Will U.S. Pay-TV Spending Continue To Rise In The Future?

As per a recent report by research firm Strategy Analytics, annual spending on subscription video and TV services in the US will reach $130.3 billion in 2019. However, the figure will gradually decline after that. In terms of customer retention, legacy pay-TV operators are yet to cope with the onslaught of low-cost online video streaming service providers, the former group’s average revenue is still 10 times higher than that the online video streaming service providers.

Strategy Analytics further stated that major pay-TV operators who offer both traditionally managed TV services and next-generation online services will hold nearly 80% of the market share till 2022. They will continue to do so despite facing intensified competition from low-cost over-the-top (OTT) service providers.

The Internet TV service, launched by leading pay-TV operators in the U.S., is gaining market traction since 2015. Technically, Internet TV is similar to pay-TV offerings. Its shows can be viewed using a broadband connection and mobile gadgets like tablets, smartphones, Roku box and smart TV, to name a few. To sum it up, Internet TV offers a TV Everywhere experience to subscribers at a cost-effective manner. The growing deployment of 4G LTE mobile network and significant adoption of portable mobile devices are the primary reasons propelling its popularity.

Major pay-TV operators, such as AT&T Inc. (NYSE:T) , DISH Network Corp. (NASDAQ:DISH) and Sony Corp. (NYSE:SNE) have already launched their Internet TV services. Verizon Communications Inc. (NYSE:VZ) and Comcast Corp. (NASDAQ:CMCSA) are the latest entrants. Most of these companies are offering both legacy pay-TV as well as Internet TV services with selected TV channels at lower costs.

Nevertheless, the pay-TV operators are yet to find out an appropriate trade-off between these two types of services. Making online ventures more attractive is resulting in more subscribers for the new services at the expense of the traditional pay-TV business model. Ultimately, the cord cutting due to Internet TV is yet to stop, which is currently the biggest threat for pay-TV operators.

Meanwhile, more online TV services like YouTube and Hulu, have entered the market. This has made the Internet TV market highly competitive. It remains to be seen how major pay-TV operators can survive the competition.

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