We have just completed our pay-TV forecasts for Europe, in which we predict that the number of pay-TV households will increase by 12% to 185.2 million between 2011 and 2016. For the first time, we have included over-the-top services within our forecasts, reflecting the increasing diversity of paid-for video services to the TV set.
Since 2009, connected TVs have become increasingly available and affordable as all the major consumer electronics manufacturers move to capitalise on this emerging opportunity. As a result, we are beginning to see mass adoption of these devices: in March 2011, BITKOM, the German Federal Association for Information Technology, Telecoms and New Media, estimated that half of all the new TVs sold in Germany were hybrid, Internet-connected TVs. For the first time, average consumers can readily gain access to over-the-top services directly through their TV sets, without seeking out devices geared towards specific niches, such as games consoles or Internet set-top boxes, like Apple TV devices. However, we believe that the impact on traditional pay-TV is likely to be far smaller than the sales figures for connected TVs suggest, for a variety of reasons:
- Many consumers do not exploit the capabilities of connected TV sets: The evidence suggests that, although many consumers are buying connected TVs, only a small percentage are active users of connected TV services. Many will play around with the services when they first purchase the TV, and then forget about them. Some do not even get around to trying the services – many connected TVs end are not connected for a multitude of reasons, including distance from the TV set to the broadband router preventing a wired connection, not having a USB modem for some Wi-Fi enabled sets, and difficulties in configuring the connection itself.
- Lack of premium content: Most of the video services offered through connected TVs are free, for example catch-up TV services from the main broadcasters, such as the BBC iPlayer, or low-value content, such as YouTube. Although there are some paid-for video services offering films, to date there are no well-established players in Europe that are comparable to Netflix in the USA. Despite the fact that the quantity and quality of content available through connected TVs will improve in the next few years as consumer electronics manufacturers strike more deals with content owners or aggregators, we anticipate that many consumers who use the services on their connected TVs will predominantly use those that are free. It will take time to drive the take-up of paid-for on-demand content, as traditional pay-TV operators found out when they introduced VoD services.
We therefore expect that only 2.58 million households will be using an over-the-top service as a primary service for their main TV set in Europe in 2016, representing a mere 1.4% of pay-TV households.
Figure 1: Pay-TV household penetration, primary and secondary services, by platform, 2011 and 2016 [Source: Analysys Mason, 2011]
However, although over-the-top services will not displace traditional pay-TV services (cable, IPTV, pay DTT or satellite) as the main provider of video services to the primary TV set, we anticipate much stronger growth for over-the-top services as a complementary, or secondary service, mostly on additional TV sets, for which many consumers are reluctant to incur ongoing additional charges of multi-room services. We believe that 14.6 million households will be using over-the-top services as a secondary TV service, attracted by the ability to supplement free-to-air content on a pay-per-use basis.
Our report Pay TV in Europe: forecasts and analysis 2011–2016 covers primary and secondary TV services delivered by cable, IPTV, pay DTT, satellite and over-the-top providers in Europe.