Pay-TV Should Use Technology to Set Operators Apart From New Rivals, Analysts Say
Conventional pay-TV operators should use new technologies such as 3D TV and whole-home DVRs to differentiate themselves from coming competition from online video and other sources, Yankee Group analysts said on a webinar Tuesday. They surveyed pay-TV subscribers about what might make them change service providers. Though price is still the main reason subscribers cite, new technologies are starting to emerge as a point of competition, said Vince Vittore. “More and more, these types of applications show up as reasons why people would consider moving their pay-TV subscription,” he said. “You can get some true differentiation among different types of pay-TV providers."
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The amount of HD programming that a provider offers no longer makes a conventional pay-TV operator stand out from others or from newer competitors online, said Dmitriy Molchanov. Everyone has HD, he said. Operators should develop new services to provide homes, such as troubleshooting network-connected devices, he said.
The proliferation of Internet-connected devices in the home is threatening pay-TV distributors, Molchanov said. Videogame consoles, which were in more than 60 percent of the homes Yankee surveyed, are increasingly used for access to programming that was once the domain only of the pay-TV operator, he said. Some of their manufacturers, such as Sony, are even beginning to offer original video programming and experimenting with targeted ads, Molchanov said. “In the long term, these videogame consoles start to look more and more like TV networks themselves."
As operators develop new interactive TV services, the application-store model popular on Apple’s iPhone and Google’s Android platforms will probably extend to TV, the analysts said. But the migration won’t be without problems, said Vittore. Splitting what subscribers pay for applications will be difficult, because far more players will want a cut in TV than on the iPhone, he said. “We're moving toward that environment, but I don’t think the business model has truly been worked out. Ultimately, I think we will see something that looks very similar to an app store on TV very soon."
Without new services, subscription-video operators risk losing customers, Vittore said. Already, customers are scaling back their subscriptions by canceling premium packages, he said. “We think this is a behavior that mimics a movement to cord cutting at some point,” Vittore said. “You get to a point where consumers will truly recognize how much they are paying and what kind of channels they are getting.” The average monthly price of a pay-TV subscription among those surveyed was about $65, he said. Twenty-two percent responded that they're planning to spend less in the next year, he said.