2013 to be the year of services as UK pay-TV growth slows

Editor | 06-12-2012

Even though the market will likely remain robust over the next 12 months, service and value will be the key elements of the UK pay-TV market through 2013, according to new research by Oliver and Ohlbaum Associates (O&O).

The analyst says in its Battling For The Media Consumer Research, surveying the UK's Internet population, that the stakes in the ground for the UK TV arena will be intensified competition with consumer choice on traditional TV platforms still expanding, and where consumers seem willing to pay for that increased choice. Indeed it adds that as traditional pay-TV growth slows, the focus is now on services.

Overall, O&O predicts that barring further economic setbacks, the medium-term forecast is for slow but steady growth in 'traditional' TV revenues. It notes that the key commercial developments will be a Licence Fee fixed to 2016, and without significant change to the scope of the BBC likely to remain relatively flat into 2017, as well as a sluggish growth in national advertising revenue (NAR) as display struggles to contend with response. Yet within pay-TV, O&O believes that rights battles will drive prices, and thus revenues, higher.

One key trend is that polarisation in how pay-TV offers are perceived continues to grow. When looking at reasons to switch to a pay-TV service by provider, the survey found that in the space of 12 months, Virgin Media has usurped Sky as offering basically better value —cited by 56.2% and 40.6% respectively. In 2011, these corresponding figures were 27.9% and 44%. The perceived basic value of BT Vision slumped from 57.2% to 38.5% in a year, perhaps fully justifying BT's current robust campaign to beef up the IPTV service.

However it should be noted that Sky Sports remains an ace for BSkyB in attracting customers to switch.
Other key trends include the fact that even though to date, on-demand viewing has been largely additive, O&O predicts that as it becomes more significant, it will start to displace a small amount of linear viewing. It also believes that viewing on-demand via connected TV platforms is forecast to become the largest segment of the market.

In general, O&O sees traditional platforms getting more connected and that in the battle for in-home connectivity, mobile might be catching up. Yet also there are signs that the connected TV landscape is beginning to affect pay-TV decisions. A third of UK Internet households claim to have a connected TV device other than that supplied by a pay-TV provider, and multi-screen is growing slowly but surely thanks to stronger links to TV content. Somewhat alarmingly, the survey found that 45% of Netflix and LOVEFiLM Instant subscribers with a main pay-TV service have reduced their pay-TV subscriptions over the year.