and is expected to pass the one-billion mark by 2017, according to a recent report from Multimedia Research Group (MRG). Although cable still accounts for the largest segment of pay-TV households, satellite services increased by 12 percent in 2012, while IPTV grew a remarkable 36 percent.

Gone are the days when a single cable operator or satellite TV provider was the only option consumers had if they wanted to receive broadcast and pay-TV channels. Consumers today have choices. As broadband access continues to expand worldwide, competitive offers from telco operators continue to roll out IPTV solutions at a time when over-the-top (OTT) service providers are becoming more prevalent and diminishing the stronghold of the cable industry by offering alternatives for consumers. And if that’s not enough, consumer expectations have risen, in part because of the “always on” Internet experience.  Operators that wish to retain their customers and persuade them to be advocates are well aware of increasing demands, but meeting those demands is often easier said than done.

And as reports of pay-TV subscribers “cutting the cord” continue to trickle out, the trend is obvious: customers are craving choices when it comes to the way they receive TV services in their homes and on multiple devices beyond the traditional television set, just as they crave the ability to watch what they want when they want. But how customers make their choices hinges on how they are treated by their service providers.

Operator opportunities and challenges

As with any opportunity for growth, challenges can impact success. There are two key areas where operators will need strategies and solutions in place to leverage the potential of the pay-TV market: redefining competition, and focusing on the customer.

Turning competition into coopetition

The competitive pressures faced by pay-TV operators include cord cutting, breaking up the bundle to offer customers more choices, and the ability to differentiate.

While reports of cord cutting aren’t yet extensive, a shift has already begun to take place. Leichtman Research Group “found that the 13 biggest U.S. cable, satellite and telco TV providers lost about 80,000 subscribers for the 12 months ended March 31, 2013,” wrote Variety’s Todd Spangler back in May. “It’s the first tangible proof that the pay television sector is shrinking.”

OTT providers like Netflix, Hulu, Roku, and YouTube are gaining some of those subscribers by offering video content to internet-connected devices—PCs, laptops, smartphones, smart TVs, gaming consoles—at a fraction of the price of a cable subscription. Ironically, this type of service is picking up momentum at the expense of the operators maintaining the broadband pipes that are used to deliver it.