Consumer Trend Toward Online Viewing Threatens Revenue Stream

OYSTER BAY, NY - Nearly 20 percent of online consumers consider online video as a replacement for pay TV – representing significant risk to the traditional TV operator business of as much as $16.8 billion - according to a new ABI Research Technology Barometer study.

With U.S. pay-TV household penetration set to decline approximately 0.5 percent per year through 2017, ABI Research believes this slow migration will continue even with an economic recovery as consumers have additional entertainment choices such as improved online and over-the-top (OTT) video experiences.

To offset this, TV operators are advised to build businesses that leverage OTT components. This critical strategy requires an understanding of the current and future customer target. DISH Network, which acquired Blockbuster with the goal of capturing online market share against Netflix, failed to license adequate content and has admitted as much. Verizon is the next U.S. operator to target this dual-pronged approach, based on its Redbox Instant partnership. European providers, including ViaSat’s Viaplay offering and Sky’s recently launched NOW TV, are also looking at lightweight pay TV offerings.

“While many OTT services focus on movies, the goal of lightweight pay TV packages should be to introduce customers to the brand and tease customers with premium content offerings,” says Sam Rosen, ABI practice director, TV and video.

In contrast, the study also notes a larger longer-term opportunity – the 30 percent of online consumers who have pay TV and the foundation in place for OTT services, but don’t yet see the value proposition for online video. This group is ripe for building and positioning services.