In our latest pay-TV forecasts, we expect that the number of households taking pay-TV services in Western Europe will increase by 9.2 million to 113.3 million, which amounts to 8.9% growth between 2013 and 2018. Take-up of over-the-top (OTT) video services will grow much more strongly than traditional pay-TV services, but cord-cutting will not be extreme – OTT video to the TV set will account for just 5.6 million primary pay-TV services by 2018. The real impact of OTT will be felt on secondary TV sets – traditional operators could broaden their reach with their own OTT services to these sets.
A shift towards IPTV and OTT and away from cable explains stable top-level Western European pay-TV household numbers
The number of Western European households taking up traditional pay-TV services – delivered via analogue or digital cable (including multichannel multipoint distribution services (MMDS), also known as wireless cable), IPTV, pay-digital terrestrial TV (DTT) or satellite – will increase by 4.1 million to 107.7 million, representing 3.9% growth between 2013 and 2018.
Figure 1: Pay-TV households, net additions or losses by primary platform, Western Europe, 2013–2018 [Source: Analysys Mason, 2013]
These overall modest gains for traditional pay-TV services belie substantial variations between the performance of individual platforms – the gains for some platforms will be nearly offset by losses for others during the forecast period.
- We expect that the number of cable households will decrease by 6.2% to 43.6 million between 2013 and 2018, representing a net loss of 2.9 million, as some analogue cable subscribers defect to digital platforms other than cable, including free-to-air (FTA) DTT services.
- We also expect the number of pay-DTT households to decline by 7.7% to 4.9 million, a net reduction of 0.4 million as pay-DTT loses its momentum in major markets such as France, Germany and the UK.
- The number of satellite pay-TV households will increase by 3.7% to 31.6 million, amounting to a net gain of 1.1 million as growth in some markets, notably Germany, offsets decreases in others, such as Italy and Spain.
- The number of IPTV households will increase by 29.0% to 27.6 million, an increase of 6.2 million. We expect strong growth for IPTV in many countries, mostly because of aggressive bundling strategies by telcos, which are offering basic pay-TV services at little or no incremental cost within multi-play propositions in order to gain market share.
Low-end IPTV services, such as Swisscom TV light, which was launched by the Swiss incumbent in November 2012 as a free add-on for its DSL subscribers, enable consumers to benefit from the latest features of digital TV services, such as access to on-demand content, without incurring the upfront cost of equipment, which can easily amount to EUR200 or more.
Operators may want to offer their own OTT video propositions in order to tap into new growth opportunities
The real impact of OTT video services will be felt on secondary TV sets, where such services will drive a decline in traditional multi-room services. We still believe that cord-cutting will not be significant in Western Europe. We expect that the number of Western European households taking up OTT video services as a primary form of pay-TV will increase by 5.2 million during the period, from 0.4 million in 2013 to 5.6 million by the end of 2018. OTT video services extend the overall market for pay-TV services by appealing to consumers who would not consider taking up traditional pay-TV services, perhaps because of the cost or level of commitment involved. In particular, the emergence of OTT video services gives consumers direct access to premium and/or niche content without the requirement to commit to other subscriptions (either for basic pay-TV or a bundle of services) as a prerequisite, bringing consumers more freedom and flexibility.
'Pure-play' OTT video providers such as Netflix need not be the only ones benefiting from this new growth opportunity. Pay-TV operators with niche and/or premium content can broaden their reach by targeting non-subscribers with their own OTT video services, ensuring that they are pitched and priced in a way that will attract consumers who have continued to be FTA viewers, while minimising the risk of cannibalising their traditional subscriber base. In July 2013, leading UK satellite pay-TV operator BSkyB launched its NOW TV Box at an 'impulse buy' price of GBP9.99 (EUR11.71) in order to drive the take-up of its OTT video service, which offers pay-per-day access to its premium sports channel line-up, as well as subscription-based access to its premium movie content.
For more details on the key trends and drivers in the pay-TV market in Western Europe, please see our recent report, Pay-TV and OTT video services in Western Europe: forecasts and analysis 2013–2018.