Pay-TV’s relationship with OTT continues to evolve | Media Analysis | Business
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While most of over-the-top (OTT) subscriptions continue to complement an existing pay-TV relationship, there is strong evidence that this is changing.

According to PwC’s Videoquake 3.0: The Evolution of TV’s Revolution report, 91% of US consumers said they could see themselves subscribing to cable in 2014; just one year later, that number has fallen to 79%.

The research also shows that 16% of US consumers surveyed have walked away from pay-TV this year, and almost a quarter (23%) have scaled down their subscription. Cost was cited as the main reason.

PWC also shed light on the number of ‘cord nevers’, those that have never subscribed to a pay-TV package. The 18-to-24s are much more likely to be cord-nevers than millennials aged 25-to-34 — a state of affairs that would seem to speak to the economic realities for this group — meaning that there’s no indication that they would remain cord-nevers as they move into the workforce and begin to earn more. However, the report postulates that the surfeit of OTT options makes pay-TV obsolete for this group.

“Younger consumers don’t see their cord-never approach as sacrificial — to them, there’s nothing that they can’t get elsewhere,” PWC noted. “Their world has been shaped by on-demand streaming, and they’re betting on it to provide all the content they desire.”

PWC said 78% of consumers surveyed subscribe to at least one streaming service. Among pay-TV subscribers, 70% subscribe to a streaming service as well.

“Netflix leads the OTT pack — nearly two out of three Americans have a Netflix subscription — but 52% of Netflix subscribers also subscribe to cable, and 55% also subscribe to at least one other OTT platform,” PwC said.

Streaming has received a boost from content companies embracing OTT platforms as well.

“Although these sales have driven short-term revenue gains for [entertainment and media] production companies, they have also enabled OTT services to gain a firmer grasp on the end-user relationship, monetise viewership in more advertising-free and ad-light environments, and build their brands at the expense of the networks or studios supplying the shows — and do all of this at lower prices compared with traditional TV bundles,” PwC stated in the report.

Unfortunately for pay-TV providers, TV everywhere apps have never really taken off — and thus provide no firewall against OTT and changing viewing habits.

“Today, fewer than one in seven US pay TV households actively use TVE,” PwC said in the report.

Pay-TV numbers have been on the decline, with total subscribers at the top MVPDs down by 190,000 in the third quarter, as telco and satellite began to see a decrease in additions. Cable operators have shown strong improvements in their video subscriber drains lately – Time Warner Cable said it added 32,000 basic video subscribers in 2015, its best year in nine years – but that hasn’t halted the overall subscriber drain.