Joseph O'Halloran ©RapidTVNews | 24-08-2011

UK pay-TV uoperators must find alternate revenue streams to ensure growth as the market plateaus in 2016 a new report from Digital TV Research is warning.

The UK Digital TV Forecasts reports makes the suggestion that UK pay-TV revenues are fast reaching maturity, from a likely $9.3 billion in 2011 but inching higher by only a further $250 million to $9.6 billion in 2016. In addition, the analyst expects TV ARPU to fall as operators convert subs to bundles and as competition from free multichannel services intensifies.

Looking at the different types of pay-TV platforms, Digital TV Research believes that the number of homes taking DTT on their primary set has already plateaued at about 10 million homes and it can see only a future decline in the number of primary free-to-air (FTA) DTT homes from 2013 as homes are tempted away by other platforms.

Indeed the analyst forecasts FTA DTT will lose its mantle as the most popular TV platform to pay-DTH, i.e. Sky, by 2014. Yet, even though it is a cash machine generating huge profits, Digital TV research sees muted growth for Sky with only 1 million more additional UK subs added. That said, as Sky increases ARPU by offering more services, Digital TV Research forecast DTH revenues to reach $7.80 billion in 2016, up from $7.27 billion in 2010.

The song remains the same for cable TV for which Digital TV Research says revenues peaked in 2010 at $1.69 billion. It predicts cable subscription and VOD revenues to be US$1.54 billion in 2016, down 8.7% on 2010. In what will be bad news for incumbent telco BT, Digital TV Research adds that IPTV is unlikely to ever make too much headway in the UK with fewer than 1 million homes forecast to pay for IPTV services by 2016. As a consequence, it forecasts IPTV revenues to remain low, reaching $226 million in 2016.

Report author Simon Murray commented: “Digital TV penetration has almost reached saturation point as it exceeds 95%. FTA is responsible for much of the recent digital TV growth. Digital pay-TV penetration is not expected to climb much and will remain below 58% of TV households. Although subscriber numbers will continue their slow growth [4 million subs by 2016], TV ARPU for cable subs will fall as more homes convert to bundles.”