US pay-TV gains slow to a trickle, but is cord-cutting to blame? | Media Analysis | Business
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The United States’ pay-TV business collectively added 46,000 subscribers in 2012 compared with a gain of 280,000 in 2011 — a noteworthy slowdown that SNL Kagan nonetheless said may or may not be evidence for cord-cutting.

The good news for traditional TV is that in total, the country had 104.28 million subscribers at the end of 2012. That’s up from around 100.38 million total pay-TV users at the end of 2011 and 100.1 million at the end of 2010, which was the first year to show quarterly declines in pay-TV subs. Still, the industry added 211,000 subscribers that year thanks to a fourth-quarter rebound.

SNL Kagan analyst Ian Olgeirson told the Hollywood Reporter that the 2012 increase is the lowest for the overall industry that he has ever recorded — but that it’s too early to sound the cord-cutting klaxon.

"It's inconclusive," he said. "It's neither a decisive victory for the multi-channel industry, nor is it a clear indication that there is some kind of precipice ahead. It is in line with our long-term view that predicts slight [annual] gains in the foreseeable future that are below what we used to see in the past."

Kagan estimates that there were 4.2 million "over-the-top substitution homes” as of the end of 2012, up from 3.2 million at the end of 2011. But, that stat also may not be indicative of a coming crash for pay-TV. "Economic pressures have been fairly persistent, and prices [for pay-TV services] continue to go up," Olgierson said. "And usage patterns are just changing ... I don't think we will see a negative year in 2013."

As RTVN previously reported, there is a small but growing group of video enthusiasts who are tuning out traditional TV, which Nielsen has dubbed the 'zero-TV' group. These households are primarily under the age of 35 and childless, and they aren't just cutting the cord — they're not turning to the TV set for video at all, whether it be broadcast, pay-TV or over-the-top.

Zero-TV households make up less than 5% of US households, according to Nielsen's Fourth-Quarter 2012 Cross-Platform Report. That means there were more than five million zero-TV households in 2013, up from just more than two million in 2007.

These households don't fit Nielsen's traditional definition of a TV household, but they still view video content. The television itself isn't obsolete, however, as over 75% of these homes still have at least one TV set, which they use to watch DVDs, play games or surf the Internet. But when it comes to video content, a growing amount of these households are using other devices like smartphones, laptops and tablets.

One of the issues for IPTV, cable and satellite in the United States is the fact that it’s a maturing — if not downright senior — market, where a completed digital transition and widespread HD availability offer little growth opportunity. Globally though, it’s clear that the ongoing rollout of HD and more programming in emerging markets is staving off any collective OTT threat.

At present, 33% of worldwide pay-TV subscribers are using HDTV services, according to ABI Research. HDTV penetration is the highest in North America followed by Western Europe, accounting for 84% and 76% of total pay-TV subscriptions respectively.

As many of the countries in different regions are trying to switch over to digital transmission, the number of HD channels and packages offered by the operators increase. “Worldwide HD service adoption is expected to grow. ABI Research forecasts that 38% of global pay-TV subscribers will be subscribing to HDTV services in 2013,” noted Khin Sandi Lynn, research analyst at ABI.

According to ABI Research, the global pay-TV market added nearly 47 million subscribers in 2012, reaching a total of 864 million subscribers.

“The growth in satellite, cable, and IPTV markets was strong, although digital terrestrial TV growth was flat in 2012,” said Jake Saunders, vice president and practice director of core forecasting. “ABI Research expects that the pay-TV market will continue to grow in 2013 to reach 907 million subscribers.”

Worldwide IPTV subscriber base has been increasing rapidly over the past few years. In 2013, the worldwide IPTV subscriber base is expected to add over 9 million subscribers to reach 79.3 million. More than half of the net addition will be from Asia-Pacific; China alone is expected to add more than 3 million subscribers.

The cable TV market will remain strong, especially due to the growth in Asian Pacific markets such as China and India. Cable TV will maintain the largest market share of the overall pay-TV market in 2013. However, rapidly growing IPTV will cause cable’s market share to decline to 65.4% in 2013 from 66.2% in 2012, ABI found.