The Changing Face of North American Pay TV

According to Kudelski Group (SIX:KUD.S) company NAGRA, changes in the North American pay TV market are driving increased service ...

NAGRA at NAB: Video from soup to nuts
NAGRA at NAB: Video from soup to nuts

According to Kudelski Group (SIX:KUD.S) company NAGRA, changes in the North American pay TV market are driving increased service provider investment in OTT, streaming and cloud technologies as well as advanced data analytics and anti-piracy measures.

According to a panel of North American pay TV service providers polled in April, evolving consumer expectations and habits, along with an increase in on-demand content consumption, pricing pressures driven by new OTT offerings and simplified access to pirated streaming services, are driving a transformation in the North American pay TV industry. Some experts talk of a possible risk of significant revenue loss if the status quo were to be maintained.

To address these challenges, service providers are leveraging OTT, streaming and cloud technologies as well as advanced data analytics and anti-piracy measures. In parallel, they are considering reviewing their pricing and packaging models and services to better respond to a more segmented marketplace.

  • OTT, Streaming and Cloud: To attract younger audiences, pay TV operators are focusing on strengthening their OTT and multiscreen propositions. According to industry executives, there are strong generational differences in terms of perceived value of pay TV services. Younger audiences expect to consume on-demand content on mobile screens vs. the traditional linear TV environment and bundles preferred by older generations. As a result, operators are rethinking their pricing and business model approaches to better address all demographics and market segments. Cloud-based technologies can also help service providers compete more effectively with Internet-based rivals.
  • Advanced Data and Analytics: More than half of industry executives polled cited advanced data and analytics as an area that will have a significant impact on the North American pay TV industry over the next five years. Developments in advanced data and analytics will help pay TV operators gain more flexibility and insight while reducing operating costs. As a result, they can deliver value through personalized content and user interfaces, targeted advertising and improvements to sales and marketing operations.
  • Anti-Piracy: The threat of content piracy is growing in the North American pay TV market. Key challenges include the emergence of illegal retail IPTV set-top boxes and apps, the growing costs of pay TV subscriptions and the increased sophistication of pirates. However, new more holistic anti-piracy solutions and increased industry awareness, along with smarter legitimate on-demand TV services are expected to reduce the impact of piracy in the long term.

"North American executives clearly recognize that the industry is experiencing a period of change and disruption - and are making the investments required to remain competitive in a challenging market. This year's research program shows that the North American industry is moving forward, developing and extending product and service portfolios and addressing new opportunities. In areas like OTT, data and analytics and IoT, the region is leading the way," said Jon Watts, managing partner of MTM, which conducted the research. "There are clearly significant challenges ahead, as competition grows - but the pay TV industry is on track to deliver improved value propositions to consumers. This is an industry in transition, and it's exciting to see the progress that is being made."

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