Ovum: OTT will have limited impact on pay TV growth

Pay TV will continue to grow, albeit at a slower rate, while OTT services such as Netflix will make only a limited impact on the pay TV market, according to Tony Gunnarsson, senior analyst at Ovum.

Speaking at the Digital TV CEE conference in Warsaw, Gunnarsson said that the number of global pay TV subscribers will continue to grow by 1-2% annually by 2018. Even though growth may flatten out, pay TV will continue to increase its base. In CEE, the picture is similar, although cable may decline from next year at a low rate of about 0.4%. Pay DTT and IPTV will grow, compensating for this decline, he said.

OTT services have almost doubled globally in the last year. However, revenues remain relatively low. Globally, Ovum predicts total OTT revenues of US$14 to US$15 billion this year, growing to US$24 billion by the end of 2019. SVOD will dominate, with electronic sell-through coming next, said Gunnarsson.

The CEE region is lagging behind somewhat, and OTT revenues will hit US$320 million this year, doubling to US$650 million by the end of 2019, according to Ovum.

In the US, OTT revenues still correspond to about 10% of the pay TV market, and will only grow to 15-17% by 2018, according to Ovum. Internationally, OTT is even smaller in relative terms, with about seven million SVOD subscribers in the most advanced European market, the UK. France and Germany have about two million each. OTT SVOD will grow, but relatively slowly, said Gunnarsson.

In CEE OTT is still behind the curve. “We believe that OTT is still eating away at the legacy disc-based market,” said Gunnarsson. Digital consumption will overtake DVD sales in terms of revenue by 2017 in the US. This is happening more quickly in some international markets including the Nordic markets, Benelux and Russia.

Overall, SVOD will account for 71% of revenues in CEE by 2019, with EST accounting for 16% and TVOD 13%, according to Ovum.

Netflix, the SVOD market leader, is unlikely to make a huge impact on pay TV outside the US, according to Gunnarsson. In the US, it is likely that existing SVOD players will retain their market share going forward, with Netflix continuing to dominate the sector. The company is currently focusing on expansion in Asia, with rumours about plans for South Africa and a likelihood that it will follow Starz in to the Middle East. Netflix is also likely to launch in CEE in 2016, said Gunnarsson. “It’s a given,” he said.

However, currently only 10% of UK home s have access to Netflix, with this likely to rise to 15% by 2019, and other countries are likely to lag behind, he said. “It’s unlikely that other countries will see the same level of penetration seen in the US – or even the UK.”