North American pay-TV subscription and on-demand revenues will fall nearly $9 billion by 2020, despite an apparent end to three years of subscriber losses by cable TV providers, according to new research.
Digital TV Research forecasts that pay-TV subscription and on-demand revenues, which reached a peak in 2013 at $95.36 billion in North America, will decline to $86.61 billion in 2020.
Analyst Simon Murray, in “Digital TV North America,” posits that the revenue decrease will come as “all pay TV operators will try to outdo each other on promotions, with pricing becoming a more and more important tool” as U.S. and Canadian operators switch off the last of their remaining analog cable networks.
While operators have been reporting strong increases in average revenues per user (ARPU) in recent years, the revenue from TV services continues to erode. The increases have come from blended services like double-play or triple-play bundles.
The bulk of pay-TV subscriber losses among cable operators have been analog cable subs. In 2010, there were 18.4 million analog cable subscribers, a number Digital TV Research expects to slip to 3.75 million by the end of this year; digital pay-TV penetration is expected to be 100% by 2017.
Murray also forecasts an increase in pay-TV subscribers over the closing years of this decade of some 5 million subscribers to 116.6 million by 2020, but believes pay-TV penetration has peaked in Canada and the U.S. and won’t keep pace with an increasing number of TV households in North America.
Murray forecasts pay-TV penetration will drop from 87% in 2010 to 83.8% by 2020.
Hardest hit likely will be cable operators who already have seen their numbers slides from a high of 68.2 million subscribers in 2010 to 62.4 million today. By 2020, Murray forecasts 60.4 million digital cable homes in North America, a penetration of 43.4%, down from 53.1% in 2010.
The decline in subs and pricing wars will drop cable revenues nearly $13 billion between 2013 and 2020.
Satellite TV will overtake cable to become the largest pay TV platform revenue generator in 2015. However, satellite TV revenues will climb by only $1.2 billion between 2013 and 2020 – to $42.8 billion.
Murray predicts IPTV offering from telcos will see huge growth of 47% between 2013 and 2020 to reach 18.2 million – or 13.1% of TV households. IPTV revenues will increase at a similar rate to achieve $9.85 billion by 2020.